Question 1

When the public sector is added to the aggregate expenditures model:

Accepted Answer

A)  the equilibrium condition becomes G + S = T + Ig + X. 
B)  the equilibrium condition becomes G + T = S + Ig + X. 
C)  the equilibrium condition becomes Ca + Ig + Xn + G + T = GDP. 
D)  we add a new leakage in the form of taxes and a new injection in the form of government spending. 
A)  the equilibrium condition becomes G + S = T + Ig + X. 
B)  the equilibrium condition becomes G + T = S + Ig + X. 
C)  the equilibrium condition becomes Ca + Ig + Xn + G + T = GDP. 
D)  we add a new leakage in the form of taxes and a new injection in the form of government spending.

Question 2

In a private closed economy (a)the marginal propensity to save is 0.25, (b)consumption equals income when consumption is $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 3

-Refer to the above 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 $100. 
C)  increase equilibrium GDP by $50. 
D)  decrease equilibrium GDP by $50. 
A)  increase equilibrium GDP by $200. 
B)  increase equilibrium GDP by $100. 
C)  increase equilibrium GDP by $50. 
D)  decrease equilibrium GDP by $50.

Question 4

If the marginal propensity to consume is .80 and both taxes and government purchases increase by $50 billion,GDP will:

Accepted Answer

A)  increase by $50 billion. 
B)  decrease by $50 billion. 
C)  increase by $10 billion. 
D)  decrease by $10 billion. 
A)  increase by $50 billion. 
B)  decrease by $50 billion. 
C)  increase by $10 billion. 
D)  decrease by $10 billion.

Question 5

In a private closed economy,where aggregate expenditures exceed domestic output:

Accepted Answer

A)  domestic output will decline to the break-even level. 
B)  business inventories will rise. 
C)  saving exceeds planned investment. 
D)  planned investment exceeds saving. 
A)  domestic output will decline to the break-even level. 
B)  business inventories will rise. 
C)  saving exceeds planned investment. 
D)  planned investment exceeds saving.

Question 6

In a recessionary expenditure gap,the equilibrium level of real GDP is:

Accepted Answer

A)  less than planned investment. 
B)  equal to full-employment GDP. 
C)  greater than full-employment GDP. 
D)  less than full-employment GDP. 
A)  less than planned investment. 
B)  equal to full-employment GDP. 
C)  greater than full-employment GDP. 
D)  less than full-employment GDP.

Question 7

-Refer to the above diagram.If (C + Ig)are the private expenditures in the closed economy and Xn2 are the net exports in the open economy:

Accepted Answer

A)  exports are negative. 
B)  net exports are positive. 
C)  net exports are negative. 
D)  exports are positive. 
A)  exports are negative. 
B)  net exports are positive. 
C)  net exports are negative. 
D)  exports are positive.

Question 8

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

Accepted Answer

A)  decrease real GDP. 
B)  increase output and employment. 
C)  shift the aggregate expenditures schedule downward. 
D)  do all of the above. 
A)  decrease real GDP. 
B)  increase output and employment. 
C)  shift the aggregate expenditures schedule downward. 
D)  do all of the above.

Question 9

-Refer to the above diagram.The equilibrium condition for a private open economy is S + M = Ig + X.

Accepted Answer

A) True 
 B)False

Question 10

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 11

In reality,if a nation devalues its currency,then the final result will be that:

Accepted Answer

A)  net exports and GDP will increase. 
B)  net exports and GDP will decrease. 
C)  there will be is no long term effect on net exports and GDP. 
D)  there will be a decrease in imports and an increase in GDP. 
A)  net exports and GDP will increase. 
B)  net exports and GDP will decrease. 
C)  there will be is no long term effect on net exports and GDP. 
D)  there will be a decrease in imports and an increase in GDP.

Question 12

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 unplanned 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 unplanned accumulation of inventories by businesses 
C)  a rise in the real GDP 
D)  the federal budget will automatically move toward a deficit

Question 13

-Refer to the above diagram.The impact of the public sector on the equilibrium GDP:

Accepted Answer

A)  is expansionary. 
B)  is contractionary. 
C)  is neutral. 
D)  cannot be determined from the information given. 
A)  is expansionary. 
B)  is contractionary. 
C)  is neutral. 
D)  cannot be determined from the information given.

Question 14

In reality,if a nation imposes tariffs,then the final result will be that net exports and GDP will decrease.

Accepted Answer

A) True 
 B)False

Question 15

If the marginal propensity to save in a closed economy is 0.25 and a lump-sum tax is imposed,the slope of the economy's aggregate expenditures schedule will be:

Accepted Answer

A)  .25. 
B)  less than the slope before the imposition of the tax. 
C)  greater than the slope before the imposition of the tax. 
D)  .75. 
A)  .25. 
B)  less than the slope before the imposition of the tax. 
C)  greater than the slope before the imposition of the tax. 
D)  .75.

Question 16

A "recessionary expenditure gap" is:

Accepted Answer

A)  the amount by which the full-employment GDP exceeds equilibrium GDP. 
B)  the amount by which aggregate expenditures fall short of those required to achieve 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 domestic output. 
A)  the amount by which the full-employment GDP exceeds equilibrium GDP. 
B)  the amount by which aggregate expenditures fall short of those required to achieve 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 domestic output.

Question 17

In which of the following situations for a private closed economy will the level of GDP expand?

Accepted Answer

A)  when planned investment exceeds saving 
B)  when planned investment exceeds consumption 
C)  when saving exceeds consumption 
D)  when consumption exceeds investment 
A)  when planned investment exceeds saving 
B)  when planned investment exceeds consumption 
C)  when saving exceeds consumption 
D)  when consumption exceeds investment

Question 18

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 19

Refer to the information below.The multiplier in this economy is:

Accepted Answer

A)  4 
B)  5 
C)  1.5. 
D)  3 
A)  4 
B)  5 
C)  1.5. 
D)  3

Question 20

Actual investment is $62 billion at an equilibrium output level of $620 billion in a private closed economy.The average propensity to save at this level of output:

Accepted Answer

A)  is 0.10. 
B)  is 10. 
C)  is 0.62. 
D)  cannot be determined on the basis of the information given. 
A)  is 0.10. 
B)  is 10. 
C)  is 0.62. 
D)  cannot be determined on the basis of the information given.

When the public sector is added to the aggregate expenditures model:

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

-Refer to the above information.In this economy a 3 percentage point decrease in the interest rate will:

If the marginal propensity to consume is .80 and both taxes and government purchases increase by $50 billion,GDP will:

In a private closed economy,where aggregate expenditures exceed domestic output:

In a recessionary expenditure gap,the equilibrium level of real GDP is:

-Refer to the above diagram.If (C + I_g)are the private expenditures in the closed economy and X_n2 are the net exports in the open economy:

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

-Refer to the above diagram.The equilibrium condition for a private open economy is S + M = I_g + X.

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

In reality,if a nation devalues its currency,then the final result will be that:

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

-Refer to the above diagram.The impact of the public sector on the equilibrium GDP:

In reality,if a nation imposes tariffs,then the final result will be that net exports and GDP will decrease.

If the marginal propensity to save in a closed economy is 0.25 and a lump-sum tax is imposed,the slope of the economy's aggregate expenditures schedule will be:

A "recessionary expenditure gap" is:

In which of the following situations for a private closed economy will the level of GDP expand?

What do investment and government expenditures have in common?

Refer to the information below.The multiplier in this economy is:

Actual investment is $62 billion at an equilibrium output level of $620 billion in a private closed economy.The average propensity to save at this level of output:

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

An Introduction to Macroeconomics

Measuring the Economys Output

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, Surpluses, and Debt

Money, Banking, and Money Creation

Interest Rates and Monetary Policy

Long-Run Macroeconomic Adjustments

International Trade

Exchange Rates and the Balance of Payments

Filters

Exam 11: The Aggregate Expenditures Model

When the public sector is added to the aggregate expenditures model:

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

-Refer to the above information.In this economy a 3 percentage point decrease in the interest rate will:

If the marginal propensity to consume is .80 and both taxes and government purchases increase by $50 billion,GDP will:

In a private closed economy,where aggregate expenditures exceed domestic output:

In a recessionary expenditure gap,the equilibrium level of real GDP is:

-Refer to the above diagram.If (C + Ig)are the private expenditures in the closed economy and Xn2 are the net exports in the open economy:

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

-Refer to the above diagram.The equilibrium condition for a private open economy is S + M = Ig + X.

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

In reality,if a nation devalues its currency,then the final result will be that:

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

-Refer to the above diagram.The impact of the public sector on the equilibrium GDP:

In reality,if a nation imposes tariffs,then the final result will be that net exports and GDP will decrease.

If the marginal propensity to save in a closed economy is 0.25 and a lump-sum tax is imposed,the slope of the economy's aggregate expenditures schedule will be:

A "recessionary expenditure gap" is:

In which of the following situations for a private closed economy will the level of GDP expand?

What do investment and government expenditures have in common?

Refer to the information below.The multiplier in this economy is:

Actual investment is $62 billion at an equilibrium output level of $620 billion in a private closed economy.The average propensity to save at this level of output:

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

An Introduction to Macroeconomics

Measuring the Economys Output

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, Surpluses, and Debt

Money, Banking, and Money Creation

Interest Rates and Monetary Policy

Long-Run Macroeconomic Adjustments

International Trade

Exchange Rates and the Balance of Payments

Filters

-Refer to the above diagram.If (C + I_g)are the private expenditures in the closed economy and X_n2 are the net exports in the open economy:

-Refer to the above diagram.The equilibrium condition for a private open economy is S + M = I_g + X.