Question 1

Consider a simple macro model with a constant price level and demand-determined output.The marginal propensity to spend out of national income,z,can be expressed as ________ (where t = net tax rate and m = marginal propensity to import).

Accepted Answer

A) z = MPC(1 - t - m) 
B) z = tY - mY 
C) z = MPC - (1 - t- m)Y 
D) z = MPC - (1 - t - m) 
E) z = MPC(1 - t)- m

Question 2

Consider the simplest macro model with demand-determined output.The equations are: C = 150 + 0.8Yd,Yd = Y-T,I = 400,G = 700,T = .2Y,X = 130,and IM = 0.14Y.Autonomous expenditures in this model are

Accepted Answer

A) 1120. 
B) 1350. 
C) 1380. 
D) 2700. 
E) 5400.

Question 3

Consider a consumption function in a simple macro model with government and taxes.Given a marginal propensity to consume out of disposable income of 0.8 and a net tax rate of 20% of national income,the marginal propensity to consume out of national income is

Accepted Answer

A) 0.36. 
B) 0.64. 
C) 0.80. 
D) 0.90. 
E) 1.00.

Question 4

Consider the government's budget balance.Suppose G = 2500 and the government's net tax revenue is equal to 0.2Y.When Y = 11 000,the government is running a budget

Accepted Answer

A) deficit of 1500. 
B) surplus of 300. 
C) balance. 
D) deficit of 300. 
E) surplus of 1500.

Question 5

The diagrams below show the import,export,and net export functions for an economy.  FIGURE 22-1 Refer to Figure 22-1.The net export function for this economy can be expressed as

Accepted Answer

A) NX = 2250 - 450(Y). 
B) NX = 450 - 0.2(Y). 
C) NX = 2250 - 450. 
D) NX = 0.2Y. 
E) NX = 2250 - .2(IM).

Question 6

Consider a simple macro model with a constant price level and demand-determined output.The equations of the model are: C = 150 + 0.8Yd,Yd = Y-T,I = 400,G = 700,T = 0.2Y,X = 130,and IM = 0.14Y.Equilibrium national income in this model is

Accepted Answer

A) 1120. 
B) 1350. 
C) 2240. 
D) 2760. 
E) 5400.

Question 7

Consider the net export function.An increase in domestic national income,other things being equal,is assumed to cause

Accepted Answer

A) the net export function to shift upward. 
B) the net export function to pivot upward. 
C) movement to the right along the net export function. 
D) the net export function to pivot downward. 
E) no effect on net exports.

Question 8

The AE function for an open economy with government can be written as

Accepted Answer

A) AE = C + I - G + (X - IM). 
B) AE = C + I + G - (X - IM). 
C) AE = C + I - G - (X + IM). 
D) AE = C + I + S + (X + IM). 
E) AE = C + I + G + (X - IM).

Question 9

Consider a simple macro model with a constant price level and demand-determined output.The equations of the model are: C = 60 + 0.43Y,I = 150,G = 260,T = 0,X = 90,IM = 0.06Y.Equilibrium national income is

Accepted Answer

A) 560.00. 
B) 888.89. 
C) 1142.85. 
D) 1302.33. 
E) 1513.50.

Question 10

FIGURE 22-4 Refer to Figure 22-4.The rotation from AE1 to AE0 could be caused by

Accepted Answer

A) an increase in the marginal propensity to consume out of disposable income. 
B) a decrease in the marginal propensity to import. 
C) an increase in the marginal propensity to import. 
D) a decrease in the net tax rate. 
E) a decrease in government purchases.

Question 11

In an open economy with government and demand-determined output,an increase in the equilibrium level of national income could be caused by

Accepted Answer

A) an increase in taxes at all levels of income. 
B) an increase in the desired level of imports at all levels of income. 
C) a decrease in desired consumption at all levels of income. 
D) a decrease in the desired level of saving at all levels of income. 
E) a decrease in government purchases.

Question 12

Which of the following can cause a parallel downward shift in the net export (NX)function?

Accepted Answer

A) an increase in domestic national income 
B) a decrease in foreign national income 
C) a decrease in domestic prices 
D) an increase in the Canadian-dollar price of foreign currency 
E) a decrease in foreign prices

Question 13

The net export (NX)function crosses the horizontal axis at a level of national income where the

Accepted Answer

A) X and IM curves intersect. 
B) X curve reaches the horizontal axis. 
C) IM curve reaches the horizontal axis. 
D) X and IM curves are at their farthest distance apart. 
E) X curve reaches its maximum.

Question 14

Consider the following news headline: "Canadian exporters hurt by foreign recession." Assuming that aggregate output is demand-determined,what effect will this have,all other things equal,on the AE function and on equilibrium national income?

Accepted Answer

A) The AE function will shift down parallel to itself,and equilibrium national income will fall. 
B) The AE function will rotate upward (become steeper),and equilibrium national income will rise. 
C) The AE function will rotate downward (become flatter),and national income will fall. 
D) The AE function will shift up parallel to itself,and equilibrium national income will rise. 
E) There will be no change in the AE function or in equilibrium national income.

Question 15

Consider the following news headline: "China signs deal to buy more Canadian wheat." Assuming that aggregate output is demand-determined,what effect will this have,all other things equal,on the AE function and on equilibrium national income?

Accepted Answer

A) The AE function will shift down parallel to itself,and equilibrium national income will fall. 
B) The AE function will rotate upward (become steeper),and equilibrium national income will rise. 
C) The AE function will rotate downward (become flatter),and national income will fall. 
D) The AE function will shift up parallel to itself,and equilibrium national income will rise. 
E) There will be no change in the AE function or in equilibrium national income.

Question 16

The table below shows national income and imports.The level of exports is fixed at $300.All figures in the table and in the questions are in millions of dollars.  TABLE 22-1 Refer to Table 22-1.What is the marginal propensity to import?

Accepted Answer

A) 0.01 
B) 0.10 
C) 1.0 
D) 10.0 
E) not enough data to determine

Question 17

Consider a simple macro model with government and demand-determined output.If the government wants to reduce equilibrium national income by $20 billion,G must be

Accepted Answer

A) raised by $20 billion times the simple multiplier. 
B) raised by $20 billion divided by the simple multiplier. 
C) lowered by $20 billion times the simple multiplier. 
D) lowered by $20 billion divided by the simple multiplier. 
E) lowered by $20 billion.

Question 18

Consider the simplest macro model with demand-determined output.The equations are: C = 150 + 0.8Yd,Yd = Y -T,I = 400,G = 700,T = .2Y,X = 130,and IM = 0.14Y.The marginal propensity to spend on national income in this model is

Accepted Answer

A) 0.50. 
B) 0.54. 
C) 0.64. 
D) 0.84. 
E) 0.86.

Question 19

The diagrams below show the import,export,and net export functions for an economy.  FIGURE 22-1 Refer to Figure 22-1.If actual national income in this economy is equal to $1000,then net exports are equal to

Accepted Answer

A) $90. 
B) $200. 
C) $250. 
D) $375. 
E) $400.

Question 20

If the government's net tax rate increases,then for a given level of national income disposable income will ________ and net tax revenue will ________.

Accepted Answer

A) decrease; decrease 
B) decrease; increase 
C) increase; increase 
D) increase; decrease 
E) not change; increase

Exam 22: Adding Government and Trade to the Simple Macro Model

Consider a simple macro model with a constant price level and demand-determined output.The marginal propensity to spend out of national income,z,can be expressed as ________ (where t = net tax rate and m = marginal propensity to import) .

Consider the simplest macro model with demand-determined output.The equations are: C = 150 + 0.8Yd,Yd = Y-T,I = 400,G = 700,T = .2Y,X = 130,and IM = 0.14Y.Autonomous expenditures in this model are

Consider a consumption function in a simple macro model with government and taxes.Given a marginal propensity to consume out of disposable income of 0.8 and a net tax rate of 20% of national income,the marginal propensity to consume out of national income is

Consider the government's budget balance.Suppose G = 2500 and the government's net tax revenue is equal to 0.2Y.When Y = 11 000,the government is running a budget

The diagrams below show the import,export,and net export functions for an economy. FIGURE 22-1 Refer to Figure 22-1.The net export function for this economy can be expressed as

Consider a simple macro model with a constant price level and demand-determined output.The equations of the model are: C = 150 + 0.8Yd,Yd = Y-T,I = 400,G = 700,T = 0.2Y,X = 130,and IM = 0.14Y.Equilibrium national income in this model is

Consider the net export function.An increase in domestic national income,other things being equal,is assumed to cause

The AE function for an open economy with government can be written as

Consider a simple macro model with a constant price level and demand-determined output.The equations of the model are: C = 60 + 0.43Y,I = 150,G = 260,T = 0,X = 90,IM = 0.06Y.Equilibrium national income is

FIGURE 22-4 Refer to Figure 22-4.The rotation from AE₁ to AE₀could be caused by

In an open economy with government and demand-determined output,an increase in the equilibrium level of national income could be caused by

Which of the following can cause a parallel downward shift in the net export (NX) function?

The net export (NX) function crosses the horizontal axis at a level of national income where the

Consider the following news headline: "Canadian exporters hurt by foreign recession." Assuming that aggregate output is demand-determined,what effect will this have,all other things equal,on the AE function and on equilibrium national income?

Consider the following news headline: "China signs deal to buy more Canadian wheat." Assuming that aggregate output is demand-determined,what effect will this have,all other things equal,on the AE function and on equilibrium national income?

The table below shows national income and imports.The level of exports is fixed at $300.All figures in the table and in the questions are in millions of dollars. TABLE 22-1 Refer to Table 22-1.What is the marginal propensity to import?

Consider a simple macro model with government and demand-determined output.If the government wants to reduce equilibrium national income by $20 billion,G must be

Consider the simplest macro model with demand-determined output.The equations are: C = 150 + 0.8Yd,Yd = Y -T,I = 400,G = 700,T = .2Y,X = 130,and IM = 0.14Y.The marginal propensity to spend on national income in this model is

The diagrams below show the import,export,and net export functions for an economy. FIGURE 22-1 Refer to Figure 22-1.If actual national income in this economy is equal to $1000,then net exports are equal to

If the government's net tax rate increases,then for a given level of national income disposable income will and net tax revenue will .