Question 1

-Refer to Figure 11-8.If YFE represents the full-employment level of output,what can we say about the state of the economy at Y1?

Accepted Answer

A)  It is in recession. 
B)  It is in expansion. 
C)  It is in equilibrium,but above full employment. 
D)  It is not in equilibrium,and output will increase. 
E)  It is not in equilibrium,and output will fall. 
A)  It is in recession. 
B)  It is in expansion. 
C)  It is in equilibrium,but above full employment. 
D)  It is not in equilibrium,and output will increase. 
E)  It is not in equilibrium,and output will fall.

Question 2

If expectations of future income become more optimistic,which of the following would occur?

Accepted Answer

A)  Nothing would occur. 
B)  The consumption-income line would shift downward. 
C)  The consumption-income line would shift upward. 
D)  There would be an rightward movement along the consumption-income line. 
E)  There would be a leftward movement along the consumption-income line. 
A)  Nothing would occur. 
B)  The consumption-income line would shift downward. 
C)  The consumption-income line would shift upward. 
D)  There would be an rightward movement along the consumption-income line. 
E)  There would be a leftward movement along the consumption-income line.

Question 3

If people regard economic fluctuations as temporary,

Accepted Answer

A)  spending will be less sensitive to changes in income,and the multiplier will be larger. 
B)  spending will be less sensitive to changes in income,and the multiplier will be smaller. 
C)  they will be pessimistic about the future. 
D)  spending will be more sensitive to changes in income. 
E)  spending will be independent of changes in income. 
A)  spending will be less sensitive to changes in income,and the multiplier will be larger. 
B)  spending will be less sensitive to changes in income,and the multiplier will be smaller. 
C)  they will be pessimistic about the future. 
D)  spending will be more sensitive to changes in income. 
E)  spending will be independent of changes in income.

Question 4

In the short-run macro model,the change in inventories will

Accepted Answer

A)  equal output minus aggregate expenditures 
B)  trigger a price change 
C)  equal investment minus depreciation 
D)  equal sales minus investment 
E)  be matched by an equal and opposite change in the subsequent period 
A)  equal output minus aggregate expenditures 
B)  trigger a price change 
C)  equal investment minus depreciation 
D)  equal sales minus investment 
E)  be matched by an equal and opposite change in the subsequent period

Question 5

Since the value of the multiplier is always at least 1,which of the following is correct?

Accepted Answer

A)  The size of the vertical shift in the aggregate expenditure line is always equal to the change in GDP 
B)  The size of the vertical shift in the aggregate expenditure line is always less than the change in GDP 
C)  The size of the vertical shift in the aggregate expenditure line is always greater than the change in GDP 
D)  The size of the vertical shift in the aggregate expenditure line is always equal to or smaller than the change in GDP 
E)  The MPC is always bigger than 1 
A)  The size of the vertical shift in the aggregate expenditure line is always equal to the change in GDP 
B)  The size of the vertical shift in the aggregate expenditure line is always less than the change in GDP 
C)  The size of the vertical shift in the aggregate expenditure line is always greater than the change in GDP 
D)  The size of the vertical shift in the aggregate expenditure line is always equal to or smaller than the change in GDP 
E)  The MPC is always bigger than 1

Question 6

The largest component of aggregate expenditure is

Accepted Answer

A)  consumption spending 
B)  investment spending 
C)  government purchases 
D)  net exports 
E)  a virtual tie between consumption spending and government purchases 
A)  consumption spending 
B)  investment spending 
C)  government purchases 
D)  net exports 
E)  a virtual tie between consumption spending and government purchases

Question 7

When aggregate expenditure at a particular level of GDP is more than output,

Accepted Answer

A)  output will increase 
B)  output will decrease 
C)  output will remain constant 
D)  there is not enough information to determine what happens to output 
E)  prices will rise 
A)  output will increase 
B)  output will decrease 
C)  output will remain constant 
D)  there is not enough information to determine what happens to output 
E)  prices will rise

Question 8

In the short-run macro model,which of the following is the cause of cyclical unemployment?

Accepted Answer

A)  It takes time for people to move to new jobs. 
B)  Insufficient aggregate spending. 
C)  It takes time for firms to find new employees. 
D)  It takes time for people to retrain. 
E)  Fewer people want to work than before. 
A)  It takes time for people to move to new jobs. 
B)  Insufficient aggregate spending. 
C)  It takes time for firms to find new employees. 
D)  It takes time for people to retrain. 
E)  Fewer people want to work than before.

Question 9

In the short-run macro model,what type of unemployment is caused by insufficient spending?

Accepted Answer

A)  Cyclical 
B)  Structural 
C)  Frictional 
D)  Seasonal 
E)  All types of unemployment are caused by insufficient spending 
A)  Cyclical 
B)  Structural 
C)  Frictional 
D)  Seasonal 
E)  All types of unemployment are caused by insufficient spending

Question 10

If the marginal propensity to consume is 0.75 and investment spending increases by $200 billion,by how much will equilibrium output increase?

Accepted Answer

A)  $350 billion 
B)  $150 billion 
C)  $200 billion 
D)  $266.7 billion 
E)  $800 billion 
A)  $350 billion 
B)  $150 billion 
C)  $200 billion 
D)  $266.7 billion 
E)  $800 billion

Question 11

-Refer to Figure 11-8.If YFE represents the full-employment level of output,what can we say about the state of the economy at Y1?

Accepted Answer

A)  It is in equilibrium,but below full employment. 
B)  It is in equilibrium,and therefore at full employment. 
C)  It is in equilibrium,but above full employment. 
D)  It is not in equilibrium,and output will increase. 
E)  It is not in equilibrium,and output will fall. 
A)  It is in equilibrium,but below full employment. 
B)  It is in equilibrium,and therefore at full employment. 
C)  It is in equilibrium,but above full employment. 
D)  It is not in equilibrium,and output will increase. 
E)  It is not in equilibrium,and output will fall.

Question 12

Use the table below to determine autonomous consumption spending.

Accepted Answer

A)  $0 
B)  $100 
C)  $180 
D)  $200 
E)  $1,000 
A)  $0 
B)  $100 
C)  $180 
D)  $200 
E)  $1,000

Question 13

Which of the following would not cause the consumption-income line to shift upward?

Accepted Answer

A)  An increase in income 
B)  An increase in autonomous consumption 
C)  A decrease in the interest rate 
D)  Greater optimism about economic conditions 
E)  An increase in household wealth 
A)  An increase in income 
B)  An increase in autonomous consumption 
C)  A decrease in the interest rate 
D)  Greater optimism about economic conditions 
E)  An increase in household wealth

Question 14

The multiplier effect

Accepted Answer

A)  tells us nothing about how increases in investment spending affect GDP 
B)  tells us that a change in investment spending changes equilibrium GDP by more than the change in investment 
C)  works only for increases in investment 
D)  is relevant only in situations where the marginal propensity to consume cannot be determined 
E)  is relevant only in situations in which the MPC is between 0.5 and 0.7 
A)  tells us nothing about how increases in investment spending affect GDP 
B)  tells us that a change in investment spending changes equilibrium GDP by more than the change in investment 
C)  works only for increases in investment 
D)  is relevant only in situations where the marginal propensity to consume cannot be determined 
E)  is relevant only in situations in which the MPC is between 0.5 and 0.7

Question 15

At each level of income,net taxes reduce disposable income,thereby reducing consumption spending.

Accepted Answer

A) True 
 B)False

Question 16

If the expenditure multiplier is 10 and investment spending decreases by $1,000 billion,what will be the change in GDP?

Accepted Answer

A)  -$10,000 
B)  $2,500 
C)  $1,000 
D)  $10,000 
E)  -$1,000 
A)  -$10,000 
B)  $2,500 
C)  $1,000 
D)  $10,000 
E)  -$1,000

Question 17

In the short run,

Accepted Answer

A)  the labor market is always in equilibrium 
B)  actual output can deviate from potential output 
C)  crowding out is always complete 
D)  total output is independent of spending 
E)  spending is independent of total income 
A)  the labor market is always in equilibrium 
B)  actual output can deviate from potential output 
C)  crowding out is always complete 
D)  total output is independent of spending 
E)  spending is independent of total income

Question 18

Which of the following lines has a slope equal to the marginal propensity to consume?

Accepted Answer

A)  The demand for loanable funds curve 
B)  The labor demand curve 
C)  The consumption function 
D)  Inventory line 
E)  The 45-degree line 
A)  The demand for loanable funds curve 
B)  The labor demand curve 
C)  The consumption function 
D)  Inventory line 
E)  The 45-degree line

Question 19

If the marginal propensity to consume is 2/3 and autonomous consumption spending increases by $3 trillion,what is the change in GDP?

Accepted Answer

A)  $3 trillion 
B)  $1 trillion 
C)  -$3 trillion 
D)  $9 trillion 
E)  -$9 trillion 
A)  $3 trillion 
B)  $1 trillion 
C)  -$3 trillion 
D)  $9 trillion 
E)  -$9 trillion

Question 20

Which of the following statements is most accurate?

Accepted Answer

A)  Most of the variation in consumption spending can be explained by changes in the interest rate. 
B)  Most of the variation in consumption spending can be explained by changes in disposable income. 
C)  Most of the variation in consumption spending can be explained by changes in wealth. 
D)  Most of the variation in consumption spending can be explained by changes in debt. 
E)  There is no single factor that explains much of the variation in consumption spending. 
A)  Most of the variation in consumption spending can be explained by changes in the interest rate. 
B)  Most of the variation in consumption spending can be explained by changes in disposable income. 
C)  Most of the variation in consumption spending can be explained by changes in wealth. 
D)  Most of the variation in consumption spending can be explained by changes in debt. 
E)  There is no single factor that explains much of the variation in consumption spending.

Exam 23: The Short-Run Macro Model

-Refer to Figure 11-8.If YFE represents the full-employment level of output,what can we say about the state of the economy at Y1?

If expectations of future income become more optimistic,which of the following would occur?

If people regard economic fluctuations as temporary,

In the short-run macro model,the change in inventories will

Since the value of the multiplier is always at least 1,which of the following is correct?

The largest component of aggregate expenditure is

When aggregate expenditure at a particular level of GDP is more than output,

In the short-run macro model,which of the following is the cause of cyclical unemployment?

In the short-run macro model,what type of unemployment is caused by insufficient spending?

If the marginal propensity to consume is 0.75 and investment spending increases by $200 billion,by how much will equilibrium output increase?

-Refer to Figure 11-8.If YFE represents the full-employment level of output,what can we say about the state of the economy at Y1?

Use the table below to determine autonomous consumption spending.

Which of the following would not cause the consumption-income line to shift upward?

The multiplier effect

At each level of income,net taxes reduce disposable income,thereby reducing consumption spending.

If the expenditure multiplier is 10 and investment spending decreases by $1,000 billion,what will be the change in GDP?

In the short run,

Which of the following lines has a slope equal to the marginal propensity to consume?

If the marginal propensity to consume is 2/3 and autonomous consumption spending increases by $3 trillion,what is the change in GDP?

Which of the following statements is most accurate?

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

-Refer to Figure 11-8.If Y_FE represents the full-employment level of output,what can we say about the state of the economy at Y₁?

-Refer to Figure 11-8.If Y_FE represents the full-employment level of output,what can we say about the state of the economy at Y₁?