Question 1

Suppose a $30 billion increase in government purchases increased GDP by $120 billion,what is the value of the MPC?

Accepted Answer

A)  4.00 
B)  0.75 
C)  0.25 
D)  0.50 
E)  0.33 
A)  4.00 
B)  0.75 
C)  0.25 
D)  0.50 
E)  0.33 B

Question 2

Which of the following is an equilibrium condition of the short-run macro model?

Accepted Answer

A)  Taxes equal transfers. 
B)  Imports equal exports. 
C)  Aggregate expenditure equals output. 
D)  Consumption spending equals autonomous consumption spending. 
E)  Consumption spending equals investment spending plus government spending. 
A)  Taxes equal transfers. 
B)  Imports equal exports. 
C)  Aggregate expenditure equals output. 
D)  Consumption spending equals autonomous consumption spending. 
E)  Consumption spending equals investment spending plus government spending. C

Question 3

In the short-run macro model,equilibrium occurs when

Accepted Answer

A)  all of the following conditions are satisfied 
B)  the unintended change in inventories is zero 
C)  total sales equals output 
D)  the aggregate expenditure line intersects the 45-degree line 
E)  GDP equals aggregate expenditure 
A)  all of the following conditions are satisfied 
B)  the unintended change in inventories is zero 
C)  total sales equals output 
D)  the aggregate expenditure line intersects the 45-degree line 
E)  GDP equals aggregate expenditure A

Question 4

-Refer to Figure 11-6.Which point represents the value of equilibrium GDP?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
E)  E or F 
A)  A 
B)  B 
C)  C 
D)  D 
E)  E or F

Question 5

Which of the following is held constant in the short-run macro model?

Accepted Answer

A)  GDP 
B)  Prices 
C)  Investment spending 
D)  Consumption 
E)  The money supply 
A)  GDP 
B)  Prices 
C)  Investment spending 
D)  Consumption 
E)  The money supply

Question 6

The marginal propensity to consume is always

Accepted Answer

A)  greater than 1 
B)  between 0 and 1 
C)  less than 0 
D)  between 0 and -1 
E)  between 0 and 0.6 
A)  greater than 1 
B)  between 0 and 1 
C)  less than 0 
D)  between 0 and -1 
E)  between 0 and 0.6

Question 7

If the marginal propensity to consume is 0.5,the income tax rate is 10%,and income rises by $20,000,by how much will consumption spending increase?

Accepted Answer

A)  $15,000 
B)  $10,000 
C)  $5,000 
D)  $9,000 
E)  $1,000 
A)  $15,000 
B)  $10,000 
C)  $5,000 
D)  $9,000 
E)  $1,000

Question 8

The value of the expenditure multiplier in the long run is

Accepted Answer

A)  1 
B)  0 
C)  -1 
D)  equal to the MPC 
E)  equal to the 1/MPC 
A)  1 
B)  0 
C)  -1 
D)  equal to the MPC 
E)  equal to the 1/MPC

Question 9

The marginal propensity to consume (MPC)is

Accepted Answer

A)  the change in consumption divided by the change in disposable income 
B)  total consumption divided by total disposable income 
C)  the change in disposable income divided by the change in consumption 
D)  total disposable income divided by total consumption 
E)  the change in disposable income minus the change in consumption 
A)  the change in consumption divided by the change in disposable income 
B)  total consumption divided by total disposable income 
C)  the change in disposable income divided by the change in consumption 
D)  total disposable income divided by total consumption 
E)  the change in disposable income minus the change in consumption

Question 10

The reason the short-run macro model suggests that the economy can operate either above or below its potential while in the long-run classical model the economy operates automatically at full employment is that

Accepted Answer

A)  the short-run macro model is flawed and inaccurate 
B)  the classical model is flawed and inaccurate 
C)  the two models measure completely different aspects of the economy 
D)  in the short run,spending affects output,but not in the long run 
E)  in the short run the role of government in helping the economy return to equilibrium is not considered 
A)  the short-run macro model is flawed and inaccurate 
B)  the classical model is flawed and inaccurate 
C)  the two models measure completely different aspects of the economy 
D)  in the short run,spending affects output,but not in the long run 
E)  in the short run the role of government in helping the economy return to equilibrium is not considered

Question 11

If we know that the slope of the consumption function is 0.6,then we know that if real disposable income increased by $1,000 billion,real consumption spending would

Accepted Answer

A)  increase by $60 billion 
B)  increase by $1,000 billion 
C)  increase by $600 billion 
D)  increase by $6,000 billion 
E)  decrease by $6 billion 
A)  increase by $60 billion 
B)  increase by $1,000 billion 
C)  increase by $600 billion 
D)  increase by $6,000 billion 
E)  decrease by $6 billion

Question 12

If the marginal propensity to consume is 0.75,net taxes are fixed at $2,000 and real income rises by $12,000,by how much will real consumption spending increase?

Accepted Answer

A)  $9,000 
B)  $8,000 
C)  $7,500 
D)  $7,000 
E)  $10,000 
A)  $9,000 
B)  $8,000 
C)  $7,500 
D)  $7,000 
E)  $10,000

Question 13

The difference between the number of workers employed if the economy was operating at full employment and the number of workers currently employed given aggregate expenditures is known as

Accepted Answer

A)  cyclical unemployment 
B)  frictional unemployment 
C)  structural unemployment 
D)  unemployment is not possible in the short run macro model 
E)  urban unemployment 
A)  cyclical unemployment 
B)  frictional unemployment 
C)  structural unemployment 
D)  unemployment is not possible in the short run macro model 
E)  urban unemployment

Question 14

Suppose each of the following news items appears on the evening news.Which one would most likely cause consumption spending to increase?

Accepted Answer

A)  "Layoffs reach record high" 
B)  "Government to increase taxes with the start of the next quarter" 
C)  "Stock market drops 10%" 
D)  "Government to issue tax rebates at the end of next month" 
E)  "Bankruptcies increase 20% over the last six months" 
A)  "Layoffs reach record high" 
B)  "Government to increase taxes with the start of the next quarter" 
C)  "Stock market drops 10%" 
D)  "Government to issue tax rebates at the end of next month" 
E)  "Bankruptcies increase 20% over the last six months"

Question 15

If the marginal propensity to consume is 0.5,what is the value of the expenditure multiplier?

Accepted Answer

A)  1.0 
B)  1.5 
C)  2.0 
D)  0.5 
E)  10.0 
A)  1.0 
B)  1.5 
C)  2.0 
D)  0.5 
E)  10.0

Question 16

If the MPC is 0.8 and disposable income shrinks by $100 million.Consumption would

Accepted Answer

A)  rise by $8 million 
B)  rise by $80 million 
C)  fall by $80 million 
D)  fall by $8 million 
E)  fall by $20 million 
A)  rise by $8 million 
B)  rise by $80 million 
C)  fall by $80 million 
D)  fall by $8 million 
E)  fall by $20 million

Question 17

If the marginal propensity to consume is 0.6,what is the value of the expenditure multiplier?

Accepted Answer

A)  1.0 
B)  1.6 
C)  2.0 
D)  2.5 
E)  6.0 
A)  1.0 
B)  1.6 
C)  2.0 
D)  2.5 
E)  6.0

Question 18

Whenever there is an increase in autonomous consumption spending,there will be

Accepted Answer

A)  an upward shift of the aggregate expenditure line causing equilibrium GDP to rise 
B)  an upward shift of aggregate expenditure line,but no change in equilibrium GDP 
C)  no change in the aggregate expenditure line,but equilibrium GDP will rise 
D)  an upward shift of the aggregate expenditure line,causing equilibrium GDP to fall 
E)  no change in the aggregate expenditure line or equilibrium GDP 
A)  an upward shift of the aggregate expenditure line causing equilibrium GDP to rise 
B)  an upward shift of aggregate expenditure line,but no change in equilibrium GDP 
C)  no change in the aggregate expenditure line,but equilibrium GDP will rise 
D)  an upward shift of the aggregate expenditure line,causing equilibrium GDP to fall 
E)  no change in the aggregate expenditure line or equilibrium GDP

Question 19

When income increases,aggregate expenditure will rise by

Accepted Answer

A)  the change in GDP 
B)  the change in GDP minus the MPC 
C)  the change in GDP times the MPC 
D)  the MPC 
E)  the change in GDP divided by the MPC 
A)  the change in GDP 
B)  the change in GDP minus the MPC 
C)  the change in GDP times the MPC 
D)  the MPC 
E)  the change in GDP divided by the MPC

Question 20

If the output level is such that the aggregate expenditure line lies below the 45-degree line,which of the following is true?

