Question 1

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) A) and D)
F) A) and C)

Question 2

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

Question 3

In a mixed open economy, where aggregate expenditures exceed GDP:

Accepted Answer

A)  Ig + X + G = Ca.
B)  Ca + Ig + Xn + G 
C)  Ig > S.
D)  Ig + X + G > Sa + M + T.E) B) and C)
F) A) and C)

Question 4

Refer to the below data.Equilibrium Y = (GDP)  is: The letters Y, C, and, I are used to represent GDP, consumption, and, investment respectively.

Accepted Answer

A)  $100
B)  $200
C)  $300
D)  $400E) A) and D)
F) All of the above

Question 5

In the above private open economy exports are __________ and imports are __________ domestic GDP:

Accepted Answer

A)  inversely related to; directly related to
B)  independent of; inversely related to
C)  independent of; dependent of
D)  directly related to; independent ofE) All of the above
F) B) and D)

Question 6

In reality, if a nation imposes tarrifs, 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) A) and B)
F) None of the above

Question 7

Refer to the above diagrams.Curve A:

Accepted Answer

A)  is an investment schedule and curve B is a consumption of fixed capital schedule.
B)  is an investment demand curve and curve B is an investment schedule.
C)  and B are totally unrelated.
D)  shifts to the left when curve B shifts upward.E) A) and D)
F) A) and C)

Question 8

Which of the following occurred during the recession of 2008-2009?

Accepted Answer

A)  Both after-tax consumption and government expenditures declined.
B)  Both after-tax consumption and investment expenditures declined.
C)  Both government expenditures and investment expenditures declined.
D)  Government expenditures declined but after-tax consumption increasedE) None of the above
F) A) and B)

Question 9

If a nation imposes tariffs and quotas on foreign products, the immediate effect, if no retaliation is immediately imposed by other countries will be to:

Accepted Answer

A)  reduce the rate of domestic inflation.
B)  increase efficiency in the world economy.
C)  increase domestic output and employment.
D)  reduce domestic output and employment.E) A) and B)
F) None of the above

Question 10

n2, the GDP in the open economy will exceed GDP in the closed economy by: A) AB. B) AD. C) FG. D) BD." class="answers-bank-image d-inline" rel="preload" > Refer to the above diagram.If net exports are Xn2, the GDP in the open economy will exceed GDP in the closed economy by:

Accepted Answer

A)  AB.
B)  AD.
C)  FG.
D)  BD.E) C) and D)
F) A) and B)

Question 11

The following information is for a private closed economy, where Ig is gross investment, S is saving, and Y is gross domestic product (GDP) .Ig = 80 S = -80 + 0.4Y
Refer to the above information.In equilibrium, saving will be:

Accepted Answer

A)  $40.
B)  $120.
C)  $60.
D)  $80.E) None of the above
F) B) and D)

Question 12

If government decreases its purchases by $20 billion and the MPC is 0.8, equilibrium GDP will decrease by $100 billion.

Accepted Answer

A) True 
 B)False

Question 13

Refer to the above diagram for a private closed economy.The equilibrium level of GDP in this economy:

Accepted Answer

A)  is $60 billion.
B)  is $180 billion.
C)  is between $60 and $180 billion.
D)  cannot be determined from the information given.E) B) and C)
F) B) and D)

Question 14

Refer to the above diagram.The sizes of the multipliers associated with changes in investment and government spending in this economy:

Accepted Answer

A)  are 2.5 and 1.5 respectively.
B)  are 3 and 2 respectively.
C)  are both 2.5.
D)  are 2 and 3 respectively.E) C) and D)
F) A) and D)

Question 15

The inequality of saving and planned investment:

Accepted Answer

A)  is attributable to a low MPC.
B)  may be of considerable significance because of the subsequent changes in income, employment, and the price level.
C)  is of no consequence because a compensating inequality of tax collections and government spending will always occur.
D)  is of no consequence because saving and actual investment will always be equal.E) A) and D)
F) C) and D)

Question 16

An increase in taxes of a specific amount will have a smaller impact on the equilibrium GDP than will a decline in government spending of the same amount because:

Accepted Answer

A)  the MPC is smaller in the private sector than it is in the public sector.
B)  declines in government spending always tend to stimulate private investment.
C)  disposable income will fall by some amount smaller than the tax increase.
D)  only part of the tax increase will affect the consumption negatively.E) A) and B)
F) B) and C)

Question 17

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 zero, government purchases of goods and services $10, planned investment $6, and net exports zero, equilibrium real GDP would be:

Accepted Answer

A)  $620
B)  $630
C)  $640
D)  $650E) A) and B)
F) All of the above

Question 18

During the recession of 2008-2009 the federal government undertook various policies intended to stimulate private spending and investment.

Accepted Answer

A) True 
 B)False

Question 19

Refer to the diagram given below. 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, which is taxes less transfers.The effect of the public budget is to: A) lower the equilibrium level of GDP from Y4 to Y2. B) raise the equilibrium level of GDP from Y2 to Y4. C) lower the equilibrium level of GDP from Y4 to Y3. D) raise the equilibrium level of GDP from Y2 to Y3." class="answers-bank-image d-inline" rel="preload" > In the above diagram 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, which is taxes less transfers.The effect of the public budget is to:

Accepted Answer

A)  lower the equilibrium level of GDP from Y4 to Y2.
B)  raise the equilibrium level of GDP from Y2 to Y4.
C)  lower the equilibrium level of GDP from Y4 to Y3.
D)  raise the equilibrium level of GDP from Y2 to Y3.E) B) and C)
F) A) and B)

Question 20

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.E) All of the above
F) None of the above

Exam 11: Part B: The Aggregate Expenditures Model

The following information is for a private closed economy, where Ig is gross investment, S is saving, and Y is gross domestic product (GDP) .Ig = 80 S = -80 + 0.4Y Refer to the above information.In equilibrium, saving will be:

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In reality, if a nation imposes tarrifs, then the final result will be that:

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In the above private open economy exports are __________ and imports are __________ domestic GDP:

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The inequality of saving and planned investment:

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Refer to the above diagram.If net exports are Xn2, the GDP in the open economy will exceed GDP in the closed economy by:

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Refer to the above diagrams.Curve A:

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Refer to the above diagram.The sizes of the multipliers associated with changes in investment and government spending in this economy:

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In a mixed open economy, where aggregate expenditures exceed GDP:

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Refer to the diagram given below. In the above diagram 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, which is taxes less transfers.The effect of the public budget is to:

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In the above private open economy, international trade:

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If a nation imposes tariffs and quotas on foreign products, the immediate effect, if no retaliation is immediately imposed by other countries will be to:

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If government decreases its purchases by $20 billion and the MPC is 0.8, equilibrium GDP will decrease by $100 billion.

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

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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 zero, government purchases of goods and services $10, planned investment $6, and net exports zero, equilibrium real GDP would be:

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Refer to the above diagram for a private closed economy.The equilibrium level of GDP in this economy:

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An increase in taxes of a specific amount will have a smaller impact on the equilibrium GDP than will a decline in government spending of the same amount because:

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Which of the following occurred during the recession of 2008-2009?

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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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During the recession of 2008-2009 the federal government undertook various policies intended to stimulate private spending and investment.

Correct AnswerverifiedShow Answer

Refer to the below data.Equilibrium Y = (GDP) is: The letters Y, C, and, I are used to represent GDP, consumption, and, investment respectively.

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The following information is for a private closed economy, where I_g is gross investment, S is saving, and Y is gross domestic product (GDP) .I_g = 80 S = -80 + 0.4Y Refer to the above information.In equilibrium, saving will be:

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In the above private open economy exports are and imports are domestic GDP:

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Refer to the above diagram.If net exports are X_n2, the GDP in the open economy will exceed GDP in the closed economy by:

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Refer to the diagram given below. In the above diagram 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, which is taxes less transfers.The effect of the public budget is to:

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