Question 1

The net export share has been negative for the last 25 years.

Accepted Answer

A) True 
 B)False

Question 2

If the exchange rate between the dollar and the euro is equal to €0.76 per $1.00,then what is the U.S.dollar cost of a German-made Porsche costing €39,000?

Accepted Answer

A) $29,640 
B) $51,316 
C) $39,000 
D) $297 
E) None of these 
A) $29,640 
B) $51,316 
C) $39,000 
D) $297 
E) None of these

Question 3

Which of the following statements is true?

Accepted Answer

A) A decrease in the interest rate will cause the nongovernment share of GDP to decline. 
B) A decrease in the interest rate will cause the government purchases share to decrease. 
C) A decrease in the interest rate will cause the share of GDP available for nongovernment use to decline. 
D) A decrease in the interest rate will cause the nongovernment share of GDP to increase. 
E) A decrease in the interest rate will cause GDP to decrease. 
A) A decrease in the interest rate will cause the nongovernment share of GDP to decline. 
B) A decrease in the interest rate will cause the government purchases share to decrease. 
C) A decrease in the interest rate will cause the share of GDP available for nongovernment use to decline. 
D) A decrease in the interest rate will cause the nongovernment share of GDP to increase. 
E) A decrease in the interest rate will cause GDP to decrease.

Question 4

Suppose the government share of GDP is 25 percent and the consumption,investment,and net export shares of GDP are 60,12,and 3 percent,respectively.If,all else held constant,businesses become more optimistic about the benefits of investment,then

Accepted Answer

A) investment spending as a share of GDP increases. 
B) the nongovernment share of GDP remains constant. 
C) the rate of interest increases. 
D) the government share of GDP remains at 25 percent. 
E) All of these 
A) investment spending as a share of GDP increases. 
B) the nongovernment share of GDP remains constant. 
C) the rate of interest increases. 
D) the government share of GDP remains at 25 percent. 
E) All of these

Question 5

All else being equal,if consumption rises as a share of GDP,then

Accepted Answer

A) future consumption will fall. 
B) people must be saving more. 
C) there must have been an increase in GDP. 
D) people must have experienced an increase in wealth. 
E) there will be less available to consume in the future. 
A) future consumption will fall. 
B) people must be saving more. 
C) there must have been an increase in GDP. 
D) people must have experienced an increase in wealth. 
E) there will be less available to consume in the future.

Question 6

In a market economy,if the sum of the consumption,investment,and net export shares of GDP is greater than 1 minus the government share of GDP,market forces will result in

Accepted Answer

A) GDP contracting. 
B) an increase in interest rates. 
C) GDP expanding. 
D) a decrease in interest rates. 
E) an increase in the price level. 
A) GDP contracting. 
B) an increase in interest rates. 
C) GDP expanding. 
D) a decrease in interest rates. 
E) an increase in the price level.

Question 7

Which of the following is the correct ordering if we want to rank the four spending shares of U.S.GDP in 2010 in descending (from highest to lowest)order?

Accepted Answer

A) Consumption,government purchases,investment,net exports 
B) Consumption,investment,government purchases,net exports 
C) Government purchases,consumption,investment,net exports 
D) Consumption,government purchases,net exports,investment 
E) Consumption,investment,net exports,government purchases 
A) Consumption,government purchases,investment,net exports 
B) Consumption,investment,government purchases,net exports 
C) Government purchases,consumption,investment,net exports 
D) Consumption,government purchases,net exports,investment 
E) Consumption,investment,net exports,government purchases

Question 8

In 2010,the investment share of GDP was about

Accepted Answer

A) 27 percent. 
B) 12 percent. 
C) 7 percent. 
D) 10 percent. 
E) 33 percent. 
A) 27 percent. 
B) 12 percent. 
C) 7 percent. 
D) 10 percent. 
E) 33 percent.

Question 9

The exchange rate can be defined as the price of one currency in terms of another,and it is determined in the foreign exchange market.

Accepted Answer

A) True 
 B)False

Question 10

The investment share line will become flatter if investment becomes more sensitive to changes in the real interest rate.

Accepted Answer

A) True 
 B)False

Question 11

Explain why the nongovernment share line of GDP slopes downward.

Accepted Answer

The nongovernment share line of GDP is,f

Question 12

To bring about an increase in the share of GDP available for nongovernment use,

Accepted Answer

A) there will have to be a tax increase. 
B) government purchases will have to decline. 
C) interest rates will have to decline. 
D) government purchases will have to increase. 
E) interest rates will have to increase. 
A) there will have to be a tax increase. 
B) government purchases will have to decline. 
C) interest rates will have to decline. 
D) government purchases will have to increase. 
E) interest rates will have to increase.

Question 13

National saving in 2010 was

Accepted Answer

A) 8.9 percent of GDP. 
B) 1.5 percent of GDP. 
C) 20.25 percent of GDP. 
D) 31.35 percent of GDP. 
E) 41.65 percent of GDP. 
A) 8.9 percent of GDP. 
B) 1.5 percent of GDP. 
C) 20.25 percent of GDP. 
D) 31.35 percent of GDP. 
E) 41.65 percent of GDP.

Question 14

If the nongovernment share of GDP shifts to the right,the government share of GDP will decline.

Accepted Answer

A) True 
 B)False

Question 15

According to the 1994 Economic Report of the President,how would market forces enable a cut in government expenditures to lead to an increase in investment expenditures?

Accepted Answer

A) Through lower taxes 
B) Through increased taxes 
C) Through lower interest rates 
D) Through government regulation 
E) Through increased interest rates 
A) Through lower taxes 
B) Through increased taxes 
C) Through lower interest rates 
D) Through government regulation 
E) Through increased interest rates

Question 16

To understand how the shares of GDP are allocated in a market economy,which of the following factors needs to be understood?

Accepted Answer

A) The rate of growth of potential GDP 
B) The rate of growth of aggregate demand 
C) The real rate of interest 
D) The rate of growth of the labor force 
E) The rate of inflation 
A) The rate of growth of potential GDP 
B) The rate of growth of aggregate demand 
C) The real rate of interest 
D) The rate of growth of the labor force 
E) The rate of inflation

Question 17

An increase in optimism about the strength of the economy will

Accepted Answer

A) cause the investment share line to shift to the left. 
B) cause a leftward movement along the investment share line. 
C) have no effect on the investment share line. 
D) cause the investment share line to shift to the right. 
E) cause a rightward movement along the investment share line. 
A) cause the investment share line to shift to the left. 
B) cause a leftward movement along the investment share line. 
C) have no effect on the investment share line. 
D) cause the investment share line to shift to the right. 
E) cause a rightward movement along the investment share line.

Question 18

A decline in the investment share of GDP due to an increase in government purchases is known as

Accepted Answer

A) investment blackout. 
B) devestment. 
C) crowding out. 
D) None of these 
A) investment blackout. 
B) devestment. 
C) crowding out. 
D) None of these

Question 19

Suppose the government decides to reduce the tax rate for firms that increase their investment.Use the four-diagram approach to show what happens to the interest rate and the shares of GDP in the long run.

Accepted Answer

This will increase the incentive for fir

Question 20

The share of GDP available for nongovernment use is

Accepted Answer

A) negatively related to the nominal interest rate. 
B) not dependent on the interest rate. 
C) negatively related to the real interest rate. 
D) positively related to the nominal interest rate. 
E) positively related to the real interest rate. 
A) negatively related to the nominal interest rate. 
B) not dependent on the interest rate. 
C) negatively related to the real interest rate. 
D) positively related to the nominal interest rate. 
E) positively related to the real interest rate.

Exam 19: The Spending Allocation Model

The net export share has been negative for the last 25 years.

If the exchange rate between the dollar and the euro is equal to €0.76 per $1.00,then what is the U.S.dollar cost of a German-made Porsche costing €39,000?

Which of the following statements is true?

Suppose the government share of GDP is 25 percent and the consumption,investment,and net export shares of GDP are 60,12,and 3 percent,respectively.If,all else held constant,businesses become more optimistic about the benefits of investment,then

All else being equal,if consumption rises as a share of GDP,then

In a market economy,if the sum of the consumption,investment,and net export shares of GDP is greater than 1 minus the government share of GDP,market forces will result in

Which of the following is the correct ordering if we want to rank the four spending shares of U.S.GDP in 2010 in descending (from highest to lowest)order?

In 2010,the investment share of GDP was about

The exchange rate can be defined as the price of one currency in terms of another,and it is determined in the foreign exchange market.

The investment share line will become flatter if investment becomes more sensitive to changes in the real interest rate.

Explain why the nongovernment share line of GDP slopes downward.

To bring about an increase in the share of GDP available for nongovernment use,

National saving in 2010 was

If the nongovernment share of GDP shifts to the right,the government share of GDP will decline.

According to the 1994 Economic Report of the President,how would market forces enable a cut in government expenditures to lead to an increase in investment expenditures?

To understand how the shares of GDP are allocated in a market economy,which of the following factors needs to be understood?

An increase in optimism about the strength of the economy will

A decline in the investment share of GDP due to an increase in government purchases is known as

Suppose the government decides to reduce the tax rate for firms that increase their investment.Use the four-diagram approach to show what happens to the interest rate and the shares of GDP in the long run.

The share of GDP available for nongovernment use is

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

Subtleties of the Supply and Demand Model: Price Floors,price Ceilings,and Elasticity

The Demand Curve and the Behavior of Consumers

The Supply Curve and the Behavior of Firms

The Interaction of People in Markets

Costs and the Changes at Firms Over Time

The Rise and Fall of Industries

Monopoly

Product Differentiation, monopolistic Competition, and Oligopoly

Antitrust Policy and Regulation

Labor Markets

Taxes, transfers, and Income Distribution

Public Goods, externalities, and Government Behavior

Capital and Financial Markets

Macroeconomics: the Big Picture

Measuring the Production, income, and Spending of Nations

Unemployment and Employment

Productivity and Economic Growth

Money and Inflation

The Nature and Causes of Economic Fluctuations

The Economic Fluctuations Model

Using the Economic Fluctuations Model

Fiscal Policy

Monetary Policy

Economic Growth and Globalization

International Trade

International Finance

Reading,understanding,and Creating Graphs

Consumer Theory With Indifference Curves

Producer Theory With Isoquants

Present Discounted Value

The Miracle of Compound Growth

Deriving the Growth Accounting Formula

Deriving the Formula for the Keynesian Multiplier and the Forward-Looking Consumption Model

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