Question 1

If S = -60 + 0.25Y and Ig = 60, where S is saving, Ig is gross investment, and Y is gross domestic product (GDP) , then the equilibrium level of GDP is:

Accepted Answer

A)  $200.
B)  $320.
C)  $360.
D)  $480.E) C) and D)
F) A) and D)

Question 2

During the recession of 2008 - 2009:

Accepted Answer

A)  the federal government undertook various policies intended to stimulate private spending and investment.
B)  the federal government undertook various policies that ultimately resulted in an inflationary expenditure gap.
C)  the federal government was able to achieve a balanced budget even though it undertook various policies to stimulate the economy.
D)  the federal government took no action to stimulate the economy, and instead left it to the private sector to try to eliminate the recessionary gap.E) A) and D)
F) None of the above

Question 3

Other things equal, the effect of a downward shift of the economy's net export schedule on equilibrium GDP will be similar to a(n) :

Accepted Answer

A)  rightward shift in the investment-demand schedule.
B)  downward shift in the consumption schedule.
C)  upward shift in the consumption schedule.
D)  upward shift in the investment schedule.E) B) and C)
F) A) and D)

Question 4

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

Question 5

Refer to the diagram below for a private closed economy.Saving and planned investment are equal:

Accepted Answer

A)  only at the $300 level of GDP.
B)  only at the $250 level of GDP.
C)  at all levels of GDP.
D)  only at the $375 level of GDP.E) C) and D)
F) All of the above

Question 6

A lump-sum tax causes the after-tax consumption schedule to be flatter than the before-tax consumption schedule.

Accepted Answer

A) True 
 B)False

Question 7

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) B) and D)
F) All of the above

Question 8

If the marginal propensity to consume is.80 and both taxes and government purchases increase by $50 billion, GDP will:

Accepted Answer

A)  increase by $50 billion.
B)  decrease by $50 billion.
C)  increase by $10 billion.
D)  decrease by $10 billion.E) B) and D)
F) All of the above

Question 9

Which event would most likely decrease an economy's exports?

Accepted Answer

A)  a decline in the tariff on products imported from abroad
B)  an increase 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) B) and D)
F) A) and B)

Question 10

If the MPC in an economy is .75, a $1 billion increase in taxes will reduce the GDP by:

Accepted Answer

A)  $1 billion.
B)  $.75 billion.
C)  $3 billion.
D)  $4 billion.E) All of the above
F) B) and C)

Question 11

If the economy is in equilibrium at the $400 billion level of GDP and the full-employment level of GDP is $500 billion:

Accepted Answer

A)  real and nominal GDP will both increase.
B)  economy does not reach full-employment unless aggregate expenditures increases.
C)  real GDP will increase, but nominal GDP will decrease.
D)  the price level will increase.E) None of the above
F) C) and D)

Question 12

A $1 increase in government spending on goods and services will have a greater impact on the equilibrium GDP than will a $1 decline in taxes because:

Accepted Answer

A)  government spending is more employment-intensive than is either consumption or investment spending.
B)  government spending increases the money supply and a tax reduction does not.
C)  a portion of a tax cut will be saved.
D)  taxes vary directly with income.E) B) and D)
F) C) and D)

Question 13

An increase in government expenditures will shift the aggregate expenditures schedule ____ and ____ the equilibrium GDP.

Accepted Answer

A)  upward; raise
B)  downward; raise
C)  downward; lower
D)  upward; lowerE) C) and D)
F) A) and C)

Question 14

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

Question 15

Refer to the diagram.If the full-employment level of GDP is B and aggregate expenditures are at AE1, the: 1, the:   A) inflationary expenditure gap is hg. B) recessionary expenditure gap is BC. C) inflationary expenditure gap is zero. D) inflationary expenditure gap is ed." class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)  inflationary expenditure gap is hg.
B)  recessionary expenditure gap is BC.
C)  inflationary expenditure gap is zero.
D)  inflationary expenditure gap is ed.E) A) and B)
F) B) and C)

Question 16

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) All of the above
F) A) and B)

Question 17

In the aggregate expenditures model, an increase in government spending will:

