Question 1

Refer to the diagram below for a private closed economy.In equilibrium the level of consumption:

Accepted Answer

A)  will be $100. 
B)  will be $500. 
C)  will be $600. 
D)  cannot be determined from the information given. 
A)  will be $100. 
B)  will be $500. 
C)  will be $600. 
D)  cannot be determined from the information given.

Question 2

Refer to the diagram below.The equilibrium condition for a private closed economy is Ig = S.

Accepted Answer

A) True 
 B)False

Question 3

-The equilibrium level of GDP for the above private open economy is:

Accepted Answer

A)  Y4. 
B)  Y3. 
C)  Y2. 
D)  Y1. 
A)  Y4. 
B)  Y3. 
C)  Y2. 
D)  Y1.

Question 4

At the equilibrium GDP for an open economy:

Accepted Answer

A)  net exports may be either positive or negative. 
B)  imports will always exceed exports. 
C)  exports will always exceed imports. 
D)  exports and imports will be equal. 
A)  net exports may be either positive or negative. 
B)  imports will always exceed exports. 
C)  exports will always exceed imports. 
D)  exports and imports will be equal.

Question 5

The following information is for a closed economy:
  
-Refer to the above information.If both government spending and taxes are zero,the equilibrium level of GDP:

Accepted Answer

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

Question 6

If the MPC in an economy is .75,a $1 billion increase in taxes will reduce the GDP by:

Accepted Answer

A)  $1 billion. 
B)  $.75 billion. 
C)  $3 billion. 
D)  $4 billion. 
A)  $1 billion. 
B)  $.75 billion. 
C)  $3 billion. 
D)  $4 billion.

Question 7

Assume the current equilibrium level of income is $200 billion as compared to the full-employment income level of $240 billion.If the MPC is 0.6,what change in aggregate expenditures is needed to achieve full employment?

Accepted Answer

A)  a decrease of $24 billion 
B)  an increase of $24 billion 
C)  a decrease of $16 billion 
D)  an increase of $16 billion 
A)  a decrease of $24 billion 
B)  an increase of $24 billion 
C)  a decrease of $16 billion 
D)  an increase of $16 billion

Question 8

Which of the following will cause the investment schedule to shift downward?

Accepted Answer

A)  an increase in the real interest rate 
B)  a decline in wage rates 
C)  a significant decline in the real interest rate 
D)  a new technological advance which cuts the price of steel by one-half 
A)  an increase in the real interest rate 
B)  a decline in wage rates 
C)  a significant decline in the real interest rate 
D)  a new technological advance which cuts the price of steel by one-half

Question 9

-In the above private open economy,international trade:

Accepted Answer

A)  is inflationary. 
B)  is a source of additional jobs for domestic workers. 
C)  has no effect on GDP. 
D)  has a contractionary effect on GDP. 
A)  is inflationary. 
B)  is a source of additional jobs for domestic workers. 
C)  has no effect on GDP. 
D)  has a contractionary effect on GDP.

Question 10

The relationship between investment and GDP is shown by the:

Accepted Answer

A)  consumption of fixed capital schedule. 
B)  saving schedule. 
C)  investment schedule. 
D)  consumption schedule. 
A)  consumption of fixed capital schedule. 
B)  saving schedule. 
C)  investment schedule. 
D)  consumption schedule.

Question 11

If the MPC is .50,all taxes are lump-sum taxes,and the equilibrium GDP is $40 billion below the full-employment GDP,then the size of the recessionary expenditure gap:

Accepted Answer

A)  is $40 billion. 
B)  is $20 billion. 
C)  is $60 billion. 
D)  cannot be determined from the information given. 
A)  is $40 billion. 
B)  is $20 billion. 
C)  is $60 billion. 
D)  cannot be determined from the information given.

Question 12

Refer to the data below.If gross investment is $10 at all levels of GDP,the equilibrium GDP will be:
The following schedule contains data for a private closed economy.All figures are in billions.

Accepted Answer

A)  $300 
B)  $220 
C)  $260 
D)  $180 
A)  $300 
B)  $220 
C)  $260 
D)  $180

Question 13

Investment and saving are,respectively:

Accepted Answer

A)  income and wealth. 
B)  stocks and flows. 
C)  injections and leakages. 
D)  leakages and injections. 
A)  income and wealth. 
B)  stocks and flows. 
C)  injections and leakages. 
D)  leakages and injections.

Question 14

Which of the following statements is correct for a private closed economy?

Accepted Answer

A)  Saving equals planned investment only at the equilibrium level of domestic output. 
B)  All levels of domestic output where planned investment exceeds saving will be too high for equilibrium. 
C)  Planned and actual investment are identical at all possible levels of domestic output. 
D)  Saving equals actual investment only at the equilibrium level of domestic output. 
A)  Saving equals planned investment only at the equilibrium level of domestic output. 
B)  All levels of domestic output where planned investment exceeds saving will be too high for equilibrium. 
C)  Planned and actual investment are identical at all possible levels of domestic output. 
D)  Saving equals actual investment only at the equilibrium level of domestic output.

Question 15

-Refer to the above diagrams.Other things equal,an interest rate decrease will:

Accepted Answer

A)  shift curve A to the right and shift curve B upward. 
B)  shift curve A to the left and shift curve B downward. 
C)  leave curve A in place but shift curve B downward. 
D)  leave curve A in place but shift curve A upward. 
A)  shift curve A to the right and shift curve B upward. 
B)  shift curve A to the left and shift curve B downward. 
C)  leave curve A in place but shift curve B downward. 
D)  leave curve A in place but shift curve A upward.

Question 16

In which of the following situations for a mixed open economy will the level of GDP expand?

Accepted Answer

A)  when Ig + X + G exceeds Sa + M + T 
B)  when Sa + T + M exceeds Ig + G + X 
C)  when domestic output exceeds Ca + Ig + G + Xn 
D)  when Ig + M + T exceeds Ca + X + S 
A)  when Ig + X + G exceeds Sa + M + T 
B)  when Sa + T + M exceeds Ig + G + X 
C)  when domestic output exceeds Ca + Ig + G + Xn 
D)  when Ig + M + T exceeds Ca + X + S

Question 17

Assume in a private economy that the equilibrium level of income is $380 and the MPS is 0.25.Now suppose government collects taxes of $50 and spends the entire amount.As a result:

Accepted Answer

A)  the equilibrium level of real income and the price level will both remain unchanged. 
B)  nominal wage rates will fall. 
C)  the equilibrium level of income will rise to $420. 
D)  the equilibrium level of income will rise to $430. 
A)  the equilibrium level of real income and the price level will both remain unchanged. 
B)  nominal wage rates will fall. 
C)  the equilibrium level of income will rise to $420. 
D)  the equilibrium level of income will rise to $430.

Question 18

A $1 increase in government spending on goods and services will have a greater impact on the equilibrium GDP than will a $1 decline in taxes because:

Accepted Answer

A)  government spending is more employment-intensive than is either consumption or investment spending. 
B)  government spending increases the money supply and a tax reduction does not. 
C)  a portion of a tax cut will be saved. 
D)  taxes vary directly with income. 
A)  government spending is more employment-intensive than is either consumption or investment spending. 
B)  government spending increases the money supply and a tax reduction does not. 
C)  a portion of a tax cut will be saved. 
D)  taxes vary directly with income.

Question 19

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

Accepted Answer

A)  automatically changes in response to changes in the current level of real domestic output. 
B)  changes by less in percentage terms than changes in the level of real domestic output. 
C)  does not respond to changes in interest rates. 
D)  does not change when the level of real domestic output changes. 
A)  automatically changes in response to changes in the current level of real domestic output. 
B)  changes by less in percentage terms than changes in the level of real domestic output. 
C)  does not respond to changes in interest rates. 
D)  does not change when the level of real domestic output changes.

Question 20

If a nation imposes tariffs and quotas on foreign products,the immediate effect,if no retaliation is immediately imposed by other countries will be to:

Accepted Answer

A)  reduce the rate of domestic inflation. 
B)  increase efficiency in the world economy. 
C)  increase domestic output and employment. 
D)  reduce domestic output and employment. 
A)  reduce the rate of domestic inflation. 
B)  increase efficiency in the world economy. 
C)  increase domestic output and employment. 
D)  reduce domestic output and employment.

Refer to the diagram below for a private closed economy.In equilibrium the level of consumption:

Refer to the diagram below.The equilibrium condition for a private closed economy is I_g = S.

-The equilibrium level of GDP for the above private open economy is:

At the equilibrium GDP for an open economy:

The following information is for a closed economy: -Refer to the above information.If both government spending and taxes are zero,the equilibrium level of GDP:

If the MPC in an economy is .75,a $1 billion increase in taxes will reduce the GDP by:

Assume the current equilibrium level of income is $200 billion as compared to the full-employment income level of $240 billion.If the MPC is 0.6,what change in aggregate expenditures is needed to achieve full employment?

Which of the following will cause the investment schedule to shift downward?

-In the above private open economy,international trade:

The relationship between investment and GDP is shown by the:

If the MPC is .50,all taxes are lump-sum taxes,and the equilibrium GDP is $40 billion below the full-employment GDP,then the size of the recessionary expenditure gap:

Refer to the data below.If gross investment is $10 at all levels of GDP,the equilibrium GDP will be: The following schedule contains data for a private closed economy.All figures are in billions.

Investment and saving are,respectively:

Which of the following statements is correct for a private closed economy?

-Refer to the above diagrams.Other things equal,an interest rate decrease will:

In which of the following situations for a mixed open economy will the level of GDP expand?

Assume in a private economy that the equilibrium level of income is $380 and the MPS is 0.25.Now suppose government collects taxes of $50 and spends the entire amount.As a result:

A $1 increase in government spending on goods and services will have a greater impact on the equilibrium GDP than will a $1 decline in taxes because:

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

If a nation imposes tariffs and quotas on foreign products,the immediate effect,if no retaliation is immediately imposed by other countries will be to:

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

Refer to the diagram below for a private closed economy.In equilibrium the level of consumption:

Refer to the diagram below.The equilibrium condition for a private closed economy is Ig = S.

-The equilibrium level of GDP for the above private open economy is:

At the equilibrium GDP for an open economy:

The following information is for a closed economy: -Refer to the above information.If both government spending and taxes are zero,the equilibrium level of GDP:

If the MPC in an economy is .75,a $1 billion increase in taxes will reduce the GDP by:

Assume the current equilibrium level of income is $200 billion as compared to the full-employment income level of $240 billion.If the MPC is 0.6,what change in aggregate expenditures is needed to achieve full employment?

Which of the following will cause the investment schedule to shift downward?

-In the above private open economy,international trade:

The relationship between investment and GDP is shown by the:

If the MPC is .50,all taxes are lump-sum taxes,and the equilibrium GDP is $40 billion below the full-employment GDP,then the size of the recessionary expenditure gap:

Refer to the data below.If gross investment is $10 at all levels of GDP,the equilibrium GDP will be: The following schedule contains data for a private closed economy.All figures are in billions.

Investment and saving are,respectively:

Which of the following statements is correct for a private closed economy?

-Refer to the above diagrams.Other things equal,an interest rate decrease will:

In which of the following situations for a mixed open economy will the level of GDP expand?

Assume in a private economy that the equilibrium level of income is $380 and the MPS is 0.25.Now suppose government collects taxes of $50 and spends the entire amount.As a result:

A $1 increase in government spending on goods and services will have a greater impact on the equilibrium GDP than will a $1 decline in taxes because:

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

If a nation imposes tariffs and quotas on foreign products,the immediate effect,if no retaliation is immediately imposed by other countries will be to:

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 diagram below.The equilibrium condition for a private closed economy is I_g = S.