Question 1

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 the nation's currency relative to foreign currencies
D)  a depreciation of the nation's currency relative to foreign currenciesE) All of the above
F) B) and D)

Question 2

Refer to the accompanying table.The tax in the 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 C)
F) B) and D)

Question 3

The amount by which an aggregate expenditures schedule must shift upward to achieve the full-employment GDP is a(n)

Accepted Answer

A)  inflationary expenditure gap
B)  recessionary expenditure gap.
C)  expenditure multiplier gap.
D)  negative net export gap.E) A) and D)
F) B) and C)

Question 4

GDP C S Ig $100 $100 $0 $80
200 160 40 80
300 220 80 80
400 280 120 80
500 340 160 80
600 400 200 80
700 460 240 80
Refer to the accompanying information for a closed economy.If government spends $80 billion at each level of GDP, and imposes a lump-sum tax of $100

Accepted Answer

A)  equilibrium GDP will now be $350.
B)  equilibrium GDP will now be $400.
C)  equilibrium GDP will now be $300.
D)  the equilibrium GDP cannot be determineD.E) B) and C)
F) None of the above

Question 5

If a lump-sum income tax of $25 billion is levied and the MPS is 0.20, the

Accepted Answer

A)  saving schedule will shift upward by $5 billion.
B)  consumption schedule will shift downward by $25 billion.
C)  consumption schedule will shift downward by $20 billion.
D)  consumption schedule will shift upward by $25 billion.E) A) and B)
F) B) and C)

Question 6

Classical economists held the view that in the economy,

Accepted Answer

A)  demand creates its own supply.
B)  unemployment is temporary and is soon eliminated.
C)  there is an imbalance between saving and investment.
D)  it is difficult for an economy to adjust because wages and prices are inflexible.E) A) and B)
F) A) and C)

Question 7

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

Question 8

If an unintended increase in business inventories occurs,

Accepted Answer

A)  we can expect aggregate production to be unaffected.
B)  we can expect businesses to increase the level of production.
C)  we can expect businesses to lower the level of production.
D)  aggregate expenditures must exceed the domestic output.E) A) and B)
F) A) and C)

Question 9

GDP C S Ig $100 $100 $0 $80
200 160 40 80
300 220 80 80
400 280 120 80
500 340 160 80
600 400 200 80
700 460 240 80
Refer to the accompanying information for a closed economy.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) All of the above
F) A) and B)

Question 10

Suppose the economy is operating at its full-employment, noninflationary GDP and the MPC is 0.75.The federal government now finds that it must increase spending on military goods by $21 billion in response to deterioration in the international political situation.To sustain full-employment, noninflationary GDP, government must

Accepted Answer

A)  reduce taxes by $28 billion.
B)  reduce transfer payments by $21 billion.
C)  increase taxes by $21 billion.
D)  increase taxes by $28 billion.E) A) and C)
F) B) and C)

Question 11

In 2008 during the Great Recession, the Federal government provided tax rebate checks to taxpayers in the hope that

Accepted Answer

A)  C would shift down.
B)  C would shift up.
C)  G would shift down.
D)  G would shift up.E) A) and B)
F) None of the above

Question 12

Planned investment is $20 billion and saving is $15 billion when GDP in the economy is $180 billion.The economy

Accepted Answer

A)  is at the equilibrium level of GDP.
B)  is disequilibrium and its GDP will increase.
C)  is disequilibrium and its GDP will decrease.
D)  has a GDP level that is greater than its aggregate expenditures.E) All of the above
F) A) and B)

Question 13

A $20 billion decrease in investment in a private closed economy that has an MPS of 0.5 will reduce saving by $10 billion once the multiplier process has ended.

Accepted Answer

A) True 
 B)False

Question 14

When there are unplanned increases in inventories, then actual investment ends up being less than planned investment.

Accepted Answer

A) True 
 B)False

Question 15

(Advanced analysis)  Assume the saving schedule for a private closed economy is S = -20 + 0.2Y, where S is saving and Y is gross domestic product.The multiplier for this economy is

Accepted Answer

A)  3.
B)  4.
C)  5.
D)  10.E) None of the above
F) C) and D)

Question 16

If an increase in aggregate expenditures results in no increase in real GDP, we can surmise 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) A) and B)
F) B) and C)

Question 17

In an open mixed economy, the inflationary expenditure gap may be described as the

Accepted Answer

A)  excess of GDP over Ca + Ig + Xn + G at the full-employment output.
B)  excess of Sa + M + T over Ig + X + G at the full-employment GDP.
C)  extra consumption that occurs when investment increases in a full-employment economy.
D)  excess of Ca + Ig + Xn + G at the full-employment GDP.E) A) and B)
F) All of the above

Question 18

Other things being equal, a decrease in an economy's exports will

Accepted Answer

A)  increase domestic aggregate expenditures and the equilibrium level of GDP.
B)  decrease domestic aggregate expenditures and the equilibrium level of GDP.
C)  have no effect on domestic GDP, because imports will offset the change in exports.
D)  increase the amount of imports consumed by the private sector.E) C) and D)
F) A) and D)

Question 19

Positive net exports increase aggregate expenditures beyond what they would be in a closed economy and thus have an expansionary effect on domestic GDP.

Accepted Answer

A) True 
 B)False

Question 20

The major basic premise of the aggregate expenditures model is that if the total demand for output increases, then firms will raise their prices.

Accepted Answer

A) True 
 B)False

Exam 31: The Aggregate Expenditures Model

GDP C S Ig $100 $100 $0 $80 200 160 40 80 300 220 80 80 400 280 120 80 500 340 160 80 600 400 200 80 700 460 240 80 Refer to the accompanying information for a closed economy.If government spends $80 billion at each level of GDP, and imposes a lump-sum tax of $100

Correct Answer
verified

The major basic premise of the aggregate expenditures model is that if the total demand for output increases, then firms will raise their prices.

Correct Answer
verified

Refer to the accompanying table.The tax in the economy is a

Correct Answer
verified

Classical economists held the view that in the economy,

Correct Answer
verified

If a lump-sum income tax of $25 billion is levied and the MPS is 0.20, the

Correct Answer
verified

In 2008 during the Great Recession, the Federal government provided tax rebate checks to taxpayers in the hope that

Correct Answer
verified

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

Correct Answer
verified

If an unintended increase in business inventories occurs,

Correct Answer
verified

When there are unplanned increases in inventories, then actual investment ends up being less than planned investment.

Correct Answer
verified

Other things being equal, a decrease in an economy's exports will

Correct Answer
verified

A $20 billion decrease in investment in a private closed economy that has an MPS of 0.5 will reduce saving by $10 billion once the multiplier process has ended.

Correct Answer
verified

(Advanced analysis) Assume the saving schedule for a private closed economy is S = -20 + 0.2Y, where S is saving and Y is gross domestic product.The multiplier for this economy is

Correct Answer
verified

The amount by which an aggregate expenditures schedule must shift upward to achieve the full-employment GDP is a(n)

Correct Answer
verified

Positive net exports increase aggregate expenditures beyond what they would be in a closed economy and thus have an expansionary effect on domestic GDP.

Correct Answer
verified

Correct Answer
verified

In an open mixed economy, the inflationary expenditure gap may be described as the

Correct Answer
verified

If an increase in aggregate expenditures results in no increase in real GDP, we can surmise that the

Correct Answer
verified

Planned investment is $20 billion and saving is $15 billion when GDP in the economy is $180 billion.The economy

Correct Answer
verified

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

Correct Answer
verified

GDP C S Ig $100 $100 $0 $80 200 160 40 80 300 220 80 80 400 280 120 80 500 340 160 80 600 400 200 80 700 460 240 80 Refer to the accompanying information for a closed economy.If government now spends $80 billion at each level of GDP and taxes remain at zero, the equilibrium GDP

Correct Answer
verified

Exam 31: The Aggregate Expenditures Model

GDP C S Ig $100 $100 $0 $80 200 160 40 80 300 220 80 80 400 280 120 80 500 340 160 80 600 400 200 80 700 460 240 80 Refer to the accompanying information for a closed economy.If government spends $80 billion at each level of GDP, and imposes a lump-sum tax of $100

Correct AnswerverifiedShow Answer

The major basic premise of the aggregate expenditures model is that if the total demand for output increases, then firms will raise their prices.

Correct AnswerverifiedShow Answer

Refer to the accompanying table.The tax in the economy is a

Correct AnswerverifiedShow Answer

Classical economists held the view that in the economy,

Correct AnswerverifiedShow Answer

If a lump-sum income tax of $25 billion is levied and the MPS is 0.20, the

Correct AnswerverifiedShow Answer

In 2008 during the Great Recession, the Federal government provided tax rebate checks to taxpayers in the hope that

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If an unintended increase in business inventories occurs,

Correct AnswerverifiedShow Answer

When there are unplanned increases in inventories, then actual investment ends up being less than planned investment.

Correct AnswerverifiedShow Answer

Other things being equal, a decrease in an economy's exports will

Correct AnswerverifiedShow Answer

A $20 billion decrease in investment in a private closed economy that has an MPS of 0.5 will reduce saving by $10 billion once the multiplier process has ended.

Correct AnswerverifiedShow Answer

(Advanced analysis) Assume the saving schedule for a private closed economy is S = -20 + 0.2Y, where S is saving and Y is gross domestic product.The multiplier for this economy is

Correct AnswerverifiedShow Answer

The amount by which an aggregate expenditures schedule must shift upward to achieve the full-employment GDP is a(n)

Correct AnswerverifiedShow Answer

Positive net exports increase aggregate expenditures beyond what they would be in a closed economy and thus have an expansionary effect on domestic GDP.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In an open mixed economy, the inflationary expenditure gap may be described as the

Correct AnswerverifiedShow Answer

If an increase in aggregate expenditures results in no increase in real GDP, we can surmise that the

Correct AnswerverifiedShow Answer

Planned investment is $20 billion and saving is $15 billion when GDP in the economy is $180 billion.The economy

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

GDP C S Ig $100 $100 $0 $80 200 160 40 80 300 220 80 80 400 280 120 80 500 340 160 80 600 400 200 80 700 460 240 80 Refer to the accompanying information for a closed economy.If government now spends $80 billion at each level of GDP and taxes remain at zero, the equilibrium GDP

Correct AnswerverifiedShow Answer

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