Question 1

If a $20 billion increase in government expenditures increases equilibrium GDP by $50 billion,then:

Accepted Answer

A)  the multiplier is 2. 
B)  the MPC for this economy is .6. 
C)  inflation is occurring. 
D)  the MPS for this economy is .6. 
A)  the multiplier is 2. 
B)  the MPC for this economy is .6. 
C)  inflation is occurring. 
D)  the MPS for this economy is .6.

Question 2

(Advanced analysis)Answer the question on the basis of the following information for a private open economy.The letters Y,C,Ig,X,and M stand for GDP,consumption,gross investment,exports,and imports respectively.Figures are in billions of dollars. $\begin{array} { l } 
C = 40 + 0.8 Y \
t _ { g } = \overline { I _ { g } } = 40 \
X = \bar { X } = 20 \
M = \bar { M } = 30
\end{array}$ Refer to the information.In equilibrium,saving is:

Accepted Answer

A)  $20. 
B)  $30. 
C)  $40. 
D)  $50. 
A)  $20. 
B)  $30. 
C)  $40. 
D)  $50.

Question 3

If the United States wants to increase its net exports in the short term,it might take steps to:

Accepted Answer

A)  increase its GDP. 
B)  reduce existing tariffs and import quotas. 
C)  appreciate the dollar compared to foreign currencies. 
D)  depreciate the dollar compared to foreign currencies. 
A)  increase its GDP. 
B)  reduce existing tariffs and import quotas. 
C)  appreciate the dollar compared to foreign currencies. 
D)  depreciate the dollar compared to foreign currencies.

Question 4

In the aggregate expenditures model presented in the textbook,investment is assumed to rise with increases in real GDP and fall with decreases in real GDP.

Accepted Answer

A) True 
 B)False

Question 5

The equilibrium level of GDP is associated with:

Accepted Answer

A)  an excess of planned investment over saving. 
B)  no unintended changes in inventories. 
C)  an unintended decrease in business inventories. 
D)  an unintended increase in business inventories. 
A)  an excess of planned investment over saving. 
B)  no unintended changes in inventories. 
C)  an unintended decrease in business inventories. 
D)  an unintended increase in business inventories.

Question 6

If a lump-sum tax of $40 billion is imposed and the MPC is .6,the saving schedule will shift:

Accepted Answer

A)  downward by $24 billion. 
B)  upward by $24 billion. 
C)  downward by $16 billion. 
D)  upward by $16 billion. 
A)  downward by $24 billion. 
B)  upward by $24 billion. 
C)  downward by $16 billion. 
D)  upward by $16 billion.

Question 7

(Advanced analysis)Answer the question on the basis of the following information for a private closed economy. $\begin{array} { l } 
S = - 20 + 0.4 Y \
I _ { g } = 25 - 3 i
\end{array}$ where S is saving,Ig is gross investment,i is the real interest rate,and Y is GDP. Refer to the information.In equilibrium,the level of consumption will be:

Accepted Answer

A)  $80. 
B)  $95. 
C)  $65. 
D)  $70. 
A)  $80. 
B)  $95. 
C)  $65. 
D)  $70.

Question 8

The effect of imposing a lump-sum tax is to:

Accepted Answer

A)  reduce the absolute levels of consumption and saving at each level of GDP and to reduce the size of the multiplier. 
B)  reduce the absolute levels of consumption and saving at each level of GDP but to not change the size of the multiplier. 
C)  reduce the absolute levels of consumption and saving at each level of GDP and to increase the size of the multiplier. 
D)  increase the absolute levels of consumption and saving at each level of GDP and to increase the size of the multiplier. 
A)  reduce the absolute levels of consumption and saving at each level of GDP and to reduce the size of the multiplier. 
B)  reduce the absolute levels of consumption and saving at each level of GDP but to not change the size of the multiplier. 
C)  reduce the absolute levels of consumption and saving at each level of GDP and to increase the size of the multiplier. 
D)  increase the absolute levels of consumption and saving at each level of GDP and to increase the size of the multiplier.

Question 9

What do investment and government expenditures have in common?

Accepted Answer

A)  Both represent injections to the circular flow. 
B)  Both represent leakages from the circular flow. 
C)  Neither is subject to the multiplier effect. 
D)  Both represent a decline in indebtedness. 
A)  Both represent injections to the circular flow. 
B)  Both represent leakages from the circular flow. 
C)  Neither is subject to the multiplier effect. 
D)  Both represent a decline in indebtedness.

Question 10

If aggregate expenditures exceed GDP in a private closed economy:

Accepted Answer

A)  leakages will exceed injections. 
B)  planned investment will exceed saving. 
C)  unplanned investment in inventories will occur. 
D)  saving will exceed planned investment. 
A)  leakages will exceed injections. 
B)  planned investment will exceed saving. 
C)  unplanned investment in inventories will occur. 
D)  saving will exceed planned investment.

Question 11

Other things equal,the slope of the aggregate expenditures schedule will increase as a result of:

Accepted Answer

A)  a decline in the size of the inflationary gap. 
B)  an increase in the MPC. 
C)  an increase in the MPS. 
D)  a decline in the general price level. 
A)  a decline in the size of the inflationary gap. 
B)  an increase in the MPC. 
C)  an increase in the MPS. 
D)  a decline in the general price level.

Question 12

Answer the question on the basis of the following information for a private closed economy: $\begin{array}{l}
\begin{array} { c c } 
\underline{\text { Gross Domestic Product } }& \underline{\text { Consumption } }\
\$100& \$ 100 \
200 & 160 \
300 & 220 \
400 & 280 \
500 & 340 \
600 & 440
\end{array}\
\begin{array} { c c c } 
\underline{\text { Expected Rate of Return }} & \underline{\text { Amount of Investment }} \
15 \% & \$ 0 \
12 & 40 \
9 & 80 \
6 & 120 \
3 & 160 \
0 & 200
\end{array}
\end{array}$ Refer to the information.In this economy,a 3 percentage point decrease in the interest rate will:

Accepted Answer

A)  increase equilibrium GDP by $200. 
B)  increase equilibrium GDP by $50. 
C)  increase equilibrium GDP by $100. 
D)  decrease equilibrium GDP by $50. 
A)  increase equilibrium GDP by $200. 
B)  increase equilibrium GDP by $50. 
C)  increase equilibrium GDP by $100. 
D)  decrease equilibrium GDP by $50.

Question 13

(Advanced analysis)In a private closed economy, (a)the marginal propensity to save is 0.25, (b)consumption equals income at $120 billion,and (c)the level of investment is $40 billion.What is the equilibrium level of income?

Accepted Answer

A)  $280 billion. 
B)  $320 billion. 
C)  $262 billion. 
D)  $198 billion. 
A)  $280 billion. 
B)  $320 billion. 
C)  $262 billion. 
D)  $198 billion.

Question 14

If a $10 billion decrease in lump-sum taxes increases equilibrium GDP by $40 billion,then:

Accepted Answer

A)  the multiplier is 4. 
B)  the MPC for this economy is .8. 
C)  the MPC for this economy is .6. 
D)  the multiplier is 3. 
A)  the multiplier is 4. 
B)  the MPC for this economy is .8. 
C)  the MPC for this economy is .6. 
D)  the multiplier is 3.

Question 15

At the $180 billion equilibrium level of income,saving is $38 billion in a private closed economy.Planned investment must be:

Accepted Answer

A)  $138 billion. 
B)  $126 billion. 
C)  $38 billion. 
D)  $180 billion. 
A)  $138 billion. 
B)  $126 billion. 
C)  $38 billion. 
D)  $180 billion.

Question 16

Answer the question below on the basis of the following information for a private closed economy: $$\begin{array}{l}
\begin{array} { c c } 
\underline{\text { Gross Domestic Product }} &\underline{ \text { Consumption }} \
\$100& \$ 120 \
200 & 180 \
300 & 240 \
400 & 300 \
500 & 360
\end{array}\
\begin{array} { c c } 
\underline{\text { Expected Rate of Return }} &\underline{ \text { Amount of Investment }} \
 25 \% & \$ 0 \
20 & 20 \
15 & 40 \
10 & 60 \
5 & 80
\end{array}
\end{array}$$ Refer to the information.The multiplier for this economy is:

Accepted Answer

A)  2. 
B)  2.5. 
C)  3. 
D)  4. 
A)  2. 
B)  2.5. 
C)  3. 
D)  4.

Question 17

For an open mixed economy,the equilibrium level of GDP is determined where Sa + Ig + X = T +
G.

Accepted Answer

A) True 
 B)False

Question 18

(Advanced analysis)Answer the question on the basis of the following information for a private open economy.The letters Y,C,Ig,X,and M stand for GDP,consumption,gross investment,exports,and imports respectively.Figures are in billions of dollars. $\begin{array} { l } 
C = 40 + 0.8 Y \
t _ { g } = \overline { I _ { g } } = 40 \
X = \bar { X } = 20 \
M = \bar { M } = 30
\end{array}$ Refer to the information.This nation is incurring:

Accepted Answer

A)  a trade surplus. 
B)  balance in its international trade. 
C)  a trade deficit. 
D)  unemployment. 
A)  a trade surplus. 
B)  balance in its international trade. 
C)  a trade deficit. 
D)  unemployment.

Question 19

If the multiplier in an economy is 5,a $20 billion increase in net exports will:

Accepted Answer

A)  increase GDP by $100 billion. 
B)  reduce GDP by $4 billion. 
C)  decrease GDP by $100 billion. 
D)  increase GDP by $20 billion. 
A)  increase GDP by $100 billion. 
B)  reduce GDP by $4 billion. 
C)  decrease GDP by $100 billion. 
D)  increase GDP by $20 billion.

Question 20

If the marginal propensity to consume in an economy is .8,net exports are zero,and government spending is $33 billion at each level of real GDP,the slope of the economy's aggregate expenditures schedule will be:

Accepted Answer

A)  .8. 
B)  .2. 
C)  5. 
D)  .125. 
A)  .8. 
B)  .2. 
C)  5. 
D)  .125.

