Question 1

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

Accepted Answer

A)   4
B)   5
C)   1.5.
D)   3E) B) and C)
F) None of the above

Question 2

In a private closed economy (a) the marginal propensity to save is 0.25, (b) consumption equals income when consumption is $120 billion,and (c) the level of investment is $40 billion.What is the equilibrium level of income?

Accepted Answer

A)   $280 billion
B)   $320 billion
C)   $262 billion
D)   $198 billionE) C) and D)
F) B) and C)

Question 3

In reality,if a nation imposes tariffs,then the final result will be that net exports and GDP will decrease.

Accepted Answer

A) True 
 B)False

Question 4

What do investment and government expenditures have in common?

Accepted Answer

A)   Both represent injections to the circular flow.
B)   Both represent leakages from the circular flow.
C)   Neither is subject to the multiplier effect.
D)   Both represent a decline in indebtedness.E) B) and D)
F) B) and C)

Question 5

-Refer to the above diagram.The impact of the public sector on the equilibrium GDP:

Accepted Answer

A)   is expansionary.
B)   is contractionary.
C)   is neutral.
D)   cannot be determined from the information given.E) C) and D)
F) A) and D)

Question 6

When the public sector is added to the aggregate expenditures model:

Accepted Answer

A)   the equilibrium condition becomes G + S = T + Ig + X.
B)   the equilibrium condition becomes G + T = S + Ig + X.
C)   the equilibrium condition becomes Ca + Ig + Xn + G + T = GDP.
D)   we add a new leakage in the form of taxes and a new injection in the form of government spending.E) C) and D)
F) A) and B)

Question 7

-Refer to the above diagram.The equilibrium condition for a private open economy is S + M = Ig + X.

Accepted Answer

A) True 
 B)False

Question 8

In the aggregate expenditures model,an increase in government spending will:

Accepted Answer

A)   decrease real GDP.
B)   increase output and employment.
C)   shift the aggregate expenditures schedule downward.
D)   do all of the above.E) B) and C)
F) A) and D)

Question 9

In which of the following situations for a private closed economy will the level of GDP expand?

Accepted Answer

A)   when planned investment exceeds saving
B)   when planned investment exceeds consumption
C)   when saving exceeds consumption
D)   when consumption exceeds investmentE) A) and B)
F) All of the above

Question 10

At the $180 billion equilibrium level of income,saving is $38 billion in a private closed economy.Planned investment must be:

Accepted Answer

A)   $138 billion.
B)   $126 billion.
C)   $38 billion.
D)   $180 billion.E) All of the above
F) A) and C)

Question 11

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) A) and C)
F) None of the above

Question 12

In a private closed economy,where aggregate expenditures exceed domestic output:

Accepted Answer

A)   domestic output will decline to the break-even level.
B)   business inventories will rise.
C)   saving exceeds planned investment.
D)   planned investment exceeds saving.E) A) and B)
F) B) and D)

Question 13

In a recessionary expenditure gap,the equilibrium level of real GDP is:

Accepted Answer

A)   less than planned investment.
B)   equal to full-employment GDP.
C)   greater than full-employment GDP.
D)   less than full-employment GDP.E) A) and C)
F) None of the above

Question 14

-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) C) and D)
F) A) and B)

Question 15

g) are the private expenditures in the closed economy and Xn2 are the net exports in the open economy: A)  exports are negative. B)  net exports are positive. C)  net exports are negative. D)  exports are positive." class="answers-bank-image d-inline" rel="preload" >
-Refer to the above diagram.If (C + Ig) are the private expenditures in the closed economy and Xn2 are the net exports in the open economy:

Accepted Answer

A)   exports are negative.
B)   net exports are positive.
C)   net exports are negative.
D)   exports are positive.E) B) and D)
F) A) and C)

Question 16

If the marginal propensity to save in a closed economy is 0.25 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 imposition of the tax.
C)   greater than the slope before the imposition of the tax.
D)   .75.E) A) and B)
F) A) and C)

Question 17

What will be the effect of an excess of planned investment over saving in a private closed economy with unemployed resources?

Accepted Answer

A)   a decline in the rate of interest
B)   an unplanned accumulation of inventories by businesses
C)   a rise in the real GDP
D)   the federal budget will automatically move toward a deficitE) A) and B)
F) B) and D)

Question 18

Actual investment is $62 billion at an equilibrium output level of $620 billion in a private closed economy.The average propensity to save at this level of output:

Accepted Answer

A)   is 0.10.
B)   is 10.
C)   is 0.62.
D)   cannot be determined on the basis of the information given.E) None of the above
F) A) and B)

Question 19

In reality,if a nation devalues its currency,then the final result will be that:

Accepted Answer

A)   net exports and GDP will increase.
B)   net exports and GDP will decrease.
C)   there will be is no long term effect on net exports and GDP.
D)   there will be a decrease in imports and an increase in GDP.E) None of the above
F) A) and B)

Question 20

If the marginal propensity to consume is .80 and both taxes and government purchases increase by $50 billion,GDP will:

Accepted Answer

A)   increase by $50 billion.
B)   decrease by $50 billion.
C)   increase by $10 billion.
D)   decrease by $10 billion.E) None of the above
F) A) and C)

Exam 11: The Aggregate Expenditures Model

If the marginal propensity to save in a closed economy is 0.25 and a lump-sum tax is imposed,the slope of the economy's aggregate expenditures schedule will be:

Correct AnswerverifiedShow Answer

When the public sector is added to the aggregate expenditures model:

Correct AnswerverifiedShow Answer

If the marginal propensity to consume is .80 and both taxes and government purchases increase by $50 billion,GDP will:

Correct AnswerverifiedShow Answer

In a private closed economy (a) the marginal propensity to save is 0.25, (b) consumption equals income when consumption is $120 billion,and (c) the level of investment is $40 billion.What is the equilibrium level of income?

Correct AnswerverifiedShow Answer

-Refer to the above diagram.The impact of the public sector on the equilibrium GDP:

Correct AnswerverifiedShow Answer

Actual investment is $62 billion at an equilibrium output level of $620 billion in a private closed economy.The average propensity to save at this level of output:

Correct AnswerverifiedShow Answer

In the aggregate expenditures model,an increase in government spending will:

Correct AnswerverifiedShow Answer

In a private closed economy,where aggregate expenditures exceed domestic output:

Correct AnswerverifiedShow Answer

In a recessionary expenditure gap,the equilibrium level of real GDP is:

Correct AnswerverifiedShow Answer

A "recessionary expenditure gap" is:

Correct AnswerverifiedShow Answer

At the $180 billion equilibrium level of income,saving is $38 billion in a private closed economy.Planned investment must be:

Correct AnswerverifiedShow Answer

In reality,if a nation imposes tariffs,then the final result will be that net exports and GDP will decrease.

Correct AnswerverifiedShow Answer

-Refer to the above diagram.The equilibrium condition for a private open economy is S + M = Ig + X.

Correct AnswerverifiedShow Answer

What will be the effect of an excess of planned investment over saving in a private closed economy with unemployed resources?

Correct AnswerverifiedShow Answer

In reality,if a nation devalues its currency,then the final result will be that:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In which of the following situations for a private closed economy will the level of GDP expand?

Correct AnswerverifiedShow Answer

-Refer to the above diagram.If (C + Ig) are the private expenditures in the closed economy and Xn2 are the net exports in the open economy:

Correct AnswerverifiedShow Answer

What do investment and government expenditures have in common?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

-Refer to the above diagram.The equilibrium condition for a private open economy is S + M = I_g + X.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

-Refer to the above diagram.If (C + I_g) are the private expenditures in the closed economy and X_n2 are the net exports in the open economy:

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified