Question 1

3, the: A) inflationary expenditure gap is ed. B) inflationary expenditure gap is BC. C) recessionary expenditure gap is eg. D) economy is in equilibrium, but at less than full employment." class="answers-bank-image d-inline" rel="preload" > Refer to the above diagram.If the full-employment level of GDP is B and aggregate expenditures are at AE3, the:

Accepted Answer

A)  inflationary expenditure gap is ed.
B)  inflationary expenditure gap is BC.
C)  recessionary expenditure gap is eg.
D)  economy is in equilibrium, but at less than full employment.E) B) and D)
F) A) and D)

Question 2

Actual investment is $62 billion at an equilibrium output level of $620 billion in a private closed economy.The average propensity to save at this level of output:

Accepted Answer

A)  is 0.10.
B)  is 10.
C)  is 0.62.
D)  cannot be determined on the basis of the information given.E) A) and B)
F) A) and C)

Question 3

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 D)
F) A) and B)

Question 4

At the $180 billion equilibrium level of income, saving is $38 billion in a private closed economy.Planned investment must be:

Accepted Answer

A)  $138 billion.
B)  $126 billion.
C)  $38 billion.
D)  $180 billion.E) B) and D)
F) B) and C)

Question 5

If APC = .6 and MPC = .7, the immediate impact of an increase in personal taxes of $20 will be to:

Accepted Answer

A)  have no effect on consumption.
B)  decrease consumption by $14.
C)  decrease consumption by $12.
D)  increase consumption by $14.E) None of the above
F) A) and C)

Question 6

If an increase in aggregate expenditures results in no increase in real GDP we can conclude that the:

Accepted Answer

A)  economy is in a deep recession.
B)  MPC equals 1.
C)  economy is already operating at full employment.
D)  price level has fallen.E) B) and C)
F) A) and B)

Question 7

If the multiplier in an economy is 5, a $20 billion increase in net exports will:

Accepted Answer

A)  increase GDP by $100 billion.
B)  reduce GDP by $20 billion.
C)  decrease GDP by $100 billion.
D)  increase GDP by $20 billion.E) None of the above
F) A) and D) A

Question 8

In a mixed closed economy:

Accepted Answer

A)  government purchases and saving are injections, while investment and taxes are leakages.
B)  taxes and government purchases are leakages, while investment and saving are injections.
C)  taxes and savings are leakages, while investment and government purchases are injections.
D)  taxes and investment are injections, while saving and government purchases are leakages.E) A) and D)
F) B) and C)

Question 9

Refer to the above diagram.The equilibrium condition for a private open economy is S + M = Ig + X.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following statements is incorrect?

Accepted Answer

A)  Given the economy's MPS, a $15 billion reduction in government spending will reduce the equilibrium GDP by more than would a $15 billion increase in taxes.
B)  Other things unchanged, a tax reduction of $10 billion will increase the equilibrium GDP by $25 billion when the MPS is 0.4.
C)  If the MPC is 0.8 and GDP has declined by $40 billion, this was caused by a decline in aggregate expenditures of $8 billion.
D)  A government surplus is anti-inflationary; a government deficit is expansionary.E) B) and C)
F) A) and B)

Question 11

Complete the following table and answer the next question(s)  on the basis of the resulting data.All figures are in billions of dollars.  Other things equal, an increase in an economy's exports will:

Accepted Answer

A)  lower the marginal propensity to import.
B)  have no effect on domestic GDP because imports will change by an offsetting amount.
C)  decrease its domestic aggregate expenditures and therefore decrease its equilibrium GDP.
D)  increase its domestic aggregate expenditures and therefore increase its equilibrium GDP.E) B) and C)
F) A) and D)

Question 12

The letters Y, C, Ig, X, and M stand for GDP, consumption, gross investment, exports, and imports respectively.Figures are in billions of dollars.C = 26 + .75Y Ig = 60
X = 24
M = 10
The equilibrium level of GDP for the above open economy is:

Accepted Answer

A)  $390
B)  $375
C)  $320
D)  $400E) A) and B)
F) All of the above

Question 13

The following information is for a closed economy:  Refer to the above information.If government now spends $80 billion at each level of GDP and taxes remain at zero, the equilibrium GDP:

Accepted Answer

A)  will rise to $700.
B)  will rise to $600.
C)  will rise to $500.
D)  may either rise or fall.E) A) and C)
F) A) and B)

Question 14

If government decreases its purchases by $20 billion and the MPC is 0.8, equilibrium GDP will decrease by $100 billion.

Accepted Answer

A) True 
 B)False  True

Question 15

In a recessionary expenditure gap, the equilibrium level of real GDP is:

Accepted Answer

A)  less than planned investment.
B)  equal to full-employment GDP.
C)  greater than full-employment GDP.
D)  less than full-employment GDP.E) None of the above
F) All of the above D

Question 16

The tax in the above economy is a:

Accepted Answer

A)  10 percent proportional tax.
B)  lump-sum tax of $20.
C)  lump-sum tax of $10.
D)  progressive tax.E) A) and D)
F) A) and C)

Question 17

The table shows a private, open economy.All figures are in billions of dollars.  Refer to the above table.If the marginal propensity to consume in this economy is 0.8, a $10 increase in its net exports would increase its equilibrium real GDP by:

Accepted Answer

A)  $25
B)  $50
C)  $100
D)  $200E) B) and D)
F) B) and C)

Question 18

Refer to the above diagram, which applies to a private closed economy.If the initial gross investment Ig1 increases to Ig2, the equilibrium GDP will increase by:

Accepted Answer

A)  FE.
B)  AB.
C)  AD.
D)  GE.E) A) and B)
F) B) and C)

Question 19

The level of aggregate expenditures in the private closed economy is determined by the:

Accepted Answer

A)  expenditures of consumers and businesses.
B)  intersection of the saving schedule and the 45-degree line.
C)  equality of the MPC and MPS.
D)  intersection of the saving and consumption schedules.E) All of the above
F) A) and C)

Question 20

Refer to the diagram below.The equilibrium condition for a private closed economy is Ig = S.

Accepted Answer

A) True 
 B)False

Exam 11: B: The Aggregate Expenditures Model

Refer to the above diagram.If the full-employment level of GDP is B and aggregate expenditures are at AE3, the:

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Actual investment is $62 billion at an equilibrium output level of $620 billion in a private closed economy.The average propensity to save at this level of output:

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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:

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At the $180 billion equilibrium level of income, saving is $38 billion in a private closed economy.Planned investment must be:

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If APC = .6 and MPC = .7, the immediate impact of an increase in personal taxes of $20 will be to:

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If an increase in aggregate expenditures results in no increase in real GDP we can conclude that the:

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If the multiplier in an economy is 5, a $20 billion increase in net exports will:

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In a mixed closed economy:

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Refer to the above diagram.The equilibrium condition for a private open economy is S + M = Ig + X.

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Which of the following statements is incorrect?

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Complete the following table and answer the next question(s) on the basis of the resulting data.All figures are in billions of dollars. Other things equal, an increase in an economy's exports will:

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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.C = 26 + .75Y Ig = 60 X = 24 M = 10 The equilibrium level of GDP for the above open economy is:

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The following information is for a closed economy: Refer to the above information.If government now spends $80 billion at each level of GDP and taxes remain at zero, the equilibrium GDP:

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If government decreases its purchases by $20 billion and the MPC is 0.8, equilibrium GDP will decrease by $100 billion.

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In a recessionary expenditure gap, the equilibrium level of real GDP is:

Correct AnswerverifiedD

The tax in the above economy is a:

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The table shows a private, open economy.All figures are in billions of dollars. Refer to the above table.If the marginal propensity to consume in this economy is 0.8, a $10 increase in its net exports would increase its equilibrium real GDP by:

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Refer to the above diagram, which applies to a private closed economy.If the initial gross investment Ig1 increases to Ig2, the equilibrium GDP will increase by:

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The level of aggregate expenditures in the private closed economy is determined by the:

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Refer to the diagram below.The equilibrium condition for a private closed economy is Ig = S.

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Refer to the above diagram.If the full-employment level of GDP is B and aggregate expenditures are at AE₃, the:

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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:

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A

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Refer to the above diagram.The equilibrium condition for a private open economy is S + M = I_g + X.

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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.C = 26 + .75Y I_g = 60 X = 24 M = 10 The equilibrium level of GDP for the above open economy is:

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True

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D

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Refer to the above diagram, which applies to a private closed economy.If the initial gross investment I_g1 increases to I_g2, the equilibrium GDP will increase by:

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Refer to the diagram below.The equilibrium condition for a private closed economy is I_g = S.

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