Question 1

During the recession of 2008 - 2009:

Accepted Answer

A)   both after-tax consumption and government expenditures declined.
B)   both after-tax consumption and investment expenditures declined.
C)   both government expenditures and investment expenditures declined.
D)   government expenditures declined but after- tax consumptionE) C) and D)
F) A) and D)

Question 2

-Refer to the above diagram for a private closed economy.Planned and actual investment will be equal at:

Accepted Answer

A)   all levels of GDP below $200.
B)   all levels of GDP above $200.
C)   all levels of GDP between $200 and $600.
D)   $600 only.E) All of the above
F) B) and C)

Question 3

-The multiplier for the economy in the above diagram:

Accepted Answer

A)   is 3.
B)   is 4.
C)   is 4.8.
D)   is 5.4.E) A) and B)
F) B) and D)

Question 4

If a lump-sum tax of $40 billion is imposed and the MPC is 0.6,the saving schedule will:

Accepted Answer

A)   shift downward by $24 billion.
B)   shift upward by $24 billion.
C)   shift downward by $16 billion.
D)   shift upward by $16 billion.E) All of the above
F) B) and C)

Question 5

-Refer to the above diagram.The equilibrium level of GDP for this private open economy is Y3.

Accepted Answer

A) True 
 B)False

Question 6

If lump-sum taxes are decreased by $10 billion and the equilibrium GDP increases by $40 billion as a result,we can conclude that:

Accepted Answer

A)   the expenditures multiplier is 4.
B)   the MPC for this economy is .8.
C)   the MPC for this economy is .6.
D)   the expenditures multiplier is 3.E) All of the above
F) B) and D)

Question 7

Assume that an economy is operating at less than its full-employment level of output.Which event would most likely increase an economy's exports?

Accepted Answer

A)   a rise in the tariff on products imported from abroad
B)   a fall in the prosperity of trading partners for this economy
C)   an appreciation of a nation's currency relative to foreign currencies
D)   a depreciation of a nation's currency relative to foreign currenciesE) None of the above
F) C) and D)

Question 8

In moving from a private closed to a mixed closed economy in the aggregate expenditures model,taxes:

Accepted Answer

A)   must be added to gross investment.
B)   must be added to saving.
C)   must be added to consumption and gross investment.
D)   have no impact upon the equilibrium GDP.E) All of the above
F) A) and B)

Question 9

-Refer to the above diagram for a private closed economy.At the $300 level of GDP:

Accepted Answer

A)   planned investment will exceed saving,but actual investment will be equal to saving.
B)   aggregate expenditures will exceed GDP,causing GDP to rise.
C)   actual investment will exceed planned investment.
D)   households will consume in excess of their incomes.E) A) and B)
F) None of the above

Question 10

Planned investment equals saving:

Accepted Answer

A)   at all levels of GDP.
B)   at all below-equilibrium levels of GDP.
C)   at all above-equilibrium levels of GDP.
D)   only at the equilibrium GDP.E) B) and C)
F) None of the above

Question 11

Assume that in a private closed economy consumption is $240 billion and investment is $50 billion at the $280 billion level of domestic output.Thus:

Accepted Answer

A)   saving is $10 billion.
B)   unplanned disinvestment of $10 billion will occur.
C)   the MPC is .80.
D)   unplanned investment of $10 billion will occur.E) C) and D)
F) B) and C)

Question 12

Complete the following table and answer the next question(s) on the basis of the resulting data.All figures are in billions of dollars.
 
-Refer to the above table.For the open economy the equilibrium GDP and the multiplier will be:

Accepted Answer

A)   $300 and 2.5.
B)   $450 and 5.
C)   $400 and 4.
D)   $400 and 5.E) C) and D)
F) B) and C)

Question 13

-In the above private open economy exports are __________ and imports are __________ domestic GDP:

Accepted Answer

A)   inversely related to;directly related to
B)   independent of;inversely related to
C)   independent of;dependent of
D)   directly related to;independent ofE) A) and B)
F) B) and D)

Question 14

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

Accepted Answer

A)   real and nominal GDP will both increase.
B)   economy does not reach full-employment unless aggregate expenditures increases.
C)   real GDP will increase,but nominal GDP will decrease.
D)   the price level will increase.E) C) and D)
F) B) and D)

Question 15

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

Question 16

The following information is for a private closed economy,where Ig is gross investment,S is saving,and Y is gross domestic product (GDP) .
Ig = 80
S = -80 + .4Y
-Refer to the above information.The equilibrium GDP will be:

Accepted Answer

A)   $160
B)   $400
C)   $360
D)   $480E) B) and C)
F) A) and D)

Question 17

Other things equal,if $100 billion of government purchases (G) is added to private spending (C + Ig + Xn) ,GDP will:

Accepted Answer

A)   increase by $100 billion.
B)   increase by more than $100 billion.
C)   increase by less than $100 billion.
D)   fall by $100 billionE) C) and D)
F) All of the above

Question 18

g + Xn must equal $300 billion." class="answers-bank-image d-inline" rel="preload" >
-If the equilibrium level of GDP in a private open economy is $1000 billion and consumption is $700 billion at that level of GDP,then:

Accepted Answer

A)   unplanned investment must be occurring.
B)   net exports must be $300 billion.
C)   S + C must equal $300 billion.
D)   Ig + Xn must equal $300 billion.E) A) and C)
F) A) and D)

Question 19

Equal increases in government purchases and taxes will:

Accepted Answer

A)   increase the equilibrium GDP and the size of that increase varies directly with the size of the MPC.
B)   increase the equilibrium GDP and the size of that increase is independent of the size of the MPC.
C)   increase the equilibrium GDP and the size of that increase varies inversely with the size of the MPC.
D)   decrease the equilibrium GDP and the size of that decrease is independent of the size of the MPC.E) B) and C)
F) B) and D)

Question 20

For given data the aggregate expenditures-domestic output and the saving-investment approaches will yield the same equilibrium level of GDP.

Accepted Answer

A) True 
 B)False

Exam 11: The Aggregate Expenditures Model

Complete the following table and answer the next question(s) on the basis of the resulting data.All figures are in billions of dollars. -Refer to the above table.For the open economy the equilibrium GDP and the multiplier will be:

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

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-If the equilibrium level of GDP in a private open economy is $1000 billion and consumption is $700 billion at that level of GDP,then:

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-In the above private open economy exports are __________ and imports are __________ domestic GDP:

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During the recession of 2008 - 2009:

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-Refer to the above diagram for a private closed economy.At the $300 level of GDP:

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If lump-sum taxes are decreased by $10 billion and the equilibrium GDP increases by $40 billion as a result,we can conclude that:

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Other things equal,if $100 billion of government purchases (G) is added to private spending (C + Ig + Xn) ,GDP will:

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If a lump-sum tax of $40 billion is imposed and the MPC is 0.6,the saving schedule will:

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

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Planned investment equals saving:

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Equal increases in government purchases and taxes will:

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-Refer to the above diagram for a private closed economy.Planned and actual investment will be equal at:

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Assume that in a private closed economy consumption is $240 billion and investment is $50 billion at the $280 billion level of domestic output.Thus:

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For given data the aggregate expenditures-domestic output and the saving-investment approaches will yield the same equilibrium level of GDP.

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The following information is for a private closed economy,where Ig is gross investment,S is saving,and Y is gross domestic product (GDP) . Ig = 80 S = -80 + .4Y -Refer to the above information.The equilibrium GDP will be:

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-The multiplier for the economy in the above diagram:

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In moving from a private closed to a mixed closed economy in the aggregate expenditures model,taxes:

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-Refer to the above diagram.The equilibrium level of GDP for this private open economy is Y3.

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Assume that an economy is operating at less than its full-employment level of output.Which event would most likely increase an economy's exports?

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-In the above private open economy exports are and imports are domestic GDP:

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Other things equal,if $100 billion of government purchases (G) is added to private spending (C + I_g + X_n) ,GDP will:

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The following information is for a private closed economy,where I_g is gross investment,S is saving,and Y is gross domestic product (GDP) . I_g = 80 S = -80 + .4Y -Refer to the above information.The equilibrium GDP will be:

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-Refer to the above diagram.The equilibrium level of GDP for this private open economy is Y₃.

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