Question 1

Tax decreases do not inject money into the economy.

Accepted Answer

A) True 
 B)False

Question 2

In the full aggregate expenditure model with net exports included:

Accepted Answer

A)  C + G + X = S + T + M. 
B)  C + G + M = S + T + X. 
C)  I + G + M = S + T + X. 
D)  I + G + X = S + T + M. 
A)  C + G + X = S + T + M. 
B)  C + G + M = S + T + X. 
C)  I + G + M = S + T + X. 
D)  I + G + X = S + T + M.

Question 3

John Maynard Keynes focused on _____ to explain how the economy reaches short-term equilibrium employment,output,and income.

Accepted Answer

A)  aggregate spending 
B)  investment 
C)  the interest rate 
D)  property rights 
A)  aggregate spending 
B)  investment 
C)  the interest rate 
D)  property rights

Question 4

Keynes emphasized income as the main determinant of consumption and savings.

Accepted Answer

A) True 
 B)False

Question 5

The increase in aggregate spending needed to bring an economy to full employment is called:

Accepted Answer

A)  goal-oriented spending. 
B)  the inflationary gap. 
C)  gap closure spending. 
D)  the recessionary gap. 
A)  goal-oriented spending. 
B)  the inflationary gap. 
C)  gap closure spending. 
D)  the recessionary gap.

Question 6

If income grows from $3,000 per month to $3,500 per month and consumption rises from $2,800 per month to $3,200 per month,what is the marginal propensity to consume?

Accepted Answer

A)  1.25 
B)  0.8 
C)  1.09 
D)  0.91 
A)  1.25 
B)  0.8 
C)  1.09 
D)  0.91

Question 7

Equilibrium in the full Keynesian model requires that:

Accepted Answer

A)  all injections (I + G + X)must equal all withdrawals (S + T + M). 
B)  income exceed expenditures. 
C)  expenditures exceed income. 
D)  the government budget be in balance. 
A)  all injections (I + G + X)must equal all withdrawals (S + T + M). 
B)  income exceed expenditures. 
C)  expenditures exceed income. 
D)  the government budget be in balance.

Question 8

The Keynesian conclusion that total injections equal total withdrawals in equilibrium is consistent with the circular flow model.

Accepted Answer

A) True 
 B)False

Question 9

The 45-degree line represents the set of points where aggregate expenditures is equal to disposable income.

Accepted Answer

A) True 
 B)False

Question 10

The full Keynesian model illustrates the importance of spending in an economy whose investment,government spending,and exports all increase income,while saving,taxes,and imports reduce it.

Accepted Answer

A) True 
 B)False

Question 11

One of the determinants of investment is the present level of capital goods.

Accepted Answer

A) True 
 B)False

Question 12

The multiplier effect is a domino effect as income goes from person to person.Explain.

Accepted Answer

The multiplier effect starts with some n

Question 13

Classical economists expected government to promote full employment,stabilize prices,and stimulate economic growth.

Accepted Answer

A) True 
 B)False

Question 14

If the amount of spending in an economy declines by $1,000 and the marginal propensity to consume is 0.8,the effect on the economy is a change of _____ in income or output.

Accepted Answer

A)  -$800 
B)  -$1,000 
C)  $1,000 
D)  -$5,000 
A)  -$800 
B)  -$1,000 
C)  $1,000 
D)  -$5,000

Question 15

A horizontal investment schedule assumes that investment spending is not related to current income.

Accepted Answer

A) True 
 B)False

Question 16

According to the simple Keynesian model,which of the following statements is NOT correct?

Accepted Answer

A)  MPC + MPS = 1 
B)  APC + MPS = 1 
C)  APC + APS = 1 
D)  Y = C + S 
A)  MPC + MPS = 1 
B)  APC + MPS = 1 
C)  APC + APS = 1 
D)  Y = C + S

Question 17

If the marginal propensity to consume is 0.8 and the government reduces taxes by $5 billion,equilibrium income will:

Accepted Answer

A)  fall by $25 billion. 
B)  rise by $25 billion. 
C)  rise by $20 billion. 
D)  fall by $20 billion. 
A)  fall by $25 billion. 
B)  rise by $25 billion. 
C)  rise by $20 billion. 
D)  fall by $20 billion.

Question 18

In Keynesian macroeconomic equilibrium:

Accepted Answer

A)  AE = I and C = S. 
B)  AE = S and C = I. 
C)  AE = Y and C = S. 
D)  AE = Y and S = I. 
A)  AE = I and C = S. 
B)  AE = S and C = I. 
C)  AE = Y and C = S. 
D)  AE = Y and S = I.

