Question 1

Which of the following statements is incorrect?

Accepted Answer

A)  Given the economy's MPS,a $15 billion reduction in government spending will reduce the equilibrium GDP by more than would a $15 billion increase in taxes. 
B)  Other things unchanged,a tax reduction of $10 billion will increase the equilibrium GDP by $25 billion when the MPS is 0.4. 
C)  If the MPC is 0.8 and GDP has declined by $40 billion,this was caused by a decline in aggregate expenditures of $8 billion. 
D)  A government surplus is anti-inflationary;a government deficit is expansionary. 
A)  Given the economy's MPS,a $15 billion reduction in government spending will reduce the equilibrium GDP by more than would a $15 billion increase in taxes. 
B)  Other things unchanged,a tax reduction of $10 billion will increase the equilibrium GDP by $25 billion when the MPS is 0.4. 
C)  If the MPC is 0.8 and GDP has declined by $40 billion,this was caused by a decline in aggregate expenditures of $8 billion. 
D)  A government surplus is anti-inflationary;a government deficit is expansionary.

Question 2

Suppose that a mixed open economy is producing at its equilibrium level of income and that net exports are zero.If at the equilibrium income level the public sector's budget shows a surplus:

Accepted Answer

A)  Ca + Ig + Xn + G must exceed GDP. 
B)  planned investment must exceed saving. 
C)  a recessionary expenditure gap must exist. 
D)  saving must exceed planned investment. 
A)  Ca + Ig + Xn + G must exceed GDP. 
B)  planned investment must exceed saving. 
C)  a recessionary expenditure gap must exist. 
D)  saving must exceed planned investment.

Question 3

Refer to the information below.The multiplier for this economy:

Accepted Answer

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

Question 4

The following information is for a closed economy:
  
-Refer to the above information.The addition of a $100 billion lump-sum tax:

Accepted Answer

A)  reduces the MPC and increases the multiplier. 
B)  increases the MPC and decreases the multiplier. 
C)  increases both the MPC and the multiplier. 
D)  has no effect on either the MPC or the multiplier. 
A)  reduces the MPC and increases the multiplier. 
B)  increases the MPC and decreases the multiplier. 
C)  increases both the MPC and the multiplier. 
D)  has no effect on either the MPC or the multiplier.

Question 5

The open economy multiplier is:

Accepted Answer

A)  larger than the simple multiplier because the latter embodies fewer leakages. 
B)  larger than the simple multiplier because the latter embodies more leakages. 
C)  smaller than the simple multiplier because the latter embodies fewer leakages. 
D)  smaller than the simple multiplier because the latter embodies more leakages. 
A)  larger than the simple multiplier because the latter embodies fewer leakages. 
B)  larger than the simple multiplier because the latter embodies more leakages. 
C)  smaller than the simple multiplier because the latter embodies fewer leakages. 
D)  smaller than the simple multiplier because the latter embodies more leakages.

Question 6

-Refer to the above diagram.The level of government spending:

Accepted Answer

A)  is equal to tax collections at each level of GDP. 
B)  is the same at all levels of GDP. 
C)  varies inversely with the level of GDP. 
D)  varies directly with the level of GDP. 
A)  is equal to tax collections at each level of GDP. 
B)  is the same at all levels of GDP. 
C)  varies inversely with the level of GDP. 
D)  varies directly with the level of GDP.

Question 7

The following information is for a closed economy:
  
-Refer to the above information.The introduction of $80 billion of government spending has:

Accepted Answer

A)  lowered the multiplier from 2.5 to 2.0. 
B)  increased the multiplier from 2.5 to 3.0. 
C)  increased the multiplier from 2.0 to 2.5. 
D)  had no effect on the size of the multiplier. 
A)  lowered the multiplier from 2.5 to 2.0. 
B)  increased the multiplier from 2.5 to 3.0. 
C)  increased the multiplier from 2.0 to 2.5. 
D)  had no effect on the size of the multiplier.