Accepted Answer

A)  Aggregate expenditure is greater than output,so inventories will increase and output will be raised. 
B)  Aggregate expenditure is greater than output,so inventories will decrease and output will be increased. 
C)  Aggregate expenditure is less than output,so inventories will decrease and output will be raised. 
D)  Aggregate expenditure is less than output,so inventories will increase and output will be lowered. 
E)  Aggregate expenditure is greater than output,so inventories will increase and output will be lowered. 
A)  Aggregate expenditure is greater than output,so inventories will increase and output will be raised. 
B)  Aggregate expenditure is greater than output,so inventories will decrease and output will be increased. 
C)  Aggregate expenditure is less than output,so inventories will decrease and output will be raised. 
D)  Aggregate expenditure is less than output,so inventories will increase and output will be lowered. 
E)  Aggregate expenditure is greater than output,so inventories will increase and output will be lowered.

Exam 23: The Short-Run Macro Model

Suppose a $30 billion increase in government purchases increased GDP by $120 billion,what is the value of the MPC?

Which of the following is an equilibrium condition of the short-run macro model?

In the short-run macro model,equilibrium occurs when

-Refer to Figure 11-6.Which point represents the value of equilibrium GDP?

Which of the following is held constant in the short-run macro model?

The marginal propensity to consume is always

If the marginal propensity to consume is 0.5,the income tax rate is 10%,and income rises by $20,000,by how much will consumption spending increase?

The value of the expenditure multiplier in the long run is

The marginal propensity to consume (MPC)is

The reason the short-run macro model suggests that the economy can operate either above or below its potential while in the long-run classical model the economy operates automatically at full employment is that

If we know that the slope of the consumption function is 0.6,then we know that if real disposable income increased by $1,000 billion,real consumption spending would

If the marginal propensity to consume is 0.75,net taxes are fixed at $2,000 and real income rises by $12,000,by how much will real consumption spending increase?

The difference between the number of workers employed if the economy was operating at full employment and the number of workers currently employed given aggregate expenditures is known as

Suppose each of the following news items appears on the evening news.Which one would most likely cause consumption spending to increase?

If the marginal propensity to consume is 0.5,what is the value of the expenditure multiplier?

If the MPC is 0.8 and disposable income shrinks by $100 million.Consumption would

If the marginal propensity to consume is 0.6,what is the value of the expenditure multiplier?

Whenever there is an increase in autonomous consumption spending,there will be

When income increases,aggregate expenditure will rise by

If the output level is such that the aggregate expenditure line lies below the 45-degree line,which of the following is true?

What Is Economics

Scarcity,choice,and Economic Systems

Scarcity, choice, and Economic Systems: Part A

Working With Supply and Demand

Elasticity

Consumer Choice

Production and Cost

How Firms Make Decisions: Profit Maximization

Perfect Competition

Perfect Competition: Part A

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets

labor Markets: Part A

Capital and Financial Markets

Economic Efficiency and the Competitive Ideal

Governments Role in Economic Efficiency

Comparative Advantage and the Gains From International Trade

What Macroeconomics Tries to Explain

Production, income, and Employment

The Price Level and Inflation

The Classical Long-Run Model

Part A: The Classical Model in an Open Economy

Economic Growth and Rising Living Standards

Economic Fluctuations

Fiscal Policy

Money,banks,and the Federal Reserve

The Money Market and Monetary Policy

Feedback Effects From GDP to the Money Market

Aggregate Demand and Aggregate Supply

Inflation and Monetary Policy

Exchange Rates and Macroeconomic Policy

Appendix-finding Equilibrium GDP Algebraically

Appendix: Capital and Leverage

Filters