Question 1

-Refer to Figure 11-6.Which point represents the level of autonomous consumption?

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 2

In the short-run macro model,what is the relationship between income and government purchases?

Accepted Answer

A)  It is positive and stable. 
B)  It is positive but unstable. 
C)  It is negative and stable. 
D)  It is negative but unstable. 
E)  There is no relationship between the two variables. 
A)  It is positive and stable. 
B)  It is positive but unstable. 
C)  It is negative and stable. 
D)  It is negative but unstable. 
E)  There is no relationship between the two variables.

Question 3

In the short-run macro model,planned investment is defined as

Accepted Answer

A)  plant and equipment purchases by business firms plus inventory changes 
B)  plant and equipment purchases by business firms plus new home construction 
C)  plant and equipment purchases by business firms 
D)  new home construction plus inventory changes 
E)  inventory changes 
A)  plant and equipment purchases by business firms plus inventory changes 
B)  plant and equipment purchases by business firms plus new home construction 
C)  plant and equipment purchases by business firms 
D)  new home construction plus inventory changes 
E)  inventory changes

Question 4

If Americans became more pessimistic about the economy,what would happen to the consumption-income line?

Accepted Answer

A)  A rightward movement along the line 
B)  A leftward movement along the line 
C)  The entire line would shift upward 
D)  The entire line would shift downward 
E)  The entire line would shift downward and there would be a rightward movement along the new line 
A)  A rightward movement along the line 
B)  A leftward movement along the line 
C)  The entire line would shift upward 
D)  The entire line would shift downward 
E)  The entire line would shift downward and there would be a rightward movement along the new line

Question 5

If the marginal propensity to consume is 0.6 and investment spending declines by $50 billion,by how much will equilibrium output change?

Accepted Answer

A)  -$125 billion 
B)  -$83.3 billion 
C)  -$50 billion 
D)  $83.3 billion 
E)  $125 billion 
A)  -$125 billion 
B)  -$83.3 billion 
C)  -$50 billion 
D)  $83.3 billion 
E)  $125 billion

Question 6

Use the table below to find autonomous consumption

Accepted Answer

A)  $100 
B)  $50 
C)  $150 
D)  $200 
E)  $1,050 
A)  $100 
B)  $50 
C)  $150 
D)  $200 
E)  $1,050

Question 7

What is the main difference in the classical model as compared to the short-run macro model?

Accepted Answer

A)  In the classical model the economy automatically operates at potential GDP while in the short run model the economy can operate at a different level of GDP 
B)  In the short run model the economy automatically operates at potential GDP while in the classical model the economy can operate at a different level of GDP 
C)  Fiscal policy has no effect in the short run model but is very effective in the classical model 
D)  There is no difference in the predictions of the two models 
E)  The classical model does a better job in predicting recessions than the short-run macro model 
A)  In the classical model the economy automatically operates at potential GDP while in the short run model the economy can operate at a different level of GDP 
B)  In the short run model the economy automatically operates at potential GDP while in the classical model the economy can operate at a different level of GDP 
C)  Fiscal policy has no effect in the short run model but is very effective in the classical model 
D)  There is no difference in the predictions of the two models 
E)  The classical model does a better job in predicting recessions than the short-run macro model

Question 8

If disposable income decreased,which of the following changes in the consumption-function line would occur?

Accepted Answer

A)  A rightward movement along the line 
B)  A leftward movement along the line 
C)  The entire line would shift upward 
D)  The entire line would shift downward 
E)  The entire line would shift downward and there would be a rightward movement along the new line 
A)  A rightward movement along the line 
B)  A leftward movement along the line 
C)  The entire line would shift upward 
D)  The entire line would shift downward 
E)  The entire line would shift downward and there would be a rightward movement along the new line

Question 9

If the interest rate increased,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 shifts 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 shifts 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 10

Which of the following is the definition of wealth?

Accepted Answer

A)  Real disposable income 
B)  The total value of assets 
C)  Real income 
D)  The value of liabilities minus the value of assets 
E)  The value of assets minus the value of outstanding liabilities 
A)  Real disposable income 
B)  The total value of assets 
C)  Real income 
D)  The value of liabilities minus the value of assets 
E)  The value of assets minus the value of outstanding liabilities

Question 11

Which of the following would be most likely to increase consumption spending?

Accepted Answer

A)  A higher interest rate 
B)  A drop in stock prices 
C)  A reduction in consumer credit card debt 
D)  The expectation of lower future prices 
E)  An increase in the income tax rate 
A)  A higher interest rate 
B)  A drop in stock prices 
C)  A reduction in consumer credit card debt 
D)  The expectation of lower future prices 
E)  An increase in the income tax rate

Question 12

If investment spending decreases by $500 billion and if MPC = 0.6,

Accepted Answer

A)  equilibrium GDP will rise by $1,250 billion 
B)  equilibrium GDP will fall by $500 billion 
C)  equilibrium GDP will fall by $1,250 billion 
D)  equilibrium GDP will rise by $500 billion 
E)  nothing will happen in the short run 
A)  equilibrium GDP will rise by $1,250 billion 
B)  equilibrium GDP will fall by $500 billion 
C)  equilibrium GDP will fall by $1,250 billion 
D)  equilibrium GDP will rise by $500 billion 
E)  nothing will happen in the short run

Question 13

Transfer payments

Accepted Answer

A)  shape the structural deficit 
B)  tend to fall in a recession 
C)  automatically increase when positive spending shocks occur 
D)  transfer jobs to the federal bureaucracy 
E)  automatically decline when positive spending shocks occur 
A)  shape the structural deficit 
B)  tend to fall in a recession 
C)  automatically increase when positive spending shocks occur 
D)  transfer jobs to the federal bureaucracy 
E)  automatically decline when positive spending shocks occur

Question 14

The expenditure multiplier acts on changes in investment spending,government purchases,net exports,and autonomous consumption.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following statements is true?

Accepted Answer

A)  When a change in income causes consumption to change,the consumption-income line shifts;however,when anything besides income changes,we move along the line. 
B)  When a change in income causes consumption to change,we move along the consumption-income line;however,when anything besides income changes,the line shifts. 
C)  When income or anything else affecting consumption changes,we move along the consumption-income line. 
D)  When income or anything else affecting consumption changes,the consumption-income line shifts. 
E)  There is no way to determine,without more information,whether a change in income or anything else will shift the consumption line or cause movement along the consumption-income line. 
A)  When a change in income causes consumption to change,the consumption-income line shifts;however,when anything besides income changes,we move along the line. 
B)  When a change in income causes consumption to change,we move along the consumption-income line;however,when anything besides income changes,the line shifts. 
C)  When income or anything else affecting consumption changes,we move along the consumption-income line. 
D)  When income or anything else affecting consumption changes,the consumption-income line shifts. 
E)  There is no way to determine,without more information,whether a change in income or anything else will shift the consumption line or cause movement along the consumption-income line.

Question 16

Which of the following is not true of a recession?

Accepted Answer

A)  The economy is overheated. 
B)  Cyclical unemployment is high. 
C)  Unemployment is caused by insufficient spending. 
D)  If the economy is in equilibrium,the aggregate expenditure line is too low to create an intersection at the full-employment level. 
E)  If employers hired more workers to reduce unemployment,they would be unable to sell all the extra output those workers would produce. 
A)  The economy is overheated. 
B)  Cyclical unemployment is high. 
C)  Unemployment is caused by insufficient spending. 
D)  If the economy is in equilibrium,the aggregate expenditure line is too low to create an intersection at the full-employment level. 
E)  If employers hired more workers to reduce unemployment,they would be unable to sell all the extra output those workers would produce.

Question 17

Suppose you observed firms' inventory stocks drop by $100 billion.If you knew that aggregate expenditure was $3,000 billion,what would GDP be?

Accepted Answer

A)  $3,000 billion 
B)  $2,000 billion 
C)  $2,900 billion 
D)  $1,000 billion 
E)  $3,100 billion 
A)  $3,000 billion 
B)  $2,000 billion 
C)  $2,900 billion 
D)  $1,000 billion 
E)  $3,100 billion

Question 18

Which of the following is not true of an economic expansion?

Accepted Answer

A)  The economy is overheated. 
B)  There is too much spending. 
C)  Production exceeds equilibrium output. 
D)  The aggregate expenditure line is too low to create an intersection at full-employment output. 
E)  Unemployment will be unusually low. 
A)  The economy is overheated. 
B)  There is too much spending. 
C)  Production exceeds equilibrium output. 
D)  The aggregate expenditure line is too low to create an intersection at full-employment output. 
E)  Unemployment will be unusually low.

Question 19

Which of the following is a definition of the consumption function?

Accepted Answer

A)  A functional relationship between real consumption spending and real disposable income 
B)  A functional relationship between real consumption spending and the interest rate 
C)  A functional relationship between real consumption spending and wealth 
D)  A functional relationship between real consumption spending and total spending 
E)  A functional relationship between real consumption spending and net taxes 
A)  A functional relationship between real consumption spending and real disposable income 
B)  A functional relationship between real consumption spending and the interest rate 
C)  A functional relationship between real consumption spending and wealth 
D)  A functional relationship between real consumption spending and total spending 
E)  A functional relationship between real consumption spending and net taxes

Question 20

Net exports

Accepted Answer

A)  are equal to total exports minus total imports 
B)  are always positive because total imports exceed total exports 
C)  are always negative because total exports exceed total imports 
D)  always exceed total exports 
E)  include goods produced and sold abroad 
A)  are equal to total exports minus total imports 
B)  are always positive because total imports exceed total exports 
C)  are always negative because total exports exceed total imports 
D)  always exceed total exports 
E)  include goods produced and sold abroad

Exam 23: The Short-Run Macro Model

-Refer to Figure 11-6.Which point represents the level of autonomous consumption?

In the short-run macro model,what is the relationship between income and government purchases?

In the short-run macro model,planned investment is defined as

If Americans became more pessimistic about the economy,what would happen to the consumption-income line?

If the marginal propensity to consume is 0.6 and investment spending declines by $50 billion,by how much will equilibrium output change?

Use the table below to find autonomous consumption

What is the main difference in the classical model as compared to the short-run macro model?

If disposable income decreased,which of the following changes in the consumption-function line would occur?

If the interest rate increased,which of the following would occur?

Which of the following is the definition of wealth?

Which of the following would be most likely to increase consumption spending?

If investment spending decreases by $500 billion and if MPC = 0.6,

Transfer payments

The expenditure multiplier acts on changes in investment spending,government purchases,net exports,and autonomous consumption.

Which of the following statements is true?

Which of the following is not true of a recession?

Suppose you observed firms' inventory stocks drop by $100 billion.If you knew that aggregate expenditure was $3,000 billion,what would GDP be?

Which of the following is not true of an economic expansion?

Which of the following is a definition of the consumption function?

Net exports

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