Question 1

If the consumption function is C = 80 + 0.6Y, then the marginal propensity to consume equals:

Accepted Answer

A)  0.4. 
B)  - 0.4. 
C)  0.5. 
D)  0.6. 
A)  0.4. 
B)  - 0.4. 
C)  0.5. 
D)  0.6.

Question 2

In the most basic model of the economy, equilibrium output is achieved when:

Accepted Answer

A)  there is no change in inventories. 
B)  C+I equals output. 
C)  the C+I line intersects the 45 degree line. 
D)  all of the above are correct. 
A)  there is no change in inventories. 
B)  C+I equals output. 
C)  the C+I line intersects the 45 degree line. 
D)  all of the above are correct.

Question 3

An increase in the marginal propensity to import will cause equilibrium GDP to:

Accepted Answer

A)  increase if the marginal propensity to import is negative. 
B)  increase. 
C)  decrease if the marginal propensity to import is negative. 
D)  decrease. 
A)  increase if the marginal propensity to import is negative. 
B)  increase. 
C)  decrease if the marginal propensity to import is negative. 
D)  decrease.

Question 4

Another term for the total demand for goods and services is "planned expenditures."

Accepted Answer

A) True 
 B)False

Question 5

Figure 11.1
-Refer to Figure 11.1. For the economy in general, which of the following points correspond to an equilibrium?

Accepted Answer

A)  a 
B)  b 
C)  c 
D)  a and d 
A)  a 
B)  b 
C)  c 
D)  a and d

Question 6

Fiscal policy generally takes the form of regulations specifying the maximum amount by which the money supply can be changed.

Accepted Answer

A) True 
 B)False

Question 7

When the consumption function is expressed as C = Ca + b (1- t)y, "b(1- t)" is the

Accepted Answer

A)  adjusted MPC. 
B)  multiplier. 
C)  MPC. 
D)  income tax. 
A)  adjusted MPC. 
B)  multiplier. 
C)  MPC. 
D)  income tax.

Question 8

Identify the factors that would shift the autonomous consumption.

Accepted Answer

1) Changes in consumer wealth will cause

Question 9

An example of an automatic stabilizer is:

Accepted Answer

A)  the indexation of social security benefits to the consumer price index. 
B)  the purchase of military equipment. 
C)  changing the tax laws to increase the marginal tax rates. 
D)  the food stamp program. 
A)  the indexation of social security benefits to the consumer price index. 
B)  the purchase of military equipment. 
C)  changing the tax laws to increase the marginal tax rates. 
D)  the food stamp program.

Question 10

-Assume a closed economy with no government. Why doesn't equilibrium exist at aggregate output level Y = 400 in Table 11.4? Why doesn't equilibrium exist at aggregate output level Y = 1,000 in Table 11.4?

Accepted Answer

At aggregate output level Y = 400, the l

Question 11

If the marginal propensity to consume is 0.75 and marginal propensity to import is 0.15, then the multiplier in an open economy is:

Accepted Answer

A)  4. 
B)  10. 
C)  8.3. 
D)  2.5. 
A)  4. 
B)  10. 
C)  8.3. 
D)  2.5.

Question 12

Figure 11.4
-Refer to Figure 11.4. Between expenditure lines C+I+G0 and C+I+G1, government purchases increased by:

Accepted Answer

A)  $400. 
B)  $600. 
C)  $1400. 
D)  $200. 
A)  $400. 
B)  $600. 
C)  $1400. 
D)  $200.

Question 13

Assume that an economy is represented by the following:
C = 100 + 0.9(Y - T) T = 1000
G = 1000
I = 200
(a) Calculate the equilibrium level of output.
(b) Based on your analysis in Part (a), calculate the levels of consumption and saving that occur when the economy is in equilibrium.
(c) Now suppose planned investment rises by 100. Calculate the new equilibrium level of income. Given your answer, what is the size of the multiplier?
(d) What is the size of the tax multiplier for this economy?

Accepted Answer

(a) Y = 4,000
(b) C = 2,800 an

Question 14

For the consumption function, C = Ca + bY, Ca represents:

Accepted Answer

A)  the level of consumption that is independent from income. 
B)  aggregate consumption. 
C)  the slope of the line. 
D)  aggregate output. 
A)  the level of consumption that is independent from income. 
B)  aggregate consumption. 
C)  the slope of the line. 
D)  aggregate output.

Question 15

The marginal propensity to consume is the change in consumption divided by the change in income.

Accepted Answer

A) True 
 B)False

Question 16

The level of consumption that does not depend on income is called:

Accepted Answer

A)  the marginal propensity to consume. 
B)  the consumption function. 
C)  independent income. 
D)  autonomous consumption. 
A)  the marginal propensity to consume. 
B)  the consumption function. 
C)  independent income. 
D)  autonomous consumption.

Question 17

If the consumption function is C = 100 + 0.8Y, then the Savings Function is

Accepted Answer

A)  S = 100 + 0.8 Y. 
B)  S = - 100 + 0.8Y. 
C)  S = - 100 + 0.2Y. 
D)  S = 100 + 0.2Y. 
A)  S = 100 + 0.8 Y. 
B)  S = - 100 + 0.8Y. 
C)  S = - 100 + 0.2Y. 
D)  S = 100 + 0.2Y.

Question 18

-Refer to Table 11.6. If net taxes (T) increases from 200 to 300 , the new equilibrium output is:

Accepted Answer

A)  $5700. 
B)  $5600. 
C)  $6000. 
D)  $5500. 
A)  $5700. 
B)  $5600. 
C)  $6000. 
D)  $5500.

Question 19

When the consumption function is expressed as C = 200 + .75(1- t)y where t =0.2, then the adjusted MPC is

Accepted Answer

A)  0.75. 
B)  0.15. 
C)  0.6. 
D)  0.8. 
A)  0.75. 
B)  0.15. 
C)  0.6. 
D)  0.8.

Question 20

The higher your income, the lower your consumption is likely to be.

Accepted Answer

A) True 
 B)False

If the consumption function is C = 80 + 0.6Y, then the marginal propensity to consume equals:

In the most basic model of the economy, equilibrium output is achieved when:

An increase in the marginal propensity to import will cause equilibrium GDP to:

Another term for the total demand for goods and services is "planned expenditures."

Figure 11.1 -Refer to Figure 11.1. For the economy in general, which of the following points correspond to an equilibrium?

Fiscal policy generally takes the form of regulations specifying the maximum amount by which the money supply can be changed.

When the consumption function is expressed as C = Ca + b (1- t)y, "b(1- t)" is the

Identify the factors that would shift the autonomous consumption.

An example of an automatic stabilizer is:

-Assume a closed economy with no government. Why doesn't equilibrium exist at aggregate output level Y = 400 in Table 11.4? Why doesn't equilibrium exist at aggregate output level Y = 1,000 in Table 11.4?

If the marginal propensity to consume is 0.75 and marginal propensity to import is 0.15, then the multiplier in an open economy is:

Figure 11.4 -Refer to Figure 11.4. Between expenditure lines C+I+G₀and C+I+G₁, government purchases increased by:

For the consumption function, C = Ca + bY, Ca represents:

The marginal propensity to consume is the change in consumption divided by the change in income.

The level of consumption that does not depend on income is called:

If the consumption function is C = 100 + 0.8Y, then the Savings Function is

-Refer to Table 11.6. If net taxes (T) increases from 200 to 300 , the new equilibrium output is:

When the consumption function is expressed as C = 200 + .75(1- t)y where t =0.2, then the adjusted MPC is

The higher your income, the lower your consumption is likely to be.

Introduction: What Is Economics

The Key Principles of Economics

Exchange and Markets

Demand, Supply, and Market Equilibrium

Measuring a Nations Production and Income

Unemployment and Inflation

The Economy at Full Employment

Why Do Economies Grow

Aggregate Demand and Aggregate Supply

Fiscal Policy

Investment and Financial Markets

Money and the Banking System

The Federal Reserve and Monetary Policy

Modern Macroeconomics: From the Short Run to the Long Run

The Dynamics of Inflation and Unemployment

Macroeconomic Policy Debates

International Trade and Public Policy

The World of International Finance

Filters

Exam 11: The Income-Expenditure Model

If the consumption function is C = 80 + 0.6Y, then the marginal propensity to consume equals:

In the most basic model of the economy, equilibrium output is achieved when:

An increase in the marginal propensity to import will cause equilibrium GDP to:

Another term for the total demand for goods and services is "planned expenditures."

Figure 11.1 -Refer to Figure 11.1. For the economy in general, which of the following points correspond to an equilibrium?

Fiscal policy generally takes the form of regulations specifying the maximum amount by which the money supply can be changed.

When the consumption function is expressed as C = Ca + b (1- t)y, "b(1- t)" is the

Identify the factors that would shift the autonomous consumption.

An example of an automatic stabilizer is:

-Assume a closed economy with no government. Why doesn't equilibrium exist at aggregate output level Y = 400 in Table 11.4? Why doesn't equilibrium exist at aggregate output level Y = 1,000 in Table 11.4?

If the marginal propensity to consume is 0.75 and marginal propensity to import is 0.15, then the multiplier in an open economy is:

Figure 11.4 -Refer to Figure 11.4. Between expenditure lines C+I+G0 and C+I+G1, government purchases increased by:

For the consumption function, C = Ca + bY, Ca represents:

The marginal propensity to consume is the change in consumption divided by the change in income.

The level of consumption that does not depend on income is called:

If the consumption function is C = 100 + 0.8Y, then the Savings Function is

-Refer to Table 11.6. If net taxes (T) increases from 200 to 300 , the new equilibrium output is:

When the consumption function is expressed as C = 200 + .75(1- t)y where t =0.2, then the adjusted MPC is

The higher your income, the lower your consumption is likely to be.

Introduction: What Is Economics

The Key Principles of Economics

Exchange and Markets

Demand, Supply, and Market Equilibrium

Measuring a Nations Production and Income

Unemployment and Inflation

The Economy at Full Employment

Why Do Economies Grow

Aggregate Demand and Aggregate Supply

Fiscal Policy

Investment and Financial Markets

Money and the Banking System

The Federal Reserve and Monetary Policy

Modern Macroeconomics: From the Short Run to the Long Run

The Dynamics of Inflation and Unemployment

Macroeconomic Policy Debates

International Trade and Public Policy

The World of International Finance

Filters

Figure 11.4 -Refer to Figure 11.4. Between expenditure lines C+I+G₀and C+I+G₁, government purchases increased by: