Question 1

Suppose the price level is constant,output is demand-determined,and the economy is closed with no government.If the saving function is S = -100 + (0.2)Y,the simple multiplier is

Accepted Answer

A) 0.2. 
B) 1. 
C) 2.5. 
D) 5. 
E) Insufficient information to know.

Question 2

The "marginal propensity to consume" refers to the additional

Accepted Answer

A) desired saving that occurs out of an additional dollar of disposable income. 
B) desired consumption that occurs out of an additional dollar of disposable income. 
C) desired consumption that occurs out of an additional dollar of investment. 
D) desired consumption caused by a change in tastes. 
E) desired consumption that occurs out of an additional dollar of national income.

Question 3

Suppose the price level is constant,output is demand-determined,and the economy is closed with no government.If the consumption function is C = (2/3)Y,then the simple multiplier is

Accepted Answer

A) 2/3. 
B) 1. 
C) 2. 
D) 3. 
E) Insufficient information to know.

Question 4

Consider a simple macro model with a constant price level and demand-determined output.In such a model,a downward shift of the saving function causes equilibrium national income to

Accepted Answer

A) fall because the AE function shifts downward simultaneously. 
B) rise because the AE function shifts upward simultaneously. 
C) remain constant but consist of more consumption and less investment. 
D) remain constant but consist of less consumption and more investment. 
E) remain constant because it does not affect desired aggregate expenditure.

Question 5

Consider the consumption function in our macro model.The key factors that influence desired consumption are assumed to be

Accepted Answer

A) expectations about the future. 
B) wealth. 
C) interest rates. 
D) disposable income. 
E) all of the above

Question 6

Consider a simple macro model with a constant price level and demand-determined output.If the marginal propensity to spend is 0.9,the simple multiplier is

Accepted Answer

A) 0.1. 
B) 0.9. 
C) 1.0. 
D) 1.1. 
E) 10.0.

Question 7

Consider the simplest macroeconomic model,with a closed economy and no government.If we assume that desired investment is autonomous with respect to national income,then the investment function (which graphs desired investment against actual national income)will be

Accepted Answer

A) negatively sloped. 
B) positively sloped and relatively steep. 
C) positively sloped and relatively flat. 
D) vertical. 
E) horizontal.

Question 8

Consider the following information describing a closed economy with no government.Aggregate output is demand determined and the price level is constant.  TABLE 21-6 Refer to Table 21-6.The simple multiplier in this economy is

Accepted Answer

A) 2.0. 
B) 2.5. 
C) 3.0. 
D) 4.0. 
E) 5.0.

Question 9

With respect to consumption,investment,government purchases and net exports,the national-income and product accounts measure

Accepted Answer

A) desired expenditures in each of the categories. 
B) both actual and desired expenditures,since actual expenditure must equal desired expenditure in each category. 
C) the flow of saving at any income. 
D) neither actual nor desired expenditures. 
E) actual expenditures in each of the categories.

Question 10

When would we expect to see undesired or unplanned inventory accumulation?

Accepted Answer

A) when consumption exceeds investment 
B) when investment exceeds consumption 
C) when autonomous expenditure exceeds induced expenditure 
D) when desired aggregate expenditure exceeds actual aggregate expenditure 
E) when actual aggregate expenditure exceeds desired aggregate expenditure

Question 11

Consider a simple macro model with a constant price level and demand-determined output.Suppose desired aggregate expenditures are less than the current level of national income.The vertical distance between the AE curve and the 45-degree line represents

Accepted Answer

A) desired accumulation of inventories. 
B) desired decumulation of inventories. 
C) the amount by which output exceeds desired expenditures. 
D) the output gap. 
E) the amount by which desired expenditures exceeds output.

Question 12

Suppose the price level is constant,output is demand-determined,and the economy is closed with no government.If the consumption function is C = (1/2)Y,the simple multiplier is

Accepted Answer

A) 2/3. 
B) 1. 
C) 2. 
D) 3. 
E) Insufficient information to know.

Question 13

Consider the following information describing a closed economy with no government and where aggregate output is demand determined.All dollar figures are in billions.  TABLE 21-4 Refer to Table 21-4.The equilibrium level of national income ($billions)will be

Accepted Answer

A) $70. 
B) $93. 
C) $120. 
D) $160. 
E) $280.

Question 14

The assumed relationship between desired total expenditures and actual national income is called the

Accepted Answer

A) consumption function. 
B) desired aggregate demand function. 
C) aggregate expenditure function. 
D) dissaving function. 
E) equilibrium function.

Question 15

In a simple macro model,an increase in households' wealth is generally assumed to

Accepted Answer

A) cause no change in desired consumption because consumption is a function of disposable income only. 
B) cause no change in desired consumption because the increase is always expected. 
C) cause a downward shift in the aggregate consumption function. 
D) cause an upward shift in the aggregate consumption function. 
E) affect only desired saving,not desired consumption.

Exam 21: The Simplest Short-Run Macro Model

Suppose the price level is constant,output is demand-determined,and the economy is closed with no government.If the saving function is S = -100 + (0.2) Y,the simple multiplier is

The "marginal propensity to consume" refers to the additional

Suppose the price level is constant,output is demand-determined,and the economy is closed with no government.If the consumption function is C = (2/3) Y,then the simple multiplier is

Consider a simple macro model with a constant price level and demand-determined output.In such a model,a downward shift of the saving function causes equilibrium national income to

Consider the consumption function in our macro model.The key factors that influence desired consumption are assumed to be

Consider a simple macro model with a constant price level and demand-determined output.If the marginal propensity to spend is 0.9,the simple multiplier is

Consider the simplest macroeconomic model,with a closed economy and no government.If we assume that desired investment is autonomous with respect to national income,then the investment function (which graphs desired investment against actual national income) will be

Consider the following information describing a closed economy with no government.Aggregate output is demand determined and the price level is constant. TABLE 21-6 Refer to Table 21-6.The simple multiplier in this economy is

With respect to consumption,investment,government purchases and net exports,the national-income and product accounts measure

When would we expect to see undesired or unplanned inventory accumulation?

Consider a simple macro model with a constant price level and demand-determined output.Suppose desired aggregate expenditures are less than the current level of national income.The vertical distance between the AE curve and the 45-degree line represents

Suppose the price level is constant,output is demand-determined,and the economy is closed with no government.If the consumption function is C = (1/2) Y,the simple multiplier is

Consider the following information describing a closed economy with no government and where aggregate output is demand determined.All dollar figures are in billions. TABLE 21-4 Refer to Table 21-4.The equilibrium level of national income ($billions) will be

The assumed relationship between desired total expenditures and actual national income is called the

In a simple macro model,an increase in households' wealth is generally assumed to