Question 1

In a private closed economy, when aggregate expenditures equal GDP,

Accepted Answer

A)  consumption equals investment.
B)  consumption equals aggregate expenditures.
C)  planned investment equals saving.
D)  disposable income equals consumption minus saving.E) C) and D)
F) None of the above

Question 2

A constitutional amendment is passed that requires the government to have an annually balanced budget in the sense that changes in spending should be matched by equivalent changes in taxes.Should the government desire to increase GDP by $25 billion and meet the provisions of the law, it

Accepted Answer

A)  cannot possibly reach its objective without breaking the law.
B)  could increase spending by $25 billion and reduce taxes by $25 billion.
C)  could increase spending by $25 billion and increase taxes by $25 billion.
D)  could increase spending by $30 billion and increase taxes by $25 billion.E) None of the above
F) B) and C)

Question 3

Net exports are negative when

Accepted Answer

A)  net exports exceed imports.
B)  depreciation exceeds exports.
C)  exports exceed imports.
D)  imports exceed exports.E) None of the above
F) C) and D)

Question 4

If consumers respond to a tax-cut by saving a large portion of the extra disposable income (or using it to reduce their debts) , then the tax-cut policy would

Accepted Answer

A)  shift the AE curve up significantly.
B)  shift the AE curve down.
C)  cause a reduction in aggregate spending.
D)  not have much effect on the aggregate expenditures curve.E) None of the above
F) A) and D)

Question 5

If the dollar appreciates relative to foreign currencies, we would expect

Accepted Answer

A)  the multiplier to decrease.
B)  a country's exports and imports to both fall.
C)  a country's net exports to rise.
D)  a country's net exports to fall.E) B) and D)
F) B) and C)

Question 6

Which of the following would reduce GDP by the greatest amount?

Accepted Answer

A)  a $20 billion increase in taxes
B)  $20 billion increases in both government spending and taxes
C)  $20 billion decreases in both government spending and taxes
D)  a $20 billion decrease in government spendingE) None of the above
F) A) and B)

Question 7

The equilibrium level of GDP is associated with

Accepted Answer

A)  an excess of planned investment over saving.
B)  no unintended changes in inventories.
C)  an unintended decrease in business inventories.
D)  an unintended increase in business inventories.Topic: Other Features of Equilibrium GDPE) B) and C)
F) All of the above

Question 8

A rightward shift of the investment demand curve translates into an upward shift of the investment schedule in the aggregate expenditures model.

Accepted Answer

A) True 
 B)False

Question 9

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

Question 10

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.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) None of the above
F) B) and C)

Question 11

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

Accepted Answer

A)  real and nominal GDP will both increase.
B)  GDP will remain at $400 billion unless aggregate expenditures change.
C)  real GDP will increase, but nominal GDP will decrease.
D)  the price level will increase.E) A) and D)
F) B) and C)

Question 12

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

Question 13

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)  aggregate expenditures and real GDP are equal.
D)  planned saving and consumption are equal.E) A) and B)
F) B) and D)

Question 14

If net exports decline from zero to some negative amount, the aggregate expenditures schedule would

Accepted Answer

A)  shift upward.
B)  shift downward.
C)  not move.(Net exports do not affect aggregate expenditures.) 
D)  become steeper.E) All of the above
F) None of the above

Question 15

When the Federal government provides tax rebate checks to taxpayers, as it did in 2008, the intent is to push the aggregate expenditures schedule in the economy upward.

Accepted Answer

A) True 
 B)False

Question 16

If the MPC is 0.8 in a private closed economy, a $30 billion increase in planned investment will increase equilibrium real GDP by $120 billion.

Accepted Answer

A) True 
 B)False

Question 17

If aggregate expenditures rise by $200 billion and real GDP consequently rises by $500 billion, then the MPC in the economy must be 0.4.

Accepted Answer

A) True 
 B)False

Question 18

If an unintended increase in business inventories occurs at some level of GDP, then GDP

Accepted Answer

A)  entails a rate of aggregate expenditures in excess of the rate of aggregate production.
B)  may be either above or below the equilibrium output.
C)  is too low for equilibrium.
D)  is too high for equilibrium.E) C) and D)
F) A) and D)

Question 19

The major economic issue during the Great Depression of the 1930s that concerned John Maynard Keynes was

Accepted Answer

A)  rising interest rates.
B)  large trade deficits.
C)  unemployment.
D)  hyperinflation.E) B) and D)
F) B) and C)

Question 20

Which of the following statements concerning the equilibrium level of GDP is incorrect?

Accepted Answer

A)  There will be no tendency for businesses to alter the aggregate rate of production.
B)  Full employment will necessarily be realized.
C)  No unintended changes in inventories will occur.
D)  Leakages equal injections.E) A) and B)
F) A) and C)

Exam 31: The Aggregate Expenditures Model

A rightward shift of the investment demand curve translates into an upward shift of the investment schedule in the aggregate expenditures model.

Correct Answer
verified

If net exports decline from zero to some negative amount, the aggregate expenditures schedule would

Correct Answer
verified

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
verified

Which of the following statements concerning the equilibrium level of GDP is incorrect?

Correct Answer
verified

Which of the following would reduce GDP by the greatest amount?

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 consumers respond to a tax-cut by saving a large portion of the extra disposable income (or using it to reduce their debts) , then the tax-cut policy would

Correct Answer
verified

If the MPC is 0.8 in a private closed economy, a $30 billion increase in planned investment will increase equilibrium real GDP by $120 billion.

Correct Answer
verified

Net exports are negative when

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

The equilibrium level of GDP is associated with

Correct Answer
verified

In a private closed economy, when aggregate expenditures equal GDP,

Correct Answer
verified

A constitutional amendment is passed that requires the government to have an annually balanced budget in the sense that changes in spending should be matched by equivalent changes in taxes.Should the government desire to increase GDP by $25 billion and meet the provisions of the law, it

Correct Answer
verified

If aggregate expenditures rise by $200 billion and real GDP consequently rises by $500 billion, then the MPC in the economy must be 0.4.

Correct Answer
verified

When the Federal government provides tax rebate checks to taxpayers, as it did in 2008, the intent is to push the aggregate expenditures schedule in the economy upward.

Correct Answer
verified

At equilibrium real GDP in a private closed economy,

Correct Answer
verified

If an unintended increase in business inventories occurs at some level of GDP, then GDP

Correct Answer
verified

The major economic issue during the Great Depression of the 1930s that concerned John Maynard Keynes was

Correct Answer
verified

If the dollar appreciates relative to foreign currencies, we would expect

Correct Answer
verified

Exam 31: The Aggregate Expenditures Model

A rightward shift of the investment demand curve translates into an upward shift of the investment schedule in the aggregate expenditures model.

Correct AnswerverifiedShow Answer

If net exports decline from zero to some negative amount, the aggregate expenditures schedule would

Correct AnswerverifiedShow Answer

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

Which of the following statements concerning the equilibrium level of GDP is incorrect?

Correct AnswerverifiedShow Answer

Which of the following would reduce GDP by the greatest amount?

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 consumers respond to a tax-cut by saving a large portion of the extra disposable income (or using it to reduce their debts) , then the tax-cut policy would

Correct AnswerverifiedShow Answer

If the MPC is 0.8 in a private closed economy, a $30 billion increase in planned investment will increase equilibrium real GDP by $120 billion.

Correct AnswerverifiedShow Answer

Net exports are negative when

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The equilibrium level of GDP is associated with

Correct AnswerverifiedShow Answer

In a private closed economy, when aggregate expenditures equal GDP,

Correct AnswerverifiedShow Answer

A constitutional amendment is passed that requires the government to have an annually balanced budget in the sense that changes in spending should be matched by equivalent changes in taxes.Should the government desire to increase GDP by $25 billion and meet the provisions of the law, it

Correct AnswerverifiedShow Answer

If aggregate expenditures rise by $200 billion and real GDP consequently rises by $500 billion, then the MPC in the economy must be 0.4.

Correct AnswerverifiedShow Answer

When the Federal government provides tax rebate checks to taxpayers, as it did in 2008, the intent is to push the aggregate expenditures schedule in the economy upward.

Correct AnswerverifiedShow Answer

At equilibrium real GDP in a private closed economy,

Correct AnswerverifiedShow Answer

If an unintended increase in business inventories occurs at some level of GDP, then GDP

Correct AnswerverifiedShow Answer

The major economic issue during the Great Depression of the 1930s that concerned John Maynard Keynes was

Correct AnswerverifiedShow Answer

If the dollar appreciates relative to foreign currencies, we would expect

Correct AnswerverifiedShow Answer

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