Question 1

Other things equal, serious recession in the economies of Canada's trading partners will:

Accepted Answer

A)  have no perceptible impact on the Canadian economy. 
B)  cause inflation in the Canadian economy. 
C)  depress real output and employment in the Canadian economy. 
D)  stimulate real output and employment in the Canadian economy. 
A)  have no perceptible impact on the Canadian economy. 
B)  cause inflation in the Canadian economy. 
C)  depress real output and employment in the Canadian economy. 
D)  stimulate real output and employment in the Canadian economy.

Question 2

An increase in taxes of a specific amount will have a smaller impact on the equilibrium GDP than will a decline in government spending of the same amount because:

Accepted Answer

A)  the MPC is smaller in the private sector than it is in the public sector. 
B)  declines in government spending always tend to stimulate private investment. 
C)  disposable income will fall by some amount smaller than the tax increase. 
D)  only part of the tax increase will affect the consumption negatively. 
A)  the MPC is smaller in the private sector than it is in the public sector. 
B)  declines in government spending always tend to stimulate private investment. 
C)  disposable income will fall by some amount smaller than the tax increase. 
D)  only part of the tax increase will affect the consumption negatively.

Question 3

-Refer to the above diagram for a private closed economy. At the $200 level of GDP:

Accepted Answer

A)  consumption is $200 and planned investment is $50 so that aggregate expenditures are $250. 
B)  consumption is $200 and planned investment is $100 so that aggregate expenditures are $300. 
C)  consumption is $250 and actual investment is $50 so that aggregate expenditures are $300. 
D)  aggregate expenditures is equal to the GDP. 
A)  consumption is $200 and planned investment is $50 so that aggregate expenditures are $250. 
B)  consumption is $200 and planned investment is $100 so that aggregate expenditures are $300. 
C)  consumption is $250 and actual investment is $50 so that aggregate expenditures are $300. 
D)  aggregate expenditures is equal to the GDP.

Question 4

The recessionary expenditure gap is the amount by which the equilibrium GDP and the full-employment GDP differ.

Accepted Answer

A) True 
 B)False

Question 5

When the public sector is added to the aggregate expenditures model:

Accepted Answer

A)  the equilibrium condition becomes G + S = T + Ig + X. 
B)  the equilibrium condition becomes G + T = S + Ig + X. 
C)  the equilibrium condition becomes Ca + Ig + Xn + G + T = GDP. 
D)  we add a new leakage in the form of taxes and a new injection in the form of government spending. 
A)  the equilibrium condition becomes G + S = T + Ig + X. 
B)  the equilibrium condition becomes G + T = S + Ig + X. 
C)  the equilibrium condition becomes Ca + Ig + Xn + G + T = GDP. 
D)  we add a new leakage in the form of taxes and a new injection in the form of government spending.

Question 6

Refer to the diagram below for a private closed economy. In equilibrium the level of consumption:

Accepted Answer

A)  will be $100. 
B)  will be $500. 
C)  will be $600. 
D)  cannot be determined from the information given. 
A)  will be $100. 
B)  will be $500. 
C)  will be $600. 
D)  cannot be determined from the information given.

Question 7

-Refer to the above diagram for a private closed economy. Aggregate saving in this economy will be zero when:

Accepted Answer

A)  C + Ig cuts the 45-degree line. 
B)  GDP is $180 billion. 
C)  GDP is $60 billion. 
D)  GDP is also zero. 
A)  C + Ig cuts the 45-degree line. 
B)  GDP is $180 billion. 
C)  GDP is $60 billion. 
D)  GDP is also zero.

Question 8

If the MPC is 2/3, the initial impact of an increase of $12 billion in lump-sum taxes will be to cause:

Accepted Answer

A)  a rightward shift in the investment-demand schedule. 
B)  an $8 billion downshift in the consumption schedule. 
C)  a $4 billion upshift in the consumption schedule. 
D)  a $12 billion downshift in the consumption schedule. 
A)  a rightward shift in the investment-demand schedule. 
B)  an $8 billion downshift in the consumption schedule. 
C)  a $4 billion upshift in the consumption schedule. 
D)  a $12 billion downshift in the consumption schedule.

Question 9

The letters Y, C, IS1U1B1gS1U1B0, X, and M stand for GDP, consumption, gross investment, exports, and imports respectively. Figures are in billions of dollars.
C = 26 + .75Y
IS1U1B1gS1U1B0 = 60
X = 24
M = 10
-Refer to the above information. If the economy's tax schedule was T = 0.2Y rather than T = T0 = 30, the equilibrium GDP would be:

Accepted Answer

A)  $387.3. 
B)  $518.5. 
C)  $316. 
D)  $412. 
A)  $387.3. 
B)  $518.5. 
C)  $316. 
D)  $412.

Question 10

What is the likely result from a depreciation of a nation's currency when its economy is operating at its full-employment level of output?

Accepted Answer

A)  net exports fall and contribute to demand-pull inflation 
B)  net exports rise and contribute to demand-pull inflation 
C)  net exports fall, but equilibrium GDP rises 
D)  net exports rise, but equilibrium GDP falls 
A)  net exports fall and contribute to demand-pull inflation 
B)  net exports rise and contribute to demand-pull inflation 
C)  net exports fall, but equilibrium GDP rises 
D)  net exports rise, but equilibrium GDP falls

Question 11

The table shows a private, open economy. All figures are in billions of dollars.
  
-Refer to the above table. The equilibrium real GDP is:

Accepted Answer

A)  $550. 
B)  $600. 
C)  $650. 
D)  $700. 
A)  $550. 
B)  $600. 
C)  $650. 
D)  $700.

Question 12

-Refer to the above diagram. Other things equal, an interest rate decrease coupled with a rightward shift in curve A will:

Accepted Answer

A)  shift curve B upward. 
B)  shift curve B downward. 
C)  has no effect on curve B 
D)  reduce GDP. 
A)  shift curve B upward. 
B)  shift curve B downward. 
C)  has no effect on curve B 
D)  reduce GDP.

Question 13

What do investment and government expenditures have in common?

Accepted Answer

A)  Both represent injections to the circular flow. 
B)  Both represent leakages from the circular flow. 
C)  Neither is subject to the multiplier effect. 
D)  Both represent a decline in indebtedness. 
A)  Both represent injections to the circular flow. 
B)  Both represent leakages from the circular flow. 
C)  Neither is subject to the multiplier effect. 
D)  Both represent a decline in indebtedness.

Question 14

-The economy in the above diagram is incurring:

Accepted Answer

A)  balance in its international trade. 
B)  a trade deficit. 
C)  a trade surplus. 
D)  inflation. 
A)  balance in its international trade. 
B)  a trade deficit. 
C)  a trade surplus. 
D)  inflation.

Question 15

-Refer to the above diagrams. Other things equal, an interest rate decrease will:

Accepted Answer

A)  shift curve A to the right and shift curve B upward. 
B)  shift curve A to the left and shift curve B downward. 
C)  leave curve A in place but shift curve B downward. 
D)  leave curve A in place but shift curve A upward. 
A)  shift curve A to the right and shift curve B upward. 
B)  shift curve A to the left and shift curve B downward. 
C)  leave curve A in place but shift curve B downward. 
D)  leave curve A in place but shift curve A upward.

Question 16

-Refer to the above diagram for a private closed economy. In this economy, aggregate expenditures:

Accepted Answer

A)  do not change as GDP increases. 
B)  increase by $2 for every $5 increase in GDP. 
C)  increase by $2 for every $4 increase in GDP. 
D)  increase by $2 for every $3 increase in GDP. 
A)  do not change as GDP increases. 
B)  increase by $2 for every $5 increase in GDP. 
C)  increase by $2 for every $4 increase in GDP. 
D)  increase by $2 for every $3 increase in GDP.

Question 17

The level of aggregate expenditures in the private closed economy is determined by the:

Accepted Answer

A)  expenditures of consumers and businesses. 
B)  intersection of the saving schedule and the 45-degree line. 
C)  equality of the MPC and MPS. 
D)  intersection of the saving and consumption schedules. 
A)  expenditures of consumers and businesses. 
B)  intersection of the saving schedule and the 45-degree line. 
C)  equality of the MPC and MPS. 
D)  intersection of the saving and consumption schedules.

Question 18

-Refer to the above diagram, the location of curve B depends on the:

Accepted Answer

A)  level of real GDP. 
B)  location of curve A only. 
C)  interest rate only. 
D)  both interest rate and, the location of curve A 
A)  level of real GDP. 
B)  location of curve A only. 
C)  interest rate only. 
D)  both interest rate and, the location of curve A

Question 19

The equilibrium GDP is the level of domestic output:

Accepted Answer

A)  where consumption equals saving. 
B)  where actual investment equals consumption. 
C)  which is sustainable. 
D)  where full employment exists. 
A)  where consumption equals saving. 
B)  where actual investment equals consumption. 
C)  which is sustainable. 
D)  where full employment exists.

Question 20

-Refer to the above diagram which is for a private closed economy. All figures are in billions of dollars. If businesses were willing to invest $30 at each possible level of GDP, the equilibrium level of GDP would be:

Accepted Answer

A)  $462.5. 
B)  $435. 
C)  $420. 
D)  $380. 
A)  $462.5. 
B)  $435. 
C)  $420. 
D)  $380.

Other things equal, serious recession in the economies of Canada's trading partners will:

An increase in taxes of a specific amount will have a smaller impact on the equilibrium GDP than will a decline in government spending of the same amount because:

-Refer to the above diagram for a private closed economy. At the $200 level of GDP:

The recessionary expenditure gap is the amount by which the equilibrium GDP and the full-employment GDP differ.

When the public sector is added to the aggregate expenditures model:

Refer to the diagram below for a private closed economy. In equilibrium the level of consumption:

-Refer to the above diagram for a private closed economy. Aggregate saving in this economy will be zero when:

If the MPC is 2/3, the initial impact of an increase of $12 billion in lump-sum taxes will be to cause:

What is the likely result from a depreciation of a nation's currency when its economy is operating at its full-employment level of output?

The table shows a private, open economy. All figures are in billions of dollars. -Refer to the above table. The equilibrium real GDP is:

-Refer to the above diagram. Other things equal, an interest rate decrease coupled with a rightward shift in curve A will:

What do investment and government expenditures have in common?

-The economy in the above diagram is incurring:

-Refer to the above diagrams. Other things equal, an interest rate decrease will:

-Refer to the above diagram for a private closed economy. In this economy, aggregate expenditures:

The level of aggregate expenditures in the private closed economy is determined by the:

-Refer to the above diagram, the location of curve B depends on the:

The equilibrium GDP is the level of domestic output:

-Refer to the above diagram which is for a private closed economy. All figures are in billions of dollars. If businesses were willing to invest $30 at each possible level of GDP, the equilibrium level of GDP would be:

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Introduction to Macroeconomics

Measuring the Economys Output

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, Surpluses, and Debt

Money, Banking, and Money Creation

Interest Rates and Monetary Policy

Financial Economics

Long-Run Macroeconomic Adjustments

International Trade

Exchange Rates and the Balance of Payments

Filters

Exam 9: The Aggregate Expenditures Model

Other things equal, serious recession in the economies of Canada's trading partners will:

An increase in taxes of a specific amount will have a smaller impact on the equilibrium GDP than will a decline in government spending of the same amount because:

-Refer to the above diagram for a private closed economy. At the $200 level of GDP:

The recessionary expenditure gap is the amount by which the equilibrium GDP and the full-employment GDP differ.

When the public sector is added to the aggregate expenditures model:

Refer to the diagram below for a private closed economy. In equilibrium the level of consumption:

-Refer to the above diagram for a private closed economy. Aggregate saving in this economy will be zero when:

If the MPC is 2/3, the initial impact of an increase of $12 billion in lump-sum taxes will be to cause:

What is the likely result from a depreciation of a nation's currency when its economy is operating at its full-employment level of output?

The table shows a private, open economy. All figures are in billions of dollars. -Refer to the above table. The equilibrium real GDP is:

-Refer to the above diagram. Other things equal, an interest rate decrease coupled with a rightward shift in curve A will:

What do investment and government expenditures have in common?

-The economy in the above diagram is incurring:

-Refer to the above diagrams. Other things equal, an interest rate decrease will:

-Refer to the above diagram for a private closed economy. In this economy, aggregate expenditures:

The level of aggregate expenditures in the private closed economy is determined by the:

-Refer to the above diagram, the location of curve B depends on the:

The equilibrium GDP is the level of domestic output:

-Refer to the above diagram which is for a private closed economy. All figures are in billions of dollars. If businesses were willing to invest $30 at each possible level of GDP, the equilibrium level of GDP would be:

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Introduction to Macroeconomics

Measuring the Economys Output

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, Surpluses, and Debt

Money, Banking, and Money Creation

Interest Rates and Monetary Policy

Financial Economics

Long-Run Macroeconomic Adjustments

International Trade

Exchange Rates and the Balance of Payments

Filters