Question 1

The table shows the consumption schedule for a hypothetical economy. All figures are in billions of dollars.
 
-Refer to the above table. If taxes were $5, government purchases of goods and services $10, planned investment $6, and net exports zero, equilibrium real GDP would be:

Accepted Answer

A)   $600.
B)   $610.
C)   $620.
D)   $630.

Question 2

If Canada wants to increase its net exports, other things equal, it might take steps to:

Accepted Answer

A)   increase its GDP.
B)   reduce existing tariffs and import quotas.
C)   decrease the dollar price of foreign currencies.
D)   increase the dollar price of foreign currencies.

Question 3

If a lump-sum tax of $40 billion is imposed and the MPC is 0.6, the saving schedule will:

Accepted Answer

A)   shift downward by $24 billion.
B)   shift upward by $24 billion.
C)   shift downward by $16 billion.
D)   shift upward by $16 billion.

Question 4

Imports have the same macroeconomic effect on GDP as:

Accepted Answer

A)   exports.
B)   investment.
C)   consumption.
D)   saving.

Question 5

-In the above private open economy, international trade:

Accepted Answer

A)   is inflationary.
B)   is a source of additional jobs for domestic workers.
C)   has no effect on GDP.
D)   has a contractionary effect on GDP.

Question 6

Suppose the economy is operating at its full-employment-noninflationary GDP and the MPC is 0.75. The federal government now finds that it must increase spending on military goods by $21 billion in response to a deterioration in the international political situation. To sustain full-employment-noninflationary GDP government must:

Accepted Answer

A)   reduce taxes by $28 billion.
B)   reduce transfer payments by $21 billion.
C)   increase taxes by $21 billion.
D)   increase taxes by $28 billion.

Question 7

Investment and saving are, respectively:

Accepted Answer

A)   income and wealth.
B)   stocks and flows.
C)   injections and leakages.
D)   leakages and injections.

Question 8

Suppose that a mixed open economy is producing at its equilibrium level of income and that net exports are zero. If at the equilibrium income level the public sector's budget shows a surplus:

Accepted Answer

A)   Ca + Ig + Xn + G must exceed GDP.
B)   planned investment must exceed saving.
C)   a recessionary expenditure gap must exist.
D)   saving must exceed planned investment.

Question 9

A $10 billion decrease in taxes will increase the equilibrium GDP by more than would a $10 billion increase in government expenditures.

Accepted Answer

A) True 
 B)False

Question 10

The following information is for a closed economy:
 
-Refer to the above information. If government now spends $80 billion at each level of GDP and taxes remain at zero, the equilibrium GDP:

Accepted Answer

A)   will rise to $700.
B)   will rise to $600.
C)   will rise to $500.
D)   may either rise or fall.

Question 11

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.

Question 12

For a private closed economy, an unplanned decline in inventories suggests that:

Accepted Answer

A)   aggregate expenditures are less than the business sector expected them to be.
B)   planned investment is greater than saving.
C)   actual investment exceeds saving.
D)   planned investment is greater than consumption.

Question 13

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.

Question 14

g is gross investment, X is exports, G is government purchases, S and Sa are saving before and after taxes respectively, M is imports, and T is net taxes, that is, taxes less transfers. The equilibrium level of GDP for this economy is: A)  Y4. B)  Y3. C)  Y2. D)  Y1." class="answers-bank-image d-inline" rel="preload" >
-Refer to the above diagram where Ig is gross investment, X is exports, G is government purchases, S and Sa are saving before and after taxes respectively, M is imports, and T is net taxes, that is, taxes less transfers. The equilibrium level of GDP for this economy is:

Accepted Answer

A)   Y4.
B)   Y3.
C)   Y2.
D)   Y1.

Question 15

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

Accepted Answer

A)   C = Y - .6S.
B)   Y = C + S.
C)   C = 60 + .4Y.
D)   C = 60 + .6Y.

Question 16

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.

Question 17

Refer to the above diagram for a private closed economy. At the $400 level of GDP:

Accepted Answer

A)   aggregate expenditures exceed GDP with the result that GDP will rise.
B)   consumption is $350 and planned investment is zero so that aggregate expenditures are $350.
C)   consumption is $300 and planned investment is $50 so that aggregate expenditures are $350.
D)   consumption is $300 and actual investment is $100 so that aggregate expenditures are $400.

Question 18

-Refer to the above data. If gross investment is $120, the equilibrium level of GDP will be:

Accepted Answer

A)   $380.
B)   $370.
C)   $360.
D)   $400.

Question 19

The open economy multiplier is:

Accepted Answer

A)   larger than the simple multiplier because the latter embodies fewer leakages.
B)   larger than the simple multiplier because the latter embodies more leakages.
C)   smaller than the simple multiplier because the latter embodies fewer leakages.
D)   smaller than the simple multiplier because the latter embodies more leakages.

Question 20

If government increases lump-sum taxes by $20 billion and the economy's MPC is .6, then the:

Accepted Answer

A)   consumption schedule will shift upward by $12 billion.
B)   consumption schedule will shift downward by $12 billion.
C)   equilibrium GDP will increase by $40 billion.
D)   equilibrium GDP will decrease by $12 billion.

Exam 9: The Aggregate Expenditures Model

Investment and saving are, respectively:

Correct Answer
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The open economy multiplier is:

Correct Answer
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-In the above private open economy, international trade:

Correct Answer
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Correct Answer
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-Refer to the above data. If gross investment is $120, the equilibrium level of GDP will be:

Correct Answer
verified

If Canada wants to increase its net exports, other things equal, it might take steps to:

Correct Answer
verified

Refer to the above diagram for a private closed economy. At the $400 level of GDP:

Correct Answer
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Imports have the same macroeconomic effect on GDP as:

Correct Answer
verified

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:

Correct Answer
verified

If government increases lump-sum taxes by $20 billion and the economy's MPC is .6, then the:

Correct Answer
verified

For a private closed economy, an unplanned decline in inventories suggests that:

Correct Answer
verified

Suppose that a mixed open economy is producing at its equilibrium level of income and that net exports are zero. If at the equilibrium income level the public sector's budget shows a surplus:

Correct Answer
verified

A $10 billion decrease in taxes will increase the equilibrium GDP by more than would a $10 billion increase in government expenditures.

Correct Answer
verified

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

Correct Answer
verified

The following information is for a closed economy: -Refer to the above information. If government now spends $80 billion at each level of GDP and taxes remain at zero, the equilibrium GDP:

Correct Answer
verified

If a lump-sum tax of $40 billion is imposed and the MPC is 0.6, the saving schedule will:

Correct Answer
verified

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

Correct Answer
verified

The table shows the consumption schedule for a hypothetical economy. All figures are in billions of dollars. -Refer to the above table. If taxes were $5, government purchases of goods and services $10, planned investment $6, and net exports zero, equilibrium real GDP would be:

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

Correct Answer
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-Refer to the above diagram where I_g is gross investment, X is exports, G is government purchases, S and S_a are saving before and after taxes respectively, M is imports, and T is net taxes, that is, taxes less transfers. The equilibrium level of GDP for this economy is:

Correct Answer
verified

Exam 9: The Aggregate Expenditures Model

Investment and saving are, respectively:

Correct AnswerverifiedShow Answer

The open economy multiplier is:

Correct AnswerverifiedShow Answer

-In the above private open economy, international trade:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

-Refer to the above data. If gross investment is $120, the equilibrium level of GDP will be:

Correct AnswerverifiedShow Answer

If Canada wants to increase its net exports, other things equal, it might take steps to:

Correct AnswerverifiedShow Answer

Refer to the above diagram for a private closed economy. At the $400 level of GDP:

Correct AnswerverifiedShow Answer

Imports have the same macroeconomic effect on GDP as:

Correct AnswerverifiedShow Answer

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:

Correct AnswerverifiedShow Answer

If government increases lump-sum taxes by $20 billion and the economy's MPC is .6, then the:

Correct AnswerverifiedShow Answer

For a private closed economy, an unplanned decline in inventories suggests that:

Correct AnswerverifiedShow Answer

Suppose that a mixed open economy is producing at its equilibrium level of income and that net exports are zero. If at the equilibrium income level the public sector's budget shows a surplus:

Correct AnswerverifiedShow Answer

A $10 billion decrease in taxes will increase the equilibrium GDP by more than would a $10 billion increase in government expenditures.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The following information is for a closed economy: -Refer to the above information. If government now spends $80 billion at each level of GDP and taxes remain at zero, the equilibrium GDP:

Correct AnswerverifiedShow Answer

If a lump-sum tax of $40 billion is imposed and the MPC is 0.6, the saving schedule will:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The table shows the consumption schedule for a hypothetical economy. All figures are in billions of dollars. -Refer to the above table. If taxes were $5, government purchases of goods and services $10, planned investment $6, and net exports zero, equilibrium real GDP would be:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

-Refer to the above diagram where Ig is gross investment, X is exports, G is government purchases, S and Sa are saving before and after taxes respectively, M is imports, and T is net taxes, that is, taxes less transfers. The equilibrium level of GDP for this economy is:

Correct AnswerverifiedShow Answer

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-Refer to the above diagram where I_g is gross investment, X is exports, G is government purchases, S and S_a are saving before and after taxes respectively, M is imports, and T is net taxes, that is, taxes less transfers. The equilibrium level of GDP for this economy is:

Correct Answer
verified