Question 1

If unintended increases in business inventories occur, we can expect

Accepted Answer

A)   a decline in GDP and rising unemployment.
B)   inﬂation.
C)   an increase in consumption.
D)   an offsetting increase in planned investment.

Question 2

Which of the following statements is incorrect?

Accepted Answer

A)   Given the economy's MPS, a $15 billion reduction in government spending will reduce the equilibrium GDP by more than would a $15 billion increase in taxes.
B)   Other things unchanged, a tax reduction of $10 billion will increase the equilibrium GDP by $25 billion when the MPS is 0.4.
C)   If the MPC is 0.8 and GDP has declined by $40 billion, this was caused by a decline in aggregate expenditures of $8 billion.
D)   A government surplus is anti-inﬂationary; a government deﬁcit is expansionary.

Question 3

In the aggregate expenditures model, it is assumed that investment

Accepted Answer

A)   automatically changes in response to changes in real GDP.
B)   changes by less in percentage terms than changes in real GDP.
C)   does not respond to changes in interest rates.
D)   does not change when real GDP changes.

Question 4

Other things equal, an increase in an economy's exports will

Accepted Answer

A)   lower the marginal propensity to import.
B)   have no effect on domestic GDP because imports will change by an offsetting amount.
C)   decrease its domestic aggregate expenditures and therefore decrease its equilibrium GDP.
D)   increase its domestic aggregate expenditures and therefore increase its equilibrium GDP.

Question 5

Gross Domestic Product  Consumption $100$100200160300220400280500340600440 Expected Rate of Return  Amount of Investment 15%$01240980612031600200\begin{array}{l}\begin{array} { | c | c | } \hline 	ext { Gross Domestic Product } & 	ext { Consumption } \\hline \$ 100 & \$ 100 \\hline 200 & 160 \\hline 300 & 220 \\hline 400 & 280 \\hline 500 & 340 \\hline 600 & 440 \\hline\end{array}\\\begin{array} { | c | c | } \hline 	ext { Expected Rate of Return } & 	ext { Amount of Investment } \\hline 15 \% & \$ 0 \\hline 12 & 40 \\hline 9 & 80 \\hline 6 & 120 \\hline 3 & 160 \\hline 0 & 200 \\hline\end{array}\end{array} Gross Domestic Product $100200300400500600​ Consumption $100160220280340440​​ Expected Rate of Return 15%129630​ Amount of Investment $04080120160200​​​  Refer to the tables of information for a private closed economy. If the real interest rate is 9 percent, the equilibrium GDP will be

Accepted Answer

A)   $600.
B)   $500.
C)   $400.
D)   $300.

Question 6

Refer to the 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.

Exam 11: The Aggregate Expenditures Model

If unintended increases in business inventories occur, we can expect

Correct Answer
verified

Refer to the diagram. The level of government spending

Correct Answer
verified

Which of the following statements is incorrect?

Correct Answer
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Correct Answer
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Other things equal, an increase in an economy's exports will

Correct Answer
verified

In the aggregate expenditures model, it is assumed that investment

Correct Answer
verified

Exam 11: The Aggregate Expenditures Model

If unintended increases in business inventories occur, we can expect

Correct AnswerverifiedShow Answer

Refer to the diagram. The level of government spending

Correct AnswerverifiedShow Answer

Which of the following statements is incorrect?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Other things equal, an increase in an economy's exports will

Correct AnswerverifiedShow Answer

In the aggregate expenditures model, it is assumed that investment

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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