Question 1

Refer to the above diagram which is for a private closed economy.All figures are in billions of dollars.If businesses were willing to invest $30 at each possible level of GDP, the equilibrium level of GDP would be:

Accepted Answer

A)  $462.5.
B)  $435.
C)  $420.
D)  $380.E) A) and B)
F) All of the above

Question 2

The equilibrium level of GDP in a private closed economy is where:

Accepted Answer

A)  MPC = APC.
B)  unemployment is about 3 percent of the labor force.
C)  planned consumption equals saving.
D)  saving equals planned investment.E) A) and C)
F) A) and B)

Question 3

The equilibrium level of GDP in the above open economy:

Accepted Answer

A)  is $100.
B)  is $250.
C)  is $350.
D)  is $500.E) All of the above
F) C) and D)

Question 4

Exports are added to, and imports are subtracted from, aggregate expenditures in moving from a closed to an open economy.

Accepted Answer

A) True 
 B)False

Question 5

If government increases its purchases by $15 billion and the MPC is 2/3, then we would expect the equilibrium GDP to:

Accepted Answer

A)  increase by $30 billion.
B)  increase by $45 billion.
C)  decrease by $35 billion.
D)  increase by $50 billion.E) A) and B)
F) A) and C)

Question 6

The letters Y, C, S, and I are used to represent GDP, consumption, saving, and investment respectively. 0 = 30." class="answers-bank-image d-inline" rel="preload" > The equation representing the investment schedule for the above economy is:

Accepted Answer

A)  I = .3Y.
B)  I = 80 - .3Y.
C)  I = 30 + .1Y.
D)  I = I0 = 30.E) None of the above
F) B) and C)

Question 7

If government expenditures increase by $20 billion and equilibrium GDP increases by $50 billion as a result, we can conclude that:

Accepted Answer

A)  the expenditures multiplier is 2.
B)  the MPC for this economy is .6.
C)  inflation is occurring.
D)  the MPS for this economy is .6.E) B) and C)
F) B) and D)

Question 8

g1 to Ig2, the equilibrium GDP will: A) decrease by KD. B) increase by HJ. C) increase by KD. D) increase by GH." class="answers-bank-image d-inline" rel="preload" > Refer to the above diagram which applies to a private closed economy.If gross investment increases from Ig1 to Ig2, the equilibrium GDP will:

Accepted Answer

A)  decrease by KD.
B)  increase by HJ.
C)  increase by KD.
D)  increase by GH.E) All of the above
F) B) and C)

Question 9

A "recessionary expenditure gap" is:

Accepted Answer

A)  the amount by which the full-employment GDP exceeds equilibrium GDP.
B)  the amount by which aggregate expenditures fall short of those required to achieve the full-employment GDP.
C)  the amount by which investment exceeds saving at the full-employment GDP.
D)  the amount by which aggregate expenditures exceed the full-employment level of domestic output.E) None of the above
F) A) and C)

Question 10

Refer to the diagram below for a private closed economy.The multiplier is:

Accepted Answer

A)  GF/DE.
B)  GF/GB.
C)  FE/GF.
D)  AB/GF.E) B) and D)
F) All of the above

Question 11

Refer to the above information.In this economy a 3 percentage point decrease in the interest rate will:

Accepted Answer

A)  increase equilibrium GDP by $200.
B)  increase equilibrium GDP by $100.
C)  increase equilibrium GDP by $50.
D)  decrease equilibrium GDP by $50.E) A) and B)
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) All of the above
F) A) and D)

Question 13

A recessionary expenditure gap in a mixed open economy can be measured as the extent to which aggregate expenditures fall short of those required to achieve the full-employment GDP.

Accepted Answer

A) True 
 B)False

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

Question 15

Unplanned changes in inventories:

Accepted Answer

A)  cause the economy to move away from the equilibrium GDP.
B)  must be subtracted from planned investment to determine actual investment.
C)  bring actual investment and saving into equality only at the equilibrium level of GDP.
D)  bring actual investment and saving into equality at all levels of GDP.E) None of the above
F) All of the above

Question 16

The following information is for a closed economy:  Refer to the above information.If in addition to spending $80 billion at each level of GDP, government imposes a lump-sum tax of $100:

Accepted Answer

A)  equilibrium GDP will now be $350.
B)  equilibrium GDP will now be $400.
C)  equilibrium GDP will now be $300.
D)  the equilibrium GDP cannot be determined.E) B) and D)
F) B) and C)

Question 17

In a private closed economy _____ investment is equal to saving at all levels of GDP and equilibrium occurs only at that level of GDP where _____ investment is equal to saving.

Accepted Answer

A)  planned; actual
B)  actual; planned
C)  gross; net
D)  net; grossE) B) and C)
F) C) and D)

Question 18

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 19

If at some level of GDP the economy is experiencing an unplanned 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) C) and D)
F) B) and D)

Question 20

Refer to the diagram below.The multiplier in this economy is:

Accepted Answer

A)  0E/0A.
B)  BD/FG.
C)  FG/BD.
D)  BD/AD.E) All of the above
F) C) and D)

Exam 11: B: The Aggregate Expenditures Model

The following information is for a closed economy: Refer to the above information.If in addition to spending $80 billion at each level of GDP, government imposes a lump-sum tax of $100:

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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:

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

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A "recessionary expenditure gap" is:

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Unplanned changes in inventories:

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Exports are added to, and imports are subtracted from, aggregate expenditures in moving from a closed to an open economy.

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Refer to the above diagram which applies to a private closed economy.If gross investment increases from Ig1 to Ig2, the equilibrium GDP will:

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A recessionary expenditure gap in a mixed open economy can be measured as the extent to which aggregate expenditures fall short of those required to achieve the full-employment GDP.

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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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Refer to the above diagram which is for a private closed economy.All figures are in billions of dollars.If businesses were willing to invest $30 at each possible level of GDP, the equilibrium level of GDP would be:

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The letters Y, C, S, and I are used to represent GDP, consumption, saving, and investment respectively. The equation representing the investment schedule for the above economy is:

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If government increases its purchases by $15 billion and the MPC is 2/3, then we would expect the equilibrium GDP to:

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If government expenditures increase by $20 billion and equilibrium GDP increases by $50 billion as a result, we can conclude that:

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The equilibrium level of GDP in the above open economy:

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The equilibrium level of GDP in a private closed economy is where:

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Refer to the above information.In this economy a 3 percentage point decrease in the interest rate will:

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

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Refer to the diagram below.The multiplier in this economy is:

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Refer to the diagram below for a private closed economy.The multiplier is:

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In a private closed economy _____ investment is equal to saving at all levels of GDP and equilibrium occurs only at that level of GDP where _____ investment is equal to saving.

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Refer to the above diagram which applies to a private closed economy.If gross investment increases from I_g1 to I_g2, the equilibrium GDP will:

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In a private closed economy _ investment is equal to saving at all levels of GDP and equilibrium occurs only at that level of GDP where _ investment is equal to saving.

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