Question 1

Exports are added to,and imports are subtracted from,aggregate expenditures in moving from a closed to an open economy.

Accepted Answer

A) True 
 B)False

Question 2

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.The multiplier in this economy is:

Accepted Answer

A)  4. 
B)  5. 
C)  2.5. 
D)  3.5. 
A)  4. 
B)  5. 
C)  2.5. 
D)  3.5.

Question 3

(Advanced analysis)Answer the question on the basis of the following information for a private closed economy where C is consumption,Y is the gross domestic product,Ig is gross investment,and i is the interest rate: $\begin{aligned}
C & = 40 + 0.8 Y \
l _ { g } & = 60 - 2 i \
i & = \bar { i } = 10
\end{aligned}$ Refer to the information.Given that the interest rate is 10 (percent),the amount that businesses will want to invest will be:

Accepted Answer

A)  $58. 
B)  $60. 
C)  $40. 
D)  $20. 
A)  $58. 
B)  $60. 
C)  $40. 
D)  $20.

Question 4

In moving from a private closed to a mixed closed economy in the aggregate expenditures model,taxes:

Accepted Answer

A)  must be added to gross investment. 
B)  must be added to saving. 
C)  must be added to consumption and gross investment. 
D)  have no impact upon the equilibrium GDP. 
A)  must be added to gross investment. 
B)  must be added to saving. 
C)  must be added to consumption and gross investment. 
D)  have no impact upon the equilibrium GDP.

Question 5

The following information is for a closed economy: $\begin{array}{c}
\begin{array}{c}
\underline{\text { GDP }} \
\$ 100 \
200 \
300 \
400 \
500 \
600 \
700
\end{array}
\begin{array}{c}
\underline{\text { C }}\
 \$ 100 \
160 \
220 \
280 \
340 \
400 \
460 
\end{array}
\begin{array}{c}
\underline{\text { S}} \
\$ 0 \
40 \
80 \
120 \
160 \
200 \
240 
\end{array}
\begin{array}{c}
I_{g} \
\hline \$ 80 \
80 \
80 \
80 \
80 \
80 \
80 
\end{array}
\end{array}$
  Refer to the information.The introduction of $80 billion of government spending would:

Accepted Answer

A)  lower the multiplier from 2.5 to 2.0. 
B)  increase the multiplier from 2.5 to 3.0. 
C)  increase the multiplier from 2.0 to 2.5. 
D)  have no effect on the size of the multiplier. 
A)  lower the multiplier from 2.5 to 2.0. 
B)  increase the multiplier from 2.5 to 3.0. 
C)  increase the multiplier from 2.0 to 2.5. 
D)  have no effect on the size of the multiplier.

Question 6

In the aggregate expenditures model,an increase in government spending may:

Accepted Answer

A)  decrease real GDP. 
B)  increase output and employment. 
C)  shift the aggregate expenditures schedule downward. 
D)  reduce the size of the inflationary gap. 
A)  decrease real GDP. 
B)  increase output and employment. 
C)  shift the aggregate expenditures schedule downward. 
D)  reduce the size of the inflationary gap.

Question 7

The recessionary expenditure gap associated with the recession of 2007-2009 resulted from:

Accepted Answer

A)  the government's attempt to control hyperinflation. 
B)  a major increase in personal and corporate taxes. 
C)  a rapid decline in investment spending. 
D)  a rapid increase in imports resulting from large tariff reductions. 
A)  the government's attempt to control hyperinflation. 
B)  a major increase in personal and corporate taxes. 
C)  a rapid decline in investment spending. 
D)  a rapid increase in imports resulting from large tariff reductions.

Question 8

(Advanced analysis)Assume the saving schedule for a private closed economy is S = -20 + .2Y,where S is saving and Y is gross domestic product.The multiplier for this economy is:

Accepted Answer

A)  3. 
B)  4. 
C)  5. 
D)  10. 
A)  3. 
B)  4. 
C)  5. 
D)  10.

Question 9

Other things equal,an increase in an economy's exports will:

Accepted Answer

A)  lower the marginal propensity to import. 
B)  have no effect on domestic GDP because imports will change by an offsetting amount. 
C)  decrease its domestic aggregate expenditures and therefore decrease its equilibrium GDP. 
D)  increase its domestic aggregate expenditures and therefore increase its equilibrium GDP. 
A)  lower the marginal propensity to import. 
B)  have no effect on domestic GDP because imports will change by an offsetting amount. 
C)  decrease its domestic aggregate expenditures and therefore decrease its equilibrium GDP. 
D)  increase its domestic aggregate expenditures and therefore increase its equilibrium GDP.

Question 10

Planned investment plus unintended increases in inventories equals:

Accepted Answer

A)  actual investment. 
B)  consumption. 
C)  consumption minus saving. 
D)  unintended saving. 
A)  actual investment. 
B)  consumption. 
C)  consumption minus saving. 
D)  unintended saving.

Question 11

If the MPC is .9,a $20 billion increase in a lump-sum tax will reduce GDP by $200 billion.

Accepted Answer

A) True 
 B)False

Question 12

Actual investment consists of planned investment plus unplanned changes in inventories (plus or minus).

Accepted Answer

A) True 
 B)False

Question 13

(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.International trade in this case:

Accepted Answer

A)  has an expansionary effect on GDP. 
B)  has a contractionary effect on GDP. 
C)  has no effect on GDP. 
D)  is causing inflation in this economy. 
A)  has an expansionary effect on GDP. 
B)  has a contractionary effect on GDP. 
C)  has no effect on GDP. 
D)  is causing inflation in this economy.

Question 14

A lump-sum tax causes the after-tax consumption schedule:

Accepted Answer

A)  and the before-tax consumption schedule to coincide. 
B)  to be steeper than the before-tax consumption schedule. 
C)  to be flatter than the before-tax consumption schedule. 
D)  to be parallel to the before-tax consumption schedule. 
A)  and the before-tax consumption schedule to coincide. 
B)  to be steeper than the before-tax consumption schedule. 
C)  to be flatter than the before-tax consumption schedule. 
D)  to be parallel to the before-tax consumption schedule.

Question 15

(Advanced analysis)Answer the question on the basis of the following information for a mixed open economy.The letters Y,Ca,Ig,Xn,G,and T stand for GDP,consumption,gross investment,net exports,government purchases,and net taxes respectively.Figures are in billions of dollars. $\begin{aligned}
C _ { a } & = 25 + 0.75 ( Y - T ) \
I _ { g } & = I _ { g 0 } = 50 \
X _ { n } & = X _ { n 0 } = 10 \
G & = G _ { 0 } = 70 \
T & = T _ { 0 } = 30
\end{aligned}$ Refer to the information.The equilibrium level of GDP for this economy is:

Accepted Answer

A)  $600. 
B)  $530. 
C)  $415. 
D)  $400. 
A)  $600. 
B)  $530. 
C)  $415. 
D)  $400.

Question 16

Other things equal,if a change in the tastes of American consumers causes them to purchase more foreign goods at each level of U.S.GDP,then:

Accepted Answer

A)  unemployment will decrease domestically. 
B)  U.S.real GDP will fall. 
C)  inflation will occur domestically. 
D)  U.S.real GDP will rise. 
A)  unemployment will decrease domestically. 
B)  U.S.real GDP will fall. 
C)  inflation will occur domestically. 
D)  U.S.real GDP will rise.

Question 17

(Advanced analysis)Answer the question on the basis of the following information for a mixed open economy.The letters Y,Ca,Ig,Xn,G,and T stand for GDP,consumption,gross investment,net exports,government purchases,and net taxes respectively.Figures are in billions of dollars. $\begin{aligned}
C _ { a } & = 25 + 0.75 ( Y - T ) \
I _ { g } & = I _ { g 0 } = 50 \
X _ { n } & = X _ { n 0 } = 10 \
G & = G _ { 0 } = 70 \
T & = T _ { 0 } = 30
\end{aligned}$ Refer to the information.The multiplier for this economy is:

Accepted Answer

A)  4. 
B)  3. 
C)  2. 
D)  2.33. 
A)  4. 
B)  3. 
C)  2. 
D)  2.33.

Question 18

(Advanced analysis)Answer the question on the basis of the following data for a private closed economy.The letters Y,C,S,and I are used to represent real GDP,consumption,saving,and investment respectively. $\begin{array}{ccc}
\underline{\text { GDP }(Y)} & \underline{\text { Consumption (C) }} & \underline{\text { Investment (I) }} \
\$ \$ 0 & \$ 60 & \$ 30 \
100 & 120 & 40 \
200 & 180 & 50 \
300 & 240 & 60 \
400 & 300 & 70 \
500 & 360 & 80
\end{array}$ Refer to the data.Equilibrium Y (= GDP)is:

Accepted Answer

A)  $100. 
B)  $200. 
C)  $300. 
D)  $400. 
A)  $100. 
B)  $200. 
C)  $300. 
D)  $400.

Question 19

The following information is for a closed economy: $\begin{array}{c}
\begin{array}{c}
\underline{\text { GDP }} \
\$ 100 \
200 \
300 \
400 \
500 \
600 \
700
\end{array}
\begin{array}{c}
\underline{\text { C }}\
 \$ 100 \
160 \
220 \
280 \
340 \
400 \
460 
\end{array}
\begin{array}{c}
\underline{\text { S}} \
\$ 0 \
40 \
80 \
120 \
160 \
200 \
240 
\end{array}
\begin{array}{c}
I_{g} \
\hline \$ 80 \
80 \
80 \
80 \
80 \
80 \
80 
\end{array}
\end{array}$
 Refer to the information.If both government spending and taxes are zero,the equilibrium level of GDP is:

Accepted Answer

A)  $200. 
B)  $300. 
C)  $400. 
D)  $500. 
A)  $200. 
B)  $300. 
C)  $400. 
D)  $500.

Question 20

In an aggregate expenditures diagram,a lump-sum tax (T)will:

Accepted Answer

A)  not affect the C + Ig + Xn line. 
B)  shift the C + Ig + Xn line upward by an amount equal to T. 
C)  shift the C + Ig + Xn line downward by an amount equal to T. 
D)  shift the C + Ig + Xn line downward by an amount equal to T × MPC. 
A)  not affect the C + Ig + Xn line. 
B)  shift the C + Ig + Xn line upward by an amount equal to T. 
C)  shift the C + Ig + Xn line downward by an amount equal to T. 
D)  shift the C + Ig + Xn line downward by an amount equal to T × MPC.

Exports are added to,and imports are subtracted from,aggregate expenditures in moving from a closed to an open economy.

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.The multiplier in this economy is:

In moving from a private closed to a mixed closed economy in the aggregate expenditures model,taxes:

The following information is for a closed economy: \ 100 200 300 400 500 600 700 \ 100 160 220 280 340 400 460 \ 0 40 80 120 160 200 240 \ 80 80 80 80 80 80 80 Refer to the information.The introduction of $80 billion of government spending would:

In the aggregate expenditures model,an increase in government spending may:

The recessionary expenditure gap associated with the recession of 2007-2009 resulted from:

(Advanced analysis)Assume the saving schedule for a private closed economy is S = -20 + .2Y,where S is saving and Y is gross domestic product.The multiplier for this economy is:

Other things equal,an increase in an economy's exports will:

Planned investment plus unintended increases in inventories equals:

If the MPC is .9,a $20 billion increase in a lump-sum tax will reduce GDP by $200 billion.

Actual investment consists of planned investment plus unplanned changes in inventories (plus or minus).

A lump-sum tax causes the after-tax consumption schedule:

Other things equal,if a change in the tastes of American consumers causes them to purchase more foreign goods at each level of U.S.GDP,then:

The following information is for a closed economy: \ 100 200 300 400 500 600 700 \ 100 160 220 280 340 400 460 \ 0 40 80 120 160 200 240 \ 80 80 80 80 80 80 80 Refer to the information.If both government spending and taxes are zero,the equilibrium level of GDP is:

In an aggregate expenditures diagram,a lump-sum tax (T)will:

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

Exports are added to,and imports are subtracted from,aggregate expenditures in moving from a closed to an open economy.

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.The multiplier in this economy is:

In moving from a private closed to a mixed closed economy in the aggregate expenditures model,taxes:

The following information is for a closed economy: \ 100 200 300 400 500 600 700 \ 100 160 220 280 340 400 460 \ 0 40 80 120 160 200 240 \ 80 80 80 80 80 80 80 Refer to the information.The introduction of $80 billion of government spending would:

In the aggregate expenditures model,an increase in government spending may:

The recessionary expenditure gap associated with the recession of 2007-2009 resulted from:

(Advanced analysis)Assume the saving schedule for a private closed economy is S = -20 + .2Y,where S is saving and Y is gross domestic product.The multiplier for this economy is:

Other things equal,an increase in an economy's exports will:

Planned investment plus unintended increases in inventories equals:

If the MPC is .9,a $20 billion increase in a lump-sum tax will reduce GDP by $200 billion.

Actual investment consists of planned investment plus unplanned changes in inventories (plus or minus).

A lump-sum tax causes the after-tax consumption schedule:

Other things equal,if a change in the tastes of American consumers causes them to purchase more foreign goods at each level of U.S.GDP,then:

The following information is for a closed economy: \ 100 200 300 400 500 600 700 \ 100 160 220 280 340 400 460 \ 0 40 80 120 160 200 240 \ 80 80 80 80 80 80 80 Refer to the information.If both government spending and taxes are zero,the equilibrium level of GDP is:

In an aggregate expenditures diagram,a lump-sum tax (T)will:

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