Question 1

In the economy in the above diagram, international trade:

Accepted Answer

A)  does not occur.
B)  has a contractionary effect on GDP.
C)  has an expansionary effect on GDP.
D)  has no impact on GDP.E) None of the above
F) A) and B)

Question 2

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) C) and D)
F) A) and B)

Question 3

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.If government desired to raise the equilibrium GDP to $650, it could:

Accepted Answer

A)  raise G by $45 and reduce T by $10.
B)  raise G by $40 and reduce T by $30.
C)  raise G by $30 or reduce T by $40.
D)  raise both G and T by $40.E) A) and B)
F) A) and C)

Question 4

Refer to the above diagram for a private closed economy.In this economy investment:

Accepted Answer

A)  decreases as GDP increases.
B)  increases as GDP increases.
C)  is $40 billion at all levels of GDP.
D)  is $60 billion at all levels of GDP.E) A) and D)
F) B) and C)

Question 5

The following information is consumption and investment data for a private closed economy.Figures are in billions of dollars.C = 60 + .6Y I = I0 = 30
Refer to the above data.In equilibrium, the level of consumption spending will be:

Accepted Answer

A)  170
B)  270
C)  160
D)  195E) A) and C)
F) None of the above

Question 6

The table shows the consumption schedule for a hypothetical economy.All figures are in billions of dollars.  Refer to the above table.If taxes were $5, government purchases of goods and services $10, planned investment $6, and net exports zero, equilibrium real GDP would be:

Accepted Answer

A)  $600
B)  $610
C)  $620
D)  $630E) A) and B)
F) A) and C)

Question 7

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) A) and C)
F) A) and B)

Question 8

The following information is for a closed economy:  Refer to the above information.The addition of a $100 billion lump-sum tax:

Accepted Answer

A)  reduces the MPC and increases the multiplier.
B)  increases the MPC and decreases the multiplier.
C)  increases both the MPC and the multiplier.
D)  has no effect on either the MPC or the multiplier.E) A) and B)
F) A) and C)

Question 9

The marginal propensity to import is:

Accepted Answer

A)  the change in imports divided by a change by exports.
B)  the change in imports divided by a change in consumption.
C)  the change in imports divided by a change in GDP.
D)  the change in imports multiplied by a change in GDP.E) A) and D)
F) B) and C)

Question 10

The following information is for a closed economy:  Refer to the above information.If both government spending and taxes are zero, the equilibrium level of GDP:

Accepted Answer

A)  is $200.
B)  is $300.
C)  is $400.
D)  is $500.E) B) and C)
F) A) and D)

Question 11

Unplanned changes in inventories:

Accepted Answer

A)  cause the economy to move away from the equilibrium GDP.
B)  must be subtracted from planned investment to determine actual investment.
C)  bring actual investment and saving into equality only at the equilibrium level of GDP.
D)  bring actual investment and saving into equality at all levels of GDP.E) All of the above
F) A) and C)

Question 12

Refer to the information below.The multiplier in this economy is:

Accepted Answer

A)  4
B)  5
C)  1.5.
D)  3E) A) and B)
F) A) and C)

Question 13

Refer to the information below.The multiplier for this economy:

Accepted Answer

A)  is 2.
B)  is 2.5.
C)  is 3.
D)  is 4.E) B) and C)
F) C) and D)

Question 14

When the public sector is added to the aggregate expenditures model:

Accepted Answer

A)  the equilibrium condition becomes G + S = T + Ig + X.
B)  the equilibrium condition becomes G + T = S + Ig + X.
C)  the equilibrium condition becomes Ca + Ig + Xn + G + T = GDP.
D)  we add a new leakage in the form of taxes and a new injection in the form of government spending.E) B) and C)
F) A) and B)

Question 15

During the recession of 2008-2009, both after-tax consumption and government expenditures declined.

Accepted Answer

A) True 
 B)False

Question 16

If government increases its purchases by $15 billion and the MPC is 2/3, then we would expect the equilibrium GDP to:

Accepted Answer

A)  increase by $30 billion.
B)  increase by $45 billion.
C)  decrease by $35 billion.
D)  increase by $50 billion.E) A) and B)
F) A) and C)

Question 17

The economy in the above diagram is incurring:

Accepted Answer

A)  balance in its international trade.
B)  a trade deficit.
C)  a trade surplus.
D)  inflation.E) A) and B)
F) C) and D)

Question 18

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) None of the above
F) B) and D)

Question 19

At equilibrium real GDP in a private closed economy:

Accepted Answer

A)  the MPC must equal the APC.
B)  the slope of the aggregate expenditures schedule equals the MPS.
C)  planned and actual investment are equal.
D)  planned saving and consumption are equal.E) C) and D)
F) B) and C)

Question 20

Refer to the above diagram for a private closed economy.Unplanned investment in inventories will:

Accepted Answer

A)  occur at all levels of GDP in excess of $200.
B)  occur at all levels of GDP in excess of $600.
C)  occur at all levels of GDP below $600.
D)  not occur because the economy is necessarily in equilibrium.E) None of the above
F) B) and D)

Exam 11: Part B: The Aggregate Expenditures Model

The above economy is characterized by:

Correct Answer
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The following information is for a closed economy: Refer to the above information.The addition of a $100 billion lump-sum tax:

Correct Answer
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When the public sector is added to the aggregate expenditures model:

Correct Answer
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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:

Correct Answer
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During the recession of 2008-2009, both after-tax consumption and government expenditures declined.

Correct Answer
verified

Refer to the above diagram for a private closed economy.Unplanned investment in inventories will:

Correct Answer
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Unplanned changes in inventories:

Correct Answer
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If government increases its purchases by $15 billion and the MPC is 2/3, then we would expect the equilibrium GDP to:

Correct Answer
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The marginal propensity to import is:

Correct Answer
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Refer to the information below.The multiplier in this economy is:

Correct Answer
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At equilibrium real GDP in a private closed economy:

Correct Answer
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The economy in the above diagram is incurring:

Correct Answer
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Refer to the information below.The multiplier for this economy:

Correct Answer
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In the economy in the above diagram, international trade:

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

Correct Answer
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Refer to the above diagram for a private closed economy.In this economy investment:

Correct Answer
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The following information is for a closed economy: Refer to the above information.If both government spending and taxes are zero, the equilibrium level of GDP:

Correct Answer
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The table shows the consumption schedule for a hypothetical economy.All figures are in billions of dollars. Refer to the above table.If taxes were $5, government purchases of goods and services $10, planned investment $6, and net exports zero, equilibrium real GDP would be:

Correct Answer
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The following information is consumption and investment data for a private closed economy.Figures are in billions of dollars.C = 60 + .6Y I = I₀ = 30 Refer to the above data.In equilibrium, the level of consumption spending will be:

Correct Answer
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Exam 11: Part B: The Aggregate Expenditures Model

The above economy is characterized by:

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The following information is for a closed economy: Refer to the above information.The addition of a $100 billion lump-sum tax:

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When the public sector is added to the aggregate expenditures model:

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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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During the recession of 2008-2009, both after-tax consumption and government expenditures declined.

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Refer to the above diagram for a private closed economy.Unplanned investment in inventories will:

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Unplanned changes in inventories:

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If government increases its purchases by $15 billion and the MPC is 2/3, then we would expect the equilibrium GDP to:

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The marginal propensity to import is:

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Refer to the information below.The multiplier in this economy is:

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At equilibrium real GDP in a private closed economy:

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The economy in the above diagram is incurring:

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Refer to the information below.The multiplier for this economy:

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In the economy in the above diagram, international trade:

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

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Refer to the above diagram for a private closed economy.In this economy investment:

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The following information is for a closed economy: Refer to the above information.If both government spending and taxes are zero, the equilibrium level of GDP:

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The table shows the consumption schedule for a hypothetical economy.All figures are in billions of dollars. Refer to the above table.If taxes were $5, government purchases of goods and services $10, planned investment $6, and net exports zero, equilibrium real GDP would be:

Correct AnswerverifiedShow Answer

The following information is consumption and investment data for a private closed economy.Figures are in billions of dollars.C = 60 + .6Y I = I0 = 30 Refer to the above data.In equilibrium, the level of consumption spending will be:

Correct AnswerverifiedShow Answer

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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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The following information is consumption and investment data for a private closed economy.Figures are in billions of dollars.C = 60 + .6Y I = I₀ = 30 Refer to the above data.In equilibrium, the level of consumption spending will be:

Correct Answer
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