Question 1

In the Great Recession of 2007-2009, consumption C and investment Ig fell while government G expanded.

Accepted Answer

A) True 
 B)False

Question 2

Refer to the graph above for a private closed economy. At the equilibrium level of GDP, saving will be:

Accepted Answer

A)  $50 billion 
B)  $100 billion 
C)  $150 billion 
D)  Cannot be determined from the information given 
A)  $50 billion 
B)  $100 billion 
C)  $150 billion 
D)  Cannot be determined from the information given

Question 3

If the government increases its purchases by $200 billion but at the same time raises lump-sum taxes by $200 billion, then equilibrium GDP will remain constant.

Accepted Answer

A) True 
 B)False

Question 4

The graph above indicates that:

Accepted Answer

A)  I'g is an investment schedule that assumes that the investment plans of business are independent of the current level of income, whereas Ig does not 
B)  Ig is an investment schedule that assumes that the investment plans of business are independent of the current level of income, whereas I'g does not 
C)  The equilibrium level of investment is determined at the point where investment schedule I'g crosses the Ig investment schedule 
D)  Investment schedule I'g shows the inverse relationship between real domestic product and investment 
A)  I'g is an investment schedule that assumes that the investment plans of business are independent of the current level of income, whereas Ig does not 
B)  Ig is an investment schedule that assumes that the investment plans of business are independent of the current level of income, whereas I'g does not 
C)  The equilibrium level of investment is determined at the point where investment schedule I'g crosses the Ig investment schedule 
D)  Investment schedule I'g shows the inverse relationship between real domestic product and investment

Question 5

If the MPC in an economy is 0.75 and aggregate expenditures increase by $5 billion, then equilibrium GDP will increase by:

Accepted Answer

A)  $3.75 billion 
B)  $6.7 billion 
C)  $8.75 billion 
D)  $20 billion 
A)  $3.75 billion 
B)  $6.7 billion 
C)  $8.75 billion 
D)  $20 billion

Question 6

Net exports are negative when:

Accepted Answer

A)  Net exports exceed imports 
B)  Depreciation exceeds exports 
C)  Exports exceed imports 
D)  Imports exceed exports 
A)  Net exports exceed imports 
B)  Depreciation exceeds exports 
C)  Exports exceed imports 
D)  Imports exceed exports

Question 7

The table shows the consumption schedule for a hypothetical economy. All figures are in billions of dollars.   Refer to the above table. If planned investments were fixed at $16, taxes were zero, government purchases of goods and services were zero, and net exports were zero, then equilibrium real GDP would be $630 initially. If government purchases were then raised from $0 to $10, and lump-sum taxes also increased from $0 to $10, other things constant, then the equilibrium real GDP would become:

Accepted Answer

A)  $660 
B)  $630 
C)  $640 
D)  $650 
A)  $660 
B)  $630 
C)  $640 
D)  $650

Question 8

If planned investment is larger than saving, then real GDP will increase as the economy adjusts towards equilibrium.

Accepted Answer

A) True 
 B)False

Question 9

The most basic premise of the aggregate expenditures model is that:

Accepted Answer

A)  The total output produced in the economy depends directly on the level of total spending 
B)  The level of employment in the economy depends inversely on the real wage rate 
C)  The total output produced depends mostly on the total capacity of firms to produce 
D)  The unemployment level in the economy is inversely related to the inflation rate 
A)  The total output produced in the economy depends directly on the level of total spending 
B)  The level of employment in the economy depends inversely on the real wage rate 
C)  The total output produced depends mostly on the total capacity of firms to produce 
D)  The unemployment level in the economy is inversely related to the inflation rate

Question 10

In the Great Recession of 2007-2009, the aggregate expenditures schedule in the U.S. economy dropped, mostly due to a fall in:

Accepted Answer

A)  Consumption spending 
B)  Investment expenditures 
C)  Government spending 
D)  Net exports 
A)  Consumption spending 
B)  Investment expenditures 
C)  Government spending 
D)  Net exports

