Question 1

The simple Keynesian model ignores:

Accepted Answer

A)  the government. 
B)  the government and the foreign sector. 
C)  households. 
D)  households and businesses. 
A)  the government. 
B)  the government and the foreign sector. 
C)  households. 
D)  households and businesses.

Question 2

Classical economists thought that prices,wage rates,and interest rates were slow to change.

Accepted Answer

A) True 
 B)False

Question 3

If the marginal propensity to consume increases,the spending multiplier _______ and the balanced budget multiplier ___________.

Accepted Answer

A)  decreases;remains the same. 
B)  increases;remains the same. 
C)  increases;increases. 
D)  decreases;decreases. 
A)  decreases;remains the same. 
B)  increases;remains the same. 
C)  increases;increases. 
D)  decreases;decreases.

Question 4

In the simple Keynesian model with no government and foreign sectors,assume that full employment occurs at an output of $10,000.With a marginal propensity to consume of 0.5 and equilibrium output at $9,600,by how much will investment spending have to increase to move the economy to full employment?

Accepted Answer

A)  $100 
B)  $400 
C)  $200 
D)  $50 
A)  $100 
B)  $400 
C)  $200 
D)  $50

Question 5

In the simple Keynesian model,if people earn $4 billion and spend $3.5 billion on consumption goods,then saving is $0.5 billion.

Accepted Answer

A) True 
 B)False

Question 6

Aggregate expenditures are equal to consumption plus business investment in the simple private sector model.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is NOT a determinant of investment?

Accepted Answer

A)  business expectations 
B)  past stock and bond prices 
C)  technological innovations 
D)  the amount of existing capital goods 
A)  business expectations 
B)  past stock and bond prices 
C)  technological innovations 
D)  the amount of existing capital goods

Question 8

From year to year,consumption fluctuates more than gross private domestic investment.

Accepted Answer

A) True 
 B)False

Question 9

A luxury car manufacturer is contemplating investing in its assembly plants.It learns that the probability of a recession in the next few years has increased dramatically because of adverse international events.Its investment demand will:

Accepted Answer

A)  remain unchanged because auto manufacturing is well insulated from global events. 
B)  decrease because lower investment returns are expected. 
C)  increase because lower returns to the investment are expected. 
D)  increase to compensate for the lower expected sales. 
A)  remain unchanged because auto manufacturing is well insulated from global events. 
B)  decrease because lower investment returns are expected. 
C)  increase because lower returns to the investment are expected. 
D)  increase to compensate for the lower expected sales.

Question 10

The balanced budget multiplier is:

Accepted Answer

A)  less than 1. 
B)  greater than 1. 
C)  equal to 1. 
D)  equal to 0. 
A)  less than 1. 
B)  greater than 1. 
C)  equal to 1. 
D)  equal to 0.

Question 11

How did classical economists think that the self-correcting mechanism worked to get the economy out of a recession?

Accepted Answer

Classical economists believed that busin

Question 12

Which of the following illustrates the paradox of thrift?

Accepted Answer

A)  Consumer uncertainty causes people to save less;consumption rises;equilibrium income and production drop;savings drop because income is lower. 
B)  Consumer uncertainty causes people to save more;consumption drops;equilibrium income and production drop;savings drop because income is lower. 
C)  The government encourages saving by raising interest rates;higher interest rates reduce investment spending,which lower equilibrium income and production drop;savings drop because income is lower. 
D)  As businesses save more,interest rates fall,thus reducing household savings. 
A)  Consumer uncertainty causes people to save less;consumption rises;equilibrium income and production drop;savings drop because income is lower. 
B)  Consumer uncertainty causes people to save more;consumption drops;equilibrium income and production drop;savings drop because income is lower. 
C)  The government encourages saving by raising interest rates;higher interest rates reduce investment spending,which lower equilibrium income and production drop;savings drop because income is lower. 
D)  As businesses save more,interest rates fall,thus reducing household savings.

Question 13

Suppose economists observe that an increase in government purchases of $10 billion raises aggregate expenditures by $30 billion.These economists would estimate that the marginal propensity to save is:

Accepted Answer

A)  0.67. 
B)  0.33. 
C)  0.5. 
D)  20. 
A)  0.67. 
B)  0.33. 
C)  0.5. 
D)  20.

Question 14

In the simple Keynesian model,if desired investment is greater than desired saving:

Accepted Answer

A)  the multiplier effect will move the economy to a lower income level. 
B)  income and output will rise. 
C)  interest rates will fall. 
D)  actual savings will fall as the economy moves to a lower output level. 
A)  the multiplier effect will move the economy to a lower income level. 
B)  income and output will rise. 
C)  interest rates will fall. 
D)  actual savings will fall as the economy moves to a lower output level.

Question 15

Between 1929 and 1933,government spending _____ and net exports _____.

Accepted Answer

A)  declined;declined 
B)  declined;stayed the same 
C)  stayed the same;declined 
D)  stayed the same;stayed the same 
A)  declined;declined 
B)  declined;stayed the same 
C)  stayed the same;declined 
D)  stayed the same;stayed the same

Question 16

At equilibrium in the simple Keynesian model,income is $6 million and consumption spending is $5 million.Which of the following is correct?

