Question 1

If unplanned investment in business inventories occurs,we can expect:

Accepted Answer

A)   a decline in GDP.
B)   inflation.
C)   an increase in consumption.
D)   an offsetting increase in planned investment.E) None of the above
F) B) and C)

Question 2

The economy will expand when:

Accepted Answer

A)   actual GDP is less than potential GDP.
B)   planned investment exceeds saving.
C)   saving exceeds planned investment.
D)   unplanned investment occurs.E) None of the above
F) A) and D)

Question 3

If an unplanned increase in business inventories occurs at some level of GDP,then GDP:

Accepted Answer

A)   entails a rate of aggregate expenditures in excess of the rate of aggregate production.
B)   may be either above or below the equilibrium output.
C)   is too low for equilibrium.
D)   will decrease.E) None of the above
F) B) and D)

Question 4

Assume the MPC is .8.If government were to impose $50 billion of new taxes on household income,consumption spending would decrease by:

Accepted Answer

A)   $100 billion.
B)   $40 billion.
C)   $90 billion
D)   $50 billion.E) A) and B)
F) B) and C)

Question 5

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) B) and C)
F) A) and B)

Question 6

In a mixed open economy,which of the following affect the equilibrium GDP in the same direction?

Accepted Answer

A)   Ca,Ig,Sa,and M
B)   Sa,T,and M
C)   Ig,T,and Ca
D)   Sa,Ig,and XE) B) and C)
F) All of the above

Question 7

The level of aggregate expenditures in the private closed economy is determined by the:

Accepted Answer

A)   expenditures of consumers and businesses.
B)   intersection of the saving schedule and the 45-degree line.
C)   equality of the MPC and MPS.
D)   intersection of the saving and consumption schedules.E) A) and D)
F) A) and B) A

Question 8

The following information is consumption and investment data for a private closed economy.Figures are in billions of dollars.
C = 60 + .6Y
I = I0 = 30
-Refer to the above data.In equilibrium,the level of saving will be:

Accepted Answer

A)   30
B)   26
C)   25
D)   60E) B) and D)
F) A) and C)

Question 9

-Refer to the above diagrams.Other things equal,an interest rate increase will:

Accepted Answer

A)   shift curve A to the right and shift curve B upward.
B)   shift curve A to the left and shift curve B downward.
C)   leave curve A in place but shift curve B downward.
D)   leave curve A in place but shift curve A upward.E) B) and C)
F) None of the above

Question 10

Taxes represent:

Accepted Answer

A)   a leakage of purchasing power,like saving.
B)   an injection of purchasing power,like investment.
C)   an injection of purchasing power,like government spending.
D)   a leakage of purchasing power,like government spending.E) All of the above
F) A) and B)

Question 11

If the MPC is 2/3,the initial impact of an increase of $12 billion in lump-sum taxes will be to cause:

Accepted Answer

A)   a rightward shift in the investment-demand schedule.
B)   an $8 billion downshift in the consumption schedule.
C)   a $4 billion upshift in the consumption schedule.
D)   a $12 billion downshift in the consumption schedule.E) B) and C)
F) A) and D) B

Question 12

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) A) and B)
F) A) and D)

Question 13

The following information is consumption and investment data for a private closed economy.Figures are in billions of dollars.
C = 60 + .6Y
I = I0 = 30
-Refer to the above data.The equilibrium level of income (Y ) is:

Accepted Answer

A)   360
B)   225
C)   200
D)   135E) A) and B)
F) A) and C)

Question 14

Other things equal,if a change in the tastes of Canadian consumers causes them to purchase more foreign goods at each level of Canadian GDP:

Accepted Answer

A)   unemployment will decrease domestically.
B)   Canadian GDP will fall.
C)   inflation will occur domestically.
D)   Canadian real GDP will rise.E) A) and B)
F) A) and C)

Question 15

If net exports are positive:

Accepted Answer

A)   the equilibrium GDP must be greater than the full-employment GDP.
B)   imports must exceed exports.
C)   aggregate expenditures are greater at each level of GDP than when net exports are zero or negative.
D)   some other component of aggregate expenditures must be negative.E) A) and B)
F) A) and C)

Question 16

The letters Y,C,Ig,X,and M stand for GDP,consumption,gross investment,exports,and imports respectively.Figures are in billions of dollars.
C = 26 + .75Y
Ig = 60
X = 24
M = 10
-Refer to the above information.If government desired to raise the equilibrium GDP to $650,it could:

Accepted Answer

A)   raise G by $45 and reduce T by $10.
B)   raise G by $40 and reduce T by $30.
C)   raise G by $30 or reduce T by $40.
D)   raise both G and T by $40.E) All of the above
F) A) and D)

Question 17

What is the likely result from a depreciation of a nation's currency when its economy is operating at its full-employment level of output?

Accepted Answer

A)   net exports fall and contribute to demand-pull inflation
B)   net exports rise and contribute to demand-pull inflation
C)   net exports fall,but equilibrium GDP rises
D)   net exports rise,but equilibrium GDP fallsE) A) and C)
F) None of the above B

Question 18

-Refer to the above diagram.The value of the multiplier for this economy is:

Accepted Answer

A)   BC/hg.
B)   BC/AB.
C)   ed/di.
D)   df/BC.E) B) and C)
F) A) and D)

Question 19

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

Question 20

-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) All of the above
F) B) and C)

Exam 11: The Aggregate Expenditures Model

If unplanned investment in business inventories occurs,we can expect:

Correct AnswerverifiedShow Answer

The economy will expand when:

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If an unplanned increase in business inventories occurs at some level of GDP,then GDP:

Correct AnswerverifiedShow Answer

Assume the MPC is .8.If government were to impose $50 billion of new taxes on household income,consumption spending would decrease by:

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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In a mixed open economy,which of the following affect the equilibrium GDP in the same direction?

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The level of aggregate expenditures in the private closed economy is determined by the:

Correct AnswerverifiedA

The following information is consumption and investment data for a private closed economy.Figures are in billions of dollars. C = 60 + .6Y I = I0 = 30 -Refer to the above data.In equilibrium,the level of saving will be:

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-Refer to the above diagrams.Other things equal,an interest rate increase will:

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Taxes represent:

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If the MPC is 2/3,the initial impact of an increase of $12 billion in lump-sum taxes will be to cause:

Correct AnswerverifiedB

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.

Correct AnswerverifiedShow Answer

The following information is consumption and investment data for a private closed economy.Figures are in billions of dollars. C = 60 + .6Y I = I0 = 30 -Refer to the above data.The equilibrium level of income (Y ) is:

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Other things equal,if a change in the tastes of Canadian consumers causes them to purchase more foreign goods at each level of Canadian GDP:

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If net exports are positive:

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The letters Y,C,Ig,X,and M stand for GDP,consumption,gross investment,exports,and imports respectively.Figures are in billions of dollars. C = 26 + .75Y Ig = 60 X = 24 M = 10 -Refer to the above information.If government desired to raise the equilibrium GDP to $650,it could:

Correct AnswerverifiedShow Answer

What is the likely result from a depreciation of a nation's currency when its economy is operating at its full-employment level of output?

Correct AnswerverifiedB

-Refer to the above diagram.The value of the multiplier for this economy is:

Correct AnswerverifiedShow Answer

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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-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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A

The following information is consumption and investment data for a private closed economy.Figures are in billions of dollars. C = 60 + .6Y I = I₀ = 30 -Refer to the above data.In equilibrium,the level of saving will be:

Correct Answer
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B

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.

Correct Answer
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The following information is consumption and investment data for a private closed economy.Figures are in billions of dollars. C = 60 + .6Y I = I₀ = 30 -Refer to the above data.The equilibrium level of income (Y ) is:

Correct Answer
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The letters Y,C,I_g,X,and M stand for GDP,consumption,gross investment,exports,and imports respectively.Figures are in billions of dollars. C = 26 + .75Y I_g = 60 X = 24 M = 10 -Refer to the above information.If government desired to raise the equilibrium GDP to $650,it could:

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B

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