Question 11

The data below are for a private (no government) closed economy. All figures are in billions of dollars.   Refer to the table above. If planned investment is $25 billion, the equilibrium level of GDP will be:

Accepted Answer

A)  $600 billion 
B)  $620 billion 
C)  $640 billion 
D)  $660 billion 
A)  $600 billion 
B)  $620 billion 
C)  $640 billion 
D)  $660 billion

Question 12

All figures below are in billions of dollars.   Refer to the table above. Suppose investment is $12 billion and the economy revises its saving plans so as to save $4 billion less at all levels of income. The new equilibrium GDP will be:

Accepted Answer

A)  $260 billion 
B)  $270 billion 
C)  $280 billion 
D)  $290 billion 
A)  $260 billion 
B)  $270 billion 
C)  $280 billion 
D)  $290 billion

Question 13

All figures in the table below are in billions of dollars.   Refer to the above data. Gross investment is $8 billion, net exports are $4 billion, and government collects a lump-sum tax of $30 billion and spends $30 billion. Assume all taxes are personal taxes and that government spending does not entail shifts in the consumption and investment schedules. The equilibrium GDP will be:

Accepted Answer

A)  $280 billion 
B)  $290 billion 
C)  $300 billion 
D)  $310 billion 
A)  $280 billion 
B)  $290 billion 
C)  $300 billion 
D)  $310 billion

Question 14

If the stock of available capital in the economy is running too low, then the:

Accepted Answer

A)  Investment schedule will shift upward 
B)  Investment schedule will shift downward 
C)  Consumption schedule will shift upward 
D)  Consumption schedule will shift downward 
A)  Investment schedule will shift upward 
B)  Investment schedule will shift downward 
C)  Consumption schedule will shift upward 
D)  Consumption schedule will shift downward

Question 15

John Maynard Keynes developed the ideas underlying the aggregate expenditures model:

Accepted Answer

A)  In the 1960s 
B)  In the 1980s 
C)  As a reinforcement of Say's Law 
D)  As a critique of classical economics 
A)  In the 1960s 
B)  In the 1980s 
C)  As a reinforcement of Say's Law 
D)  As a critique of classical economics

Question 16

John Maynard Keynes developed the aggregate expenditures model in order to understand the:

Accepted Answer

A)  Second World War 
B)  Great Depression 
C)  Oil crises of the 1970s and 1980s 
D)  Great Recession of 2007-2009 
A)  Second World War 
B)  Great Depression 
C)  Oil crises of the 1970s and 1980s 
D)  Great Recession of 2007-2009

Question 17

The data below are for a private (no government) closed economy. All figures are in billions of dollars.   Refer to the table above. If planned investment is $18 billion, then at the $660 billion level of disposable income, there will be an:

Accepted Answer

A)  Unplanned increase in inventories of $12 billion 
B)  Unplanned increase in inventories of $30 billion 
C)  Unplanned decrease in inventories of $12 billion 
D)  Unplanned decrease in inventories of $30 billion 
A)  Unplanned increase in inventories of $12 billion 
B)  Unplanned increase in inventories of $30 billion 
C)  Unplanned decrease in inventories of $12 billion 
D)  Unplanned decrease in inventories of $30 billion

Question 18

An increase in a lump-sum tax has the same effect on equilibrium GDP as an equal decrease in government purchases.

Accepted Answer

A) True 
 B)False

Question 19

When aggregate expenditure is greater than GDP, then there will be an:

Accepted Answer

A)  Unplanned increase in inventories and GDP will increase 
B)  Unplanned decrease in inventories and GDP will increase 
C)  Unplanned increase in inventories and GDP will decrease 
D)  Unplanned decrease in inventories and GDP will decrease 
A)  Unplanned increase in inventories and GDP will increase 
B)  Unplanned decrease in inventories and GDP will increase 
C)  Unplanned increase in inventories and GDP will decrease 
D)  Unplanned decrease in inventories and GDP will decrease

Question 20

The marginal propensity to save is 0.2. Equilibrium GDP will decrease by $50 billion if aggregate expenditures schedule decrease by:

Accepted Answer

A)  $10 billion 
B)  $15 billion 
C)  $16 billion 
D)  $40 billion 
A)  $10 billion 
B)  $15 billion 
C)  $16 billion 
D)  $40 billion

In the Great Recession of 2007-2009, consumption C and investment I_g fell while government G expanded.

Refer to the graph above for a private closed economy. At the equilibrium level of GDP, saving will be:

If the government increases its purchases by $200 billion but at the same time raises lump-sum taxes by $200 billion, then equilibrium GDP will remain constant.

The graph above indicates that:

If the MPC in an economy is 0.75 and aggregate expenditures increase by $5 billion, then equilibrium GDP will increase by:

Net exports are negative when:

If planned investment is larger than saving, then real GDP will increase as the economy adjusts towards equilibrium.

The most basic premise of the aggregate expenditures model is that:

In the Great Recession of 2007-2009, the aggregate expenditures schedule in the U.S. economy dropped, mostly due to a fall in:

The data below are for a private (no government) closed economy. All figures are in billions of dollars. Refer to the table above. If planned investment is $25 billion, the equilibrium level of GDP will be:

All figures below are in billions of dollars. Refer to the table above. Suppose investment is $12 billion and the economy revises its saving plans so as to save $4 billion less at all levels of income. The new equilibrium GDP will be:

If the stock of available capital in the economy is running too low, then the:

John Maynard Keynes developed the ideas underlying the aggregate expenditures model:

John Maynard Keynes developed the aggregate expenditures model in order to understand the:

The data below are for a private (no government) closed economy. All figures are in billions of dollars. Refer to the table above. If planned investment is $18 billion, then at the $660 billion level of disposable income, there will be an:

An increase in a lump-sum tax has the same effect on equilibrium GDP as an equal decrease in government purchases.

When aggregate expenditure is greater than GDP, then there will be an:

The marginal propensity to save is 0.2. Equilibrium GDP will decrease by $50 billion if aggregate expenditures schedule decrease by:

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, and Debt

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

Filters

Exam 11: The Aggregate Expenditures Model

In the Great Recession of 2007-2009, consumption C and investment Ig fell while government G expanded.

Refer to the graph above for a private closed economy. At the equilibrium level of GDP, saving will be:

If the government increases its purchases by $200 billion but at the same time raises lump-sum taxes by $200 billion, then equilibrium GDP will remain constant.

The graph above indicates that:

If the MPC in an economy is 0.75 and aggregate expenditures increase by $5 billion, then equilibrium GDP will increase by:

Net exports are negative when:

If planned investment is larger than saving, then real GDP will increase as the economy adjusts towards equilibrium.

The most basic premise of the aggregate expenditures model is that:

In the Great Recession of 2007-2009, the aggregate expenditures schedule in the U.S. economy dropped, mostly due to a fall in:

The data below are for a private (no government) closed economy. All figures are in billions of dollars. Refer to the table above. If planned investment is $25 billion, the equilibrium level of GDP will be:

All figures below are in billions of dollars. Refer to the table above. Suppose investment is $12 billion and the economy revises its saving plans so as to save $4 billion less at all levels of income. The new equilibrium GDP will be:

If the stock of available capital in the economy is running too low, then the:

John Maynard Keynes developed the ideas underlying the aggregate expenditures model:

John Maynard Keynes developed the aggregate expenditures model in order to understand the:

The data below are for a private (no government) closed economy. All figures are in billions of dollars. Refer to the table above. If planned investment is $18 billion, then at the $660 billion level of disposable income, there will be an:

An increase in a lump-sum tax has the same effect on equilibrium GDP as an equal decrease in government purchases.

When aggregate expenditure is greater than GDP, then there will be an:

The marginal propensity to save is 0.2. Equilibrium GDP will decrease by $50 billion if aggregate expenditures schedule decrease by:

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, and Debt

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

Filters

In the Great Recession of 2007-2009, consumption C and investment I_g fell while government G expanded.