Question 1

-Refer to the above diagram which is for a private closed economy.All figures are in billions of dollars.If gross investment is $15,the equilibrium level of GDP:

Accepted Answer

A)   is $30.
B)   is $380.
C)   is $300.
D)   is $340.E) C) and D)
F) A) and C)

Question 2

In the aggregate expenditures model,equilibrium GDP in a private closed economy is indicated by:

Accepted Answer

A)   the equality of saving and planned investment.
B)   the intersection of aggregate expenditures and the 45-degree line.
C)   the absence of unplanned changes in inventories.
D)   all of the above.E) A) and D)
F) B) and C)

Question 3

Planned plus unplanned investment equals:

Accepted Answer

A)   actual investment.
B)   consumption of fixed capital.
C)   consumption minus saving.
D)   unintended saving.E) All of the above
F) C) and D)

Question 4

The table shows a private,open economy.All figures are in billions of dollars.
 
-Refer to the above table.The equilibrium real GDP is:

Accepted Answer

A)   $550
B)   $600
C)   $650
D)   $700E) B) and D)
F) B) and C)

Question 5

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.E) A) and B)
F) A) and C)

Question 6

Other things equal,the multiplier effect associated with a change in government spending is:

Accepted Answer

A)   the same as that associated with a change in taxes.
B)   equal to that associated with a change in investment or consumption.
C)   less than that associated with a change in investment.
D)   greater than that associated with a change in investment.E) B) and C)
F) A) and D)

Question 7

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) C) and D)
F) B) and D)

Question 8

The Sa + M + T schedule has a negative slope.

Accepted Answer

A) True 
 B)False

Question 9

If net exports decrease from zero to some negative amount,the aggregate expenditures schedule would:

Accepted Answer

A)   shift upward.
B)   shift downward.
C)   not move (net exports do not affect aggregate expenditures) .
D)   shift upward or downward,depending on whether the negative net exports resulted from a decline in exports or an increase in imports.E) None of the above
F) All of the above

Question 10

The marginal propensity to import is:

Accepted Answer

A)   the change in imports divided by a change by exports.
B)   the change in imports divided by a change in consumption.
C)   the change in imports divided by a change in GDP.
D)   the change in imports multiplied by a change in GDP.E) A) and D)
F) C) and D)

Question 11

The following information is for a closed economy:
 
-Refer to the above information.If in addition to spending $80 billion at each level of GDP,government imposes a lump-sum tax of $100:

Accepted Answer

A)   equilibrium GDP will now be $350.
B)   equilibrium GDP will now be $400.
C)   equilibrium GDP will now be $300.
D)   the equilibrium GDP cannot be determined.E) A) and C)
F) A) and B)

Question 12

Actual investment may be defined as:

Accepted Answer

A)   gross investment less replacement investment.
B)   the ratio of planned to unplanned investment.
C)   unintended less planned investment.
D)   planned plus unplanned investment.E) All of the above
F) A) and D)

Question 13

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 14

-Refer to the above diagram for a private closed economy.In this economy,aggregate expenditures:

Accepted Answer

A)   do not change as GDP increases.
B)   increase by $2 for every $5 increase in GDP.
C)   increase by $2 for every $4 increase in GDP.
D)   increase by $2 for every $3 increase in GDP.E) A) and C)
F) B) and C)

Question 15

If aggregate expenditures exceed the domestic output in a private closed economy:

Accepted Answer

A)   leakages will exceed injections.
B)   planned investment will exceed saving.
C)   unplanned investment in inventories will occur.
D)   saving will exceed planned investment.E) All of the above
F) None of the above

Question 16

An increase in taxes will have a greater effect on the equilibrium GDP:

Accepted Answer

A)   if the tax revenues are redistributed through transfer payments.
B)   the larger the MPS.
C)   the smaller the MPC.
D)   the larger the MPC.E) A) and D)
F) A) and C)

Question 17

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

Question 18

-The above economy is characterized by:

Accepted Answer

A)   built-in stability.
B)   taxes which vary directly with GDP,but government spending which is independent of GDP.
C)   taxes which are independent of GDP,but government spending which varies directly with GDP.
D)   a multiplier of 2.5.E) None of the above
F) C) and D)

Question 19

3,the: A)  inflationary expenditure gap is ed. B)  inflationary expenditure gap is BC. C)  recessionary expenditure gap is eg. D)  economy is in equilibrium,but at less than full employment." class="answers-bank-image d-inline" rel="preload" >
-Refer to the above diagram.If the full-employment level of GDP is B and aggregate expenditures are at AE3,the:

Accepted Answer

A)   inflationary expenditure gap is ed.
B)   inflationary expenditure gap is BC.
C)   recessionary expenditure gap is eg.
D)   economy is in equilibrium,but at less than full employment.E) C) and D)
F) A) and C)

Question 20

1,the equilibrium GDP and the level of consumption will be: A)  H and HB respectively. B)  J and JI respectively. C)  J and JK respectively D)  H and HF respectively." class="answers-bank-image d-inline" rel="preload" >
-Refer to the above diagram which applies to a private closed economy.If gross investment is Ig1,the equilibrium GDP and the level of consumption will be:

Accepted Answer

A)   H and HB respectively.
B)   J and JI respectively.
C)   J and JK respectively
D)   H and HF respectively.E) B) and C)
F) A) and C)

Exam 11: The Aggregate Expenditures Model

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

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-Refer to the above diagram.If the full-employment level of GDP is B and aggregate expenditures are at AE3,the:

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The table shows a private,open economy.All figures are in billions of dollars. -Refer to the above table.The equilibrium real GDP is:

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An increase in taxes will have a greater effect on the equilibrium GDP:

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

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If aggregate expenditures exceed the domestic output in a private closed economy:

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The marginal propensity to import is:

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-Refer to the above diagram which applies to a private closed economy.If gross investment is Ig1,the equilibrium GDP and the level of consumption will be:

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The Sa + M + T schedule has a negative slope.

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Other things equal,the multiplier effect associated with a change in government spending is:

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-Refer to the above diagram which is for a private closed economy.All figures are in billions of dollars.If gross investment is $15,the equilibrium level of GDP:

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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:

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-The above economy is characterized by:

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If net exports decrease from zero to some negative amount,the aggregate expenditures schedule would:

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The inequality of saving and planned investment:

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In the aggregate expenditures model,equilibrium GDP in a private closed economy is indicated by:

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-Refer to the above diagram for a private closed economy.In this economy,aggregate expenditures:

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The following information is for a closed economy: -Refer to the above information.If in addition to spending $80 billion at each level of GDP,government imposes a lump-sum tax of $100:

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Planned plus unplanned investment equals:

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Actual investment may be defined as:

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-Refer to the above diagram.If the full-employment level of GDP is B and aggregate expenditures are at AE₃,the:

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-Refer to the above diagram which applies to a private closed economy.If gross investment is Ig₁,the equilibrium GDP and the level of consumption will be:

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The S_a + M + T schedule has a negative slope.

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