Question 1

If net taxes decrease by $500 billion,both household disposable income and consumption spending will increase by $500 billion.

Accepted Answer

A) True 
 B)False

Question 2

A recession causes

Accepted Answer

A)  transfer payments and corporate profits to increase 
B)  military spending and corporate profits to increase 
C)  unemployment to increase and transfer payments to decrease 
D)  transfer payments to increase and corporate profits to decrease 
E)  household income and government transfer payments to decrease 
A)  transfer payments and corporate profits to increase 
B)  military spending and corporate profits to increase 
C)  unemployment to increase and transfer payments to decrease 
D)  transfer payments to increase and corporate profits to decrease 
E)  household income and government transfer payments to decrease

Question 3

The short-run macro model

Accepted Answer

A)  relies on the market-clearing assumption 
B)  is used primarily for long-run analysis 
C)  is used primarily for short-run analysis 
D)  focuses on the supply of and demand for resources 
E)  focuses on fluctuations in the financial markets to explain fluctuations in real GDP 
A)  relies on the market-clearing assumption 
B)  is used primarily for long-run analysis 
C)  is used primarily for short-run analysis 
D)  focuses on the supply of and demand for resources 
E)  focuses on fluctuations in the financial markets to explain fluctuations in real GDP

Question 4

Where can equilibrium GDP be found on a graph?

Accepted Answer

A)  Where the consumption function crosses the 45-degree line 
B)  Where the 45-degree line crosses the investment function 
C)  Where the aggregate expenditure function crosses the 45-degree line 
D)  Where total output is equal to the unplanned inventory change 
E)  Where the next exports function crosses the 45-degree line 
A)  Where the consumption function crosses the 45-degree line 
B)  Where the 45-degree line crosses the investment function 
C)  Where the aggregate expenditure function crosses the 45-degree line 
D)  Where total output is equal to the unplanned inventory change 
E)  Where the next exports function crosses the 45-degree line

Question 5

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

Accepted Answer

A)  the marginal propensity to consume cannot be determined from the information given 
B)  0.4 
C)  0.5 
D)  0.6 
E)  0.8 
A)  the marginal propensity to consume cannot be determined from the information given 
B)  0.4 
C)  0.5 
D)  0.6 
E)  0.8

Question 6

In the short-run macro model,if GDP = $5 trillion and aggregate expenditure = $4.6 trillion,we would expect

Accepted Answer

A)  prices to fall until the additional $0.4 trillion of output was sold 
B)  prices to rise 
C)  output to rise because businesses anticipate that buyers will spend more in the future to compensate for weak spending in this period 
D)  inventories to rise by $0.4 trillion 
E)  inventories to shrink by $0.4 trillion 
A)  prices to fall until the additional $0.4 trillion of output was sold 
B)  prices to rise 
C)  output to rise because businesses anticipate that buyers will spend more in the future to compensate for weak spending in this period 
D)  inventories to rise by $0.4 trillion 
E)  inventories to shrink by $0.4 trillion

Question 7

Net exports are

Accepted Answer

A)  total exports minus total imports 
B)  what foreigners earn in the United States minus what US citizens earn abroad 
C)  always positive because the United States has always had a positive trade balance. 
D)  total imports minus total exports 
E)  total exports minus depreciation 
A)  total exports minus total imports 
B)  what foreigners earn in the United States minus what US citizens earn abroad 
C)  always positive because the United States has always had a positive trade balance. 
D)  total imports minus total exports 
E)  total exports minus depreciation

Question 8

Which of the following serve as automatic stabilizers?

Accepted Answer

A)  Transfer payments 
B)  Prices 
C)  Imports 
D)  All of the above serve as automatic stabilizers 
E)  None of the above serve as automatic stabilizers 
A)  Transfer payments 
B)  Prices 
C)  Imports 
D)  All of the above serve as automatic stabilizers 
E)  None of the above serve as automatic stabilizers

Question 9

If an economy is at equilibrium,it will also be operating at full employment.

Accepted Answer

A) True 
 B)False

Question 10

The largest component of aggregate expenditure is

Accepted Answer

A)  consumption spending 
B)  government purchases 
C)  net exports 
D)  capital expenditures 
E)  investment spending 
A)  consumption spending 
B)  government purchases 
C)  net exports 
D)  capital expenditures 
E)  investment spending

Question 11

Which of the following components of spending is not treated as a given value in the short-run macro model?

Accepted Answer

A)  Net exports 
B)  Imports 
C)  Investment spending 
D)  Consumption spending 
E)  Government spending 
A)  Net exports 
B)  Imports 
C)  Investment spending 
D)  Consumption spending 
E)  Government spending

Question 12

The consumption function shows the relationship between real consumption spending and

Accepted Answer

A)  real wealth 
B)  the interest rate 
C)  expectations 
D)  real disposable income 
E)  debt 
A)  real wealth 
B)  the interest rate 
C)  expectations 
D)  real disposable income 
E)  debt

Question 13

In the short-run macro model,if firms produce more output than they sell,those firms will

Accepted Answer

A)  increase the prices of their products 
B)  decrease their output 
C)  increase their output 
D)  cut back on their consumption spending 
E)  increase the prices of their products and reduce the amount of output they produce 
A)  increase the prices of their products 
B)  decrease their output 
C)  increase their output 
D)  cut back on their consumption spending 
E)  increase the prices of their products and reduce the amount of output they produce

Question 14

A change in autonomous consumption causes a movement along the aggregate expenditure line,while a change in consumption that depends on income causes a shift of the aggregate expenditure line.

Accepted Answer

A) True 
 B)False

Question 15

The marginal propensity to consume is always

Accepted Answer

A)  a negative number 
B)  larger than 1.0 
C)  larger than 10 
D)  greater than zero and less than 0.5 
E)  greater than zero and less than 1.0 
A)  a negative number 
B)  larger than 1.0 
C)  larger than 10 
D)  greater than zero and less than 0.5 
E)  greater than zero and less than 1.0

Question 16

If aggregate expenditure was less than GDP,which of the following would happen?

Accepted Answer

A)  Inventories would shrink and GDP would drop in future periods. 
B)  Inventories would grow and GDP would drop in future periods. 
C)  Inventories would shrink and GDP would increase in future periods. 
D)  Inventories would grow and GDP would increase in future periods. 
E)  Inventories would not change and GDP would drop in future periods. 
A)  Inventories would shrink and GDP would drop in future periods. 
B)  Inventories would grow and GDP would drop in future periods. 
C)  Inventories would shrink and GDP would increase in future periods. 
D)  Inventories would grow and GDP would increase in future periods. 
E)  Inventories would not change and GDP would drop in future periods.

Question 17

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

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 18

Approximately how long does it take for the successive increases in spending and output to be completed after an initial increase in investment spending?

Accepted Answer

A)  Two years 
B)  Ten years 
C)  Six years 
D)  One year 
E)  Five years 
A)  Two years 
B)  Ten years 
C)  Six years 
D)  One year 
E)  Five years

Question 19

If the marginal propensity to consume is 0.8,what is the value of the expenditure multiplier?

Accepted Answer

A)  0.2 
B)  0.8 
C)  1.25 
D)  5.0 
E)  8.0 
A)  0.2 
B)  0.8 
C)  1.25 
D)  5.0 
E)  8.0

Question 20

The slope of the aggregate expenditure line is

Accepted Answer

A)  less than zero 
B)  less than 1.0 
C)  equal to 1.0 
D)  greater than 1.0 
E)  the same as the slope of the 45-degree line 
A)  less than zero 
B)  less than 1.0 
C)  equal to 1.0 
D)  greater than 1.0 
E)  the same as the slope of the 45-degree line

Exam 23: The Short-Run Macro Model

If net taxes decrease by $500 billion,both household disposable income and consumption spending will increase by $500 billion.

A recession causes

The short-run macro model

Where can equilibrium GDP be found on a graph?

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

In the short-run macro model,if GDP = $5 trillion and aggregate expenditure = $4.6 trillion,we would expect

Net exports are

Which of the following serve as automatic stabilizers?

If an economy is at equilibrium,it will also be operating at full employment.

The largest component of aggregate expenditure is

Which of the following components of spending is not treated as a given value in the short-run macro model?

The consumption function shows the relationship between real consumption spending and

In the short-run macro model,if firms produce more output than they sell,those firms will

A change in autonomous consumption causes a movement along the aggregate expenditure line,while a change in consumption that depends on income causes a shift of the aggregate expenditure line.

The marginal propensity to consume is always

If aggregate expenditure was less than GDP,which of the following would happen?

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

Approximately how long does it take for the successive increases in spending and output to be completed after an initial increase in investment spending?

If the marginal propensity to consume is 0.8,what is the value of the expenditure multiplier?

The slope of the aggregate expenditure line is

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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