Question 1

If the MPC = 0.80,the cumulative decrease in total spending resulting from an initial $150 recessionary gap would be

Accepted Answer

A)  $150.
B)  $187.5.
C)  $500.
D)  $750.

Question 2

Equilibrium GDP could be upset by a change in

Accepted Answer

A)  Investment only.
B)  Injections only.
C)  Leakages only.
D)  Any leakage or injection.

Question 3

Income not spent directly on domestic output is

Accepted Answer

A)  A leakage.
B)  An injection.
C)  A circular.
D)  Investment.

Question 4

Calculate the total change in spending because of an initial $100 increase in aggregate demand,given that the MPC = 0.60.

Accepted Answer

A)  $100 increase.
B)  $100 decrease.
C)  $250 increase.
D)  $60 increase.

Question 5

Assuming an upward-sloping aggregate supply curve,when aggregate demand increases,unemployment

Accepted Answer

A)  Decreases,and the price level decreases.
B)  Increases,and the price level decreases.
C)  Decreases,and the price level increases.
D)  Increases,and the price level increases.

Question 6

How does the multiplier process work when there is an initial decrease in autonomous spending?

Accepted Answer

An initial decrease in autonomous spendi...

Question 7

The primary source of macro instability,when there is no government intervention and no foreign trade,is the relationship between

Accepted Answer

A)  Investment and saving.
B)  Saving and taxes.
C)  Investment and consumption.
D)  Consumption and saving.

Question 8

Investment represents

Accepted Answer

A)  A leakage from the circular flow,like saving.
B)  A leakage from the circular flow,like taxes.
C)  An injection into the circular flow,like government spending.
D)  An injection into the circular flow,like imports.

Question 9

If leakages are greater than injections,equilibrium output will be

Accepted Answer

A)  Less than full-employment output,and a recessionary gap will occur.
B)  Less than full-employment output,and an inflationary gap will occur.
C)  More than full-employment output,and a recessionary gap will occur.
D)  More than full-employment output,and an inflationary gap will occur.

Question 10

Use Table 10.3,which shows the relationship between consumption and income.Assume the price level is constant.   Disposal Income  Total Consumption  Investment  Total Expenditure  (Billions per Year)   (Billions per Year)  (Billions per Year)   (Billions per Year) $0$200$100___200300100___400400100___600500100___\begin{array}{ll}	ext { Disposal Income } & 	ext { Total Consumption }& 	ext { Investment }& 	ext { Total Expenditure }\	ext { (Billions per Year)  }& 	ext { (Billions per Year)   }& 	ext {(Billions per Year)  }& 	ext { (Billions per Year) }\\hline\$ 0 & \$ 200 & \$ 100 &\_\_\_\200 & 300 & 100&\_\_\_ \400 & 400 & 100&\_\_\_ \600 & 500 & 100&\_\_\_\end{array} Disposal Income  (Billions per Year)  $0200400600​ Total Consumption  (Billions per Year)  $200300400500​ Investment (Billions per Year)  $100100100100​ Total Expenditure  (Billions per Year) ____________​​

Table 10.3	ext { Table } 10.3 Table 10.3  In Table 10.3,which of the following remains constant as income changes?

Accepted Answer

A)  The variable Y in the consumption function.
B)  1 ÷ (1 - AP
C)  .
C)  The APS.
D)  The MPC.

Question 11

If injections exceed leakages,

Accepted Answer

A)  Unemployment will rise.
B)  Prices will fall.
C)  The economy will expand.
D)  Disposable income will fall.

Question 12

Classical economists believe aggregate spending adjusts quickly to equal full-employment output.
The classical view holds that no government intervention in the market is needed because the price level,wages,and interest rates will adjust and the economy will self-correct to restore full employment.

Accepted Answer

A) True 
 B)False

Question 13

When unwanted inventories pile up in retail stores,retail managers will take actions that lead to greater

Accepted Answer

A)  Inflation.
B)  Unemployment.
C)  Wages.
D)  Economic growth.

Question 14

Given the MPS = 0.40,with no government and no foreign trade,a $10 billion increase in investment will eventually result in an increase in

Accepted Answer

A)  Consumption by $40 billion.
B)  Total spending by $15 billion.
C)  Consumption by $15 billion.
D)  Total spending by $2.5 billion.

Question 15

0 to AD1 was caused by a decrease in investment of $50 billion.What will happen to the equilibrium level of real output as a result of the initial $50 billion decrease? A) It will fall by less than $200 billion. B) It will fall by exactly $200 billion. C) It will fall by more than $200 billion. D) It will fall by less than $67 billion." class="answers-bank-image d-inline" rel="preload" > Suppose the MPC in the economy in Figure 10.2 equals 0.75 and the shift from AD0 to AD1 was caused by a decrease in investment of $50 billion.What will happen to the equilibrium level of real output as a result of the initial $50 billion decrease?

Accepted Answer

A)  It will fall by less than $200 billion.
B)  It will fall by exactly $200 billion.
C)  It will fall by more than $200 billion.
D)  It will fall by less than $67 billion.

Question 16

If leakages are less than injections,equilibrium output will be

Accepted Answer

A)  Less than full-employment output,and a recessionary gap will occur.
B)  More than full-employment output,and a recessionary gap will occur.
C)  Less than full-employment output,and an inflationary gap will occur.
D)  More than full-employment output,and an inflationary gap will occur.

Question 17

The formula for the multiplier is

Accepted Answer

A)  1/(1 - MPS) .
B)  1/(1 - MP
C)  .
C)  1 - MPS.
D)  1 - MPC.

Question 18

A demand-pull inflation problem can best be solved by

Accepted Answer

A)  An increase in production of goods and services.
B)  A reduction in desired spending.
C)  An increase in aggregate demand.
D)  A reduction in aggregate supply.

Question 19

One In the News article titled "Consumer Spending Drops 1 Percent" suggests that the drop in consumer spending in late 2008 was worrisome for the economy because

Accepted Answer

A)  Interest rates could not be lowered further to compensate for the drop in consumer spending.
B)  Consumer spending accounts for nearly two-thirds of GDP.
C)  Foreigners would not likely be buying many U.S.exports to offset the fall in domestic spending.
D)  Many economists had forecast a fourth quarter economic rebounD.The fall in consumer spending in September and October of 2008 did not bode well for the fourth quarter,typically the biggest quarter for U.S.retailers; additionally,since consumer spending represents two-thirds of GDP,a drop would have a large negative impact on the economy.

Question 20

The consumption function will shift when

Accepted Answer

A)  Autonomous consumption changes.
B)  Induced consumption changes.
C)  Autonomous or induced consumption changes.
D)  Investment changes.

Exam 10: Self-Adjustment or Instability

If leakages are less than injections,equilibrium output will be

Correct Answer
verified

The consumption function will shift when

Correct Answer
verified

Given the MPS = 0.40,with no government and no foreign trade,a $10 billion increase in investment will eventually result in an increase in

Correct Answer
verified

Classical economists believe aggregate spending adjusts quickly to equal full-employment output. The classical view holds that no government intervention in the market is needed because the price level,wages,and interest rates will adjust and the economy will self-correct to restore full employment.

Correct Answer
verified

If the MPC = 0.80,the cumulative decrease in total spending resulting from an initial $150 recessionary gap would be

Correct Answer
verified

Equilibrium GDP could be upset by a change in

Correct Answer
verified

Assuming an upward-sloping aggregate supply curve,when aggregate demand increases,unemployment

Correct Answer
verified

Suppose the MPC in the economy in Figure 10.2 equals 0.75 and the shift from AD₀ to AD₁ was caused by a decrease in investment of $50 billion.What will happen to the equilibrium level of real output as a result of the initial $50 billion decrease?

Correct Answer
verified

How does the multiplier process work when there is an initial decrease in autonomous spending?

Correct Answer
verified
An initial decrease in autonomous spendi...
View Answer

The primary source of macro instability,when there is no government intervention and no foreign trade,is the relationship between

Correct Answer
verified

When unwanted inventories pile up in retail stores,retail managers will take actions that lead to greater

Correct Answer
verified

Income not spent directly on domestic output is

Correct Answer
verified

Correct Answer
verified

If leakages are greater than injections,equilibrium output will be

Correct Answer
verified

One In the News article titled "Consumer Spending Drops 1 Percent" suggests that the drop in consumer spending in late 2008 was worrisome for the economy because

Correct Answer
verified

The formula for the multiplier is

Correct Answer
verified

If injections exceed leakages,

Correct Answer
verified

A demand-pull inflation problem can best be solved by

Correct Answer
verified

Investment represents

Correct Answer
verified

Calculate the total change in spending because of an initial $100 increase in aggregate demand,given that the MPC = 0.60.

Correct Answer
verified

Exam 10: Self-Adjustment or Instability

If leakages are less than injections,equilibrium output will be

Correct AnswerverifiedShow Answer

The consumption function will shift when

Correct AnswerverifiedShow Answer

Given the MPS = 0.40,with no government and no foreign trade,a $10 billion increase in investment will eventually result in an increase in

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the MPC = 0.80,the cumulative decrease in total spending resulting from an initial $150 recessionary gap would be

Correct AnswerverifiedShow Answer

Equilibrium GDP could be upset by a change in

Correct AnswerverifiedShow Answer

Assuming an upward-sloping aggregate supply curve,when aggregate demand increases,unemployment

Correct AnswerverifiedShow Answer

Suppose the MPC in the economy in Figure 10.2 equals 0.75 and the shift from AD0 to AD1 was caused by a decrease in investment of $50 billion.What will happen to the equilibrium level of real output as a result of the initial $50 billion decrease?

Correct AnswerverifiedShow Answer

How does the multiplier process work when there is an initial decrease in autonomous spending?

Correct AnswerverifiedAn initial decrease in autonomous spendi...View AnswerShow Answer

The primary source of macro instability,when there is no government intervention and no foreign trade,is the relationship between

Correct AnswerverifiedShow Answer

When unwanted inventories pile up in retail stores,retail managers will take actions that lead to greater

Correct AnswerverifiedShow Answer

Income not spent directly on domestic output is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If leakages are greater than injections,equilibrium output will be

Correct AnswerverifiedShow Answer

One In the News article titled "Consumer Spending Drops 1 Percent" suggests that the drop in consumer spending in late 2008 was worrisome for the economy because

Correct AnswerverifiedShow Answer

The formula for the multiplier is

Correct AnswerverifiedShow Answer

If injections exceed leakages,

Correct AnswerverifiedShow Answer

A demand-pull inflation problem can best be solved by

Correct AnswerverifiedShow Answer

Investment represents

Correct AnswerverifiedShow Answer

Calculate the total change in spending because of an initial $100 increase in aggregate demand,given that the MPC = 0.60.

Correct AnswerverifiedShow Answer

Correct Answer
verified

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Suppose the MPC in the economy in Figure 10.2 equals 0.75 and the shift from AD₀ to AD₁ was caused by a decrease in investment of $50 billion.What will happen to the equilibrium level of real output as a result of the initial $50 billion decrease?

Correct Answer
verified

Correct Answer
verified
An initial decrease in autonomous spendi...
View Answer

Correct Answer
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