Question 8

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 9

Unplanned changes in inventories:

Accepted Answer

A)  cause the economy to move away from the equilibrium GDP. 
B)  must be subtracted from planned investment to determine actual investment. 
C)  bring actual investment and saving into equality only at the equilibrium level of GDP. 
D)  bring actual investment and saving into equality at all levels of GDP. 
A)  cause the economy to move away from the equilibrium GDP. 
B)  must be subtracted from planned investment to determine actual investment. 
C)  bring actual investment and saving into equality only at the equilibrium level of GDP. 
D)  bring actual investment and saving into equality at all levels of GDP.

Question 10

If a lump-sum income tax of $25 billion is levied and the MPS is 0.20,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 11

-Refer to the above diagram for a private closed economy.The equilibrium level of GDP is:

Accepted Answer

A)  $400 
B)  $300 
C)  $250 
D)  $375 
A)  $400 
B)  $300 
C)  $250 
D)  $375

Question 12

-Refer to the above diagram for a private closed economy.At the equilibrium level of GDP saving is:

Accepted Answer

A)  $10 
B)  $20 
C)  $30 
D)  $50 
A)  $10 
B)  $20 
C)  $30 
D)  $50

Question 13

In an aggregate expenditures diagram the imposition of 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.

Question 14

-Refer to the above diagram for a private closed economy.The equilibrium level of GDP in this economy:

Accepted Answer

A)  is $60 billion. 
B)  is $180 billion. 
C)  is between $60 and $180 billion. 
D)  cannot be determined from the information given. 
A)  is $60 billion. 
B)  is $180 billion. 
C)  is between $60 and $180 billion. 
D)  cannot be determined from the information given.

Question 15

-Refer to the above diagram for a private closed economy.At the $200 level of GDP:

Accepted Answer

A)  consumption is $200 and planned investment is $50 so that aggregate expenditures are $250. 
B)  consumption is $200 and planned investment is $100 so that aggregate expenditures are $300. 
C)  consumption is $250 and actual investment is $50 so that aggregate expenditures are $300. 
D)  aggregate expenditures is equal to the GDP. 
A)  consumption is $200 and planned investment is $50 so that aggregate expenditures are $250. 
B)  consumption is $200 and planned investment is $100 so that aggregate expenditures are $300. 
C)  consumption is $250 and actual investment is $50 so that aggregate expenditures are $300. 
D)  aggregate expenditures is equal to the GDP.

Question 16

Actual investment equals saving:

Accepted Answer

A)  at all levels of GDP. 
B)  at all below-equilibrium levels of GDP. 
C)  at all above-equilibrium levels of GDP. 
D)  only at the equilibrium GDP. 
A)  at all levels of GDP. 
B)  at all below-equilibrium levels of GDP. 
C)  at all above-equilibrium levels of GDP. 
D)  only at the equilibrium GDP.

Question 17

Achieving aggregate equilibrium in the economy is indicated by:

Accepted Answer

A)  an equality of saving and planned investment. 
B)  an equality of aggregate expenditures and domestic output. 
C)  the absence of unplanned investment or disinvestment. 
D)  all of the above. 
A)  an equality of saving and planned investment. 
B)  an equality of aggregate expenditures and domestic output. 
C)  the absence of unplanned investment or disinvestment. 
D)  all of the above.

Question 18

When investment remains the same at each level of GDP in a private closed economy,the slope of the aggregate expenditures schedule:

Accepted Answer

A)  exceeds the MPC. 
B)  is less than the MPC. 
C)  equals the MPS. 
D)  equals the MPC. 
A)  exceeds the MPC. 
B)  is less than the MPC. 
C)  equals the MPS. 
D)  equals the MPC.

Question 19

An upward shift of the aggregate expenditures schedule might be caused by:

Accepted Answer

A)  a decrease in exports,with no change in imports. 
B)  a decrease in imports,with no change in exports. 
C)  an increase in exports,with an equal decrease in investment spending. 
D)  an increase in imports,with no change in exports. 
A)  a decrease in exports,with no change in imports. 
B)  a decrease in imports,with no change in exports. 
C)  an increase in exports,with an equal decrease in investment spending. 
D)  an increase in imports,with no change in exports.

Question 20

Refer to the diagram below.The change in aggregate expenditures as shown from (C + Ig + Xn2)to (C + Ig + Xn1)might be caused by:

Accepted Answer

A)  an appreciation of this nation's currency relative to the currencies of its trading partners. 
B)  a depreciation of this nation's currency relative to the currencies of its trading partners. 
C)  a decrease in this nation's price level relative to price levels abroad. 
D)  a rightward shift in this nation's aggregate supply curve. 
A)  an appreciation of this nation's currency relative to the currencies of its trading partners. 
B)  a depreciation of this nation's currency relative to the currencies of its trading partners. 
C)  a decrease in this nation's price level relative to price levels abroad. 
D)  a rightward shift in this nation's aggregate supply curve.

Which of the following statements is incorrect?

Suppose that a mixed open economy is producing at its equilibrium level of income and that net exports are zero.If at the equilibrium income level the public sector's budget shows a surplus:

Refer to the information below.The multiplier for this economy:

The following information is for a closed economy: -Refer to the above information.The addition of a $100 billion lump-sum tax:

The open economy multiplier is:

-Refer to the above diagram.The level of government spending:

The following information is for a closed economy: -Refer to the above information.The introduction of $80 billion of government spending has:

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

Unplanned changes in inventories:

If a lump-sum income tax of $25 billion is levied and the MPS is 0.20,the:

-Refer to the above diagram for a private closed economy.The equilibrium level of GDP is:

-Refer to the above diagram for a private closed economy.At the equilibrium level of GDP saving is:

In an aggregate expenditures diagram the imposition of a lump-sum tax (T)will:

-Refer to the above diagram for a private closed economy.The equilibrium level of GDP in this economy:

-Refer to the above diagram for a private closed economy.At the $200 level of GDP:

Actual investment equals saving:

Achieving aggregate equilibrium in the economy is indicated by:

When investment remains the same at each level of GDP in a private closed economy,the slope of the aggregate expenditures schedule:

An upward shift of the aggregate expenditures schedule might be caused by:

Refer to the diagram below.The change in aggregate expenditures as shown from (C + I_g + X_n2)to (C + I_g + X_n1)might be caused by:

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

Which of the following statements is incorrect?

Suppose that a mixed open economy is producing at its equilibrium level of income and that net exports are zero.If at the equilibrium income level the public sector's budget shows a surplus:

Refer to the information below.The multiplier for this economy:

The following information is for a closed economy: -Refer to the above information.The addition of a $100 billion lump-sum tax:

The open economy multiplier is:

-Refer to the above diagram.The level of government spending:

The following information is for a closed economy: -Refer to the above information.The introduction of $80 billion of government spending has:

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

Unplanned changes in inventories:

If a lump-sum income tax of $25 billion is levied and the MPS is 0.20,the:

-Refer to the above diagram for a private closed economy.The equilibrium level of GDP is:

-Refer to the above diagram for a private closed economy.At the equilibrium level of GDP saving is:

In an aggregate expenditures diagram the imposition of a lump-sum tax (T)will:

-Refer to the above diagram for a private closed economy.The equilibrium level of GDP in this economy:

-Refer to the above diagram for a private closed economy.At the $200 level of GDP:

Actual investment equals saving:

Achieving aggregate equilibrium in the economy is indicated by:

When investment remains the same at each level of GDP in a private closed economy,the slope of the aggregate expenditures schedule:

An upward shift of the aggregate expenditures schedule might be caused by:

Refer to the diagram below.The change in aggregate expenditures as shown from (C + Ig + Xn2)to (C + Ig + Xn1)might be caused by:

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 change in aggregate expenditures as shown from (C + I_g + X_n2)to (C + I_g + X_n1)might be caused by: