Question 1

Refer to the accompanying table.The MPC and MPS in the economy

Accepted Answer

A)  are 0.4 and 0.6, respectively.
B)  are 0.6 and 0.4, respectively.
C)  are 0.8 and 0.2, respectively.
D)  cannot be determined from the information given.E) C) and D)
F) B) and D)

Question 2

The investment schedule shows the

Accepted Answer

A)  inverse relationship between the expected rate of return and the quantity of investment demanded.
B)  positive relationship between the expected rate of return and the quantity of investment demanded.
C)  amounts business firms collectively intend to invest at each possible level of GDP.
D)  rate of interest that business firms must pay when they make investments in capital goods.E) B) and C)
F) All of the above

Question 3

In the Great Recession of 2007-2009, consumption, C, and investment, I g, fell, while government, G, expanded.

Accepted Answer

A) True 
 B)False

Question 4

Saving is $40 billion and planned investment is $28 billion at the $175 billion level of output in a private closed economy.At this level,

Accepted Answer

A)  consumption will be $147 billion.
B)  actual investment will be $28 billion.
C)  unplanned investment will be positive $12 billion.
D)  unplanned investment will be negative $12 billion.E) A) and B)
F) B) and D)

Question 5

If a government raises its expenditures by $50 billion and at the same time levies a lump-sum tax of $50 billion, the net effect on the economy will be to

Accepted Answer

A)  increase GDP by less than $50 billion.
B)  increase GDP by more than $50 billion.
C)  increase GDP by $50 billion.
D)  make no change in GDP.E) A) and D)
F) None of the above

Question 6

Ca = 25 + 0.75 (Y - T)  Ig = 50 Xn = 10
G = 70
T = 30
(Advanced analysis)  The accompanying equations are for a mixed open economy.The letters Y, Ca, Ig, Xn, G, and T stand for GDP, consumption, gross investment, net exports, government purchases, and net taxes, respectively.Figures are in billions of dollars.The equilibrium level of GDP for this economy is

Accepted Answer

A)  $600.
B)  $530.
C)  $415.
D)  $400.E) B) and C)
F) None of the above

Question 7

If a nation imposes tariffs and quotas on foreign products, the immediate effect will be to

Accepted Answer

A)  reduce the rate of domestic inflation.
B)  increase efficiency in the world economy.
C)  increase domestic output and employment.
D)  reduce domestic output and employment.E) B) and D)
F) C) and D)

Question 8

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) All of the above

Question 9

An increase in imports, other things constant, would tend to raise the equilibrium level of GDP.

Accepted Answer

A) True 
 B)False

Question 10

If MPC = 0.5, a simultaneous increase in both taxes and government spending of $20 will

Accepted Answer

A)  decrease GDP by $20.
B)  decrease GDP by $40.
C)  increase GDP by $20.
D)  increase GDP by $40.E) B) and C)
F) A) and D)

Question 11

Imports have the same effect on the current size of GDP as

Accepted Answer

A)  exports.
B)  investment.
C)  consumption.
D)  saving.E) All of the above
F) A) and D)

Question 12

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 13

John Maynard Keynes expressed his ideas about the macroeconomy and attacked classical economics in his book, The

Accepted Answer

A)  Affluent Society.
B)  Wealth of Nations.
C)  Theory and Practice of Economics in Capitalism.
D)  General Theory of Employment, Interest, and Money.E) All of the above
F) A) and D)

Question 14

Recently, the level of GDP has declined by $60 billion in an economy where the marginal propensity to consume is 0.75.Aggregate expenditures must have fallen by

Accepted Answer

A)  $45 billion.
B)  $30 billion.
C)  $15 billion.
D)  $60 billion.E) A) and D)
F) A) and C)

Question 15

In an aggregate expenditures diagram, equal increases in government spending and in lump-sum taxes will

Accepted Answer

A)  shift the aggregate expenditures line downward.
B)  shift the aggregate expenditures line upward.
C)  leave the aggregate expenditures line unchanged.
D)  reduce the equilibrium GDP.E) B) and C)
F) A) and D)

Question 16

(Last Word)  Say's law and classical macroeconomics were disputed by

Accepted Answer

A)  Adam Smith.
B)  Jeremy Bentham.
C)  John Stuart Mill.
D)  John Maynard Keynes.E) B) and D)
F) B) and C)

Question 17

Assume the current equilibrium level of income is $200 billion as compared to the full-employment income level of $240 billion.If the MPC is 0.625, what change in aggregate expenditures is needed to achieve full employment?