Accepted Answer

A)  decrease real GDP.
B)  increase output and employment.
C)  shift the aggregate expenditures schedule downward.
D)  do all of the above.E) B) and C)
F) A) and B)

Question 18

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

Accepted Answer

A)  decrease by $30 billion.
B)  decrease by $45 billion.
C)  decrease by $35 billion.
D)  decrease by $55 billion.E) B) and D)
F) A) and B)

Exam 11: Part B: The Aggregate Expenditures Model

A $1 increase in government spending on goods and services will have a greater impact on the equilibrium GDP than will a $1 decline in taxes because:

Correct Answer
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If the MPC in an economy is .75, a $1 billion increase in taxes will reduce the GDP by:

Correct Answer
verified

If the economy is in equilibrium at the $400 billion level of GDP and the full-employment level of GDP is $500 billion:

Correct Answer
verified

In the aggregate expenditures model, an increase in government spending will:

Correct Answer
verified

Refer to the diagram below for a private closed economy.Saving and planned investment are equal:

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

If S = -60 + 0.25Y and I_g = 60, where S is saving, I_g is gross investment, and Y is gross domestic product (GDP) , then the equilibrium level of GDP is:

Correct Answer
verified

A lump-sum tax causes the after-tax consumption schedule to be flatter than the before-tax consumption schedule.

Correct Answer
verified

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

Correct Answer
verified

Refer to the diagram.If the full-employment level of GDP is B and aggregate expenditures are at AE₁, the:

Correct Answer
verified

If the marginal propensity to consume is.80 and both taxes and government purchases increase by $50 billion, GDP will:

Correct Answer
verified

Other things equal, the effect of a downward shift of the economy's net export schedule on equilibrium GDP will be similar to a(n) :

Correct Answer
verified

Which event would most likely decrease an economy's exports?

Correct Answer
verified

In a mixed closed economy:

Correct Answer
verified

An increase in government expenditures will shift the aggregate expenditures schedule and the equilibrium GDP.

Correct Answer
verified

During the recession of 2008 - 2009:

Correct Answer
verified

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

Correct Answer
verified

Exam 11: Part B: The Aggregate Expenditures Model

A $1 increase in government spending on goods and services will have a greater impact on the equilibrium GDP than will a $1 decline in taxes because:

Correct AnswerverifiedShow Answer

If the MPC in an economy is .75, a $1 billion increase in taxes will reduce the GDP by:

Correct AnswerverifiedShow Answer

If the economy is in equilibrium at the $400 billion level of GDP and the full-employment level of GDP is $500 billion:

Correct AnswerverifiedShow Answer

In the aggregate expenditures model, an increase in government spending will:

Correct AnswerverifiedShow Answer

Refer to the diagram below for a private closed economy.Saving and planned investment are equal:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If S = -60 + 0.25Y and Ig = 60, where S is saving, Ig is gross investment, and Y is gross domestic product (GDP) , then the equilibrium level of GDP is:

Correct AnswerverifiedShow Answer

A lump-sum tax causes the after-tax consumption schedule to be flatter than the before-tax consumption schedule.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Refer to the diagram.If the full-employment level of GDP is B and aggregate expenditures are at AE1, the:

Correct AnswerverifiedShow Answer

If the marginal propensity to consume is.80 and both taxes and government purchases increase by $50 billion, GDP will:

Correct AnswerverifiedShow Answer

Other things equal, the effect of a downward shift of the economy's net export schedule on equilibrium GDP will be similar to a(n) :

Correct AnswerverifiedShow Answer

Which event would most likely decrease an economy's exports?

Correct AnswerverifiedShow Answer

In a mixed closed economy:

Correct AnswerverifiedShow Answer

An increase in government expenditures will shift the aggregate expenditures schedule ____ and ____ the equilibrium GDP.

Correct AnswerverifiedShow Answer

During the recession of 2008 - 2009:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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If S = -60 + 0.25Y and I_g = 60, where S is saving, I_g is gross investment, and Y is gross domestic product (GDP) , then the equilibrium level of GDP is:

Correct Answer
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Refer to the diagram.If the full-employment level of GDP is B and aggregate expenditures are at AE₁, the:

Correct Answer
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An increase in government expenditures will shift the aggregate expenditures schedule and the equilibrium GDP.

Correct Answer
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