Question 1

The table below shows national income and imports.The level of exports is fixed at $300.All figures (in table and 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 2

The table below shows national income and imports.The level of exports is fixed at $300.All figures (in table and questions)are in millions of dollars.
  TABLE 22-1
-Refer to Table 22-1.In this economy,if actual national income increases by $600,the level of imports will

Accepted Answer

A) rise by $30. 
B) rise by $60. 
C) rise by $100. 
D) fall by $100. 
E) not change.

Question 3

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 4

Consider a consumption function in a simple macro model with government and taxes.Given a marginal propensity to consume out of disposable income of 0.9 and a net tax rate of 10% of national income,the marginal propensity to consume out of national income is

Accepted Answer

A) 0.09. 
B) 0.72. 
C) 0.81. 
D) 0.90. 
E) 1.00.

Question 5

If the price level is taken as given in a simple macro model with demand-determined output,it is implicitly being assumed that

Accepted Answer

A) net exports are positive. 
B) net exports are negative. 
C) the marginal propensity to consume out of disposable income is equal to the marginal propensity to spend out of national income. 
D) all resources in the economy are fully employed. 
E) producers can provide whatever output is demanded of them without requiring higher prices to offset any higher costs.

Question 6

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 7

Consider the government's budget balance.Suppose G = 300 and the government's net tax revenue is 0.3Y.The government budget is in surplus only when Y is

Accepted Answer

A) less than 350. 
B) less than 1000. 
C) greater than 1000. 
D) greater than 2500. 
E) greater than 3000.

Question 8

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

Accepted Answer

A) NX = 450 - Y. 
B) IM = 450 - 0.5(Y). 
C) NX = 0.5(Y). 
D) IM = 0.5(Y). 
E) IM = 0.2(Y).

Question 9

Suppose exports (X)=100,Y=500,and imports are equal to mY,where m is the marginal propensity to import.Net exports would be equal to zero if the marginal propensity to import were

Accepted Answer

A) 1%. 
B) 5%. 
C) 10%. 
D) 20%. 
E) 50%.

Question 10

The diagram below shows desired aggregate expenditure for a hypothetical economy.Assume the following features of this economy:
∙ marginal propensity to consume (mpc)= 0.75
∙ net tax rate (t)= 0.20
∙ no foreign trade
∙ fixed price level
∙ all expenditure and income figures are in billions of dollars.  FIGURE 22-2
-Refer to Figure 22-2.What is the marginal propensity to spend (z)in this economy?

Accepted Answer

A) 0.15 
B) 0.20 
C) 0.40 
D) 0.60 
E) 0.75

Question 11

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 12

A downward shift and steepening of the net export (NX)function can be caused by

Accepted Answer

A) an increase in domestic national income. 
B) a decrease in foreign national income. 
C) an increase in domestic prices relative to foreign prices. 
D) a decrease in the Canadian-dollar price of foreign currency. 
E) both C and D are correct.

Question 13

We would expect real national income to be "demand determined" when
1)there is large-scale unemployment of resources in the economy;
2)firms are price setters;
3)firms have excess capacity.

Accepted Answer

A) 1,2,and 3 
B) 1 and 2 
C) 2 and 3 
D) 1 only 
E) 3 only

Question 14

The diagram below shows desired aggregate expenditure for a hypothetical economy.Assume the following features of this economy:
∙ marginal propensity to consume (mpc)= 0.75
∙ net tax rate (t)= 0.20
∙ no foreign trade
∙ fixed price level
∙ all expenditure and income figures are in billions of dollars.  FIGURE 22-2
-Refer to Figure 22-2.Which of the following equations describes the aggregate expenditure function for this economy?

Accepted Answer

A) AE = 250 + (0.6)Y 
B) AE = 225 + (0.75)Y 
C) AE = 250 +(0.15)Y 
D) AE = 75 + (0.75)Y + (0.2)YD 
E) AE = 250 +(0.75)Y + (0.2)YD

Question 15

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 16

The diagram below shows desired aggregate expenditure for a hypothetical economy.Assume the following features of this economy:
∙ marginal propensity to consume (mpc)= 0.75
∙ net tax rate (t)= 0.20
∙ no foreign trade
∙ fixed price level
∙ all expenditure and income figures are in billions of dollars.  FIGURE 22-2
-Refer to Figure 22-2.What is the level of autonomous consumption?

Accepted Answer

A) $0 
B) $75 
C) $100 
D) $175 
E) $250

Question 17

An upward shift and flattening of the net export (NX)function can be caused by

Accepted Answer

A) an increase in domestic national income. 
B) a decrease in foreign national income. 
C) a decrease in domestic prices relative to foreign prices. 
D) an increase in the Canadian-dollar price of foreign currency. 
E) both C and D are correct

Question 18

When determining the AE function for an open economy with government,it is generally assumed that as real national income

Accepted Answer

A) increases,exports will decrease. 
B) increases,net exports will decrease. 
C) increases,imports will decrease. 
D) decreases,net exports will decrease. 
E) decreases,exports will decrease.

Question 19

A fall in the Canadian-dollar price of foreign currency,other things being equal,causes Canada's net export (NX)function to shift ________ and ________.

Accepted Answer

A) upward; become flatter 
B) upward; become steeper 
C) downward; become flatter 
D) downward; keep the same slope 
E) downward; become steeper

Question 20

Consider the net tax rate,denoted by t.Which of the following correctly defines the net tax rate?

Accepted Answer

A) it is total tax revenue minus transfer payments 
B) it is the sum of the federal income tax rate plus an average of provincial income tax rates 
C) it is the increase in net tax revenue when national income rises by one dollar 
D) it is the sum of all government tax revenues 
E) both A and C are correct

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

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

The table below shows national income and imports.The level of exports is fixed at $300.All figures (in table and questions) are in millions of dollars. TABLE 22-1 -Refer to Table 22-1.In this economy,if actual national income increases by $600,the level of imports will

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 0.9 and a net tax rate of 10% of national income,the marginal propensity to consume out of national income is

If the price level is taken as given in a simple macro model with demand-determined output,it is implicitly being assumed that

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

Consider the government's budget balance.Suppose G = 300 and the government's net tax revenue is 0.3Y.The government budget is in surplus only when Y is

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

Suppose exports (X) =100,Y=500,and imports are equal to mY,where m is the marginal propensity to import.Net exports would be equal to zero if the marginal propensity to import were

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

A downward shift and steepening of the net export (NX) function can be caused by

We would expect real national income to be "demand determined" when 1) there is large-scale unemployment of resources in the economy; 2) firms are price setters; 3) firms have excess capacity.

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

An upward shift and flattening of the net export (NX) function can be caused by

When determining the AE function for an open economy with government,it is generally assumed that as real national income

A fall in the Canadian-dollar price of foreign currency,other things being equal,causes Canada's net export (NX) function to shift and .

Consider the net tax rate,denoted by t.Which of the following correctly defines the net tax rate?

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

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

The table below shows national income and imports.The level of exports is fixed at $300.All figures (in table and questions) are in millions of dollars. TABLE 22-1 -Refer to Table 22-1.In this economy,if actual national income increases by $600,the level of imports will

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 0.9 and a net tax rate of 10% of national income,the marginal propensity to consume out of national income is

If the price level is taken as given in a simple macro model with demand-determined output,it is implicitly being assumed that

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

Consider the government's budget balance.Suppose G = 300 and the government's net tax revenue is 0.3Y.The government budget is in surplus only when Y is

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

Suppose exports (X) =100,Y=500,and imports are equal to mY,where m is the marginal propensity to import.Net exports would be equal to zero if the marginal propensity to import were

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

A downward shift and steepening of the net export (NX) function can be caused by

We would expect real national income to be "demand determined" when 1) there is large-scale unemployment of resources in the economy; 2) firms are price setters; 3) firms have excess capacity.

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

An upward shift and flattening of the net export (NX) function can be caused by

When determining the AE function for an open economy with government,it is generally assumed that as real national income

A fall in the Canadian-dollar price of foreign currency,other things being equal,causes Canada's net export (NX) function to shift ________ and ________.

Consider the net tax rate,denoted by t.Which of the following correctly defines the net tax rate?

A fall in the Canadian-dollar price of foreign currency,other things being equal,causes Canada's net export (NX) function to shift and .