Accepted Answer

A)  a decrease of $12 billion
B)  an increase of $25 billion
C)  an increase of $10 billion
D)  an increase of $15 billionE) A) and B)
F) All of the above

Question 18

Say's law in classical economics suggests that, over a period of time,

Accepted Answer

A)  aggregate spending would tend to exceed total output and income.
B)  aggregate spending would tend to fall short of total output and income.
C)  aggregate spending would tend to equal total output and income.
D)  aggregate spending would tend to deviate from total output and income.E) C) and D)
F) B) and D)

Question 19

Investment and saving are, respectively,

Accepted Answer

A)  income and wealth.
B)  stocks and flows.
C)  injections and leakages.
D)  leakages and injections.E) B) and C)
F) A) and B)

Exam 31: The Aggregate Expenditures Model

Investment and saving are, respectively,

Correct Answer
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Correct Answer
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Say's law in classical economics suggests that, over a period of time,

Correct Answer
verified

Saving is $40 billion and planned investment is $28 billion at the $175 billion level of output in a private closed economy.At this level,

Correct Answer
verified

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

Correct Answer
verified

If a government raises its expenditures by $50 billion and at the same time levies a lump-sum tax of $50 billion, the net effect on the economy will be to

Correct Answer
verified

If a nation imposes tariffs and quotas on foreign products, the immediate effect will be to

Correct Answer
verified

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

Correct Answer
verified

In an aggregate expenditures diagram, equal increases in government spending and in lump-sum taxes will

Correct Answer
verified

The investment schedule shows the

Correct Answer
verified

Recently, the level of GDP has declined by $60 billion in an economy where the marginal propensity to consume is 0.75.Aggregate expenditures must have fallen by

Correct Answer
verified

John Maynard Keynes expressed his ideas about the macroeconomy and attacked classical economics in his book, The

Correct Answer
verified

In the Great Recession of 2007-2009, consumption, C, and investment, I g, fell, while government, G, expanded.

Correct Answer
verified

Imports have the same effect on the current size of GDP as

Correct Answer
verified

An increase in imports, other things constant, would tend to raise the equilibrium level of GDP.

Correct Answer
verified

Assume the current equilibrium level of income is $200 billion as compared to the full-employment income level of $240 billion.If the MPC is 0.625, what change in aggregate expenditures is needed to achieve full employment?

Correct Answer
verified

Refer to the accompanying table.The MPC and MPS in the economy

Correct Answer
verified

If MPC = 0.5, a simultaneous increase in both taxes and government spending of $20 will

Correct Answer
verified

(Last Word) Say's law and classical macroeconomics were disputed by

Correct Answer
verified

Exam 31: The Aggregate Expenditures Model

Investment and saving are, respectively,

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Say's law in classical economics suggests that, over a period of time,

Correct AnswerverifiedShow Answer

Saving is $40 billion and planned investment is $28 billion at the $175 billion level of output in a private closed economy.At this level,

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If a government raises its expenditures by $50 billion and at the same time levies a lump-sum tax of $50 billion, the net effect on the economy will be to

Correct AnswerverifiedShow Answer

If a nation imposes tariffs and quotas on foreign products, the immediate effect will be to

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In an aggregate expenditures diagram, equal increases in government spending and in lump-sum taxes will

Correct AnswerverifiedShow Answer

The investment schedule shows the

Correct AnswerverifiedShow Answer

Recently, the level of GDP has declined by $60 billion in an economy where the marginal propensity to consume is 0.75.Aggregate expenditures must have fallen by

Correct AnswerverifiedShow Answer

John Maynard Keynes expressed his ideas about the macroeconomy and attacked classical economics in his book, The

Correct AnswerverifiedShow Answer

In the Great Recession of 2007-2009, consumption, C, and investment, I g, fell, while government, G, expanded.

Correct AnswerverifiedShow Answer

Imports have the same effect on the current size of GDP as

Correct AnswerverifiedShow Answer

An increase in imports, other things constant, would tend to raise the equilibrium level of GDP.

Correct AnswerverifiedShow Answer

Assume the current equilibrium level of income is $200 billion as compared to the full-employment income level of $240 billion.If the MPC is 0.625, what change in aggregate expenditures is needed to achieve full employment?

Correct AnswerverifiedShow Answer

Refer to the accompanying table.The MPC and MPS in the economy

Correct AnswerverifiedShow Answer

If MPC = 0.5, a simultaneous increase in both taxes and government spending of $20 will

Correct AnswerverifiedShow Answer

(Last Word) Say's law and classical macroeconomics were disputed by

Correct AnswerverifiedShow Answer

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