Question 19

Equal changes in government spending and taxation lead to an equal change in income.

Accepted Answer

A) True 
 B)False

Question 20

Changes in spending modify income by an amount equal to the change in spending.

Accepted Answer

A) True 
 B)False

Tax decreases do not inject money into the economy.

In the full aggregate expenditure model with net exports included:

John Maynard Keynes focused on _____ to explain how the economy reaches short-term equilibrium employment,output,and income.

Keynes emphasized income as the main determinant of consumption and savings.

The increase in aggregate spending needed to bring an economy to full employment is called:

If income grows from $3,000 per month to $3,500 per month and consumption rises from $2,800 per month to $3,200 per month,what is the marginal propensity to consume?

Equilibrium in the full Keynesian model requires that:

The Keynesian conclusion that total injections equal total withdrawals in equilibrium is consistent with the circular flow model.

The 45-degree line represents the set of points where aggregate expenditures is equal to disposable income.

The full Keynesian model illustrates the importance of spending in an economy whose investment,government spending,and exports all increase income,while saving,taxes,and imports reduce it.

One of the determinants of investment is the present level of capital goods.

The multiplier effect is a domino effect as income goes from person to person.Explain.

Classical economists expected government to promote full employment,stabilize prices,and stimulate economic growth.

If the amount of spending in an economy declines by $1,000 and the marginal propensity to consume is 0.8,the effect on the economy is a change of _____ in income or output.

A horizontal investment schedule assumes that investment spending is not related to current income.

According to the simple Keynesian model,which of the following statements is NOT correct?

If the marginal propensity to consume is 0.8 and the government reduces taxes by $5 billion,equilibrium income will:

In Keynesian macroeconomic equilibrium:

Equal changes in government spending and taxation lead to an equal change in income.

Changes in spending modify income by an amount equal to the change in spending.

Exploring Economics

Production, Economic Growth, and Trade

Supply and Demand

Markets and Government

Introduction to Macroeconomics

Measuring Inflation and Unemployment

Economic Growth

Aggregate Demand and Supply

Fiscal Policy and Debt

Saving, Investment, and the Financial System

Money Creation and the Federal Reserve

Monetary Policy

Macroeconomic Policy: Challenges in a Global Economy

International Trade

Open Economy Macroeconomic

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Exam 8: Aggregate Expenditures

Tax decreases do not inject money into the economy.

In the full aggregate expenditure model with net exports included:

John Maynard Keynes focused on _____ to explain how the economy reaches short-term equilibrium employment,output,and income.

Keynes emphasized income as the main determinant of consumption and savings.

The increase in aggregate spending needed to bring an economy to full employment is called:

If income grows from $3,000 per month to $3,500 per month and consumption rises from $2,800 per month to $3,200 per month,what is the marginal propensity to consume?

Equilibrium in the full Keynesian model requires that:

The Keynesian conclusion that total injections equal total withdrawals in equilibrium is consistent with the circular flow model.

The 45-degree line represents the set of points where aggregate expenditures is equal to disposable income.

The full Keynesian model illustrates the importance of spending in an economy whose investment,government spending,and exports all increase income,while saving,taxes,and imports reduce it.

One of the determinants of investment is the present level of capital goods.

The multiplier effect is a domino effect as income goes from person to person.Explain.

Classical economists expected government to promote full employment,stabilize prices,and stimulate economic growth.

If the amount of spending in an economy declines by $1,000 and the marginal propensity to consume is 0.8,the effect on the economy is a change of _____ in income or output.

A horizontal investment schedule assumes that investment spending is not related to current income.

According to the simple Keynesian model,which of the following statements is NOT correct?

If the marginal propensity to consume is 0.8 and the government reduces taxes by $5 billion,equilibrium income will:

In Keynesian macroeconomic equilibrium:

Equal changes in government spending and taxation lead to an equal change in income.

Changes in spending modify income by an amount equal to the change in spending.

Exploring Economics

Production, Economic Growth, and Trade

Supply and Demand

Markets and Government

Introduction to Macroeconomics

Measuring Inflation and Unemployment

Economic Growth

Aggregate Demand and Supply

Fiscal Policy and Debt

Saving, Investment, and the Financial System

Money Creation and the Federal Reserve

Monetary Policy

Macroeconomic Policy: Challenges in a Global Economy

International Trade

Open Economy Macroeconomic

Filters