Question 1

The U.S.recession of 2007-2009 provides a good example of:

Accepted Answer

A)   demand-pull inflation.
B)   cost-push inflation.
C)   a recessionary expenditure gap.
D)   the repercussions of hyperinflation.E) None of the above
F) A) and C)

Question 2

If the marginal propensity to save in a closed economy is .25 and a lump-sum tax is imposed,the slope of the economy's aggregate expenditures schedule will be:

Accepted Answer

A)   .25.
B)   less than the slope before the tax.
C)   greater than the slope before the tax.
D)   .75.E) B) and C)
F) None of the above

Question 3

In a mixed open economy,which of the following all affect the equilibrium GDP in the same direction?

Accepted Answer

A)   Ca,Ig,Sa,and M.
B)   Sa,T,and M.
C)   Ig,T,and Ca.
D)   Sa,Ig,and X.E) C) and D)
F) A) and C)

Question 4

If the MPC in an economy is .9,a $1 billion increase in government spending will ultimately increase consumption by:

Accepted Answer

A)   $1 billion.
B)   $0.9 billion.
C)   $10 billion.
D)   $9 billion.E) A) and D)
F) All of the above

Question 5

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

Question 6

Answer the question below on the basis of the following information for a private closed economy:   Gross Domestic Product ‾ Consumption ‾$100$120200180300240400300500360 Expected Rate of Return ‾ Amount of Investment ‾25%$0202015401060580\begin{array}{l}\begin{array} { c c } \underline{	ext { Gross Domestic Product }} &\underline{ 	ext { Consumption }} \\$100& \$ 120 \200 & 180 \300 & 240 \400 & 300 \500 & 360\end{array}\\begin{array} { c c } \underline{	ext { Expected Rate of Return }} &\underline{ 	ext { Amount of Investment }} \ 25 \% & \$ 0 \20 & 20 \15 & 40 \10 & 60 \5 & 80\end{array}\end{array} Gross Domestic Product ​$100200300400500​ Consumption ​$120180240300360​ Expected Rate of Return ​25%2015105​ Amount of Investment ​$020406080​​  Refer to the information.If the real interest rate is 10 percent,the equilibrium GDP will be:

Accepted Answer

A)   $100.
B)   $200.
C)   $300.
D)   $400. E) A) and B)
F) B) and C)

Question 7

A recessionary expenditure gap exists if:

Accepted Answer

A)   planned investment exceeds saving at the full-employment GDP.
B)   the aggregate expenditures schedule lies below the 45-degree line at the full-employment GDP.
C)   the aggregate expenditures schedule intersects the 45-degree line at any level of GDP.
D)   the aggregate expenditures schedule lies above the 45-degree line at the full-employment GDP.E) A) and B)
F) A) and D)

Question 8

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) B) and C)

Question 9

A lump-sum tax means that:

Accepted Answer

A)   the tax only applies to one time period.
B)   the same amount of tax revenue is collected at each level of GDP.
C)   tax revenues vary directly with GDP.
D)   tax revenues vary inversely with GDP.E) A) and B)
F) None of the above

Question 10

The recessionary expenditure gap is the amount by which the equilibrium GDP and the full-employment GDP differ.

Accepted Answer

A) True 
 B)False

Question 11

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.At the $370 billion level of DI,the APS is approximately:

Accepted Answer

A)   4 percent.
B)   7 percent.
C)   1 percent.
D)   16 percent. E) All of the above
F) A) and B)

Question 12

If the MPS is .25 and the economy has a recessionary expenditure gap of $5 billion,then equilibrium GDP is:

Accepted Answer

A)   $5 billion below the full-employment GDP.
B)   $5 billion above the full-employment GDP.
C)   $20 billion below the full-employment GDP.
D)   $20 billion above the full-employment GDP.E) B) and D)
F) B) and C)

Question 13

If unintended increases in business inventories occur,we can expect:

Accepted Answer

A)   a decline in GDP and rising unemployment.
B)   inflation.
C)   an increase in consumption.
D)   an offsetting increase in planned investment.E) None of the above
F) C) and D)

Question 14

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) None of the above
F) All of the above

Question 15

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 .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 billion.E) All of the above
F) B) and D)

Exam 30: The Aggregate Expenditures Model

In a mixed open economy,which of the following all affect the equilibrium GDP in the same direction?

Correct Answer
verified

If the marginal propensity to save in a closed economy is .25 and a lump-sum tax is imposed,the slope of the economy's aggregate expenditures schedule will be:

Correct Answer
verified

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

Correct Answer
verified

The U.S.recession of 2007-2009 provides a good example of:

Correct Answer
verified

A recessionary expenditure gap exists if:

Correct Answer
verified

If unintended increases in business inventories occur,we can expect:

Correct Answer
verified

If the MPS is .25 and the economy has a recessionary expenditure gap of $5 billion,then equilibrium GDP is:

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

Correct Answer
verified

The recessionary expenditure gap is the amount by which the equilibrium GDP and the full-employment GDP differ.

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 .625,what change in aggregate expenditures is needed to achieve full employment?

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

A lump-sum tax means that:

Correct Answer
verified

If the MPC in an economy is .9,a $1 billion increase in government spending will ultimately increase consumption by:

Correct Answer
verified

Exam 30: The Aggregate Expenditures Model

In a mixed open economy,which of the following all affect the equilibrium GDP in the same direction?

Correct AnswerverifiedShow Answer

If the marginal propensity to save in a closed economy is .25 and a lump-sum tax is imposed,the slope of the economy's aggregate expenditures schedule will be:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The U.S.recession of 2007-2009 provides a good example of:

Correct AnswerverifiedShow Answer

A recessionary expenditure gap exists if:

Correct AnswerverifiedShow Answer

If unintended increases in business inventories occur,we can expect:

Correct AnswerverifiedShow Answer

If the MPS is .25 and the economy has a recessionary expenditure gap of $5 billion,then equilibrium GDP is:

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

Correct AnswerverifiedShow Answer

The recessionary expenditure gap is the amount by which the equilibrium GDP and the full-employment GDP differ.

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 .625,what change in aggregate expenditures is needed to achieve full employment?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A lump-sum tax means that:

Correct AnswerverifiedShow Answer

If the MPC in an economy is .9,a $1 billion increase in government spending will ultimately increase consumption by:

Correct AnswerverifiedShow Answer

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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Correct Answer
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Correct Answer
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