Question 1

If the government collects taxes using a constant income tax rate t, then an increase in t will result in

Accepted Answer

A)  no change to disposable income. 
B)  an unknown change in disposable income. 
C)  a higher disposable income. 
D)  a lower disposable income. 
A)  no change to disposable income. 
B)  an unknown change in disposable income. 
C)  a higher disposable income. 
D)  a lower disposable income.

Question 2

An increase in the marginal propensity to consume will

Accepted Answer

A)  cause the consumption function to be flatter. 
B)  cause the consumption function to be steeper. 
C)  shift the consumption function downwards. 
D)  shift the consumption function upwards. 
A)  cause the consumption function to be flatter. 
B)  cause the consumption function to be steeper. 
C)  shift the consumption function downwards. 
D)  shift the consumption function upwards.

Question 3

If consumption is $5,000 when income is $5,000, and consumption increases to $10,000 when income increases to $12,000, the marginal propensity to save is:

Accepted Answer

A)  0.71. 
B)  0.43. 
C)  0.33. 
D)  0.29. 
A)  0.71. 
B)  0.43. 
C)  0.33. 
D)  0.29.

Question 4

If the consumption function is C = 80 + 0.6Y, then the autonomous consumption equals:

Accepted Answer

A)  - 0.4. 
B)  0.4. 
C)  80. 
D)  0.6. 
A)  - 0.4. 
B)  0.4. 
C)  80. 
D)  0.6.

Question 5

Assume that the consumption function is C = 200 billion + 0.8Y. When Y equals $200 billion, then saving equals _______ billion.

Accepted Answer

A)  $- 100 
B)  $140 
C)  $0 
D)  $- 160 
A)  $- 100 
B)  $140 
C)  $0 
D)  $- 160

Question 6

When the consumption function is expressed as C = Ca + b (1- t)y, taxes are collected by the government as:

Accepted Answer

A)  a constant proportion of income y. 
B)  a decreasing proportion of income y. 
C)  an increasing proportion of income y. 
D)  a lumpsum, and independent of y. 
A)  a constant proportion of income y. 
B)  a decreasing proportion of income y. 
C)  an increasing proportion of income y. 
D)  a lumpsum, and independent of y.

Question 7

Figure 11.4
-Refer to Figure 11.4. On Both expenditure lines C+I+G0 and C+I+G1, the mpc is:

Accepted Answer

A)  1/2. 
B)  1/3. 
C)  3/2. 
D)  2/3. 
A)  1/2. 
B)  1/3. 
C)  3/2. 
D)  2/3.

Question 8

An unexpected increase in inventories has:

Accepted Answer

A)  no effect on future production. 
B)  a negative effect on future production. 
C)  a positive effect on future production. 
D)  a negative effect on current production. 
A)  no effect on future production. 
B)  a negative effect on future production. 
C)  a positive effect on future production. 
D)  a negative effect on current production.

Question 9

Which of the following is not an example of the use of activist Keynesian fiscal policy in recent times?

Accepted Answer

A)  In 1994, the Japanese government formulated a plan to increase spending and cut taxes in order to help their ailing economy. 
B)  In 2001, George W. Bush led the effort for a tax cut to provide stimulus to a sluggish economy. 
C)  In the late 1990s the Chinese government increased spending to prevent severe economic activity. 
D)  In 2001- 2003, the Federal Reserve lowered the interest rate several times to help spur investments and get the economy out of its sluggish growth. 
A)  In 1994, the Japanese government formulated a plan to increase spending and cut taxes in order to help their ailing economy. 
B)  In 2001, George W. Bush led the effort for a tax cut to provide stimulus to a sluggish economy. 
C)  In the late 1990s the Chinese government increased spending to prevent severe economic activity. 
D)  In 2001- 2003, the Federal Reserve lowered the interest rate several times to help spur investments and get the economy out of its sluggish growth.

Question 10

-Refer to Table 11.2. At an aggregate output level of $600, the unplanned inventory change is:

Accepted Answer

A)  - $100. 
B)  - $50. 
C)  $0. 
D)  $50. 
A)  - $100. 
B)  - $50. 
C)  $0. 
D)  $50.

Question 11

If autonomous consumption (Ca) increases, the slope of the consumption function becomes steeper.

Accepted Answer

A) True 
 B)False

Question 12

Suppose that planned expenditure exceeds aggregate output. Explain the process by which the economy moves toward equilibrium.

Accepted Answer

If planned aggregate expenditure exceeds

Question 13

In an open economy with government spending, derive the formula for equilibrium output.

Accepted Answer

y = C + I + G + X - M
y = Ca +

Question 14

-Refer to Table 11.2. At an aggregate output level of $200, what will change in order to bring the economy to equilibrium?

Accepted Answer

A)  Inventories must increase. 
B)  Investment must decrease. 
C)  Consumption must decrease. 
D)  Output must increase. 
A)  Inventories must increase. 
B)  Investment must decrease. 
C)  Consumption must decrease. 
D)  Output must increase.

Question 15

Recall Application 1, "Falling Home Prices, the Wealth Effect, and Decreased Consumer Spending," to answer the following questions:
-According to the application, from 1997- 2006, the nationwide increase in home values generated approximately _______ in consumer wealth.

Accepted Answer

A)  a $1.5 trillion increase 
B)  a $6.5 trillion increase 
C)  a $26.5 trillion increase 
D)  a $9.5 trillion increase 
A)  a $1.5 trillion increase 
B)  a $6.5 trillion increase 
C)  a $26.5 trillion increase 
D)  a $9.5 trillion increase

Question 16

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

Accepted Answer

A)  income tax rate. 
B)  sales tax rate. 
C)  net tax rate. 
D)  lump- sum tax rate. 
A)  income tax rate. 
B)  sales tax rate. 
C)  net tax rate. 
D)  lump- sum tax rate.

Question 17

Bill's income is $1,000 and his net taxes are $250. His disposable income is:

Accepted Answer

A)  $1,250. 
B)  $750. 
C)  $500. 
D)  - $250. 
A)  $1,250. 
B)  $750. 
C)  $500. 
D)  - $250.

Question 18

If C = 500 + 0.5Y and I = 400, then the equilibrium level of income is:

Accepted Answer

A)  1,800. 
B)  900. 
C)  4,000. 
D)  2,500. 
A)  1,800. 
B)  900. 
C)  4,000. 
D)  2,500.

Question 19

Suppose investment increases by $200 and that the equilibrium level of output rises by $400. Given this information, we know that:

Accepted Answer

A)  the marginal propensity to save = 0.4. 
B)  the marginal propensity to save = 0.1. 
C)  the marginal propensity to save = 0.25. 
D)  the marginal propensity to save = 0.5. 
A)  the marginal propensity to save = 0.4. 
B)  the marginal propensity to save = 0.1. 
C)  the marginal propensity to save = 0.25. 
D)  the marginal propensity to save = 0.5.

Question 20

If the marginal propensity to consume is 0.8 and marginal propensity to import is 0.3, then the multiplier in an open economy is:

Accepted Answer

A)  .9. 
B)  2. 
C)  5. 
D)  3.3. 
A)  .9. 
B)  2. 
C)  5. 
D)  3.3.

If the government collects taxes using a constant income tax rate t, then an increase in t will result in

An increase in the marginal propensity to consume will

If consumption is $5,000 when income is $5,000, and consumption increases to $10,000 when income increases to $12,000, the marginal propensity to save is:

If the consumption function is C = 80 + 0.6Y, then the autonomous consumption equals:

Assume that the consumption function is C = 200 billion + 0.8Y. When Y equals $200 billion, then saving equals _______ billion.

When the consumption function is expressed as C = Ca + b (1- t)y, taxes are collected by the government as:

Figure 11.4 -Refer to Figure 11.4. On Both expenditure lines C+I+G₀and C+I+G₁, the mpc is:

An unexpected increase in inventories has:

Which of the following is not an example of the use of activist Keynesian fiscal policy in recent times?

-Refer to Table 11.2. At an aggregate output level of $600, the unplanned inventory change is:

If autonomous consumption (C_a) increases, the slope of the consumption function becomes steeper.

Suppose that planned expenditure exceeds aggregate output. Explain the process by which the economy moves toward equilibrium.

In an open economy with government spending, derive the formula for equilibrium output.

-Refer to Table 11.2. At an aggregate output level of $200, what will change in order to bring the economy to equilibrium?

Recall Application 1, "Falling Home Prices, the Wealth Effect, and Decreased Consumer Spending," to answer the following questions: -According to the application, from 1997- 2006, the nationwide increase in home values generated approximately _______ in consumer wealth.

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

Bill's income is $1,000 and his net taxes are $250. His disposable income is:

If C = 500 + 0.5Y and I = 400, then the equilibrium level of income is:

Suppose investment increases by $200 and that the equilibrium level of output rises by $400. Given this information, we know that:

If the marginal propensity to consume is 0.8 and marginal propensity to import is 0.3, then the multiplier in an open economy is:

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 government collects taxes using a constant income tax rate t, then an increase in t will result in

An increase in the marginal propensity to consume will

If consumption is $5,000 when income is $5,000, and consumption increases to $10,000 when income increases to $12,000, the marginal propensity to save is:

If the consumption function is C = 80 + 0.6Y, then the autonomous consumption equals:

Assume that the consumption function is C = 200 billion + 0.8Y. When Y equals $200 billion, then saving equals _______ billion.

When the consumption function is expressed as C = Ca + b (1- t)y, taxes are collected by the government as:

Figure 11.4 -Refer to Figure 11.4. On Both expenditure lines C+I+G0 and C+I+G1, the mpc is:

An unexpected increase in inventories has:

Which of the following is not an example of the use of activist Keynesian fiscal policy in recent times?

-Refer to Table 11.2. At an aggregate output level of $600, the unplanned inventory change is:

If autonomous consumption (Ca) increases, the slope of the consumption function becomes steeper.

Suppose that planned expenditure exceeds aggregate output. Explain the process by which the economy moves toward equilibrium.

In an open economy with government spending, derive the formula for equilibrium output.

-Refer to Table 11.2. At an aggregate output level of $200, what will change in order to bring the economy to equilibrium?

Recall Application 1, "Falling Home Prices, the Wealth Effect, and Decreased Consumer Spending," to answer the following questions: -According to the application, from 1997- 2006, the nationwide increase in home values generated approximately _______ in consumer wealth.

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

Bill's income is $1,000 and his net taxes are $250. His disposable income is:

If C = 500 + 0.5Y and I = 400, then the equilibrium level of income is:

Suppose investment increases by $200 and that the equilibrium level of output rises by $400. Given this information, we know that:

If the marginal propensity to consume is 0.8 and marginal propensity to import is 0.3, then the multiplier in an open economy is:

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. On Both expenditure lines C+I+G₀and C+I+G₁, the mpc is:

If autonomous consumption (C_a) increases, the slope of the consumption function becomes steeper.