Question 1

Refer to the graph above for a private closed economy. In this economy, investment is:

Accepted Answer

A)   $50 billion
B)   $100 billion
C)   $150 billion
D)   $200 billionE) All of the above
F) None of the above

Question 2

One of the most important views expressed by classical macroeconomists was that:

Accepted Answer

A)   Wages and prices are inflexible
B)   Wages and prices are always rising
C)   Demand creates its own supply
D)   Supply creates its own demandE) All of the above
F) C) and D)

Question 3

The difference between the investment demand curve and the investment schedule is that the former shows:

Accepted Answer

A)   A direct relationship between investment and interest rate, while the latter shows no correlation between investment and income
B)   An inverse relationship between investment and interest rate, while the latter shows no correlation between investment and income
C)   A direct relationship between investment and income, while the latter shows no correlation between investment and interest rate
D)   An inverse relationship between investment and income, while the latter shows no correlation between investment and interest rateE) None of the above
F) A) and B)

Question 4

Actual investment is $28 billion and saving is $15 billion at the $166 billion level of output in a private closed economy. At this level:

Accepted Answer

A)   Consumption will be $151 billion
B)   Planned investment will be $13 billion
C)   Unplanned investment will be $15 billion
D)   Planned investment minus saving will be $38 billionE) A) and B)
F) C) and D)

Question 5

In the aggregate expenditures model of a private closed economy, aggregate expenditures (C + Ig) is always equal to output GDP.

Accepted Answer

A) True 
 B)False

Question 6

All figures in the table below are in billions of dollars.  Refer to the above data. If exports should decrease by $20 billion at each level of GDP, other factors constant, then the equilibrium GDP for the economy will be:

Accepted Answer

A)   $650 billion
B)   $550 billion
C)   $500 billion
D)   $450 billionE) A) and B)
F) C) and D)

Question 7

The table shows a consumption schedule. All figures are in billions of dollars.  Refer to the above information. If planned investment was $20 billion, government purchases of goods and services were $20 billion, and taxes and net exports were zero, then the equilibrium level of GDP would be:

Accepted Answer

A)   $600 billion
B)   $640 billion
C)   $680 billion
D)   $720 billionE) B) and D)
F) None of the above

Question 8

In the aggregate expenditure model, which of the following variables is assumed to be independent of real GDP?

Accepted Answer

A)   Profit
B)   Saving
C)   Investment
D)   ConsumptionE) B) and D)
F) A) and C)

Question 9

The investment schedule shows the:

Accepted Answer

A)   Inverse relationship between the expected rate of return and the quantity of investment demanded
B)   Positive relationship between the expected rate of return and the quantity of investment demanded
C)   Amounts business firms collectively intend to invest at each possible level of GDP
D)   Rate of interest that business firms must pay when they make investments in capital goodsE) B) and D)
F) All of the above

Question 10

An economy characterized by high unemployment is likely to be:

Accepted Answer

A)   Experiencing a high rate of economic growth
B)   Experiencing hyperinflation
C)   Having a recessionary expenditure gap
D)   Having an inflationary expenditure gapE) All of the above
F) A) and B)

Question 11

John Maynard Keynes expressed his ideas about the macroeconomy and attacked classical economics in his book, The:

Accepted Answer

A)   Affluent Society
B)   Wealth of Nations
C)   Theory and Practice of Economics in Capitalism
D)   General Theory of Employment, Interest, and MoneyE) All of the above
F) A) and B)

Question 12

The data below is the consumption schedule in an economy. All figures are in billions of dollars.  Refer to the above table. Given the level of investment at $34 billion, zero net exports, and a lump-sum tax of $30 billion, the addition of government expenditures of $20 billion at each level of GDP will result in an equilibrium GDP of:

Accepted Answer

A)   $490 billion
B)   $540 billion
C)   $590 billion
D)   $640 billionE) B) and D)
F) None of the above

Question 13

When a private closed economy is at equilibrium, then (GDP - C) is equal to planned investment.

Accepted Answer

A) True 
 B)False

Question 14

A tax-cut will have a greater effect on equilibrium GDP if the:

Accepted Answer

A)   Marginal propensity to consume is smaller
B)   Marginal propensity to save is smaller
C)   Marginal propensity to save is larger
D)   Average propensity to consume is largerE) A) and B)
F) A) and C)

Question 15

In the flow of income and spending, saving and investment are, respectively:

Accepted Answer

A)   An injection and a leakage
B)   A leakage and an injection
C)   Wealth and income
D)   Income and wealthE) A) and D)
F) C) and D)

Question 16

The table shows a consumption schedule. All figures are in billions of dollars.  Refer to the above information. If lump-sum taxes were $20 billion, planned investment $45 billion, net exports zero, and government purchases $20 billion, then equilibrium GDP would be:

Accepted Answer

A)   $640 billion
B)   $680 billion
C)   $720 billion
D)   $760 billionE) B) and C)
F) A) and D)

Question 17

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

Accepted Answer

A)   At the equilibrium level of GDP
B)   In disequilibrium and its GDP will increase
C)   In disequilibrium and its GDP will decrease
D)   Having a GDP level that is greater than its aggregate expendituresE) A) and D)
F) A) and C)

Question 18

A downward-sloping investment demand curve and a horizontal investment schedule indicate that investments are inversely related to interest rates but are not affected by the level of income.

Accepted Answer

A) True 
 B)False

Question 19

The effect of a decline in taxes on the level of income will differ somewhat from an increase in government expenditures of the same amount because:

Accepted Answer

A)   Tax declines tend to be more expansionary
B)   Households may not spend all of an increase in disposable income
C)   The MPC which applies to the incomes of households always exceeds the MPC which applies to business incomes
D)   The multiplier is high when the MPS is lowE) None of the above
F) All of the above

Question 20

Recently, the level of GDP has declined by $60 billion in an economy where the marginal propensity to consume is 0.75. Aggregate expenditures must have fallen by:

Accepted Answer

A)   $45 billion
B)   $30 billion
C)   $15 billion
D)   $60 billionE) C) and D)
F) B) and C)

Exam 11: The Aggregate Expenditures Model

Recently, the level of GDP has declined by $60 billion in an economy where the marginal propensity to consume is 0.75. Aggregate expenditures must have fallen by:

Correct Answer
verified

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

Correct Answer
verified

When a private closed economy is at equilibrium, then (GDP - C) is equal to planned investment.

Correct Answer
verified

A downward-sloping investment demand curve and a horizontal investment schedule indicate that investments are inversely related to interest rates but are not affected by the level of income.

Correct Answer
verified

One of the most important views expressed by classical macroeconomists was that:

Correct Answer
verified

All figures in the table below are in billions of dollars. Refer to the above data. If exports should decrease by $20 billion at each level of GDP, other factors constant, then the equilibrium GDP for the economy will be:

Correct Answer
verified

In the aggregate expenditure model, which of the following variables is assumed to be independent of real GDP?

Correct Answer
verified

The effect of a decline in taxes on the level of income will differ somewhat from an increase in government expenditures of the same amount because:

Correct Answer
verified

The investment schedule shows the:

Correct Answer
verified

Refer to the graph above for a private closed economy. In this economy, investment is:

Correct Answer
verified

The difference between the investment demand curve and the investment schedule is that the former shows:

Correct Answer
verified

Correct Answer
verified

A tax-cut will have a greater effect on equilibrium GDP if the:

Correct Answer
verified

John Maynard Keynes expressed his ideas about the macroeconomy and attacked classical economics in his book, The:

Correct Answer
verified

The table shows a consumption schedule. All figures are in billions of dollars. Refer to the above information. If planned investment was $20 billion, government purchases of goods and services were $20 billion, and taxes and net exports were zero, then the equilibrium level of GDP would be:

Correct Answer
verified

Actual investment is $28 billion and saving is $15 billion at the $166 billion level of output in a private closed economy. At this level:

Correct Answer
verified

In the flow of income and spending, saving and investment are, respectively:

Correct Answer
verified

The table shows a consumption schedule. All figures are in billions of dollars. Refer to the above information. If lump-sum taxes were $20 billion, planned investment $45 billion, net exports zero, and government purchases $20 billion, then equilibrium GDP would be:

Correct Answer
verified

In the aggregate expenditures model of a private closed economy, aggregate expenditures (C + I_g) is always equal to output GDP.

Correct Answer
verified

An economy characterized by high unemployment is likely to be:

Correct Answer
verified

Exam 11: The Aggregate Expenditures Model

Recently, the level of GDP has declined by $60 billion in an economy where the marginal propensity to consume is 0.75. Aggregate expenditures must have fallen by:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When a private closed economy is at equilibrium, then (GDP - C) is equal to planned investment.

Correct AnswerverifiedShow Answer

A downward-sloping investment demand curve and a horizontal investment schedule indicate that investments are inversely related to interest rates but are not affected by the level of income.

Correct AnswerverifiedShow Answer

One of the most important views expressed by classical macroeconomists was that:

Correct AnswerverifiedShow Answer

All figures in the table below are in billions of dollars. Refer to the above data. If exports should decrease by $20 billion at each level of GDP, other factors constant, then the equilibrium GDP for the economy will be:

Correct AnswerverifiedShow Answer

In the aggregate expenditure model, which of the following variables is assumed to be independent of real GDP?

Correct AnswerverifiedShow Answer

The effect of a decline in taxes on the level of income will differ somewhat from an increase in government expenditures of the same amount because:

Correct AnswerverifiedShow Answer

The investment schedule shows the:

Correct AnswerverifiedShow Answer

Refer to the graph above for a private closed economy. In this economy, investment is:

Correct AnswerverifiedShow Answer

The difference between the investment demand curve and the investment schedule is that the former shows:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A tax-cut will have a greater effect on equilibrium GDP if the:

Correct AnswerverifiedShow Answer

John Maynard Keynes expressed his ideas about the macroeconomy and attacked classical economics in his book, The:

Correct AnswerverifiedShow Answer

The table shows a consumption schedule. All figures are in billions of dollars. Refer to the above information. If planned investment was $20 billion, government purchases of goods and services were $20 billion, and taxes and net exports were zero, then the equilibrium level of GDP would be:

Correct AnswerverifiedShow Answer

Actual investment is $28 billion and saving is $15 billion at the $166 billion level of output in a private closed economy. At this level:

Correct AnswerverifiedShow Answer

In the flow of income and spending, saving and investment are, respectively:

Correct AnswerverifiedShow Answer

The table shows a consumption schedule. All figures are in billions of dollars. Refer to the above information. If lump-sum taxes were $20 billion, planned investment $45 billion, net exports zero, and government purchases $20 billion, then equilibrium GDP would be:

Correct AnswerverifiedShow Answer

In the aggregate expenditures model of a private closed economy, aggregate expenditures (C + Ig) is always equal to output GDP.

Correct AnswerverifiedShow Answer

An economy characterized by high unemployment is likely to be:

Correct AnswerverifiedShow Answer

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In the aggregate expenditures model of a private closed economy, aggregate expenditures (C + I_g) is always equal to output GDP.

Correct Answer
verified

Correct Answer
verified