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Deck 9: The Government and Fiscal Policy
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Refer to the information provided in Table 9.1 below to answer the questions that follow.
Table 9.1
Refer to Table 9.1.At an output level of $2,000 billion,the level of aggregate expenditure is
A)$1,500 billion.
B)$1,800 billion.
C)$1,900 billion.
D)$2,000 billion.
Table 9.1
Refer to Table 9.1.At an output level of $2,000 billion,the level of aggregate expenditure is
A)$1,500 billion.
B)$1,800 billion.
C)$1,900 billion.
D)$2,000 billion.
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Refer to the information provided in Table 9.1 below to answer the questions that follow.
Table 9.1
Refer to Table 9.1.At an output level of $1,200 billion,there is an unplanned inventory change of
A)positive $10 billion.
B)zero.
C)negative $100 billion.
D)positive $100 billion.
Table 9.1
Refer to Table 9.1.At an output level of $1,200 billion,there is an unplanned inventory change of
A)positive $10 billion.
B)zero.
C)negative $100 billion.
D)positive $100 billion.
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Refer to the information provided in Table 9.1 below to answer the questions that follow.
Table 9.1
Refer to Table 9.1.At an output level of $1,200 billion,the level of aggregate expenditure is
A)$1,000 billion.
B)$1,200 billion.
C)$1,300 billion.
D)$1,400 billion.
Table 9.1
Refer to Table 9.1.At an output level of $1,200 billion,the level of aggregate expenditure is
A)$1,000 billion.
B)$1,200 billion.
C)$1,300 billion.
D)$1,400 billion.
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Refer to the information provided in Table 9.1 below to answer the questions that follow.
Table 9.1
Refer to Table 9.1.At an output level of $2,000 billion,there is an unplanned inventory change of
A)positive $100 billion.
B)positive $10 billion.
C)negative $100 billion.
D)zero.
Table 9.1
Refer to Table 9.1.At an output level of $2,000 billion,there is an unplanned inventory change of
A)positive $100 billion.
B)positive $10 billion.
C)negative $100 billion.
D)zero.
Question
Refer to the information provided in Table 9.2 below to answer the questions that follow.
Table 9.2
Refer to Table 9.2.At an output level of $2,500,the level of aggregate expenditure is ________ billion.
A)$1,500
B)$2,000
C)$2,200
D)$2,300
Table 9.2
Refer to Table 9.2.At an output level of $2,500,the level of aggregate expenditure is ________ billion.
A)$1,500
B)$2,000
C)$2,200
D)$2,300
Question
Refer to the information provided in Table 9.2 below to answer the questions that follow.
Table 9.2
Refer to Table 9.2.The equilibrium level of output is ________ billion.
A)$1,000
B)$1,500
C)$2,000
D)$2,500
Table 9.2
Refer to Table 9.2.The equilibrium level of output is ________ billion.
A)$1,000
B)$1,500
C)$2,000
D)$2,500
Question
Refer to the information provided in Table 9.2 below to answer the questions that follow.
Table 9.2
Refer to Table 9.2.At an output level of $1,500,disposable income
A)is $1,000.
B)is $1,200.
C)is $1,400.
D)cannot be determined from this information.
Table 9.2
Refer to Table 9.2.At an output level of $1,500,disposable income
A)is $1,000.
B)is $1,200.
C)is $1,400.
D)cannot be determined from this information.
Question
Refer to the information provided in Table 9.1 below to answer the questions that follow.
Table 9.1
Refer to Table 9.1.At an output level of $2,000 billion,the value of saving
A)cannot be determined from the given information.
B)is $300 billion.
C)is $200 billion.
D)is $100 billion.
Table 9.1
Refer to Table 9.1.At an output level of $2,000 billion,the value of saving
A)cannot be determined from the given information.
B)is $300 billion.
C)is $200 billion.
D)is $100 billion.
Question
Refer to the information provided in Table 9.1 below to answer the questions that follow.
Table 9.1
Refer to Table 9.1 At an output level of $1,200 billion,there is a tendency for output
A)to fall.
B)to increase.
C)to remain constant.
D)to either increase or decrease.
Table 9.1
Refer to Table 9.1 At an output level of $1,200 billion,there is a tendency for output
A)to fall.
B)to increase.
C)to remain constant.
D)to either increase or decrease.
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Refer to the information provided in Table 9.2 below to answer the questions that follow.
Table 9.2
Refer to Table 9.2.At an output level of $2,500,there is an unplanned inventory
A)increase of $300 billion.
B)decrease of $200 billion.
C)change of $0.
D)increase of $200 billion.
Table 9.2
Refer to Table 9.2.At an output level of $2,500,there is an unplanned inventory
A)increase of $300 billion.
B)decrease of $200 billion.
C)change of $0.
D)increase of $200 billion.
Question
Refer to the information provided in Table 9.2 below to answer the questions that follow.
Table 9.2
Refer to Table 9.2.At an output level of $2,500,the level for saving
A)is $300.
B)is $400.
C)is $500.
D)cannot be determined from this information.
Table 9.2
Refer to Table 9.2.At an output level of $2,500,the level for saving
A)is $300.
B)is $400.
C)is $500.
D)cannot be determined from this information.
Question
Refer to the information provided in Table 9.2 below to answer the questions that follow.
Table 9.2
Refer to Table 9.2.At an output level of $1,500 billion,the level of aggregate expenditure is ________ billion.
A)$1,300
B)$1,400
C)$1,500
D)$1,600
Table 9.2
Refer to Table 9.2.At an output level of $1,500 billion,the level of aggregate expenditure is ________ billion.
A)$1,300
B)$1,400
C)$1,500
D)$1,600
Question
Refer to the information provided in Table 9.1 below to answer the questions that follow.
Table 9.1
Refer to Table 9.1.The equilibrium level of output is ________ billion.
A)$800
B)$1,200
C)$1,600
D)$2,000
Table 9.1
Refer to Table 9.1.The equilibrium level of output is ________ billion.
A)$800
B)$1,200
C)$1,600
D)$2,000
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Refer to the information provided in Table 9.1 below to answer the questions that follow.
Table 9.1
Refer to Table 9.1.At an output level of $800 billion,disposable income equals ________ billion.
A)$800
B)$700
C)$600
D)$500
Table 9.1
Refer to Table 9.1.At an output level of $800 billion,disposable income equals ________ billion.
A)$800
B)$700
C)$600
D)$500
Question
Refer to the information provided in Table 9.1 below to answer the questions that follow.
Table 9.1
Refer to Table 9.1.At the equilibrium level of income,leakages equal ________ billion.
A)$0
B)$100
C)$200
D)$300
Table 9.1
Refer to Table 9.1.At the equilibrium level of income,leakages equal ________ billion.
A)$0
B)$100
C)$200
D)$300
Question
Refer to the information provided in Table 9.2 below to answer the questions that follow.
Table 9.2
Refer to Table 9.2 At the equilibrium level of income,leakages equal ________ billion.
A)$0
B)$300
C)$500
D)$200
Table 9.2
Refer to Table 9.2 At the equilibrium level of income,leakages equal ________ billion.
A)$0
B)$300
C)$500
D)$200
Question
Refer to the information provided in Table 9.2 below to answer the questions that follow.
Table 9.2
Refer to Table 9.2.At an output level of $1,500 billion,there is an unplanned inventory
A)decrease of $200 billion.
B)change of $0.
C)increase of $100 billion.
D)increase of $150 billion.
Table 9.2
Refer to Table 9.2.At an output level of $1,500 billion,there is an unplanned inventory
A)decrease of $200 billion.
B)change of $0.
C)increase of $100 billion.
D)increase of $150 billion.
Question
Refer to the information provided in Table 9.2 below to answer the questions that follow.
Table 9.2
Refer to Table 9.2.At an output level of $2,500,there is a tendency for output
A)to increase.
B)to remain constant.
C)to either increase or decrease.
D)to fall.
Table 9.2
Refer to Table 9.2.At an output level of $2,500,there is a tendency for output
A)to increase.
B)to remain constant.
C)to either increase or decrease.
D)to fall.
Question
Refer to the information provided in Figure 9.1 below to answer the questions that follow. 
Figure 9.1
Refer to Figure 9.1.Suppose that the consumption function is C = 400 + 0.5Yd and taxes are $200 billion,at equilibrium the value of injections are
A)$700 billion.
B)$650 billion.
C)$500 billion.
D)$350 billion.
Figure 9.1Refer to Figure 9.1.Suppose that the consumption function is C = 400 + 0.5Yd and taxes are $200 billion,at equilibrium the value of injections are
A)$700 billion.
B)$650 billion.
C)$500 billion.
D)$350 billion.
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Refer to the information provided in Figure 9.1 below to answer the questions that follow. Figure 9.1
Refer to Figure 9.1.The equilibrium level of aggregate expenditure is $________ billion.
A)4,000
B)3,000
C)2,000
D)1,500
Figure 9.1Refer to Figure 9.1.The equilibrium level of aggregate expenditure is $________ billion.
A)4,000
B)3,000
C)2,000
D)1,500
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Refer to the information provided in Figure 9.1 below to answer the questions that follow. Figure 9.1
Refer to Figure 9.1.The MPC in this economy is
A)0.4.
B)0.5.
C)0.6.
D)cannot be determined from the given information
Figure 9.1Refer to Figure 9.1.The MPC in this economy is
A)0.4.
B)0.5.
C)0.6.
D)cannot be determined from the given information
Question
Refer to the information provided in Figure 9.1 below to answer the questions that follow. Figure 9.1
Refer to Figure 9.1.At equilibrium,injections
A)can be greater than $1,000 billion.
B)equal $1,500 billion.
C)equal leakages.
D)equal $2,000 billion.
Figure 9.1Refer to Figure 9.1.At equilibrium,injections
A)can be greater than $1,000 billion.
B)equal $1,500 billion.
C)equal leakages.
D)equal $2,000 billion.
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Refer to the information provided in Figure 9.1 below to answer the questions that follow. Figure 9.1
Refer to Figure 9.1.Suppose that the consumption function is C = 400 + 0.5Yd and taxes are $200 billion,at equilibrium the value of autonomous consumption is
A)$400 billion.
B)$300 billion.
C)$200 billion.
D)$100 billion.
Figure 9.1Refer to Figure 9.1.Suppose that the consumption function is C = 400 + 0.5Yd and taxes are $200 billion,at equilibrium the value of autonomous consumption is
A)$400 billion.
B)$300 billion.
C)$200 billion.
D)$100 billion.
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Refer to the information provided in Figure 9.1 below to answer the questions that follow. Figure 9.1
Refer to Figure 9.1.Suppose that the consumption function is C = 400 + 0.5Yd and taxes are $200 billion,at equilibrium,what is the value of consumption?
A)$2,000
B)$1,350
C)$1,300
D)$1,150
Figure 9.1Refer to Figure 9.1.Suppose that the consumption function is C = 400 + 0.5Yd and taxes are $200 billion,at equilibrium,what is the value of consumption?
A)$2,000
B)$1,350
C)$1,300
D)$1,150
Question
Refer to the information provided in Figure 9.1 below to answer the questions that follow. Figure 9.1
Refer to Figure 9.1.At equilibrium,the part of consumption that is dependent on income equals $________ billion.
A)$2,000
B)$1,500
C)$1,000
D)cannot be determined from the given information
Figure 9.1Refer to Figure 9.1.At equilibrium,the part of consumption that is dependent on income equals $________ billion.
A)$2,000
B)$1,500
C)$1,000
D)cannot be determined from the given information
Question
Refer to the information provided in Table 9.4 below to answer the questions that follow.
Table 9.4
All Figures in Billions of Dollars
Refer to Table 9.4.The MPS
A)is 0.8.
B)is 0.2.
C)is 0.1
D)cannot be determined from the available information.
Table 9.4
All Figures in Billions of Dollars
Refer to Table 9.4.The MPS
A)is 0.8.
B)is 0.2.
C)is 0.1
D)cannot be determined from the available information.
Question
Refer to the information provided in Table 9.3 below to answer the questions that follow.
Table 9.3
All Numbers are in $ Million
Refer to Table 9.3.The MPC in this economy is ________ and the MPS is ________.
A)0.5;0.5
B)0.7;0.5
C)0.9;0.1
D)0.8;0.2
Table 9.3
All Numbers are in $ Million
Refer to Table 9.3.The MPC in this economy is ________ and the MPS is ________.
A)0.5;0.5
B)0.7;0.5
C)0.9;0.1
D)0.8;0.2
Question
Refer to the information provided in Table 9.3 below to answer the questions that follow.
Table 9.3
All Numbers are in $ Million
Refer to Table 9.3.Assuming constant MPC,at income of $1,200 million,saving is $________ million,at income of $1,600 million,saving is $________ million.
A)150;230
B)160;240
C)170;250
D)180;260
Table 9.3
All Numbers are in $ Million
Refer to Table 9.3.Assuming constant MPC,at income of $1,200 million,saving is $________ million,at income of $1,600 million,saving is $________ million.
A)150;230
B)160;240
C)170;250
D)180;260
Question
Refer to the information provided in Table 9.4 below to answer the questions that follow.
Table 9.4
All Figures in Billions of Dollars
Refer to Table 9.4.The value of the government spending multiplier
A)is 10.
B)is 5.
C)is 0.9.
D)cannot be determined from the available information.
Table 9.4
All Figures in Billions of Dollars
Refer to Table 9.4.The value of the government spending multiplier
A)is 10.
B)is 5.
C)is 0.9.
D)cannot be determined from the available information.
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Refer to the information provided in Table 9.3 below to answer the questions that follow.
Table 9.3
All Numbers are in $ Million
Refer to Table 9.3.The equilibrium level of aggregate output is $________ million.
A)1,200
B)1,300
C)1,400
D)1,500
Table 9.3
All Numbers are in $ Million
Refer to Table 9.3.The equilibrium level of aggregate output is $________ million.
A)1,200
B)1,300
C)1,400
D)1,500
Question
Refer to the information provided in Table 9.3 below to answer the questions that follow.
Table 9.3
All Numbers are in $ Million
Refer to Table 9.3.Which of the following variables is NOT considered autonomous?
A)saving
B)planned investment
C)planned government spending
D)none of the above
Table 9.3
All Numbers are in $ Million
Refer to Table 9.3.Which of the following variables is NOT considered autonomous?
A)saving
B)planned investment
C)planned government spending
D)none of the above
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Refer to the information provided in Table 9.4 below to answer the questions that follow.
Table 9.4
All Figures in Billions of Dollars
Refer to Table 9.4.If taxes are reduced from $100 billion to $50 billion,the new equilibrium level of output is
A)$1,600 billion.
B)$2,100 billion.
C)$3,850 billion.
D)$4,050 billion.
Table 9.4
All Figures in Billions of Dollars
Refer to Table 9.4.If taxes are reduced from $100 billion to $50 billion,the new equilibrium level of output is
A)$1,600 billion.
B)$2,100 billion.
C)$3,850 billion.
D)$4,050 billion.
Question
Refer to the information provided in Table 9.3 below to answer the questions that follow.
Table 9.3
All Numbers are in $ Million
Refer to Table 9.3.Suppose the economy is in equilibrium and the government increases spending by $50 million,the new equilibrium output is $________ million
A)1,350
B)1,450
C)1,650
D)1,750
Table 9.3
All Numbers are in $ Million
Refer to Table 9.3.Suppose the economy is in equilibrium and the government increases spending by $50 million,the new equilibrium output is $________ million
A)1,350
B)1,450
C)1,650
D)1,750
Question
Refer to the information provided in Table 9.4 below to answer the questions that follow.
Table 9.4
All Figures in Billions of Dollars
Refer to Table 9.4.The equilibrium level of income is
A)$3,800 billion.
B)$3,600 billion.
C)$3,400 billion.
D)$2,000 billion.
Table 9.4
All Figures in Billions of Dollars
Refer to Table 9.4.The equilibrium level of income is
A)$3,800 billion.
B)$3,600 billion.
C)$3,400 billion.
D)$2,000 billion.
Question
Refer to the information provided in Table 9.4 below to answer the questions that follow.
Table 9.4
All Figures in Billions of Dollars
Refer to Table 9.4.The economy is at the equilibrium level of output.If government spending increases to a level of $400 billion,the new equilibrium level of output is
A)$2,100 billion.
B)$5,400 billion.
C)$6,040 billion.
D)$6,600 billion.
Table 9.4
All Figures in Billions of Dollars
Refer to Table 9.4.The economy is at the equilibrium level of output.If government spending increases to a level of $400 billion,the new equilibrium level of output is
A)$2,100 billion.
B)$5,400 billion.
C)$6,040 billion.
D)$6,600 billion.
Question
Refer to the information provided in Table 9.3 below to answer the questions that follow.
Table 9.3
All Numbers are in $ Million
Refer to Table 9.3.Assuming constant MPC,at income of $1,000 million,consumption is $________ million,and at income of $1,300 million,consumption is $________ million.
A)600;860
B)640;900
C)680;920
D)720;960
Table 9.3
All Numbers are in $ Million
Refer to Table 9.3.Assuming constant MPC,at income of $1,000 million,consumption is $________ million,and at income of $1,300 million,consumption is $________ million.
A)600;860
B)640;900
C)680;920
D)720;960
Question
Refer to the information provided in Table 9.3 below to answer the questions that follow.
Table 9.3
All Numbers are in $ Million
Refer to Table 9.3.Suppose the economy is in equilibrium and the government raises taxes from $200 million to $220 million,equilibrium output will ________ by $________ million.
A)decrease;20
B)increase;20
C)decrease;80
D)increase;80
Table 9.3
All Numbers are in $ Million
Refer to Table 9.3.Suppose the economy is in equilibrium and the government raises taxes from $200 million to $220 million,equilibrium output will ________ by $________ million.
A)decrease;20
B)increase;20
C)decrease;80
D)increase;80
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Refer to the information provided in Table 9.4 below to answer the questions that follow.
Table 9.4
All Figures in Billions of Dollars
Refer to Table 9.4.The economy is at the equilibrium level of output.If government spending decreases by $100 billion,the new equilibrium level of output is
A)$3,100 billion.
B)$2,400 billion.
C)$1,550 billion.
D)$1,450 billion.
Table 9.4
All Figures in Billions of Dollars
Refer to Table 9.4.The economy is at the equilibrium level of output.If government spending decreases by $100 billion,the new equilibrium level of output is
A)$3,100 billion.
B)$2,400 billion.
C)$1,550 billion.
D)$1,450 billion.
Question
Refer to the information provided in Table 9.4 below to answer the questions that follow.
Table 9.4
All Figures in Billions of Dollars
Refer to Table 9.4.If taxes are reduced from $100 billion to $50 billion and government spending is reduced from $200 billion to $150 billion,the new equilibrium level of income
A)is $3,550 billion.
B)is $3,350 billion.
C)is $1,600 billion.
D)cannot be determined from this information.
Table 9.4
All Figures in Billions of Dollars
Refer to Table 9.4.If taxes are reduced from $100 billion to $50 billion and government spending is reduced from $200 billion to $150 billion,the new equilibrium level of income
A)is $3,550 billion.
B)is $3,350 billion.
C)is $1,600 billion.
D)cannot be determined from this information.
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Deck 9: The Government and Fiscal Policy
1
After government is added to the income-expenditure model,the formula for the aggregate consumption function is
A)C = a - b(Y - T).
B)C = a - b(T - Y).
C)C = a + b(Y + T).
D)C = a + b(Y - T).
A)C = a - b(Y - T).
B)C = a - b(T - Y).
C)C = a + b(Y + T).
D)C = a + b(Y - T).
D
2
What determines tax revenues?
A)the income tax rate
B)the rate of interest
C)the money supply in the economy
D)the rate of inflation
A)the income tax rate
B)the rate of interest
C)the money supply in the economy
D)the rate of inflation
A
3
The aggregate consumption function is C = 100 + 0.6Yd.If income is $1,000 and net taxes are $300,consumption equals
A)800.
B)700.
C)580.
D)520.
A)800.
B)700.
C)580.
D)520.
D
4
When the government sector is included in the income-expenditure model,the equation for aggregate income is
A)Y = C + S - T.
B)Y = C + I.
C)Y = C + I + G.
D)Y = C + S + I.
A)Y = C + S - T.
B)Y = C + I.
C)Y = C + I + G.
D)Y = C + S + I.
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5
Refer to the information provided in Table 9.1 below to answer the questions that follow.
Table 9.1
Refer to Table 9.1.At an output level of $2,000 billion,the level of aggregate expenditure is
A)$1,500 billion.
B)$1,800 billion.
C)$1,900 billion.
D)$2,000 billion.
Table 9.1
Refer to Table 9.1.At an output level of $2,000 billion,the level of aggregate expenditure is
A)$1,500 billion.
B)$1,800 billion.
C)$1,900 billion.
D)$2,000 billion.
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6
The difference between what a government spends and what it collects in taxes in a year is
A)net revenue.
B)net taxes.
C)the government budget deficit or surplus.
D)the government debt.
A)net revenue.
B)net taxes.
C)the government budget deficit or surplus.
D)the government debt.
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7
The aggregate consumption function is C = 1,000 + 0.9Yd.If income is $3,600 and net taxes are $600,consumption equals
A)2,400.
B)3,400.
C)3,700.
D)4,000.
A)2,400.
B)3,400.
C)3,700.
D)4,000.
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8
In 2012,the city of Miketown collected $250,000 in taxes and spent $350,000.In 2012,the city of Miketown had a
A)budget surplus of $100,000.
B)budget surplus of 57%.
C)budget deficit of $100,000.
D)budget deficit of $200,000.
A)budget surplus of $100,000.
B)budget surplus of 57%.
C)budget deficit of $100,000.
D)budget deficit of $200,000.
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9
If output is less than planned aggregate expenditure,there will be
A)an unplanned increase in inventories.
B)an unplanned decrease in inventories.
C)no change in inventories.
D)a planned increase in inventories.
A)an unplanned increase in inventories.
B)an unplanned decrease in inventories.
C)no change in inventories.
D)a planned increase in inventories.
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10
In 2012,the city of Canfield collected $500,000 in taxes and spent $450,000.In 2012,the city of Canfield had a
A)budget surplus of $450,000.
B)budget surplus of $50,000.
C)budget deficit of $50,000.
D)budget surplus of $5,000.
A)budget surplus of $450,000.
B)budget surplus of $50,000.
C)budget deficit of $50,000.
D)budget surplus of $5,000.
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11
Fiscal policy refers to
A)the techniques used by a business firm to reduce its tax liability.
B)the behavior of the nation's central bank,the Federal Reserve,regarding the nation's money supply.
C)the spending and taxing policies used by the government to influence the economy.
D)the government's ability to regulate a firm's behavior in the financial markets.
A)the techniques used by a business firm to reduce its tax liability.
B)the behavior of the nation's central bank,the Federal Reserve,regarding the nation's money supply.
C)the spending and taxing policies used by the government to influence the economy.
D)the government's ability to regulate a firm's behavior in the financial markets.
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12
During recessions,government spending usually
A)decreases because unemployment payments decrease.
B)increases because unemployment payments increase.
C)decrease because unemployment payments increase.
D)increases because unemployment payments decrease.
A)decreases because unemployment payments decrease.
B)increases because unemployment payments increase.
C)decrease because unemployment payments increase.
D)increases because unemployment payments decrease.
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13
Refer to the information provided in Table 9.1 below to answer the questions that follow.
Table 9.1
Refer to Table 9.1.At an output level of $1,200 billion,there is an unplanned inventory change of
A)positive $10 billion.
B)zero.
C)negative $100 billion.
D)positive $100 billion.
Table 9.1
Refer to Table 9.1.At an output level of $1,200 billion,there is an unplanned inventory change of
A)positive $10 billion.
B)zero.
C)negative $100 billion.
D)positive $100 billion.
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14
Which of the following is INCORRECT regarding tax revenues?
A)they increase during recessions
B)they change with changes in the tax rate
C)they are a revenue source in the government's budget
D)they increase during economic expansions
A)they increase during recessions
B)they change with changes in the tax rate
C)they are a revenue source in the government's budget
D)they increase during economic expansions
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15
Disposable income
A)increases when net taxes increase.
B)increases when income increases.
C)decreases when saving increases.
D)increases when saving decreases.
A)increases when net taxes increase.
B)increases when income increases.
C)decreases when saving increases.
D)increases when saving decreases.
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16
Which of the following is NOT a category of fiscal policy?
A)government policies regarding the purchase of goods and services
B)government policies regarding taxation
C)government policies regarding money supply in the economy
D)government policies regarding transfer payments and welfare benefits
A)government policies regarding the purchase of goods and services
B)government policies regarding taxation
C)government policies regarding money supply in the economy
D)government policies regarding transfer payments and welfare benefits
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17
The aggregate consumption function is C = 100 + 0.8Yd.If income is $600 and net taxes are zero,consumption equals
A)zero.
B)360.
C)460.
D)580.
A)zero.
B)360.
C)460.
D)580.
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18
Refer to the information provided in Table 9.1 below to answer the questions that follow.
Table 9.1
Refer to Table 9.1.At an output level of $1,200 billion,the level of aggregate expenditure is
A)$1,000 billion.
B)$1,200 billion.
C)$1,300 billion.
D)$1,400 billion.
Table 9.1
Refer to Table 9.1.At an output level of $1,200 billion,the level of aggregate expenditure is
A)$1,000 billion.
B)$1,200 billion.
C)$1,300 billion.
D)$1,400 billion.
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19
The aggregate consumption function is C = 800 + 0.8Yd.If income is $2,000 and net taxes are $500,consumption equals
A)1,500.
B)2,000.
C)2,050.
D)2,150.
A)1,500.
B)2,000.
C)2,050.
D)2,150.
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20
Bill's income is $1,000 and his net taxes are $350.His disposable income is
A)$1,350.
B)$750.
C)$650.
D)-$350.
A)$1,350.
B)$750.
C)$650.
D)-$350.
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21
The Italian economy can be characterized by Equation 9.1.
EQUATION 9.1:
C = 300 + 0.8Yd
G = 400
T = 200
I = 200
Refer to Equation 9.1.At the equilibrium level of output in Italy,leakages equal
A)$600.
B)$650.
C)$700.
D)$750.
EQUATION 9.1:
C = 300 + 0.8Yd
G = 400
T = 200
I = 200
Refer to Equation 9.1.At the equilibrium level of output in Italy,leakages equal
A)$600.
B)$650.
C)$700.
D)$750.
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22
Refer to the information provided in Table 9.1 below to answer the questions that follow.
Table 9.1
Refer to Table 9.1.At an output level of $2,000 billion,there is an unplanned inventory change of
A)positive $100 billion.
B)positive $10 billion.
C)negative $100 billion.
D)zero.
Table 9.1
Refer to Table 9.1.At an output level of $2,000 billion,there is an unplanned inventory change of
A)positive $100 billion.
B)positive $10 billion.
C)negative $100 billion.
D)zero.
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23
Refer to the information provided in Table 9.2 below to answer the questions that follow.
Table 9.2
Refer to Table 9.2.At an output level of $2,500,the level of aggregate expenditure is ________ billion.
A)$1,500
B)$2,000
C)$2,200
D)$2,300
Table 9.2
Refer to Table 9.2.At an output level of $2,500,the level of aggregate expenditure is ________ billion.
A)$1,500
B)$2,000
C)$2,200
D)$2,300
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24
Refer to the information provided in Table 9.2 below to answer the questions that follow.
Table 9.2
Refer to Table 9.2.The equilibrium level of output is ________ billion.
A)$1,000
B)$1,500
C)$2,000
D)$2,500
Table 9.2
Refer to Table 9.2.The equilibrium level of output is ________ billion.
A)$1,000
B)$1,500
C)$2,000
D)$2,500
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25
Refer to the information provided in Table 9.2 below to answer the questions that follow.
Table 9.2
Refer to Table 9.2.At an output level of $1,500,disposable income
A)is $1,000.
B)is $1,200.
C)is $1,400.
D)cannot be determined from this information.
Table 9.2
Refer to Table 9.2.At an output level of $1,500,disposable income
A)is $1,000.
B)is $1,200.
C)is $1,400.
D)cannot be determined from this information.
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26
Refer to the information provided in Table 9.1 below to answer the questions that follow.
Table 9.1
Refer to Table 9.1.At an output level of $2,000 billion,the value of saving
A)cannot be determined from the given information.
B)is $300 billion.
C)is $200 billion.
D)is $100 billion.
Table 9.1
Refer to Table 9.1.At an output level of $2,000 billion,the value of saving
A)cannot be determined from the given information.
B)is $300 billion.
C)is $200 billion.
D)is $100 billion.
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27
Refer to the information provided in Table 9.1 below to answer the questions that follow.
Table 9.1
Refer to Table 9.1 At an output level of $1,200 billion,there is a tendency for output
A)to fall.
B)to increase.
C)to remain constant.
D)to either increase or decrease.
Table 9.1
Refer to Table 9.1 At an output level of $1,200 billion,there is a tendency for output
A)to fall.
B)to increase.
C)to remain constant.
D)to either increase or decrease.
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28
The Italian economy can be characterized by Equation 9.1.
EQUATION 9.1:
C = 300 + 0.8Yd
G = 400
T = 200
I = 200
Refer to Equation 9.1.At the equilibrium level of output in Italy,saving equals
A)$400.
B)$450.
C)$500.
D)$550.
EQUATION 9.1:
C = 300 + 0.8Yd
G = 400
T = 200
I = 200
Refer to Equation 9.1.At the equilibrium level of output in Italy,saving equals
A)$400.
B)$450.
C)$500.
D)$550.
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29
The Italian economy can be characterized by Equation 9.1.
EQUATION 9.1:
C = 300 + 0.8Yd
G = 400
T = 200
I = 200
Refer to Equation 9.1.At the equilibrium level of output in Italy,consumption equals
A)$3,100.
B)$3,250.
C)$3,400.
D)$3,625.
EQUATION 9.1:
C = 300 + 0.8Yd
G = 400
T = 200
I = 200
Refer to Equation 9.1.At the equilibrium level of output in Italy,consumption equals
A)$3,100.
B)$3,250.
C)$3,400.
D)$3,625.
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30
Refer to the information provided in Table 9.2 below to answer the questions that follow.
Table 9.2
Refer to Table 9.2.At an output level of $2,500,there is an unplanned inventory
A)increase of $300 billion.
B)decrease of $200 billion.
C)change of $0.
D)increase of $200 billion.
Table 9.2
Refer to Table 9.2.At an output level of $2,500,there is an unplanned inventory
A)increase of $300 billion.
B)decrease of $200 billion.
C)change of $0.
D)increase of $200 billion.
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31
Refer to the information provided in Table 9.2 below to answer the questions that follow.
Table 9.2
Refer to Table 9.2.At an output level of $2,500,the level for saving
A)is $300.
B)is $400.
C)is $500.
D)cannot be determined from this information.
Table 9.2
Refer to Table 9.2.At an output level of $2,500,the level for saving
A)is $300.
B)is $400.
C)is $500.
D)cannot be determined from this information.
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32
Refer to the information provided in Table 9.2 below to answer the questions that follow.
Table 9.2
Refer to Table 9.2.At an output level of $1,500 billion,the level of aggregate expenditure is ________ billion.
A)$1,300
B)$1,400
C)$1,500
D)$1,600
Table 9.2
Refer to Table 9.2.At an output level of $1,500 billion,the level of aggregate expenditure is ________ billion.
A)$1,300
B)$1,400
C)$1,500
D)$1,600
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33
Refer to the information provided in Table 9.1 below to answer the questions that follow.
Table 9.1
Refer to Table 9.1.The equilibrium level of output is ________ billion.
A)$800
B)$1,200
C)$1,600
D)$2,000
Table 9.1
Refer to Table 9.1.The equilibrium level of output is ________ billion.
A)$800
B)$1,200
C)$1,600
D)$2,000
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34
The Italian economy can be characterized by Equation 9.1.
EQUATION 9.1:
C = 300 + 0.8Yd
G = 400
T = 200
I = 200
Refer to Equation 9.1.The equilibrium level of output for the Italian economy is
A)$2,850.
B)$3,145.
C)$3,700.
D)$3,800.
EQUATION 9.1:
C = 300 + 0.8Yd
G = 400
T = 200
I = 200
Refer to Equation 9.1.The equilibrium level of output for the Italian economy is
A)$2,850.
B)$3,145.
C)$3,700.
D)$3,800.
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35
The Canadian economy can be characterized by Equation 9.2.
EQUATION 9.2:
C = 500 + 0.5Yd
Taxes = 600
Equilibrium Output = $4,000
Refer to Equation 9.2.At equilibrium,the sum of investment and government purchases in Canada is
A)$1,800.
B)$1,750.
C)$1,500.
D)cannot be determined from the given information
EQUATION 9.2:
C = 500 + 0.5Yd
Taxes = 600
Equilibrium Output = $4,000
Refer to Equation 9.2.At equilibrium,the sum of investment and government purchases in Canada is
A)$1,800.
B)$1,750.
C)$1,500.
D)cannot be determined from the given information
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36
Refer to the information provided in Table 9.1 below to answer the questions that follow.
Table 9.1
Refer to Table 9.1.At an output level of $800 billion,disposable income equals ________ billion.
A)$800
B)$700
C)$600
D)$500
Table 9.1
Refer to Table 9.1.At an output level of $800 billion,disposable income equals ________ billion.
A)$800
B)$700
C)$600
D)$500
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37
Refer to the information provided in Table 9.1 below to answer the questions that follow.
Table 9.1
Refer to Table 9.1.At the equilibrium level of income,leakages equal ________ billion.
A)$0
B)$100
C)$200
D)$300
Table 9.1
Refer to Table 9.1.At the equilibrium level of income,leakages equal ________ billion.
A)$0
B)$100
C)$200
D)$300
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38
Refer to the information provided in Table 9.2 below to answer the questions that follow.
Table 9.2
Refer to Table 9.2 At the equilibrium level of income,leakages equal ________ billion.
A)$0
B)$300
C)$500
D)$200
Table 9.2
Refer to Table 9.2 At the equilibrium level of income,leakages equal ________ billion.
A)$0
B)$300
C)$500
D)$200
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39
Refer to the information provided in Table 9.2 below to answer the questions that follow.
Table 9.2
Refer to Table 9.2.At an output level of $1,500 billion,there is an unplanned inventory
A)decrease of $200 billion.
B)change of $0.
C)increase of $100 billion.
D)increase of $150 billion.
Table 9.2
Refer to Table 9.2.At an output level of $1,500 billion,there is an unplanned inventory
A)decrease of $200 billion.
B)change of $0.
C)increase of $100 billion.
D)increase of $150 billion.
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40
Refer to the information provided in Table 9.2 below to answer the questions that follow.
Table 9.2
Refer to Table 9.2.At an output level of $2,500,there is a tendency for output
A)to increase.
B)to remain constant.
C)to either increase or decrease.
D)to fall.
Table 9.2
Refer to Table 9.2.At an output level of $2,500,there is a tendency for output
A)to increase.
B)to remain constant.
C)to either increase or decrease.
D)to fall.
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41
Refer to the information provided in Figure 9.1 below to answer the questions that follow. Figure 9.1
Refer to Figure 9.1.Suppose that the consumption function is C = 400 + 0.5Yd and taxes are $200 billion,at equilibrium the value of injections are
A)$700 billion.
B)$650 billion.
C)$500 billion.
D)$350 billion.
Figure 9.1Refer to Figure 9.1.Suppose that the consumption function is C = 400 + 0.5Yd and taxes are $200 billion,at equilibrium the value of injections are
A)$700 billion.
B)$650 billion.
C)$500 billion.
D)$350 billion.
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42
The Canadian economy can be characterized by Equation 9.2.
EQUATION 9.2:
C = 500 + 0.5Yd
Taxes = 600
Equilibrium Output = $4,000
Refer to Equation 9.2.At equilibrium leakages in Canada equal
A)$1,700.
B)$1,750.
C)$1,800.
D)$2,100.
EQUATION 9.2:
C = 500 + 0.5Yd
Taxes = 600
Equilibrium Output = $4,000
Refer to Equation 9.2.At equilibrium leakages in Canada equal
A)$1,700.
B)$1,750.
C)$1,800.
D)$2,100.
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43
The economy is in equilibrium when aggregate output equals consumption spending.
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44
Refer to the information provided in Figure 9.1 below to answer the questions that follow. Figure 9.1
Refer to Figure 9.1.The equilibrium level of aggregate expenditure is $________ billion.
A)4,000
B)3,000
C)2,000
D)1,500
Figure 9.1Refer to Figure 9.1.The equilibrium level of aggregate expenditure is $________ billion.
A)4,000
B)3,000
C)2,000
D)1,500
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45
If the government wants to reduce unemployment,government purchases should be ________ and/or taxes should be ________.
A)increased;increased
B)decreased;decreased
C)decreased;increased
D)increased;decreased
A)increased;increased
B)decreased;decreased
C)decreased;increased
D)increased;decreased
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46
The President of Vulcan hires you as an economic consultant.He is concerned that the output level in Vulcan is too high and that this will cause prices to rise.He feels that it is necessary to reduce output by $10 billion.He tells you that the MPC in Vulcan is 0.6.Which of the following would be the best advice to give to the Vulcan president?
A)reduce government purchases by $4 billion
B)increase taxes by $10 billion
C)reduce government purchases by $10 billion
D)increase taxes by $2.5 billion
A)reduce government purchases by $4 billion
B)increase taxes by $10 billion
C)reduce government purchases by $10 billion
D)increase taxes by $2.5 billion
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47
Assuming there is no foreign trade in the economy,the economy is in equilibrium when
A)S + T = C + I.
B)I + G = S + T.
C)IT = S + G.
D)G + T = S + I.
A)S + T = C + I.
B)I + G = S + T.
C)IT = S + G.
D)G + T = S + I.
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48
The Canadian economy can be characterized by Equation 9.2.
EQUATION 9.2:
C = 500 + 0.5Yd
Taxes = 600
Equilibrium Output = $4,000
Refer to Equation 9.2.At equilibrium,saving in Canada equals
A)$1,200.
B)$1,250.
C)$1,350.
D)$1,600.
EQUATION 9.2:
C = 500 + 0.5Yd
Taxes = 600
Equilibrium Output = $4,000
Refer to Equation 9.2.At equilibrium,saving in Canada equals
A)$1,200.
B)$1,250.
C)$1,350.
D)$1,600.
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49
For the economy to be in equilibrium,
A)government purchases must equal tax revenue and saving must equal investment.
B)government purchases must equal the sum of tax revenue,saving and investment.
C)government purchases plus investment must equal saving plus tax revenue.
D)investment plus tax revenue must equal government purchases plus saving.
A)government purchases must equal tax revenue and saving must equal investment.
B)government purchases must equal the sum of tax revenue,saving and investment.
C)government purchases plus investment must equal saving plus tax revenue.
D)investment plus tax revenue must equal government purchases plus saving.
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50
Disposable income is income less net taxes.
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51
Refer to the information provided in Figure 9.1 below to answer the questions that follow. Figure 9.1
Refer to Figure 9.1.The MPC in this economy is
A)0.4.
B)0.5.
C)0.6.
D)cannot be determined from the given information
Figure 9.1Refer to Figure 9.1.The MPC in this economy is
A)0.4.
B)0.5.
C)0.6.
D)cannot be determined from the given information
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52
Refer to the information provided in Figure 9.1 below to answer the questions that follow. Figure 9.1
Refer to Figure 9.1.At equilibrium,injections
A)can be greater than $1,000 billion.
B)equal $1,500 billion.
C)equal leakages.
D)equal $2,000 billion.
Figure 9.1Refer to Figure 9.1.At equilibrium,injections
A)can be greater than $1,000 billion.
B)equal $1,500 billion.
C)equal leakages.
D)equal $2,000 billion.
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53
The Canadian economy can be characterized by Equation 9.2.
EQUATION 9.2:
C = 500 + 0.5Yd
Taxes = 600
Equilibrium Output = $4,000
Refer to Equation 9.2.At equilibrium,government purchases in Canada is
A)$1,500.
B)$1,250.
C)$1,000.
D)cannot be determined from the given information
EQUATION 9.2:
C = 500 + 0.5Yd
Taxes = 600
Equilibrium Output = $4,000
Refer to Equation 9.2.At equilibrium,government purchases in Canada is
A)$1,500.
B)$1,250.
C)$1,000.
D)cannot be determined from the given information
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54
When investment is greater than planned investment,output grows.
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55
Assuming there is no foreign trade in the economy,equilibrium is achieved when government purchases equal
A)saving minus net taxes minus consumption.
B)saving plus net taxes minus investment.
C)net taxes plus investment minus saving.
D)net taxes minus investment minus saving.
A)saving minus net taxes minus consumption.
B)saving plus net taxes minus investment.
C)net taxes plus investment minus saving.
D)net taxes minus investment minus saving.
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56
Refer to the information provided in Figure 9.1 below to answer the questions that follow. Figure 9.1
Refer to Figure 9.1.Suppose that the consumption function is C = 400 + 0.5Yd and taxes are $200 billion,at equilibrium the value of autonomous consumption is
A)$400 billion.
B)$300 billion.
C)$200 billion.
D)$100 billion.
Figure 9.1Refer to Figure 9.1.Suppose that the consumption function is C = 400 + 0.5Yd and taxes are $200 billion,at equilibrium the value of autonomous consumption is
A)$400 billion.
B)$300 billion.
C)$200 billion.
D)$100 billion.
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57
If planned injections exceed leakages,output will
A)decrease.
B)increase.
C)remain constant.
D)either increase or decrease.
A)decrease.
B)increase.
C)remain constant.
D)either increase or decrease.
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58
For the economy to be in equilibrium,the following condition must be satisfied: G + I = S + T.
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59
Refer to the information provided in Figure 9.1 below to answer the questions that follow. Figure 9.1
Refer to Figure 9.1.Suppose that the consumption function is C = 400 + 0.5Yd and taxes are $200 billion,at equilibrium,what is the value of consumption?
A)$2,000
B)$1,350
C)$1,300
D)$1,150
Figure 9.1Refer to Figure 9.1.Suppose that the consumption function is C = 400 + 0.5Yd and taxes are $200 billion,at equilibrium,what is the value of consumption?
A)$2,000
B)$1,350
C)$1,300
D)$1,150
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60
Refer to the information provided in Figure 9.1 below to answer the questions that follow. Figure 9.1
Refer to Figure 9.1.At equilibrium,the part of consumption that is dependent on income equals $________ billion.
A)$2,000
B)$1,500
C)$1,000
D)cannot be determined from the given information
Figure 9.1Refer to Figure 9.1.At equilibrium,the part of consumption that is dependent on income equals $________ billion.
A)$2,000
B)$1,500
C)$1,000
D)cannot be determined from the given information
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61
Refer to the information provided in Table 9.4 below to answer the questions that follow.
Table 9.4
All Figures in Billions of Dollars
Refer to Table 9.4.The MPS
A)is 0.8.
B)is 0.2.
C)is 0.1
D)cannot be determined from the available information.
Table 9.4
All Figures in Billions of Dollars
Refer to Table 9.4.The MPS
A)is 0.8.
B)is 0.2.
C)is 0.1
D)cannot be determined from the available information.
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62
Refer to the information provided in Table 9.3 below to answer the questions that follow.
Table 9.3
All Numbers are in $ Million
Refer to Table 9.3.The MPC in this economy is ________ and the MPS is ________.
A)0.5;0.5
B)0.7;0.5
C)0.9;0.1
D)0.8;0.2
Table 9.3
All Numbers are in $ Million
Refer to Table 9.3.The MPC in this economy is ________ and the MPS is ________.
A)0.5;0.5
B)0.7;0.5
C)0.9;0.1
D)0.8;0.2
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63
Refer to the information provided in Table 9.3 below to answer the questions that follow.
Table 9.3
All Numbers are in $ Million
Refer to Table 9.3.Assuming constant MPC,at income of $1,200 million,saving is $________ million,at income of $1,600 million,saving is $________ million.
A)150;230
B)160;240
C)170;250
D)180;260
Table 9.3
All Numbers are in $ Million
Refer to Table 9.3.Assuming constant MPC,at income of $1,200 million,saving is $________ million,at income of $1,600 million,saving is $________ million.
A)150;230
B)160;240
C)170;250
D)180;260
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64
Refer to the information provided in Table 9.4 below to answer the questions that follow.
Table 9.4
All Figures in Billions of Dollars
Refer to Table 9.4.The value of the government spending multiplier
A)is 10.
B)is 5.
C)is 0.9.
D)cannot be determined from the available information.
Table 9.4
All Figures in Billions of Dollars
Refer to Table 9.4.The value of the government spending multiplier
A)is 10.
B)is 5.
C)is 0.9.
D)cannot be determined from the available information.
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65
If the MPC is 0.75,the government spending multiplier is
A)4.
B)3.
C)2.5.
D)1.75.
A)4.
B)3.
C)2.5.
D)1.75.
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66
Refer to the information provided in Table 9.3 below to answer the questions that follow.
Table 9.3
All Numbers are in $ Million
Refer to Table 9.3.The equilibrium level of aggregate output is $________ million.
A)1,200
B)1,300
C)1,400
D)1,500
Table 9.3
All Numbers are in $ Million
Refer to Table 9.3.The equilibrium level of aggregate output is $________ million.
A)1,200
B)1,300
C)1,400
D)1,500
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67
Refer to the information provided in Table 9.3 below to answer the questions that follow.
Table 9.3
All Numbers are in $ Million
Refer to Table 9.3.Which of the following variables is NOT considered autonomous?
A)saving
B)planned investment
C)planned government spending
D)none of the above
Table 9.3
All Numbers are in $ Million
Refer to Table 9.3.Which of the following variables is NOT considered autonomous?
A)saving
B)planned investment
C)planned government spending
D)none of the above
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68
If the government spending multiplier is 5 and government spending decreases by $200 billion,output will ________ by $________ billion.
A)increase;200
B)decrease;1,000
C)decrease;40
D)decrease;200
A)increase;200
B)decrease;1,000
C)decrease;40
D)decrease;200
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69
Refer to the information provided in Table 9.4 below to answer the questions that follow.
Table 9.4
All Figures in Billions of Dollars
Refer to Table 9.4.If taxes are reduced from $100 billion to $50 billion,the new equilibrium level of output is
A)$1,600 billion.
B)$2,100 billion.
C)$3,850 billion.
D)$4,050 billion.
Table 9.4
All Figures in Billions of Dollars
Refer to Table 9.4.If taxes are reduced from $100 billion to $50 billion,the new equilibrium level of output is
A)$1,600 billion.
B)$2,100 billion.
C)$3,850 billion.
D)$4,050 billion.
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70
Refer to the information provided in Table 9.3 below to answer the questions that follow.
Table 9.3
All Numbers are in $ Million
Refer to Table 9.3.Suppose the economy is in equilibrium and the government increases spending by $50 million,the new equilibrium output is $________ million
A)1,350
B)1,450
C)1,650
D)1,750
Table 9.3
All Numbers are in $ Million
Refer to Table 9.3.Suppose the economy is in equilibrium and the government increases spending by $50 million,the new equilibrium output is $________ million
A)1,350
B)1,450
C)1,650
D)1,750
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71
Refer to the information provided in Table 9.4 below to answer the questions that follow.
Table 9.4
All Figures in Billions of Dollars
Refer to Table 9.4.The equilibrium level of income is
A)$3,800 billion.
B)$3,600 billion.
C)$3,400 billion.
D)$2,000 billion.
Table 9.4
All Figures in Billions of Dollars
Refer to Table 9.4.The equilibrium level of income is
A)$3,800 billion.
B)$3,600 billion.
C)$3,400 billion.
D)$2,000 billion.
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72
Refer to the information provided in Table 9.4 below to answer the questions that follow.
Table 9.4
All Figures in Billions of Dollars
Refer to Table 9.4.The economy is at the equilibrium level of output.If government spending increases to a level of $400 billion,the new equilibrium level of output is
A)$2,100 billion.
B)$5,400 billion.
C)$6,040 billion.
D)$6,600 billion.
Table 9.4
All Figures in Billions of Dollars
Refer to Table 9.4.The economy is at the equilibrium level of output.If government spending increases to a level of $400 billion,the new equilibrium level of output is
A)$2,100 billion.
B)$5,400 billion.
C)$6,040 billion.
D)$6,600 billion.
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73
Refer to the information provided in Table 9.3 below to answer the questions that follow.
Table 9.3
All Numbers are in $ Million
Refer to Table 9.3.Assuming constant MPC,at income of $1,000 million,consumption is $________ million,and at income of $1,300 million,consumption is $________ million.
A)600;860
B)640;900
C)680;920
D)720;960
Table 9.3
All Numbers are in $ Million
Refer to Table 9.3.Assuming constant MPC,at income of $1,000 million,consumption is $________ million,and at income of $1,300 million,consumption is $________ million.
A)600;860
B)640;900
C)680;920
D)720;960
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74
Refer to the information provided in Table 9.3 below to answer the questions that follow.
Table 9.3
All Numbers are in $ Million
Refer to Table 9.3.Suppose the economy is in equilibrium and the government raises taxes from $200 million to $220 million,equilibrium output will ________ by $________ million.
A)decrease;20
B)increase;20
C)decrease;80
D)increase;80
Table 9.3
All Numbers are in $ Million
Refer to Table 9.3.Suppose the economy is in equilibrium and the government raises taxes from $200 million to $220 million,equilibrium output will ________ by $________ million.
A)decrease;20
B)increase;20
C)decrease;80
D)increase;80
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75
If the government spending multiplier is 2 and government purchases increase by $200 billion,output will increase by
A)$100 billion.
B)$400 billion.
C)$500 billion.
D)$1,600 billion.
A)$100 billion.
B)$400 billion.
C)$500 billion.
D)$1,600 billion.
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76
If the MPC is 0.5,the tax multiplier is
A)-2.5.
B)-2.
C)-1.67.
D)-1.
A)-2.5.
B)-2.
C)-1.67.
D)-1.
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77
The leader of Atlantis hires you as an economic consultant.He is concerned that the output level in Atlantis is too low and that this will cause prices to fall.He feels that it is necessary to increase output by $200 billion.He tells you that the MPC in Atlantis is 0.8.Which of the following would be the best advice to give to the Atlantis president?
A)reduce government spending by $100 billion
B)decease taxes by $50 billion
C)increase government spending by $200 billion
D)increase government spending by $100 billion
A)reduce government spending by $100 billion
B)decease taxes by $50 billion
C)increase government spending by $200 billion
D)increase government spending by $100 billion
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78
The government purchases multiplier is
A)the difference between the old equilibrium level of output and the new equilibrium level of output.
B)the ratio of the change in government purchases to the change in the equilibrium level of output.
C)the ratio of the change in the equilibrium level of output to a change in government purchases.
D)the difference between the new and old levels of government purchases.
A)the difference between the old equilibrium level of output and the new equilibrium level of output.
B)the ratio of the change in government purchases to the change in the equilibrium level of output.
C)the ratio of the change in the equilibrium level of output to a change in government purchases.
D)the difference between the new and old levels of government purchases.
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79
Refer to the information provided in Table 9.4 below to answer the questions that follow.
Table 9.4
All Figures in Billions of Dollars
Refer to Table 9.4.The economy is at the equilibrium level of output.If government spending decreases by $100 billion,the new equilibrium level of output is
A)$3,100 billion.
B)$2,400 billion.
C)$1,550 billion.
D)$1,450 billion.
Table 9.4
All Figures in Billions of Dollars
Refer to Table 9.4.The economy is at the equilibrium level of output.If government spending decreases by $100 billion,the new equilibrium level of output is
A)$3,100 billion.
B)$2,400 billion.
C)$1,550 billion.
D)$1,450 billion.
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80
Refer to the information provided in Table 9.4 below to answer the questions that follow.
Table 9.4
All Figures in Billions of Dollars
Refer to Table 9.4.If taxes are reduced from $100 billion to $50 billion and government spending is reduced from $200 billion to $150 billion,the new equilibrium level of income
A)is $3,550 billion.
B)is $3,350 billion.
C)is $1,600 billion.
D)cannot be determined from this information.
Table 9.4
All Figures in Billions of Dollars
Refer to Table 9.4.If taxes are reduced from $100 billion to $50 billion and government spending is reduced from $200 billion to $150 billion,the new equilibrium level of income
A)is $3,550 billion.
B)is $3,350 billion.
C)is $1,600 billion.
D)cannot be determined from this information.
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