If a $20 billion increase in government expenditures increases equilibrium GDP by $50 billion,then:

If the United States wants to increase its net exports in the short term,it might take steps to:

In the aggregate expenditures model presented in the textbook,investment is assumed to rise with increases in real GDP and fall with decreases in real GDP.

The equilibrium level of GDP is associated with:

If a lump-sum tax of $40 billion is imposed and the MPC is .6,the saving schedule will shift:

(Advanced analysis)Answer the question on the basis of the following information for a private closed economy. S=-20+0.4Y =25-3i where S is saving,I_g is gross investment,i is the real interest rate,and Y is GDP. Refer to the information.In equilibrium,the level of consumption will be:

The effect of imposing a lump-sum tax is to:

What do investment and government expenditures have in common?

If aggregate expenditures exceed GDP in a private closed economy:

Other things equal,the slope of the aggregate expenditures schedule will increase as a result of:

Answer the question on the basis of the following information for a private closed economy: \1 00 \ 100 200 160 300 220 400 280 500 340 600 440 15\% \ 0 12 40 9 80 6 120 3 160 0 200 Refer to the information.In this economy,a 3 percentage point decrease in the interest rate will:

(Advanced analysis)In a private closed economy, (a)the marginal propensity to save is 0.25, (b)consumption equals income at $120 billion,and (c)the level of investment is $40 billion.What is the equilibrium level of income?

If a $10 billion decrease in lump-sum taxes increases equilibrium GDP by $40 billion,then:

At the $180 billion equilibrium level of income,saving is $38 billion in a private closed economy.Planned investment must be:

Answer the question below on the basis of the following information for a private closed economy: \1 00 \ 120 200 180 300 240 400 300 500 360 25\% \ 0 20 20 15 40 10 60 5 80 Refer to the information.The multiplier for this economy is:

For an open mixed economy,the equilibrium level of GDP is determined where S_a + I_g + X = T + G.

If the multiplier in an economy is 5,a $20 billion increase in net exports will:

If the marginal propensity to consume in an economy is .8,net exports are zero,and government spending is $33 billion at each level of real GDP,the slope of the economy's aggregate expenditures schedule will be:

Income Inequality Poverty and Discrimination

Health Care

Immigration

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

Aggregate Demand and Aggregate Supply

The Balance of Payments, Exchange Rates, and Trade Deficits

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

The United States and the Global Economy

Filters

Exam 30: The Aggregate Expenditures Model

If a $20 billion increase in government expenditures increases equilibrium GDP by $50 billion,then:

If the United States wants to increase its net exports in the short term,it might take steps to:

In the aggregate expenditures model presented in the textbook,investment is assumed to rise with increases in real GDP and fall with decreases in real GDP.

The equilibrium level of GDP is associated with:

If a lump-sum tax of $40 billion is imposed and the MPC is .6,the saving schedule will shift:

(Advanced analysis)Answer the question on the basis of the following information for a private closed economy. S=-20+0.4Y =25-3i where S is saving,Ig is gross investment,i is the real interest rate,and Y is GDP. Refer to the information.In equilibrium,the level of consumption will be:

The effect of imposing a lump-sum tax is to:

What do investment and government expenditures have in common?

If aggregate expenditures exceed GDP in a private closed economy:

Other things equal,the slope of the aggregate expenditures schedule will increase as a result of:

Answer the question on the basis of the following information for a private closed economy: \1 00 \ 100 200 160 300 220 400 280 500 340 600 440 15\% \ 0 12 40 9 80 6 120 3 160 0 200 Refer to the information.In this economy,a 3 percentage point decrease in the interest rate will:

(Advanced analysis)In a private closed economy, (a)the marginal propensity to save is 0.25, (b)consumption equals income at $120 billion,and (c)the level of investment is $40 billion.What is the equilibrium level of income?

If a $10 billion decrease in lump-sum taxes increases equilibrium GDP by $40 billion,then:

At the $180 billion equilibrium level of income,saving is $38 billion in a private closed economy.Planned investment must be:

Answer the question below on the basis of the following information for a private closed economy: \1 00 \ 120 200 180 300 240 400 300 500 360 25\% \ 0 20 20 15 40 10 60 5 80 Refer to the information.The multiplier for this economy is:

For an open mixed economy,the equilibrium level of GDP is determined where Sa + Ig + X = T + G.

If the multiplier in an economy is 5,a $20 billion increase in net exports will:

If the marginal propensity to consume in an economy is .8,net exports are zero,and government spending is $33 billion at each level of real GDP,the slope of the economy's aggregate expenditures schedule will be:

Income Inequality Poverty and Discrimination

Health Care

Immigration

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

Aggregate Demand and Aggregate Supply

The Balance of Payments, Exchange Rates, and Trade Deficits

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

The United States and the Global Economy

Filters

(Advanced analysis)Answer the question on the basis of the following information for a private closed economy. S=-20+0.4Y =25-3i where S is saving,I_g is gross investment,i is the real interest rate,and Y is GDP. Refer to the information.In equilibrium,the level of consumption will be:

For an open mixed economy,the equilibrium level of GDP is determined where S_a + I_g + X = T + G.