Question 1

The data below are for a private (no government)  closed economy. All figures are in billions of dollars.  Refer to the table above. If planned investment is $15 billion, then at the $560 billion level of output, there will be a(n) :

Accepted Answer

A)   Unplanned increase in inventories of $5 billion
B)   Unplanned increase in inventories of $10 billion
C)   Unplanned decrease in inventories of $5 billion
D)   Unplanned decrease in inventories of $10 billionE) A) and D)
F) A) and C)

Question 2

Consumption is $141 billion, planned investment is $15 billion, and saving is $15 billion in a private, closed economy. At this level:

Accepted Answer

A)   Actual investment does not equal planned investment
B)   There will be unplanned increases in inventories
C)   There will be unplanned decreases in inventories
D)   The economy is in equilibriumE) A) and B)
F) A) and D)

Question 3

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

Question 4

From the perspective of classical macroeconomic theory, an excess of aggregate spending would:

Accepted Answer

A)   Increase aggregate output and the level of employment in the economy
B)   Decrease the rate of interest and lower the level of investment
C)   Increase consumption, and thus move the economy toward the full-employment level of output
D)   Increase prices, wages, and interest rates, and thus reduce aggregate spending to equal the full-employment level of outputE) B) and C)
F) A) and C)

Question 5

When the economy is at its equilibrium GDP level, all of the following will occur, except:

Accepted Answer

A)   Aggregate expenditures = GDP
B)   Inventories will be zero
C)   Saving equals planned investment
D)   There are no unplanned changes in inventoriesE) C) and D)
F) A) and B)

Question 6

If GDP exceeds aggregate expenditures in a private closed economy:

Accepted Answer

A)   Saving will exceed planned investment
B)   Planned investment will exceed saving
C)   Planned investment will exceed actual investment
D)   Injections will exceed leakagesE) C) and D)
F) A) and D)

Question 7

Refer to the above graph for a private closed economy. If the consumption schedule shifts up by $50 B at all levels of income or output, then the equilibrium GDP will increase to:

Accepted Answer

A)   $550 B
B)   $300 B
C)   $600 B
D)   $150 BE) A) and B)
F) None of the above

Question 8

The table shows a private open economy. All figures are in billions of dollars.  Refer to the above table. If the investment Ig in this economy is independent of income GDP, then a $10 increase in its net exports would increase its equilibrium real GDP by:

Accepted Answer

A)   $25
B)   $50
C)   $100
D)   $200E) B) and C)
F) All of the above

Question 9

In an inflationary expenditure gap, the equilibrium level of real GDP is:

Accepted Answer

A)   Greater than planned investment
B)   Equal to full-employment GDP
C)   Greater than full-employment GDP
D)   Less than full-employment GDPE) A) and B)
F) A) and C)

Question 10

In a private closed economy where MPC = 0.8, if consumers reduce their spending by $10 billion and firms cut investments by $5 billion, then equilibrium GDP will decrease by:

Accepted Answer

A)   $75 billion
B)   $25 billion
C)   $18.8 billion
D)   $15 billionE) A) and B)
F) A) 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 upE) B) and D)
F) C) and D)

Question 12

The table shows a private open economy. All figures are in billions of dollars.  Refer to the above table. The equilibrium real GDP is:

Accepted Answer

A)   $550
B)   $600
C)   $650
D)   $700E) A) and C)
F) B) and C)

Question 13

The data below are for a private (no government)  closed economy. All figures are in billions of dollars.  Refer to the table above. If planned investment is $25 billion, then aggregate expenditures at the income level of $560 billion will be:

Accepted Answer

A)   $565 billion
B)   $580 billion
C)   $585 billion
D)   $595 billionE) All of the above
F) B) and C)

Question 14

Assuming that MPC is .75, equal increases in government spending and tax collections by $10 billion will:

Accepted Answer

A)   Leave the equilibrium GDP unchanged
B)   Increase the equilibrium GDP by $10 billion
C)   Increase the equilibrium GDP by $2.5 billion
D)   Reduce the equilibrium GDP by $10 billionE) A) and B)
F) C) and D)

Question 15

In the Great Recession of 2007-2009, the sector of the economy that decreased the most was
G.

Accepted Answer

A) True 
 B)False

Question 16

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

Question 17

Other things being equal, the effect of a downward shift of the economy's net export schedule on equilibrium GDP will be similar to a(n) :

Accepted Answer

A)   Rightward shift in the investment-demand schedule
B)   Downward shift in the consumption schedule
C)   Upward shift in the consumption schedule
D)   Upward shift in the investment scheduleE) All of the above
F) None of the above

Question 18

If the expected rate of return on investment decreases, then most likely the:

Accepted Answer

A)   Investment schedule will shift upward
B)   Investment schedule will shift downward
C)   Consumption schedule will shift upward
D)   Consumption schedule will shift downwardE) B) and C)
F) A) and D)

Question 19

An increase in imports, other things constant, would tend to raise the equilibrium level of GDP.

Accepted Answer

A) True 
 B)False

Question 20

All figures in the table below are in billions of dollars.  Refer to the above data. If this economy were closed to international trade, then the equilibrium GDP and the multiplier would be:

Accepted Answer

A)   $500 billion and 5
B)   $500 billion and 4
C)   $600 billion and 5
D)   $600 billion and 4E) A) and C)
F) All of the above

Exam 11: The Aggregate Expenditures Model

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

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Assuming that MPC is .75, equal increases in government spending and tax collections by $10 billion will:

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

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Refer to the above graph for a private closed economy. If the consumption schedule shifts up by $50 B at all levels of income or output, then the equilibrium GDP will increase to:

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In an inflationary expenditure gap, the equilibrium level of real GDP is:

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In the Great Recession of 2007-2009, the sector of the economy that decreased the most was G.

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Consumption is $141 billion, planned investment is $15 billion, and saving is $15 billion in a private, closed economy. At this level:

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All figures in the table below are in billions of dollars. Refer to the above data. If this economy were closed to international trade, then the equilibrium GDP and the multiplier would be:

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The data below are for a private (no government) closed economy. All figures are in billions of dollars. Refer to the table above. If planned investment is $15 billion, then at the $560 billion level of output, there will be a(n) :

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The data below are for a private (no government) closed economy. All figures are in billions of dollars. Refer to the table above. If planned investment is $25 billion, then aggregate expenditures at the income level of $560 billion will be:

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From the perspective of classical macroeconomic theory, an excess of aggregate spending would:

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

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If GDP exceeds aggregate expenditures in a private closed economy:

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Other things being equal, the effect of a downward shift of the economy's net export schedule on equilibrium GDP will be similar to a(n) :

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When the economy is at its equilibrium GDP level, all of the following will occur, except:

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If the expected rate of return on investment decreases, then most likely the:

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The table shows a private open economy. All figures are in billions of dollars. Refer to the above table. The equilibrium real GDP is:

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An increase in imports, other things constant, would tend to raise the equilibrium level of GDP.

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The table shows a private open economy. All figures are in billions of dollars. Refer to the above table. If the investment Ig in this economy is independent of income GDP, then a $10 increase in its net exports would increase its equilibrium real GDP by:

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In a private closed economy where MPC = 0.8, if consumers reduce their spending by $10 billion and firms cut investments by $5 billion, then equilibrium GDP will decrease by:

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