Question 1

Suppose the marginal propensity to consume is 0.80 and taxes decrease by $10 billion.Which of the following is true?

Accepted Answer

A)  Disposable income and consumption fall by $10 billion 
B)  Disposable income and consumption rise by $10 billion 
C)  Disposable income rises by $10 billion and consumption rises by $8 billion 
D)  Disposable income falls by $10 billion and consumption falls by $8 billion 
E)  Disposable income rises by $10 billion and consumption falls by $8 billion 
A)  Disposable income and consumption fall by $10 billion 
B)  Disposable income and consumption rise by $10 billion 
C)  Disposable income rises by $10 billion and consumption rises by $8 billion 
D)  Disposable income falls by $10 billion and consumption falls by $8 billion 
E)  Disposable income rises by $10 billion and consumption falls by $8 billion

Question 2

In calculating total spending,after adding together Consumption,Investment,and Government Purchases,we must

Accepted Answer

A)  add imports and subtract exports 
B)  add exports and subtract imports 
C)  compute net consumption and net investment by subtracting products produced abroad 
D)  compute net consumption and net investment by adding products produced abroad 
E)  compute net consumption and net investment by add products consumed abroad 
A)  add imports and subtract exports 
B)  add exports and subtract imports 
C)  compute net consumption and net investment by subtracting products produced abroad 
D)  compute net consumption and net investment by adding products produced abroad 
E)  compute net consumption and net investment by add products consumed abroad

Question 3

Suppose GDP is $4,000 billion and aggregate expenditure is $3,750 billion.Inventories will

Accepted Answer

A)  increase by $250 billion 
B)  increase by $375 billion 
C)  increase by $400 billion 
D)  decrease by $250 billion 
E)  decrease by $375 billion 
A)  increase by $250 billion 
B)  increase by $375 billion 
C)  increase by $400 billion 
D)  decrease by $250 billion 
E)  decrease by $375 billion

Question 4

-Refer to Figure 11-7.If the economy is currently producing at point X,what does the short-run macro model predict will happen?

Accepted Answer

A)  Nothing will happen;the economy is in equilibrium. 
B)  Prices will rise and firms will increase production. 
C)  Prices will fall and firms will increase production. 
D)  Inventories will shrink and firms will increase production. 
E)  Inventories will accumulate and firms will cut production. 
A)  Nothing will happen;the economy is in equilibrium. 
B)  Prices will rise and firms will increase production. 
C)  Prices will fall and firms will increase production. 
D)  Inventories will shrink and firms will increase production. 
E)  Inventories will accumulate and firms will cut production.

Question 5

The equilibrium level of GDP can be determined by finding the output level at which the unplanned change in inventories is

Accepted Answer

A)  greater than aggregate expenditures 
B)  less than aggregate expenditures 
C)  zero 
D)  equal to government expenditures 
E)  equal to consumer spending 
A)  greater than aggregate expenditures 
B)  less than aggregate expenditures 
C)  zero 
D)  equal to government expenditures 
E)  equal to consumer spending

Question 6

When finding GDP algebraically,what is the final,unique equation that can be used?

Accepted Answer

A)  GDP = C + Ip + G + NX 
B)  GDP = AE + NX + T 
C)  GDP = C + I + G + NX 
D)  GDP = Y + T + G 
E)  GDP = C + I + NX 
A)  GDP = C + Ip + G + NX 
B)  GDP = AE + NX + T 
C)  GDP = C + I + G + NX 
D)  GDP = Y + T + G 
E)  GDP = C + I + NX

Question 7

If the marginal propensity to consume is 0.5 and disposable income decreases by $10,000,by how much will consumption spending decrease?

Accepted Answer

A)  $10,000 
B)  $500 
C)  $50 
D)  $5,000 
E)  $9,524 
A)  $10,000 
B)  $500 
C)  $50 
D)  $5,000 
E)  $9,524

Question 8

In the short run,

Accepted Answer

A)  spending depends on income and income depends on spending 
B)  spending depends on income,but income does not depend on spending 
C)  income depends on spending,but spending does not depend on income 
D)  spending and income are independent of one another 
E)  spending is the only determinant of how much income an economy will produce 
A)  spending depends on income and income depends on spending 
B)  spending depends on income,but income does not depend on spending 
C)  income depends on spending,but spending does not depend on income 
D)  spending and income are independent of one another 
E)  spending is the only determinant of how much income an economy will produce

Question 9

The most important factor that influences total spending is

Accepted Answer

A)  the interest rate 
B)  real wealth 
C)  expectations regarding future income 
D)  the income tax rate 
E)  real disposable income 
A)  the interest rate 
B)  real wealth 
C)  expectations regarding future income 
D)  the income tax rate 
E)  real disposable income

Question 10

Which of the following changes would probably not lead to an increase in aggregate expenditure?

Accepted Answer

A)  an increase in aggregate wage income 
B)  an increased mood of optimism about the nation's economic prospects 
C)  an increase in the value of corporate stocks 
D)  a decrease in the income tax rate 
E)  an increase in the interest rate 
A)  an increase in aggregate wage income 
B)  an increased mood of optimism about the nation's economic prospects 
C)  an increase in the value of corporate stocks 
D)  a decrease in the income tax rate 
E)  an increase in the interest rate

Question 11

Automatic stabilizers reduce fluctuations in GDP by

Accepted Answer

A)  eliminating spending shocks 
B)  increasing the amount of spending each year 
C)  reducing the additional spending that occurs in each round of the multiplier 
D)  increasing saving 
E)  reducing the need for government involvement in the economy 
A)  eliminating spending shocks 
B)  increasing the amount of spending each year 
C)  reducing the additional spending that occurs in each round of the multiplier 
D)  increasing saving 
E)  reducing the need for government involvement in the economy

Question 12

Which of the following would cause the consumption function to shift down?

Accepted Answer

A)  A decrease in disposable income 
B)  A decrease in taxes 
C)  An increase in taxes 
D)  An increase in the marginal propensity to consume 
E)  None of the above 
A)  A decrease in disposable income 
B)  A decrease in taxes 
C)  An increase in taxes 
D)  An increase in the marginal propensity to consume 
E)  None of the above

Question 13

If income increased by $20,000,investment spending is fixed at $5,000,government purchases are fixed at $10,000,net exports are fixed at $500,and aggregate expenditure increases by $15,000,what is the marginal propensity to consume (MPC)?

Accepted Answer

A)  0.25 
B)  0.75 
C)  0.33 
D)  0.50 
E)  0.70 
A)  0.25 
B)  0.75 
C)  0.33 
D)  0.50 
E)  0.70

Question 14

One benefit of automatic stabilizers is that they

Accepted Answer

A)  decrease consumption during a recession below what it would otherwise be 
B)  make GDP more volatile 
C)  cause the cyclical deficit to fall during a recession 
D)  increase consumption during a recession above what it would otherwise be 
E)  increase consumption during an expansion above what it would otherwise be 
A)  decrease consumption during a recession below what it would otherwise be 
B)  make GDP more volatile 
C)  cause the cyclical deficit to fall during a recession 
D)  increase consumption during a recession above what it would otherwise be 
E)  increase consumption during an expansion above what it would otherwise be

Question 15

Which of the following components of government spending and revenue serves as an automatic stabilizer?

Accepted Answer

A)  the wealth effect 
B)  the multiplier 
C)  unemployment insurance 
D)  military spending 
E)  property taxes 
A)  the wealth effect 
B)  the multiplier 
C)  unemployment insurance 
D)  military spending 
E)  property taxes

Question 16

If the marginal propensity to consume is 0.6,what is the long-run expenditure multiplier?

Accepted Answer

A)  0.0 
B)  2.0 
C)  2.5 
D)  10.0 
E)  1.0 
A)  0.0 
B)  2.0 
C)  2.5 
D)  10.0 
E)  1.0

Question 17

Real consumption spending is inversely related to

Accepted Answer

A)  real disposable income 
B)  the amount of common stock owned 
C)  the amount of real estate owned 
D)  expectations of future income 
E)  the interest rate 
A)  real disposable income 
B)  the amount of common stock owned 
C)  the amount of real estate owned 
D)  expectations of future income 
E)  the interest rate

Question 18

Which of the following is the definition of autonomous consumption spending?

Accepted Answer

A)  The effect of a change in wealth on consumption spending 
B)  The part of consumption spending that is independent of disposable income 
C)  The impact of disposable income on consumption spending 
D)  The part of consumption spending that is independent of wealth 
E)  The horizontal intercept of the consumption function 
A)  The effect of a change in wealth on consumption spending 
B)  The part of consumption spending that is independent of disposable income 
C)  The impact of disposable income on consumption spending 
D)  The part of consumption spending that is independent of wealth 
E)  The horizontal intercept of the consumption function

Question 19

Use the table below to find the marginal propensity to consume.

Accepted Answer

A)  0.50 
B)  0.60 
C)  0.65 
D)  0.75 
E)  0.80 
A)  0.50 
B)  0.60 
C)  0.65 
D)  0.75 
E)  0.80

Question 20

Which of the following would lead to a decrease in autonomous consumption spending?

Accepted Answer

A)  a decrease in disposable income 
B)  an increase in disposable income 
C)  an increase in the interest rate 
D)  more optimistic expectations about future income 
E)  an increase in wealth 
A)  a decrease in disposable income 
B)  an increase in disposable income 
C)  an increase in the interest rate 
D)  more optimistic expectations about future income 
E)  an increase in wealth

Exam 23: The Short-Run Macro Model

Suppose the marginal propensity to consume is 0.80 and taxes decrease by $10 billion.Which of the following is true?

In calculating total spending,after adding together Consumption,Investment,and Government Purchases,we must

Suppose GDP is $4,000 billion and aggregate expenditure is $3,750 billion.Inventories will

-Refer to Figure 11-7.If the economy is currently producing at point X,what does the short-run macro model predict will happen?

The equilibrium level of GDP can be determined by finding the output level at which the unplanned change in inventories is

When finding GDP algebraically,what is the final,unique equation that can be used?

If the marginal propensity to consume is 0.5 and disposable income decreases by $10,000,by how much will consumption spending decrease?

In the short run,

The most important factor that influences total spending is

Which of the following changes would probably not lead to an increase in aggregate expenditure?

Automatic stabilizers reduce fluctuations in GDP by

Which of the following would cause the consumption function to shift down?

If income increased by $20,000,investment spending is fixed at $5,000,government purchases are fixed at $10,000,net exports are fixed at $500,and aggregate expenditure increases by $15,000,what is the marginal propensity to consume (MPC)?

One benefit of automatic stabilizers is that they

Which of the following components of government spending and revenue serves as an automatic stabilizer?

If the marginal propensity to consume is 0.6,what is the long-run expenditure multiplier?

Real consumption spending is inversely related to

Which of the following is the definition of autonomous consumption spending?

Use the table below to find the marginal propensity to consume.

Which of the following would lead to a decrease in autonomous consumption spending?

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

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