Question 1

What will be the effect of an excess of planned investment over saving in a private closed economy with unemployed resources?

Accepted Answer

A)  A decline in the rate of interest. 
B)  An unintended accumulation of inventories by businesses. 
C)  A rise in the real GDP. 
D)  The federal budget will automatically move toward a deficit. 
A)  A decline in the rate of interest. 
B)  An unintended accumulation of inventories by businesses. 
C)  A rise in the real GDP. 
D)  The federal budget will automatically move toward a deficit.

Question 2

The following schedule contains data for a private closed economy.All figures are in billions.Use these data in answering the question. $\begin{array}{l}
\underline{\text { GDP }}& \underline{C} \
\$140&\$150\
180 & 180 \
220 & 210 \
260 & 240\
300 &270 \
\end{array}$ Refer to the data.If a lump-sum tax of $20 is imposed,the consumption schedule will become:

Accepted Answer

A) 
$\begin{array}{l}
\underline{\text { GDP }}& \underline{C} \
\$140&\$150\
180 & 180 \
220 & 210 \
260 & 240\
300 &270 \
\end{array}$ 
B) 
$\begin{array}{l}
\underline{\text { GDP }}& \underline{C} \
\$140&\$155\
180 & 185 \
220 & 215 \
260 & 245\
300 &275 \
\end{array}$ 
C) 
$\begin{array}{l}
\underline{\text { GDP }}& \underline{C} \
\$140&\$135\
180 & 165 \
220 &195 \
260 & 255\
300 &255 \
\end{array}$ 
D) 
$\begin{array}{l}
\underline{\text { GDP }}& \underline{C} \
\$140&\$130\
180 & 160 \
220 & 190 \
260 & 220\
300 &250 \
\end{array}$ 
A) 
$\begin{array}{l}
\underline{\text { GDP }}& \underline{C} \
\$140&\$150\
180 & 180 \
220 & 210 \
260 & 240\
300 &270 \
\end{array}$ 
B) 
$\begin{array}{l}
\underline{\text { GDP }}& \underline{C} \
\$140&\$155\
180 & 185 \
220 & 215 \
260 & 245\
300 &275 \
\end{array}$ 
C) 
$\begin{array}{l}
\underline{\text { GDP }}& \underline{C} \
\$140&\$135\
180 & 165 \
220 &195 \
260 & 255\
300 &255 \
\end{array}$ 
D) 
$\begin{array}{l}
\underline{\text { GDP }}& \underline{C} \
\$140&\$130\
180 & 160 \
220 & 190 \
260 & 220\
300 &250 \
\end{array}$

Question 3

A private closed economy will expand when:

Accepted Answer

A)  actual GDP is less than potential GDP. 
B)  unplanned decreases in inventories occur. 
C)  aggregate expenditures are less than GDP. 
D)  unplanned increases in inventories occur. 
A)  actual GDP is less than potential GDP. 
B)  unplanned decreases in inventories occur. 
C)  aggregate expenditures are less than GDP. 
D)  unplanned increases in inventories occur.

Question 4

Classical macroeconomics was dealt severe blows by:

Accepted Answer

A)  the Great Depression and Keynes's macroeconomic theory. 
B)  the Second World War and the writings of Milton Friedman. 
C)  Adam Smith and his idea of the invisible hand. 
D)  the strong recovery after the Second World War and Alvin Hansen's stagnation thesis. 
A)  the Great Depression and Keynes's macroeconomic theory. 
B)  the Second World War and the writings of Milton Friedman. 
C)  Adam Smith and his idea of the invisible hand. 
D)  the strong recovery after the Second World War and Alvin Hansen's stagnation thesis.

Question 5

If a lump-sum income tax of $25 billion is levied and the MPS is .20,the:

Accepted Answer

A)  saving schedule will shift upward by $5 billion. 
B)  consumption schedule will shift downward by $25 billion. 
C)  consumption schedule will shift downward by $20 billion. 
D)  consumption schedule will shift upward by $25 billion. 
A)  saving schedule will shift upward by $5 billion. 
B)  consumption schedule will shift downward by $25 billion. 
C)  consumption schedule will shift downward by $20 billion. 
D)  consumption schedule will shift upward by $25 billion.

Question 6

If the equilibrium level of GDP in a private open economy is $1,000 billion and consumption is $700 billion at that level of GDP,then:

Accepted Answer

A)  saving must be $300 billion. 
B)  net exports must be $300 billion. 
C)  S + C must equal $300 billion. 
D)  Ig + Xn must equal $300 billion. 
A)  saving must be $300 billion. 
B)  net exports must be $300 billion. 
C)  S + C must equal $300 billion. 
D)  Ig + Xn must equal $300 billion.

Question 7

Suppose government finds it can increase the equilibrium real GDP $45 billion by increasing government purchases by $18 billion.On the basis of this information,we can say that the:

Accepted Answer

A)  MPS in this economy is .4. 
B)  MPC in this economy is .4. 
C)  multiplier does not apply in this economy. 
D)  multiplier is 3. 
A)  MPS in this economy is .4. 
B)  MPC in this economy is .4. 
C)  multiplier does not apply in this economy. 
D)  multiplier is 3.

