Question 1

Which of the following is eliminated when output equals full-employment GDP?

Accepted Answer

A)  Cyclical unemployment.
B)  Demand-pull inflation.
C)  The need for autonomous consumption.
D)  Net exports.

Question 2

How does an improvement in consumer confidence affect the consumption function and the aggregate demand curve?

Accepted Answer

Consumer confidence is affected by expec...

Question 3

The combination of price level and real output that is compatible with both aggregate demand and aggregate supply is the definition of

Accepted Answer

A)  Full-employment GDP.
B)  Disposable income.
C)  Macro equilibrium.
D)  Real expenditures.

Question 4

Given a consumption function of C = $25 + 0.75YD,the average propensity to consume equals 1 when disposable income equals

Accepted Answer

A)  $25.
B)  $75.
C)  $100.
D)  -$300.

Question 5

The economy will not reach and maintain its goals of full employment and price stability unless the economy is

Accepted Answer

A)  At full employment and the price level is stable.
B)  Above full employment and the price level is stable.
C)  Below full employment and the price level is stable.
D)  None of the choices are correct.

Question 6

A rise in interest rates will cause

Accepted Answer

A)  A decline in investment spending.
B)  A rise in investment spending.
C)  Investment spending to remain constant.
D)  Investment spending to be eliminated from the economy.

Question 7

The change in total spending from additional income is

Accepted Answer

A)  MPC.
B)  MPS.
C)  APC.
D)  APS.

Question 8

According to Keynes,cyclical unemployment is caused by too

Accepted Answer

A)  Much aggregate demand.
B)  Little aggregate demand.
C)  Much aggregate supply.
D)  Little aggregate supply.

Question 9

How can autonomous consumption be greater than zero when income is zero?

Accepted Answer

Autonomous consumption is the level of c...

Question 10

Full-employment income is the same as the potential GDP of the economy.
At full employment,the economy will be operating at a point along its production possibilities curve.

Accepted Answer

A) True 
 B)False

Question 11

The investment demand curve would shift to the left because of

Accepted Answer

A)  The discovery of more efficient production methods.
B)  Expectations of a recession.
C)  Higher interest rates.
D)  A lower current income level for the economy.

Question 12

Which of the following is not a determinant of autonomous consumption?

Accepted Answer

A)  The disposable income level.
B)  Taxes.
C)  The availability of credit.
D)  The price level.

Question 13

Which of the following causes a movement along the investment demand curve?

Accepted Answer

A)  A change in expenditures.
B)  A change in technology.
C)  A change in the rate of interest.
D)  The current level of income.

Question 14

Federal government spending has a countercyclical impact that helps to stabilize the economy.
Automatic stabilizers such as transfer payments will rise during a recession,preventing a large drop in consumption.

Accepted Answer

A) True 
 B)False

Question 15

If the full-employment level of income in Figure 9.7 is $300 billion,there is

Accepted Answer

A)  A recessionary gap of $50 billion per year.
B)  A recessionary gap of $100 billion per year.
C)  An inflationary gap of $500 billion per year.
D)  Achievement of macro equilibrium.

Question 16

If we assume that government expenditure,investment,and net exports are not affected by income,the slope of the consumption function equals

Accepted Answer

A)  APC.
B)  The change in income divided by the change in consumption.
C)  The slope of the aggregate expenditure curve.
D)  APS.

Question 17

According to an In the News article titled "Cuomo to Cut New York State Spending by $8.86 Billion,Fire 9,800 Workers," the governor did this because

Accepted Answer

A)  Increased federal funding cannot keep up with decreased state gasoline taxes.
B)  New York State taxes cannot keep up with the loss of federal aid.
C)  State law requires the governor shrink the budget by 5 percent per year through 2015.
D)  None of the choices are correct.

Question 18

Which of the following is not considered to be an important determinant of investment?

Accepted Answer

A)  Current disposable income.
B)  Expectations.
C)  Interest rates.
D)  Technological change.

Question 19

Given that C = $1,000 + 0.60YD,if the level of disposable income is $1,000,the level of saving is

Accepted Answer

A)  $600.
B)  $400.
C)  -$600.
D)  -$300.

Question 20

Which of the following most likely occurs when an inflationary gap exists?

Accepted Answer

A)  A bidding war for available goods and services.
B)  More layoffs.
C)  Rising inventories.
D)  Excessive saving.

Exam 9: Aggregate Demand

The economy will not reach and maintain its goals of full employment and price stability unless the economy is

Correct AnswerverifiedShow Answer

Which of the following causes a movement along the investment demand curve?

Correct AnswerverifiedShow Answer

How can autonomous consumption be greater than zero when income is zero?

Correct AnswerverifiedAutonomous consumption is the level of c...View AnswerShow Answer

Which of the following most likely occurs when an inflationary gap exists?

Correct AnswerverifiedShow Answer

Federal government spending has a countercyclical impact that helps to stabilize the economy. Automatic stabilizers such as transfer payments will rise during a recession,preventing a large drop in consumption.

Correct AnswerverifiedShow Answer

A rise in interest rates will cause

Correct AnswerverifiedShow Answer

Full-employment income is the same as the potential GDP of the economy. At full employment,the economy will be operating at a point along its production possibilities curve.

Correct AnswerverifiedShow Answer

Which of the following is eliminated when output equals full-employment GDP?

Correct AnswerverifiedShow Answer

The investment demand curve would shift to the left because of

Correct AnswerverifiedShow Answer

Which of the following is not a determinant of autonomous consumption?

Correct AnswerverifiedShow Answer

The combination of price level and real output that is compatible with both aggregate demand and aggregate supply is the definition of

Correct AnswerverifiedShow Answer

The change in total spending from additional income is

Correct AnswerverifiedShow Answer

Which of the following is not considered to be an important determinant of investment?

Correct AnswerverifiedShow Answer

Given a consumption function of C = $25 + 0.75YD,the average propensity to consume equals 1 when disposable income equals

Correct AnswerverifiedShow Answer

If the full-employment level of income in Figure 9.7 is $300 billion,there is

Correct AnswerverifiedShow Answer

How does an improvement in consumer confidence affect the consumption function and the aggregate demand curve?

Correct AnswerverifiedConsumer confidence is affected by expec...View AnswerShow Answer

Given that C = $1,000 + 0.60YD,if the level of disposable income is $1,000,the level of saving is

Correct AnswerverifiedShow Answer

If we assume that government expenditure,investment,and net exports are not affected by income,the slope of the consumption function equals

Correct AnswerverifiedShow Answer

According to an In the News article titled "Cuomo to Cut New York State Spending by $8.86 Billion,Fire 9,800 Workers," the governor did this because

Correct AnswerverifiedShow Answer

According to Keynes,cyclical unemployment is caused by too

Correct AnswerverifiedShow Answer

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Autonomous consumption is the level of c...
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Given a consumption function of C = $25 + 0.75Y_D,the average propensity to consume equals 1 when disposable income equals

Correct Answer
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Correct Answer
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Correct Answer
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Consumer confidence is affected by expec...
View Answer

Given that C = $1,000 + 0.60Y_D,if the level of disposable income is $1,000,the level of saving is

Correct Answer
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