Question 1

Refer to the above diagram.The sizes of the multipliers associated with changes in investment and government spending in this economy:

Accepted Answer

A)  are 2.5 and 1.5 respectively.
B)  are 3 and 2 respectively.
C)  are both 2.5.
D)  are 2 and 3 respectively.E) A) and B)
F) All of the above

Question 2

Assume that an economy is operating at less than its full-employment level of output.Which event would most likely increase an economy's exports?

Accepted Answer

A)  a rise in the tariff on products imported from abroad
B)  a fall in the prosperity of trading partners for this economy
C)  an appreciation of a nation's currency relative to foreign currencies
D)  a depreciation of a nation's currency relative to foreign currenciesE) All of the above
F) A) and B)

Question 3

Suppose the multiplier is 4 and lump-sum taxes are increased by $16 in a closed economy.We can predict that:

Accepted Answer

A)  GDP will increase by $64.
B)  GDP will decrease by $64.
C)  the aggregate expenditures schedule will shift downward by $12.
D)  inflation will occur.E) B) and C)
F) A) and C)

Question 4

Other things equal, the multiplier effect associated with a change in government spending is:

Accepted Answer

A)  the same as that associated with a change in taxes.
B)  equal to that associated with a change in investment or consumption.
C)  less than that associated with a change in investment.
D)  greater than that associated with a change in investment.E) A) and B)
F) A) and D)

Question 5

In the above private open economy, international trade:

Accepted Answer

A)  is inflationary.
B)  is a source of additional jobs for domestic workers.
C)  has no effect on GDP.
D)  has a contractionary effect on GDP.E) A) and B)
F) All of the above

Question 6

Refer to the above diagrams.Other things equal, Curve B will shift upward when:

Accepted Answer

A)  the level of GDP increases.
B)  the interest rate increases.
C)  curve A shifts to the left.
D)  curve A shifts to the right.E) B) and C)
F) A) and B)

Question 7

Refer to the below data.Equilibrium Y = (GDP)  is: The letters Y, C, and, I are used to represent GDP, consumption, and, investment respectively.

Accepted Answer

A)  $100
B)  $200
C)  $300
D)  $400E) A) and C)
F) None of the above

Question 8

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.E) C) and D)
F) All of the above

Question 9

Refer to the above diagrams.Other things equal, an interest rate increase 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.E) B) and D)
F) A) and D)

Question 10

Exports have the same macroeconomic effect on GDP as:

Accepted Answer

A)  imports.
B)  investment.
C)  taxes.
D)  saving.E) A) and D)
F) A) and C)

Question 11

Planned investment is $75 billion and saving is $62 billion in a private closed economy.In equilibrium actual investment must be:

Accepted Answer

A)  $13 billion.
B)  $75 billion.
C)  $62 billion.
D)  minus $13 billion.E) A) and D)
F) A) and B)

Question 12

The following information is for a private closed economy, where Ig is gross investment, S is saving, and Y is gross domestic product (GDP) .Ig = 80 S = -80 + 0.4Y
Refer to the above information.The equilibrium GDP will be:

Accepted Answer

A)  $160.
B)  $400.
C)  $360.
D)  $480.E) None of the above
F) All of the above

Question 13

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.E) B) and C)
F) A) and D)

Question 14

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)  $700E) B) and C)
F) None of the above

Question 15

The letters Y, C, S, and I are used to represent GDP, consumption, saving, and investment respectively.  The equation representing the consumption schedule for the above economy is:

Accepted Answer

A)  C = Y -.6S.
B)  Y = C + S.
C)  C = 60 + .4Y.
D)  C = 60 + .6Y.E) All of the above
F) B) and D)

Question 16

For a private closed economy, an unplanned decline in inventories suggests that:

Accepted Answer

A)  aggregate expenditures are less than the business sector expected them to be.
B)  planned investment is greater than saving.
C)  actual investment exceeds saving.
D)  planned investment is greater than consumption.E) A) and B)
F) A) and C)

Question 17

An increase in taxes will have a greater effect on the equilibrium GDP:

Accepted Answer

A)  if the tax revenues are redistributed through transfer payments.
B)  the larger the MPS.
C)  the smaller the MPC.
D)  the larger the MPC.E) B) and C)
F) A) and C)

Question 18

The letters Y, C, Ig, X, and M stand for GDP, consumption, gross investment, exports, and imports respectively.Figures are in billions of dollars.Ca = 25.75(Y - T )  Ig = Ig0 = 50
Xn = Xn0 = 10
G = G0 = 70
T = T0 = 30
Refer to the above information.The multiplier for this economy:

Accepted Answer

A)  is 4.
B)  is 3.
C)  is 2.
D)  is 2.33.E) None of the above
F) A) and C)

Question 19

In the aggregate expenditures model, it is assumed that the planned investment:

Accepted Answer

A)  automatically changes in response to changes in the current level of real domestic output.
B)  changes by less in percentage terms than changes in the level of real domestic output.
C)  does not respond to changes in interest rates.
D)  does not change when the level of real domestic output changes.E) B) and C)
F) A) and D)

Question 20

The above economy is characterized by:

Accepted Answer

A)  built-in stability.
B)  taxes which vary directly with GDP, but government spending which is independent of GDP.
C)  taxes which are independent of GDP, but government spending which varies directly with GDP.
D)  a multiplier of 2.5.E) A) and B)
F) A) and C)

Exam 11: B: The Aggregate Expenditures Model

Suppose the multiplier is 4 and lump-sum taxes are increased by $16 in a closed economy.We can predict that:

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The equilibrium GDP is the level of domestic output:

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

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The letters Y, C, S, and I are used to represent GDP, consumption, saving, and investment respectively. The equation representing the consumption schedule for the above economy is:

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In the aggregate expenditures model, it is assumed that the planned investment:

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Other things equal, the multiplier effect associated with a change in government spending is:

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An increase in taxes will have a greater effect on the equilibrium GDP:

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In the above private open economy, international trade:

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Refer to the below data.Equilibrium Y = (GDP) is: The letters Y, C, and, I are used to represent GDP, consumption, and, investment respectively.

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Planned investment is $75 billion and saving is $62 billion in a private closed economy.In equilibrium actual investment must be:

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The following information is for a private closed economy, where Ig is gross investment, S is saving, and Y is gross domestic product (GDP) .Ig = 80 S = -80 + 0.4Y Refer to the above information.The equilibrium GDP will be:

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For a private closed economy, an unplanned decline in inventories suggests that:

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Refer to the above diagrams.Other things equal, Curve B will shift upward when:

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Exports have the same macroeconomic effect on GDP as:

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Assume that an economy is operating at less than its full-employment level of output.Which event would most likely increase an economy's exports?

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The above economy is characterized by:

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Refer to the above diagram.The sizes of the multipliers associated with changes in investment and government spending in this economy:

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The letters Y, C, Ig, X, and M stand for GDP, consumption, gross investment, exports, and imports respectively.Figures are in billions of dollars.Ca = 25.75(Y - T ) Ig = Ig0 = 50 Xn = Xn0 = 10 G = G0 = 70 T = T0 = 30 Refer to the above information.The multiplier for this economy:

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

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

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The following information is for a private closed economy, where I_g is gross investment, S is saving, and Y is gross domestic product (GDP) .I_g = 80 S = -80 + 0.4Y Refer to the above information.The equilibrium GDP will be:

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The letters Y, C, I_g, X, and M stand for GDP, consumption, gross investment, exports, and imports respectively.Figures are in billions of dollars.Ca = 25.75(Y - T ) Ig = Ig0 = 50 Xn = Xn0 = 10 G = G0 = 70 T = T0 = 30 Refer to the above information.The multiplier for this economy:

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