Question 8

Imports have the same effect on the current size of GDP as:

Accepted Answer

A)  exports. 
B)  investment. 
C)  consumption. 
D)  saving. 
A)  exports. 
B)  investment. 
C)  consumption. 
D)  saving.

Question 9

All else equal,a large decline in the real interest rate will shift the:

Accepted Answer

A)  investment demand curve leftward. 
B)  investment demand curve rightward. 
C)  investment schedule upward. 
D)  investment schedule downward. 
A)  investment demand curve leftward. 
B)  investment demand curve rightward. 
C)  investment schedule upward. 
D)  investment schedule downward.

Question 10

In the aggregate expenditures model,a reduction in taxes may:

Accepted Answer

A)  increase saving. 
B)  decrease real GDP. 
C)  increase unemployment. 
D)  reduce consumption. 
A)  increase saving. 
B)  decrease real GDP. 
C)  increase unemployment. 
D)  reduce consumption.

Question 11

In the aggregate expenditures model,it is assumed that investment:

Accepted Answer

A)  automatically changes in response to changes in real GDP. 
B)  changes by less in percentage terms than changes in real GDP. 
C)  does not respond to changes in interest rates. 
D)  does not change when real GDP changes. 
A)  automatically changes in response to changes in real GDP. 
B)  changes by less in percentage terms than changes in real GDP. 
C)  does not respond to changes in interest rates. 
D)  does not change when real GDP changes.

Question 12

Suppose that the level of GDP increased by $100 billion in a private closed economy where the marginal propensity to consume is .5.Aggregate expenditures must have increased by:

Accepted Answer

A)  $100 billion. 
B)  $50 billion. 
C)  $500 billion. 
D)  $5 billion. 
A)  $100 billion. 
B)  $50 billion. 
C)  $500 billion. 
D)  $5 billion.

Question 13

Taxes represent:

Accepted Answer

A)  a leakage of purchasing power,like saving. 
B)  an injection of purchasing power,like investment. 
C)  an injection of purchasing power,like government spending. 
D)  a leakage of purchasing power,like government spending. 
A)  a leakage of purchasing power,like saving. 
B)  an injection of purchasing power,like investment. 
C)  an injection of purchasing power,like government spending. 
D)  a leakage of purchasing power,like government spending.

Question 14

A recessionary expenditure gap is:

Accepted Answer

A)  the amount by which the full-employment GDP exceeds the level of aggregate expenditures. 
B)  the amount by which equilibrium GDP falls short of the full-employment GDP. 
C)  the amount by which investment exceeds saving at the full-employment GDP. 
D)  the amount by which aggregate expenditures exceed the full-employment level of GDP. 
A)  the amount by which the full-employment GDP exceeds the level of aggregate expenditures. 
B)  the amount by which equilibrium GDP falls short of the full-employment GDP. 
C)  the amount by which investment exceeds saving at the full-employment GDP. 
D)  the amount by which aggregate expenditures exceed the full-employment level of GDP.

Question 15

Which of the following statements concerning the equilibrium level of GDP is incorrect?

Accepted Answer

A)  There will be no tendency for businesses to alter the aggregate rate of production. 
B)  Full employment will necessarily be realized. 
C)  No unintended changes in inventories will occur. 
D)  Leakages equal injections. 
A)  There will be no tendency for businesses to alter the aggregate rate of production. 
B)  Full employment will necessarily be realized. 
C)  No unintended changes in inventories will occur. 
D)  Leakages equal injections.

Question 16

An exchange rate:

Accepted Answer

A)  is the ratio of the dollar volume of a nation's exports to the dollar volume of its imports. 
B)  measures the interest rate ratios of any two nations. 
C)  is the amount that one nation must export to obtain $1 worth of imports. 
D)  is the price that the currencies of any two nations exchange for one another. 
A)  is the ratio of the dollar volume of a nation's exports to the dollar volume of its imports. 
B)  measures the interest rate ratios of any two nations. 
C)  is the amount that one nation must export to obtain $1 worth of imports. 
D)  is the price that the currencies of any two nations exchange for one another.

Question 17

In a mixed open economy,the equilibrium GDP exists where:

Accepted Answer

A)  Ca + Ig + Xn intersects the 45-degree line. 
B)  Ca + Ig = Sa + T + X. 
C)  Ca + Ig + Xn + G = GDP. 
D)  Ca + Ig + Xn = Sa + T. 
A)  Ca + Ig + Xn intersects the 45-degree line. 
B)  Ca + Ig = Sa + T + X. 
C)  Ca + Ig + Xn + G = GDP. 
D)  Ca + Ig + Xn = Sa + T.

Question 18

Complete the following table and answer the question on the basis of the resulting data.All figures are in billions of dollars. $\begin{array}{cccccc}
\begin{array}{c}
\text { Domestic } \
\text { Output } \
\underline{\text { (GDP = DI) }}
\end{array} & \begin{array}{c}
\text { Aggregate } \
\text { Expenditures, } \
\underline{\text { Closed Economy }}
\end{array} & \begin{array}{c}
\
\
\underline{\text { Exports }}
\end{array} & \begin{array}{c}\
\
\underline{\text { Imports }}
\end{array} & \begin{array}{c}
\
\text { Net } \
\underline{\text { Exports }}
\end{array} & \begin{array}{c}
\text { Aggregate } \
\text { Expenditures, } \
\underline{\text { Open Economy }}
\end{array} \
 \$ 200 & \$ 230 & \$ 30 & \$ 20 & \$- & \$- \
250 & 270 & 30 & 20 & -&- \
300 & 310 & 30 & 20 & - & - \
350 & 350 & 30 & 20 & - & - \
400 & 390 & 30 & 20 & - & - \
450 & 430 & 30 & 20 & - & - \
500 & 470 & 30 & 20 & - & -
\end{array}$ If the economy was closed to international trade,the equilibrium GDP and the multiplier would be:

Accepted Answer

A)  $300 and 5. 
B)  $350 and 4. 
C)  $400 and 4. 
D)  $350 and 5. 
A)  $300 and 5. 
B)  $350 and 4. 
C)  $400 and 4. 
D)  $350 and 5.

Question 19

(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 saving will be:

Accepted Answer

A)  $10. 
B)  $15. 
C)  $20. 
D)  $30. 
A)  $10. 
B)  $15. 
C)  $20. 
D)  $30.

Question 20

If an unintended increase in business inventories occurs at some level of GDP,then GDP:

Accepted Answer

A)  entails a rate of aggregate expenditures in excess of the rate of aggregate production. 
B)  may be either above or below the equilibrium output. 
C)  is too low for equilibrium. 
D)  is too high for equilibrium. 
A)  entails a rate of aggregate expenditures in excess of the rate of aggregate production. 
B)  may be either above or below the equilibrium output. 
C)  is too low for equilibrium. 
D)  is too high for equilibrium.

What will be the effect of an excess of planned investment over saving in a private closed economy with unemployed resources?

The following schedule contains data for a private closed economy.All figures are in billions.Use these data in answering the question. \1 40 \1 50 180 180 220 210 260 240 300 270 Refer to the data.If a lump-sum tax of $20 is imposed,the consumption schedule will become:

A private closed economy will expand when:

Classical macroeconomics was dealt severe blows by:

If a lump-sum income tax of $25 billion is levied and the MPS is .20,the:

If the equilibrium level of GDP in a private open economy is $1,000 billion and consumption is $700 billion at that level of GDP,then:

Suppose government finds it can increase the equilibrium real GDP $45 billion by increasing government purchases by $18 billion.On the basis of this information,we can say that the:

Imports have the same effect on the current size of GDP as:

All else equal,a large decline in the real interest rate will shift the:

In the aggregate expenditures model,a reduction in taxes may:

In the aggregate expenditures model,it is assumed that investment:

Suppose that the level of GDP increased by $100 billion in a private closed economy where the marginal propensity to consume is .5.Aggregate expenditures must have increased by:

Taxes represent:

A recessionary expenditure gap is:

Which of the following statements concerning the equilibrium level of GDP is incorrect?

An exchange rate:

In a mixed open economy,the equilibrium GDP exists where:

(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 saving will be:

If an unintended increase in business inventories occurs at some level of GDP,then GDP:

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

What will be the effect of an excess of planned investment over saving in a private closed economy with unemployed resources?

The following schedule contains data for a private closed economy.All figures are in billions.Use these data in answering the question. \1 40 \1 50 180 180 220 210 260 240 300 270 Refer to the data.If a lump-sum tax of $20 is imposed,the consumption schedule will become:

A private closed economy will expand when:

Classical macroeconomics was dealt severe blows by:

If a lump-sum income tax of $25 billion is levied and the MPS is .20,the:

If the equilibrium level of GDP in a private open economy is $1,000 billion and consumption is $700 billion at that level of GDP,then:

Suppose government finds it can increase the equilibrium real GDP $45 billion by increasing government purchases by $18 billion.On the basis of this information,we can say that the:

Imports have the same effect on the current size of GDP as:

All else equal,a large decline in the real interest rate will shift the:

In the aggregate expenditures model,a reduction in taxes may:

In the aggregate expenditures model,it is assumed that investment:

Suppose that the level of GDP increased by $100 billion in a private closed economy where the marginal propensity to consume is .5.Aggregate expenditures must have increased by:

Taxes represent:

A recessionary expenditure gap is:

Which of the following statements concerning the equilibrium level of GDP is incorrect?

An exchange rate:

In a mixed open economy,the equilibrium GDP exists where:

(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 saving will be:

If an unintended increase in business inventories occurs at some level of GDP,then GDP:

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 saving will be: