Question 1

An increase in the government expenditures will:

Accepted Answer

A)  shift the aggregate expenditures line upwards and shift the aggregate demand curve to the right. 
B)  shift the aggregate expenditures line downwards and shift the aggregate demand curve to the left. 
C)  shift the aggregate expenditures line upwards and shift the aggregate demand curve to the left. 
D)  shift the aggregate expenditures line downwards and shift the aggregate demand curve to the right. 
A)  shift the aggregate expenditures line upwards and shift the aggregate demand curve to the right. 
B)  shift the aggregate expenditures line downwards and shift the aggregate demand curve to the left. 
C)  shift the aggregate expenditures line upwards and shift the aggregate demand curve to the left. 
D)  shift the aggregate expenditures line downwards and shift the aggregate demand curve to the right.

Question 2

Recall Application 2, "Using Long-Term Macro Data to Measure Multipliers," to answer the following questions:
-According to the application, the reason why other studies found a strong correlation between government spending and GDP was:

Accepted Answer

A)  because government spending increased in response to an increase in GDP. 
B)  because the increase in GDP was caused by an increase in government spending. 
C)  because government spending lowered interest rates and increased investments. 
D)  A and C are correct. 
A)  because government spending increased in response to an increase in GDP. 
B)  because the increase in GDP was caused by an increase in government spending. 
C)  because government spending lowered interest rates and increased investments. 
D)  A and C are correct.

Question 3

Figure 11.2
-Refer to Figure 11.2. The consumption functions C1 and C2:

Accepted Answer

A)  differ in terms of the amount of consumption that does not depend on income. 
B)  have the same marginal propensity to consume. 
C)  have the same marginal propensity to save. 
D)  all of the above 
A)  differ in terms of the amount of consumption that does not depend on income. 
B)  have the same marginal propensity to consume. 
C)  have the same marginal propensity to save. 
D)  all of the above

Question 4

Uncertainty about the future is likely to:

Accepted Answer

A)  increase current consumption. 
B)  decrease current consumption 
C)  have no impact on current consumption. 
D)  either increase or decrease current consumption. 
A)  increase current consumption. 
B)  decrease current consumption 
C)  have no impact on current consumption. 
D)  either increase or decrease current consumption.

Question 5

If C = 100 + 0.6Y and I = 50, then the equilibrium level of income is:

Accepted Answer

A)  525. 
B)  390. 
C)  375. 
D)  450. 
A)  525. 
B)  390. 
C)  375. 
D)  450.

Question 6

The marginal propensity to consume can be negative.

Accepted Answer

A) True 
 B)False

Question 7

Assume that the consumption function is C = 200 + 0.8Y. The marginal propensity to save is:

Accepted Answer

A)  0.75. 
B)  0.25. 
C)  0.8. 
D)  0.2. 
A)  0.75. 
B)  0.25. 
C)  0.8. 
D)  0.2.

Question 8

If the marginal propensity to consume is 0.55, the tax multiplier is:

Accepted Answer

A)  - 1.22. 
B)  - 2.33. 
C)  - 2.22. 
D)  - 3.33. 
A)  - 1.22. 
B)  - 2.33. 
C)  - 2.22. 
D)  - 3.33.

Question 9

-Refer to Table 11.3. At an aggregate output level of $4,000 million, the unplanned inventory change is:

Accepted Answer

A)  0. 
B)  $200 million. 
C)  - $200 million. 
D)  - $20 million. 
A)  0. 
B)  $200 million. 
C)  - $200 million. 
D)  - $20 million.

Question 10

Recall Application 3, "John Maynard Keynes: A World Intellectual," to answer the following questions:
-According to the application, Keynes book The General Theory of Employment, Interest and Money was his last major written work.

Accepted Answer

A) True 
 B)False

Question 11

An increase in government spending will result in a:

Accepted Answer

A)  movement along the aggregate demand curve upwards. 
B)  movement along the aggregate demand curve downwards. 
C)  shift the aggregate expenditure line downwards. 
D)  shift the aggregate expenditure line upwards. 
A)  movement along the aggregate demand curve upwards. 
B)  movement along the aggregate demand curve downwards. 
C)  shift the aggregate expenditure line downwards. 
D)  shift the aggregate expenditure line upwards.

Question 12

-Refer to Table 11.6. In this example, the tax multiplier is:

Accepted Answer

A)  - 1. 
B)  - 2. 
C)  1. 
D)  0.5. 
A)  - 1. 
B)  - 2. 
C)  1. 
D)  0.5.

Question 13

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 averaged:

Accepted Answer

A)  80 percent. 
B)  90 percent. 
C)  150 percent. 
D)  200 percent. 
A)  80 percent. 
B)  90 percent. 
C)  150 percent. 
D)  200 percent.

Question 14

A tax cut of $10 billion will have less effect on the economy than an increase in government spending of $10 billion.

Accepted Answer

A) True 
 B)False

Question 15

If both government spending and taxes increase by an equal amount at the same time, GDP will:

Accepted Answer

A)  decrease. 
B)  remain the same. 
C)  increase. 
D)  none of the above are true, it is impossible to say. 
A)  decrease. 
B)  remain the same. 
C)  increase. 
D)  none of the above are true, it is impossible to say.

Question 16

If an economy's marginal propensity to consume is 0.6 and the marginal propensity to import is 0.1, then the multiplier in an open economy is

Accepted Answer

A)  1.5. 
B)  2. 
C)  2.5. 
D)  0.5. 
A)  1.5. 
B)  2. 
C)  2.5. 
D)  0.5.

Question 17

Taxes are reduced by $50 billion and income increases by $1,000 billion. The value of the tax multiplier is:

Accepted Answer

A)  - 5. 
B)  - 4. 
C)  - 10. 
D)  - 20. 
A)  - 5. 
B)  - 4. 
C)  - 10. 
D)  - 20.

Question 18

Give an example of an automatic stabilizer. Explain how automatic stabilizers operate within the economy during a recession and during an expansion.

Accepted Answer

An example of an automatic stabilizer is

Question 19

Figure 11.4
-Refer to Figure 11.4. Between expenditure lines C+I+G0 and C+I+G1, the multiplier for government spending is:

Accepted Answer

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

Question 20

The government spending multiplier in a closed economy is the same as the government spending multiplier in an open economy.

Accepted Answer

A) True 
 B)False

An increase in the government expenditures will:

Recall Application 2, "Using Long-Term Macro Data to Measure Multipliers," to answer the following questions: -According to the application, the reason why other studies found a strong correlation between government spending and GDP was:

Figure 11.2 -Refer to Figure 11.2. The consumption functions C₁and C₂:

Uncertainty about the future is likely to:

If C = 100 + 0.6Y and I = 50, then the equilibrium level of income is:

The marginal propensity to consume can be negative.

Assume that the consumption function is C = 200 + 0.8Y. The marginal propensity to save is:

If the marginal propensity to consume is 0.55, the tax multiplier is:

-Refer to Table 11.3. At an aggregate output level of $4,000 million, the unplanned inventory change is:

Recall Application 3, "John Maynard Keynes: A World Intellectual," to answer the following questions: -According to the application, Keynes book The General Theory of Employment, Interest and Money was his last major written work.

An increase in government spending will result in a:

-Refer to Table 11.6. In this example, the tax multiplier is:

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 averaged:

A tax cut of $10 billion will have less effect on the economy than an increase in government spending of $10 billion.

If both government spending and taxes increase by an equal amount at the same time, GDP will:

If an economy's marginal propensity to consume is 0.6 and the marginal propensity to import is 0.1, then the multiplier in an open economy is

Taxes are reduced by $50 billion and income increases by $1,000 billion. The value of the tax multiplier is:

Give an example of an automatic stabilizer. Explain how automatic stabilizers operate within the economy during a recession and during an expansion.

Figure 11.4 -Refer to Figure 11.4. Between expenditure lines C+I+G₀and C+I+G₁, the multiplier for government spending is:

The government spending multiplier in a closed economy is the same as the government spending multiplier in an open economy.

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

An increase in the government expenditures will:

Recall Application 2, "Using Long-Term Macro Data to Measure Multipliers," to answer the following questions: -According to the application, the reason why other studies found a strong correlation between government spending and GDP was:

Figure 11.2 -Refer to Figure 11.2. The consumption functions C1 and C2:

Uncertainty about the future is likely to:

If C = 100 + 0.6Y and I = 50, then the equilibrium level of income is:

The marginal propensity to consume can be negative.

Assume that the consumption function is C = 200 + 0.8Y. The marginal propensity to save is:

If the marginal propensity to consume is 0.55, the tax multiplier is:

-Refer to Table 11.3. At an aggregate output level of $4,000 million, the unplanned inventory change is:

Recall Application 3, "John Maynard Keynes: A World Intellectual," to answer the following questions: -According to the application, Keynes book The General Theory of Employment, Interest and Money was his last major written work.

An increase in government spending will result in a:

-Refer to Table 11.6. In this example, the tax multiplier is:

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 averaged:

A tax cut of $10 billion will have less effect on the economy than an increase in government spending of $10 billion.

If both government spending and taxes increase by an equal amount at the same time, GDP will:

If an economy's marginal propensity to consume is 0.6 and the marginal propensity to import is 0.1, then the multiplier in an open economy is

Taxes are reduced by $50 billion and income increases by $1,000 billion. The value of the tax multiplier is:

Give an example of an automatic stabilizer. Explain how automatic stabilizers operate within the economy during a recession and during an expansion.

Figure 11.4 -Refer to Figure 11.4. Between expenditure lines C+I+G0 and C+I+G1, the multiplier for government spending is:

The government spending multiplier in a closed economy is the same as the government spending multiplier in an open economy.

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 11.2 -Refer to Figure 11.2. The consumption functions C₁and C₂:

Figure 11.4 -Refer to Figure 11.4. Between expenditure lines C+I+G₀and C+I+G₁, the multiplier for government spending is: