Question 1

-Refer to the above information. In this economy a 3 percentage point decrease in the interest rate will:

Accepted Answer

A)   increase equilibrium GDP by $200.
B)   increase equilibrium GDP by $100.
C)   increase equilibrium GDP by $50.
D)   decrease equilibrium GDP by $50.

Question 2

g1 to Ig2, the equilibrium GDP will: A)  decrease by KD. B)  increase by HJ. C)  increase by KD. D)  increase by GH." class="answers-bank-image d-inline" rel="preload" >
-Refer to the above diagram which applies to a private closed economy. If gross investment increases from Ig1 to Ig2, the equilibrium GDP will:

Accepted Answer

A)   decrease by KD.
B)   increase by HJ.
C)   increase by KD.
D)   increase by GH.

Question 3

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" > Other: Pick-up
-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.

Question 4

Unplanned changes in inventories:

Accepted Answer

A)   cause the economy to move away from the equilibrium GDP.
B)   must be subtracted from planned investment to determine actual investment.
C)   bring actual investment and saving into equality only at the equilibrium level of GDP.
D)   bring actual investment and saving into equality at all levels of GDP.

Question 5

If the dollar appreciates relative to foreign currencies, we would expect:

Accepted Answer

A)   the multiplier to decrease.
B)   a country's exports and imports to both fall.
C)   a country's net exports to rise.
D)   a country's net exports to fall.

Question 6

-Refer to the above diagram for a private closed economy. At the $200 level of GDP:

Accepted Answer

A)   consumption will equal GDP.
B)   planned investment will equal saving and unintended investment will be zero.
C)   aggregate expenditures will exceed GDP, causing GDP to rise.
D)   GDP will exceed aggregate expenditures, causing GDP to fall.

Question 7

Planned investment equals saving:

Accepted Answer

A)   at all levels of GDP.
B)   at all below-equilibrium levels of GDP.
C)   at all above-equilibrium levels of GDP.
D)   only at the equilibrium GDP.

Question 8

In the aggregate expenditures model, a reduction in taxes may:

Accepted Answer

A)   increase saving.
B)   increase real GDP.
C)   reduce unemployment.
D)   do all of the above.

Question 9

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.

Question 10

-Refer to the above diagram. The level of government spending:

Accepted Answer

A)   is equal to tax collections at each level of GDP.
B)   is the same at all levels of GDP.
C)   varies inversely with the level of GDP.
D)   varies directly with the level of GDP.

Question 11

If an increase in aggregate expenditures results in no increase in real GDP we can conclude that the:

Accepted Answer

A)   economy is in a deep recession.
B)   MPC equals 1.
C)   economy is already operating at full employment.
D)   price level has fallen.

Question 12

-Refer to the above diagrams. Other things equal, Curve B will shift upward when:

Accepted Answer

A)   the level of GDP increases.
B)   the interest rate increases.
C)   curve A shifts to the left.
D)   curve A shifts to the right.

Question 13

Refer to the information below. The multiplier for this economy:

Accepted Answer

A)   is 2.
B)   is 2.5.
C)   is 3.
D)   is 4.

Question 14

In a mixed closed economy:

Accepted Answer

A)   government purchases and saving are injections, while investment and taxes are leakages.
B)   taxes and government purchases are leakages, while investment and saving are injections.
C)   taxes and savings are leakages, while investment and government purchases are injections.
D)   taxes and investment are injections, while saving and government purchases are leakages.

Question 15

-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 of

Question 16

The investment schedule tends to be relatively stable over time.

Accepted Answer

A) True 
 B)False

Question 17

-Refer to the above diagram for a private closed economy. At the $100 level of GDP:

Accepted Answer

A)   aggregate expenditures will exceed GDP, causing GDP to fall.
B)   planned investment will exceed saving, but actual investment will be equal to saving.
C)   households will consume more than their income.
D)   saving will be $40.

Question 18

If a lump-sum income tax of $25 billion is levied and the MPS is 0.20, the:

Accepted Answer

A)   saving schedule will shift upward by $5 billion.
B)   consumption schedule will shift downward by $25 billion.
C)   consumption schedule will shift downward by $20 billion.
D)   consumption schedule will shift upward by $25 billion.

Question 19

The following information is for a closed economy:
 
-Refer to the above information. The introduction of $80 billion of government spending has:

Accepted Answer

A)   lowered the multiplier from 2.5 to 2.0.
B)   increased the multiplier from 2.5 to 3.0.
C)   increased the multiplier from 2.0 to 2.5.
D)   had no effect on the size of the multiplier.

Question 20

If the MPC in an economy is .75, a $1 billion increase in taxes will reduce the GDP by:

Accepted Answer

A)   $1 billion.
B)   $.75 billion.
C)   $3 billion.
D)   $4 billion.

Exam 9: The Aggregate Expenditures Model

If an increase in aggregate expenditures results in no increase in real GDP we can conclude that the:

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-Refer to the above diagram which applies to a private closed economy. If gross investment increases from Ig1 to Ig2, the equilibrium GDP will:

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Planned investment equals saving:

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-Refer to the above information. In this economy a 3 percentage point decrease in the interest rate will:

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If a lump-sum income tax of $25 billion is levied and the MPS is 0.20, the:

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-Refer to the above diagram for a private closed economy. At the $200 level of GDP:

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If the MPC in an economy is .75, a $1 billion increase in taxes will reduce the GDP by:

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

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The following information is for a closed economy: -Refer to the above information. The introduction of $80 billion of government spending has:

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The investment schedule tends to be relatively stable over time.

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

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If the dollar appreciates relative to foreign currencies, we would expect:

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-Refer to the above diagram. The level of government spending:

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In a mixed closed economy:

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Unplanned changes in inventories:

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-Refer to the above diagram for a private closed economy. At the $100 level of GDP:

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-Refer to the above diagrams. Other things equal, Curve B will shift upward when:

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In the aggregate expenditures model, a reduction in taxes may:

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Refer to the information below. The multiplier for this economy:

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Other: Pick-up -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 diagram which applies to a private closed economy. If gross investment increases from I_g1 to I_g2, the equilibrium GDP will:

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

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Other: Pick-up -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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