Accepted Answer

A)  Investment is $1 million. 
B)  There is no saving in this economy. 
C)  The economy will go into disequilibrium because consumption is not equal to income. 
D)  The information provided is insufficient to determine the level of investment spending. 
A)  Investment is $1 million. 
B)  There is no saving in this economy. 
C)  The economy will go into disequilibrium because consumption is not equal to income. 
D)  The information provided is insufficient to determine the level of investment spending.

Question 17

In the simple Keynesian model of the private economy,which of the following is assumed?

Accepted Answer

A)  The consumer price index can rise or fall. 
B)  Households and firms are savers. 
C)  The aggregate price level can change. 
D)  There is considerable slack in the economy. 
A)  The consumer price index can rise or fall. 
B)  Households and firms are savers. 
C)  The aggregate price level can change. 
D)  There is considerable slack in the economy.

Question 18

If your income is $35,000 and the average propensity to save is 0.46,what is consumption?

Accepted Answer

A)  $16,100 
B)  $18,900 
C)  $15,500 
D)  $19,500 
A)  $16,100 
B)  $18,900 
C)  $15,500 
D)  $19,500

Question 19

Exports are injections and imports are withdrawals from the domestic spending cycle.

Accepted Answer

A) True 
 B)False

Question 20

If a government always balances its budget:

Accepted Answer

A)  the economy can never slide into a recession. 
B)  raising taxes has no net effect on total spending. 
C)  economic growth is spurred by showing businesses that budgets can be balanced. 
D)  the effect of an increase in government spending on aggregate expenditures is weakened. 
A)  the economy can never slide into a recession. 
B)  raising taxes has no net effect on total spending. 
C)  economic growth is spurred by showing businesses that budgets can be balanced. 
D)  the effect of an increase in government spending on aggregate expenditures is weakened.

The simple Keynesian model ignores:

Classical economists thought that prices,wage rates,and interest rates were slow to change.

If the marginal propensity to consume increases,the spending multiplier _ and the balanced budget multiplier _____.

In the simple Keynesian model with no government and foreign sectors,assume that full employment occurs at an output of $10,000.With a marginal propensity to consume of 0.5 and equilibrium output at $9,600,by how much will investment spending have to increase to move the economy to full employment?

In the simple Keynesian model,if people earn $4 billion and spend $3.5 billion on consumption goods,then saving is $0.5 billion.

Aggregate expenditures are equal to consumption plus business investment in the simple private sector model.

Which of the following is NOT a determinant of investment?

From year to year,consumption fluctuates more than gross private domestic investment.

A luxury car manufacturer is contemplating investing in its assembly plants.It learns that the probability of a recession in the next few years has increased dramatically because of adverse international events.Its investment demand will:

The balanced budget multiplier is:

How did classical economists think that the self-correcting mechanism worked to get the economy out of a recession?

Which of the following illustrates the paradox of thrift?

Suppose economists observe that an increase in government purchases of $10 billion raises aggregate expenditures by $30 billion.These economists would estimate that the marginal propensity to save is:

In the simple Keynesian model,if desired investment is greater than desired saving:

Between 1929 and 1933,government spending _ and net exports _.

At equilibrium in the simple Keynesian model,income is $6 million and consumption spending is $5 million.Which of the following is correct?

In the simple Keynesian model of the private economy,which of the following is assumed?

If your income is $35,000 and the average propensity to save is 0.46,what is consumption?

Exports are injections and imports are withdrawals from the domestic spending cycle.

If a government always balances its budget:

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

Exam 8: Aggregate Expenditures

The simple Keynesian model ignores:

Classical economists thought that prices,wage rates,and interest rates were slow to change.

If the marginal propensity to consume increases,the spending multiplier _______ and the balanced budget multiplier ___________.

In the simple Keynesian model with no government and foreign sectors,assume that full employment occurs at an output of $10,000.With a marginal propensity to consume of 0.5 and equilibrium output at $9,600,by how much will investment spending have to increase to move the economy to full employment?

In the simple Keynesian model,if people earn $4 billion and spend $3.5 billion on consumption goods,then saving is $0.5 billion.

Aggregate expenditures are equal to consumption plus business investment in the simple private sector model.

Which of the following is NOT a determinant of investment?

From year to year,consumption fluctuates more than gross private domestic investment.

A luxury car manufacturer is contemplating investing in its assembly plants.It learns that the probability of a recession in the next few years has increased dramatically because of adverse international events.Its investment demand will:

The balanced budget multiplier is:

How did classical economists think that the self-correcting mechanism worked to get the economy out of a recession?

Which of the following illustrates the paradox of thrift?

Suppose economists observe that an increase in government purchases of $10 billion raises aggregate expenditures by $30 billion.These economists would estimate that the marginal propensity to save is:

In the simple Keynesian model,if desired investment is greater than desired saving:

Between 1929 and 1933,government spending _____ and net exports _____.

At equilibrium in the simple Keynesian model,income is $6 million and consumption spending is $5 million.Which of the following is correct?

In the simple Keynesian model of the private economy,which of the following is assumed?

If your income is $35,000 and the average propensity to save is 0.46,what is consumption?

Exports are injections and imports are withdrawals from the domestic spending cycle.

If a government always balances its budget:

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

If the marginal propensity to consume increases,the spending multiplier _ and the balanced budget multiplier _____.

Between 1929 and 1933,government spending _ and net exports _.