Question 1

Assume the MPC is .8.If government were to impose $50 billion of new taxes on household income,consumption spending would initially decrease by:

Accepted Answer

A)   $100 billion.
B)   $90 billion.
C)   $40 billion.
D)   $50 billion.E) B) and C)
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 is:

Accepted Answer

A)   0.10.
B)   10.0.
C)   0.62.
D)   0.84.E) A) and B)
F) None of the above

Question 3

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 4

(Advanced analysis) If S = -60 + .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) A) and B)
F) B) and C)

Question 5

Answer the question on the basis of the following data for a private closed economy.   Possible Levels of Domestic  Output and Income (GDP = DI)  ‾ Consumption ‾$320$320330327340334350341360348370355380362\begin{array}{l}	ext { Possible Levels of Domestic }\\begin{array} { c c c } \underline{	ext { Output and Income (GDP = DI)  } }&\underline{ 	ext { Consumption }} \\$320& \$ 320 \330 & 327 \340 & 334 \350 & 341 \360 & 348 \370 & 355 \380 & 362\end{array}\end{array} Possible Levels of Domestic  Output and Income (GDP = DI)  ​$320330340350360370380​ Consumption ​$320327334341348355362​​  Refer to the data.The MPS is:

Accepted Answer

A)   7/10.
B)   3/10.
C)   2/5.
D)   3/5. E) A) and D)
F) B) and C)

Question 6

If at some level of GDP the economy is experiencing an unintended decrease in inventories:

Accepted Answer

A)   the aggregate level of saving will decline.
B)   the price level will fall.
C)   the business sector will lay off workers.
D)   domestic output will increase.E) All of the above
F) C) and D)

Question 7

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

Question 8

Which of the following is a correct statement of the impacts of a lump-sum tax?

Accepted Answer

A)   Disposable income will increase by the amount of the tax and consumption at each level of GDP will decline by the amount of the tax multiplied by the MPC.
B)   Disposable income will decline by the amount of the tax and consumption at each level of GDP will decline by the amount of the tax multiplied by the multiplier.
C)   Disposable income will decline by the amount of the tax and consumption at each level of GDP will also decline by the amount of the tax.
D)   Disposable income will decline by the amount of the tax and consumption at each level of GDP will decline by the amount of the tax multiplied by the MPC.E) B) and C)
F) A) and D)

Question 9

An increase in taxes of a specific amount will have a smaller impact on the equilibrium GDP than will a decline in government spending of the same amount because:

Accepted Answer

A)   the MPC is smaller in the private sector than it is in the public sector.
B)   declines in government spending always tend to stimulate private investment.
C)   disposable income will fall by some amount smaller than the tax increase.
D)   some of the tax increase will be paid out of income that would otherwise have been saved.E) B) and D)
F) B) and C)

Question 10

Answer the question on the basis of the following table:  Refer to the table.If an additional lump-sum tax of $20 were imposed,we would expect:

Accepted Answer

A)   equilibrium GDP to fall by $30.
B)   equilibrium GDP to fall by $20.
C)   equilibrium GDP to fall by $50.
D)   equilibrium GDP to rise by $24.E) C) and D)
F) B) and D)

Question 11

(Advanced analysis) Answer the question on the basis of the following information for a private open economy.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=40+0.8Ytg=Ig‾=40X=Xˉ=20M=Mˉ=30\begin{array} { l } C = 40 + 0.8 Y \t _ { g } = \overline { I _ { g } } = 40 \X = \bar { X } = 20 \M = \bar { M } = 30\end{array}C=40+0.8Ytg​=Ig​​=40X=Xˉ=20M=Mˉ=30​  The equilibrium GDP (=Y) in the economy is:

Accepted Answer

A)   $200.
B)   $245.
C)   $320.
D)   $350. E) All of the above
F) A) and B)

Question 12

A $20 billion decrease in investment in a private closed economy that has an MPS of .5 will reduce saving by $10 billion once the multiplier process has ended.

Accepted Answer

A) True 
 B)False

Question 13

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

Question 14

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

Question 15

(Advanced analysis) Answer the question on the basis of the following consumption and investment data for a private closed economy.Figures are in billions of dollars. C = 60 + .6Y
I = I0 = 30
Refer to the data.In equilibrium,the level of consumption spending will be:

Accepted Answer

A)   170.
B)   270.
C)   160.
D)   195.E) B) and C)
F) All of the above

Question 16

(Advanced analysis) Assume the consumption schedule for a private closed economy is C = 40 + .75Y,where C is consumption and Y is gross domestic product.The multiplier for this economy is:

Accepted Answer

A)   3.
B)   4.
C)   5.
D)   10.E) A) and B)
F) All of the above

Question 17

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

Question 18

(Advanced analysis) Answer the question on the basis of the following information for a private closed economy where C is consumption,Y is the gross domestic product,Ig is gross investment,and i is the interest rate:  C=40+0.8YIg=60−2ii=iˉ=10\begin{aligned}C & = 40 + 0.8 Y \I _ { g } & = 60 - 2 i \i & = \bar { i } = 10\end{aligned}CIg​i​=40+0.8Y=60−2i=iˉ=10​  Refer to the information.The equilibrium level of GDP in this economy is:

Accepted Answer

A)   $240.
B)   $300.
C)   $360.
D)   $400. E) A) and B)
F) B) and C)

Question 19

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

Question 20

An increase in taxes will have a greater effect on the equilibrium GDP:

Accepted Answer

A)   if the tax revenues are redistributed through transfer payments.
B)   the larger the MPS.
C)   the smaller the MPC.
D)   the larger the MPC.E) None of the above
F) A) and B)

Exam 30: The Aggregate Expenditures Model

A $20 billion decrease in investment in a private closed economy that has an MPS of .5 will reduce saving by $10 billion once the multiplier process has ended.

Correct Answer
verified

Correct Answer
verified

If an unintended increase in business inventories occurs:

Correct Answer
verified

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 is:

Correct Answer
verified

Assume the MPC is .8.If government were to impose $50 billion of new taxes on household income,consumption spending would initially decrease by:

Correct Answer
verified

If at some level of GDP the economy is experiencing an unintended decrease in inventories:

Correct Answer
verified

An increase in taxes of a specific amount will have a smaller impact on the equilibrium GDP than will a decline in government spending of the same amount because:

Correct Answer
verified

At equilibrium real GDP in a private closed economy:

Correct Answer
verified

(Advanced analysis) If S = -60 + .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

Which of the following is a correct statement of the impacts of a lump-sum tax?

Correct Answer
verified

(Advanced analysis) Assume the consumption schedule for a private closed economy is C = 40 + .75Y,where C is consumption and Y is gross domestic product.The multiplier for this economy is:

Correct Answer
verified

Correct Answer
verified

An increase in taxes will have a greater effect on the equilibrium GDP:

Correct Answer
verified

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

Correct Answer
verified

(Advanced analysis) Answer the question on the basis of the following consumption and investment data for a private closed economy.Figures are in billions of dollars. C = 60 + .6Y I = I₀ = 30 Refer to the data.In equilibrium,the level of consumption spending will be:

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

Say's law and classical macroeconomics were disputed by:

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

Correct Answer
verified

Answer the question on the basis of the following table: Refer to the table.If an additional lump-sum tax of $20 were imposed,we would expect:

Correct Answer
verified

Exam 30: The Aggregate Expenditures Model

A $20 billion decrease in investment in a private closed economy that has an MPS of .5 will reduce saving by $10 billion once the multiplier process has ended.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If an unintended increase in business inventories occurs:

Correct AnswerverifiedShow Answer

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 is:

Correct AnswerverifiedShow Answer

Assume the MPC is .8.If government were to impose $50 billion of new taxes on household income,consumption spending would initially decrease by:

Correct AnswerverifiedShow Answer

If at some level of GDP the economy is experiencing an unintended decrease in inventories:

Correct AnswerverifiedShow Answer

An increase in taxes of a specific amount will have a smaller impact on the equilibrium GDP than will a decline in government spending of the same amount because:

Correct AnswerverifiedShow Answer

At equilibrium real GDP in a private closed economy:

Correct AnswerverifiedShow Answer

(Advanced analysis) If S = -60 + .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

Which of the following is a correct statement of the impacts of a lump-sum tax?

Correct AnswerverifiedShow Answer

(Advanced analysis) Assume the consumption schedule for a private closed economy is C = 40 + .75Y,where C is consumption and Y is gross domestic product.The multiplier for this economy is:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

An increase in taxes will have a greater effect on the equilibrium GDP:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

(Advanced analysis) Answer the question on the basis of the following consumption and investment data for a private closed economy.Figures are in billions of dollars. C = 60 + .6Y I = I0 = 30 Refer to the data.In equilibrium,the level of consumption spending will be:

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

Say's law and classical macroeconomics were disputed by:

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

Correct AnswerverifiedShow Answer

Answer the question on the basis of the following table: Refer to the table.If an additional lump-sum tax of $20 were imposed,we would expect:

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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(Advanced analysis) If S = -60 + .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

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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(Advanced analysis) Answer the question on the basis of the following consumption and investment data for a private closed economy.Figures are in billions of dollars. C = 60 + .6Y I = I₀ = 30 Refer to the data.In equilibrium,the level of consumption spending will be:

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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