Question 1

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.

Question 2

During the recession of 2008 - 2009:

Accepted Answer

A)   the federal government undertook various policies intended to stimulate private spending and investment.
B)   the federal government undertook various policies that ultimately resulted in an inflationary expenditure gap.
C)   the federal government was able to achieve a balanced budget even though it undertook various policies to stimulate the economy.
D)   the federal government took no action to stimulate the economy, and instead left it to the private sector to try to eliminate the recessionary gap.

Question 3

In reality, if a nation devalues its currency, then the final result will be that:

Accepted Answer

A)   net exports and GDP will increase.
B)   net exports and GDP will decrease.
C)   there will be is no long term effect on net exports and GDP.
D)   there will be a decrease in imports and an increase in GDP.

Question 4

-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.

Question 5

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.

Question 6

-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.

Question 7

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. D

Question 8

The multiplier for the above economy is:

Accepted Answer

A)   4.60.
B)   3.33.
C)   5.00.
D)   4.00.

Question 9

Which of the following statements is correct for a private closed economy?

Accepted Answer

A)   Saving equals planned investment only at the equilibrium level of domestic output.
B)   All levels of domestic output where planned investment exceeds saving will be too high for equilibrium.
C)   Planned and actual investment are identical at all possible levels of domestic output.
D)   Saving equals actual investment only at the equilibrium level of domestic output. A

Question 10

If lump-sum taxes are decreased by $10 billion and the equilibrium GDP increases by $40 billion as a result, we can conclude that:

Accepted Answer

A)   the expenditures multiplier is 4.
B)   the MPC for this economy is .8.
C)   the MPC for this economy is .6.
D)   the expenditures multiplier is 3.

Question 11

In an aggregate expenditures diagram the imposition of a lump-sum tax (T)  will:

Accepted Answer

A)   not affect the C + Ig + Xn line.
B)   shift the C + Ig + Xn line upward by an amount equal to T.
C)   shift the C + Ig + Xn line downward by an amount equal to T.
D)   shift the C + Ig + Xn line downward by an amount equal to T × MPC.

Question 12

-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.

Question 13

-Refer to the above diagram. The impact of the public sector on the equilibrium GDP:

Accepted Answer

A)   is expansionary.
B)   is contractionary.
C)   is neutral.
D)   cannot be determined from the information given.

Question 14

The table shows the consumption schedule for a hypothetical economy. All figures are in billions of dollars.
 
-Refer to the above table. If taxes were zero, government purchases of goods and services $10, planned investment $6, and net exports zero, equilibrium real GDP would be:

Accepted Answer

A)   $620.
B)   $630.
C)   $640.
D)   $650. B

Question 15

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.

Question 16

All else equal, a large decline in the real interest rate will shift the:

Accepted Answer

A)   investment-demand curve leftward.
B)   investment-demand curve rightward.
C)   investment schedule upward.
D)   investment schedule downward.

Question 17

Which of the following will cause the investment schedule to shift downward?

Accepted Answer

A)   an increase in the real interest rate
B)   a decline in wage rates
C)   a significant decline in the real interest rate
D)   a new technological advance which cuts the price of steel by one-half

Question 18

A "recessionary expenditure gap" is:

Accepted Answer

A)   the amount by which the full-employment GDP exceeds equilibrium GDP.
B)   the amount by which aggregate expenditures fall short of those required to achieve the full-employment GDP.
C)   the amount by which investment exceeds saving at the full-employment GDP.
D)   the amount by which aggregate expenditures exceed the full-employment level of domestic output.

Question 19

At the equilibrium GDP for an open economy:

Accepted Answer

A)   net exports may be either positive or negative.
B)   imports will always exceed exports.
C)   exports will always exceed imports.
D)   exports and imports will be equal.

Question 20

The letters Y, Ca, Ig, Xn, G, and T stand for GDP, consumption, gross investment, net exports, government purchases, and net taxes respectively. Figures are in billions of dollars.
Ca = 25 + .75(Y - T ) 
Ig = Ig0 = 50
Xn = Xn0 = 10
G = G0 = 70
T = T0 = 30
-Refer to the above information. The equilibrium level of GDP for this economy is:

Accepted Answer

A)   $600.
B)   $530.
C)   $415.
D)   $400.

Exam 9: The Aggregate Expenditures Model

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

Correct Answer
verified

During the recession of 2008 - 2009:

Correct Answer
verified

In reality, if a nation devalues its currency, then the final result will be that:

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

-Refer to the above diagram. The sizes of the multipliers associated with changes in investment and government spending in this economy:

Correct Answer
verified

Actual investment may be defined as:

Correct Answer
verified
D

The multiplier for the above economy is:

Correct Answer
verified

Which of the following statements is correct for a private closed economy?

Correct Answer
verified
A

If lump-sum taxes are decreased by $10 billion and the equilibrium GDP increases by $40 billion as a result, we can conclude that:

Correct Answer
verified

In an aggregate expenditures diagram the imposition of a lump-sum tax (T) will:

Correct Answer
verified

-The above economy is characterized by:

Correct Answer
verified

-Refer to the above diagram. The impact of the public sector on the equilibrium GDP:

Correct Answer
verified

The table shows the consumption schedule for a hypothetical economy. All figures are in billions of dollars. -Refer to the above table. If taxes were zero, government purchases of goods and services $10, planned investment $6, and net exports zero, equilibrium real GDP would be:

Correct Answer
verified
B

Taxes represent:

Correct Answer
verified

All else equal, a large decline in the real interest rate will shift the:

Correct Answer
verified

Which of the following will cause the investment schedule to shift downward?

Correct Answer
verified

A "recessionary expenditure gap" is:

Correct Answer
verified

At the equilibrium GDP for an open economy:

Correct Answer
verified

Correct Answer
verified

Exam 9: The Aggregate Expenditures Model

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

Correct AnswerverifiedShow Answer

During the recession of 2008 - 2009:

Correct AnswerverifiedShow Answer

In reality, if a nation devalues its currency, then the final result will be that:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

-Refer to the above diagram. The sizes of the multipliers associated with changes in investment and government spending in this economy:

Correct AnswerverifiedShow Answer

Actual investment may be defined as:

Correct AnswerverifiedD

The multiplier for the above economy is:

Correct AnswerverifiedShow Answer

Which of the following statements is correct for a private closed economy?

Correct AnswerverifiedA

If lump-sum taxes are decreased by $10 billion and the equilibrium GDP increases by $40 billion as a result, we can conclude that:

Correct AnswerverifiedShow Answer

In an aggregate expenditures diagram the imposition of a lump-sum tax (T) will:

Correct AnswerverifiedShow Answer

-The above economy is characterized by:

Correct AnswerverifiedShow Answer

-Refer to the above diagram. The impact of the public sector on the equilibrium GDP:

Correct AnswerverifiedShow Answer

The table shows the consumption schedule for a hypothetical economy. All figures are in billions of dollars. -Refer to the above table. If taxes were zero, government purchases of goods and services $10, planned investment $6, and net exports zero, equilibrium real GDP would be:

Correct AnswerverifiedB

Taxes represent:

Correct AnswerverifiedShow Answer

All else equal, a large decline in the real interest rate will shift the:

Correct AnswerverifiedShow Answer

Which of the following will cause the investment schedule to shift downward?

Correct AnswerverifiedShow Answer

A "recessionary expenditure gap" is:

Correct AnswerverifiedShow Answer

At the equilibrium GDP for an open economy:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
D

Correct Answer
verified

Correct Answer
verified
A

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
B

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified