Question 1

An expected change in any of the four GDP components has no effect on the forecast for real GDP.

Accepted Answer

A) True 
 B)False

Question 2

Does it make a difference whether disposable income is used instead of real GDP when working with the relationship between aggregate consumption and aggregate income? Explain.

Accepted Answer

At the aggregate level, it does not make

Question 3

If spending is greater than output, a firm's inventories will increase, and output will decrease.

Accepted Answer

A) True 
 B)False

Question 4

Disposable income and real GDP behave the same way because

Accepted Answer

A) taxes and transfer payments are not proportional to income. 
B) disposable income is the same as real GDP. 
C) taxes and transfer payments are less than 10 percent of income. 
D) taxes and transfer payments are nearly proportional to income. 
E) taxes and transfer payments are a negligible fraction of income. 
A) taxes and transfer payments are not proportional to income. 
B) disposable income is the same as real GDP. 
C) taxes and transfer payments are less than 10 percent of income. 
D) taxes and transfer payments are nearly proportional to income. 
E) taxes and transfer payments are a negligible fraction of income.

Question 5

Over the period from 1982 to 2007, economic fluctuations

Accepted Answer

A) have become more severe than in the past. 
B) have occurred more often than in the past. 
C) have not changed in severity when compared to past economic fluctuations. 
D) have become less severe than in the past. 
E) have occurred just as often as in the past. 
A) have become more severe than in the past. 
B) have occurred more often than in the past. 
C) have not changed in severity when compared to past economic fluctuations. 
D) have become less severe than in the past. 
E) have occurred just as often as in the past.

Question 6

If spending as given by the expenditure line is greater than output, then spending is too high, and the expenditure line will shift down until equilibrium is achieved.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following statements is true?

Accepted Answer

A) Most conditional forecasts assume that a change in government purchases has no effect on the other spending components of real GDP. 
B) Only consumption spending is affected by changes in government purchases. 
C) A change in government purchases has no effect on the other spending components of real GDP. 
D) Consumption, investment, and net export spending are all likely to change as a result of a change in government purchases. 
E) An increase in government purchases by $10 million will cause real GDP to increase by exactly $10 million. 
A) Most conditional forecasts assume that a change in government purchases has no effect on the other spending components of real GDP. 
B) Only consumption spending is affected by changes in government purchases. 
C) A change in government purchases has no effect on the other spending components of real GDP. 
D) Consumption, investment, and net export spending are all likely to change as a result of a change in government purchases. 
E) An increase in government purchases by $10 million will cause real GDP to increase by exactly $10 million.

Question 8

An improvement in consumer confidence will affect the growth rate of the economy.

Accepted Answer

A) True 
 B)False

Question 9

One year-ahead-forecasts for real GDP

Accepted Answer

A) reflect forecasters' beliefs about the determinants of potential GDP over the next year. 
B) are usually equal to the current year's GDP. 
C) are usually equal to a weighted average of real GDP over the past five years. 
D) reflect what forecasters believe will happen to the different spending components of real GDP. 
E) have no real use and are seldom done. 
A) reflect forecasters' beliefs about the determinants of potential GDP over the next year. 
B) are usually equal to the current year's GDP. 
C) are usually equal to a weighted average of real GDP over the past five years. 
D) reflect what forecasters believe will happen to the different spending components of real GDP. 
E) have no real use and are seldom done.

Question 10

Suppose real GDP in 2015 is $6,105 billion. If the forecasted rate of growth for the year 2016 is 2.75 percent, then in the year 2016, real GDP will be

Accepted Answer

A) $6,500 billion. 
B) $6,273 billion. 
C) $7,784 billion. 
D) $5,942 billion. 
E) $6,300 billion. 
A) $6,500 billion. 
B) $6,273 billion. 
C) $7,784 billion. 
D) $5,942 billion. 
E) $6,300 billion.

Question 11

A conditional forecast of real GDP is

Accepted Answer

A) a forecast using one of the 54 forecasts listed in Blue Chip Economic Indicators. 
B) a forecast based on potential GDP as opposed to the spending components of GDP. 
C) another name for the Blue Chip Consensus forecast. 
D) a forecast that explains what real GDP will be under alternative assumptions about the spending components. 
E) a forecast that is conditional on the time period in which it was made. 
A) a forecast using one of the 54 forecasts listed in Blue Chip Economic Indicators. 
B) a forecast based on potential GDP as opposed to the spending components of GDP. 
C) another name for the Blue Chip Consensus forecast. 
D) a forecast that explains what real GDP will be under alternative assumptions about the spending components. 
E) a forecast that is conditional on the time period in which it was made.

Question 12

Income has a strong effect on consumption during a recession.

Accepted Answer

A) True 
 B)False

Question 13

Answer the questions below:

Accepted Answer

The answer of Answer the questions below:
  
...

Question 14

Suppose the economy is booming and many firms begin to experience an increase in the demand for their goods and services.

Accepted Answer

The answer of Suppose the economy is booming and many...

Question 15

Liquidity constraints prevent people from engaging in consumption smoothing.

Accepted Answer

A) True 
 B)False

Question 16

The slope of the expenditure line is

Accepted Answer

A) greater than the slope of the 45-degree line. 
B) equal to 1. 
C) equal to the MPC. 
D) the same as the slope of the 45-degree line. 
E) equal to one-MPC. 
A) greater than the slope of the 45-degree line. 
B) equal to 1. 
C) equal to the MPC. 
D) the same as the slope of the 45-degree line. 
E) equal to one-MPC.

Question 17

Sketch the 45-degree line and the expenditure line on a diagram. What determines the slope of each line? Explain why the point of intersection is the only possible equilibrium point. Use this diagram to show what happens to the level of income if government purchases decline.

Accepted Answer

The slope of the expenditure line is the

Question 18

The forward-looking consumption model assumes that people make consumption decisions based on

Accepted Answer

A) their mood. 
B) their current income. 
C) their anticipation of their future income. 
D) their income taxes in the current year. 
E) their perceptions of other people's behavior. 
A) their mood. 
B) their current income. 
C) their anticipation of their future income. 
D) their income taxes in the current year. 
E) their perceptions of other people's behavior.

Question 19

Which of the following statements best describes what is meant by a spending balance?

Accepted Answer

A) People's consumption is described by the consumption function. 
B) Consumption and spending are the same, and people's consumption is described by the consumption function. 
C) Income and output are the same. 
D) Consumption and income are the same, and people's consumption is described by the consumption function. 
E) Income and spending are the same, and people's consumption is described by the consumption function. 
A) People's consumption is described by the consumption function. 
B) Consumption and spending are the same, and people's consumption is described by the consumption function. 
C) Income and output are the same. 
D) Consumption and income are the same, and people's consumption is described by the consumption function. 
E) Income and spending are the same, and people's consumption is described by the consumption function.

Question 20

Which of the following is true?

Accepted Answer

A) Potential GDP is determined by the available supply of labor, capital, and technology only in the long run. 
B) Real GDP is determined by aggregate demand only in the short run. 
C) Potential GDP is equal to aggregate demand in the long run. 
D) Real GDP is determined by aggregate demand only in the long run. 
E) Potential and real GDP are always equal. 
A) Potential GDP is determined by the available supply of labor, capital, and technology only in the long run. 
B) Real GDP is determined by aggregate demand only in the short run. 
C) Potential GDP is equal to aggregate demand in the long run. 
D) Real GDP is determined by aggregate demand only in the long run. 
E) Potential and real GDP are always equal.

Exam 23: The Nature and Causes of Economic Fluctuations

An expected change in any of the four GDP components has no effect on the forecast for real GDP.

Does it make a difference whether disposable income is used instead of real GDP when working with the relationship between aggregate consumption and aggregate income? Explain.

If spending is greater than output, a firm's inventories will increase, and output will decrease.

Disposable income and real GDP behave the same way because

Over the period from 1982 to 2007, economic fluctuations

If spending as given by the expenditure line is greater than output, then spending is too high, and the expenditure line will shift down until equilibrium is achieved.

Which of the following statements is true?

An improvement in consumer confidence will affect the growth rate of the economy.

One year-ahead-forecasts for real GDP

Suppose real GDP in 2015 is $6,105 billion. If the forecasted rate of growth for the year 2016 is 2.75 percent, then in the year 2016, real GDP will be

A conditional forecast of real GDP is

Income has a strong effect on consumption during a recession.

Answer the questions below:

Suppose the economy is booming and many firms begin to experience an increase in the demand for their goods and services.

Liquidity constraints prevent people from engaging in consumption smoothing.

The slope of the expenditure line is

Sketch the 45-degree line and the expenditure line on a diagram. What determines the slope of each line? Explain why the point of intersection is the only possible equilibrium point. Use this diagram to show what happens to the level of income if government purchases decline.

The forward-looking consumption model assumes that people make consumption decisions based on

Which of the following statements best describes what is meant by a spending balance?

Which of the following is true?

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

Subtleties of the Supply and Demand Model

The Demand Curve and the Behavior of Consumers

The Supply Curve and the Behavior of Firms

The Efficiency of Markets

Costs and the Changes at Firms Over Time

The Rise and Fall of Industries

Monopoly

Product Differentiation, Monopolistic Competition, and Oligopoly

Antitrust Policy and Regulation

Labor Markets

Taxes, Transfers, and Income Distribution

Public Goods, Externalities, and Government Behavior

Capital and Financial Markets

Macroeconomics: the Big Picture

Measuring the Production, Income, and Spending of Nations

The Spending Allocation Model

Unemployment and Employment

Productivity and Economic Growth

Money and Inflation

The Economic Fluctuations Model

Using the Economic Fluctuations Model

Fiscal Policy

Monetary Policy

Economic Growth Around the World

International Trade

International Finance

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