Question 1

Which of the following would be associated with an inflationary gap?

Accepted Answer

A)  interest rates too low 
B)  business expectations pessimistic 
C)  inventory levels too low 
D)  stock market crash 
E)  All of the above. 
A)  interest rates too low 
B)  business expectations pessimistic 
C)  inventory levels too low 
D)  stock market crash 
E)  All of the above.

Question 2

Assume that the MPC is 0.80 and investment rises by $50 million.How much additional saving will this generate in the second round of spending?

Accepted Answer

A)  $10 million 
B)  $40 million 
C)  $50 million 
D)  $62.5 million 
E)  $250 million 
A)  $10 million 
B)  $40 million 
C)  $50 million 
D)  $62.5 million 
E)  $250 million

Question 3

The expenditure schedule includes the consumption function.

Accepted Answer

A) True 
 B)False

Question 4

The inflationary gap is the

Accepted Answer

A)  inflation rate that will occur from excess aggregate demand. 
B)  budget deficit that caused the inflation to occur. 
C)  distance between the equilibrium level of output and the full employment level of output. 
D)  gap between expected and actual inflation. 
A)  inflation rate that will occur from excess aggregate demand. 
B)  budget deficit that caused the inflation to occur. 
C)  distance between the equilibrium level of output and the full employment level of output. 
D)  gap between expected and actual inflation.

Question 5

The expenditure schedule will shift upward when

Accepted Answer

A)  net exports decrease. 
B)  net exports increase. 
C)  total imports increase. 
D)  total exports decrease. 
A)  net exports decrease. 
B)  net exports increase. 
C)  total imports increase. 
D)  total exports decrease.

Question 6

The total expenditure schedule in Macroland begins with these initial levels (in billions of dollars): Income = 1,000; Consumption = 900; Investment = 200; Government = 300; Net Exports = −100.If the MPC = 0.75 and income increases in increments of 200,find the equilibrium level of income.If full employment requires an income level of 2,000,what (if anything)should the government do? Indicate both the direction of the spending change and the size of the spending change.

Accepted Answer

Initially,total expenditures equal 1,300

Question 7

If the multiplier is 4 and real GDP increases by $520 billion,the increase in investment spending must have been

Accepted Answer

A)  $110 billion. 
B)  $120 billion. 
C)  $130 billion. 
D)  $140 billion. 
A)  $110 billion. 
B)  $120 billion. 
C)  $130 billion. 
D)  $140 billion.

Question 8

The U.S.economy in 2009 was characterized by an excess level of output.This corresponds to a recessionary gap.

Accepted Answer

A) True 
 B)False

Question 9

Government stabilization policy would be unnecessary if the economy automatically gravitated toward

Accepted Answer

A)  full inflation. 
B)  full employment. 
C)  full recession. 
D)  an inflationary gap. 
A)  full inflation. 
B)  full employment. 
C)  full recession. 
D)  an inflationary gap.

Question 10

In a simple economy (no government),the vertical distance between the consumption function and the expenditure schedule measures

Accepted Answer

A)  undesired inventory depletion. 
B)  planned investment 
C)  undesired investment. 
D)  unintended investment. 
A)  undesired inventory depletion. 
B)  planned investment 
C)  undesired investment. 
D)  unintended investment.

Question 11

Because of a recession in Japan,net exports from the United States decrease by $10 billion.If the MPC is 0.75,how much less spending will occur in the U.S.economy in the second "round" of spending?

Accepted Answer

A)  $17.5 billion 
B)  $10 billion 
C)  $7.5 billion 
D)  $5.0 billion 
A)  $17.5 billion 
B)  $10 billion 
C)  $7.5 billion 
D)  $5.0 billion

Question 12

In comparison to the oversimplified formula for the multiplier,the real-world multiplier is

Accepted Answer

A)  lower. 
B)  higher. 
C)  almost equal to it. 
D)  higher if taxes are included. 
A)  lower. 
B)  higher. 
C)  almost equal to it. 
D)  higher if taxes are included.

Question 13

Identify the "oversimplified multiplier formula."

Accepted Answer

A)  Multiplier = 1 divided by (1 − change in GDP) 
B)  Multiplier = 1 divided by (1 − marginal propensity to consume) 
C)  Multiplier = 1 divided by (1 − marginal propensity to save) 
D)  Multiplier = 1 divided by (1 − rate of inflation) 
A)  Multiplier = 1 divided by (1 − change in GDP) 
B)  Multiplier = 1 divided by (1 − marginal propensity to consume) 
C)  Multiplier = 1 divided by (1 − marginal propensity to save) 
D)  Multiplier = 1 divided by (1 − rate of inflation)

Question 14

Equilibrium GDP occurs when total spending equals total output.

Accepted Answer

A) True 
 B)False

Question 15

A given income-expenditure diagram always assumes a variable price level.

Accepted Answer

A) True 
 B)False

Question 16

Writing during the Great Depression,Keynes naturally focused on problems of

Accepted Answer

A)  hyperinflation. 
B)  budget deficits. 
C)  trade deficits. 
D)  unemployment. 
A)  hyperinflation. 
B)  budget deficits. 
C)  trade deficits. 
D)  unemployment.

Question 17

The multiplier principle is built on the premise that one person's spending is another person's

Accepted Answer

A)  debt. 
B)  obligation. 
C)  income. 
D)  saving. 
A)  debt. 
B)  obligation. 
C)  income. 
D)  saving.

Question 18

Figure 9-4  
-In Figure 9-4,if the economy is in a recessionary gap,what must happen to reach potential GDP?

Accepted Answer

A)  The expenditure level must fall and/or the price level must rise. 
B)  The expenditure level must rise and/or the price level must fall. 
C)  The expenditure level must rise and/or the price level must rise. 
D)  The expenditure level must fall and /or the price level must fall. 
A)  The expenditure level must fall and/or the price level must rise. 
B)  The expenditure level must rise and/or the price level must fall. 
C)  The expenditure level must rise and/or the price level must rise. 
D)  The expenditure level must fall and /or the price level must fall.

Question 19

Why do booms and recessions tend to be transmitted across national borders?

Accepted Answer

The GDPs of the major economies are link

Question 20

For a given price level,an upward shift of the expenditures schedule corresponds to an

Accepted Answer

A)  inward shift of the aggregate demand curve. 
B)  outward shift of the aggregate demand curve 
C)  outward shift of the aggregate supply curve. 
D)  inward shift of the aggregate supply curve. 
A)  inward shift of the aggregate demand curve. 
B)  outward shift of the aggregate demand curve 
C)  outward shift of the aggregate supply curve. 
D)  inward shift of the aggregate supply curve.

Which of the following would be associated with an inflationary gap?

Assume that the MPC is 0.80 and investment rises by $50 million.How much additional saving will this generate in the second round of spending?

The expenditure schedule includes the consumption function.

The inflationary gap is the

The expenditure schedule will shift upward when

If the multiplier is 4 and real GDP increases by $520 billion,the increase in investment spending must have been

The U.S.economy in 2009 was characterized by an excess level of output.This corresponds to a recessionary gap.

Government stabilization policy would be unnecessary if the economy automatically gravitated toward

In a simple economy (no government),the vertical distance between the consumption function and the expenditure schedule measures

Because of a recession in Japan,net exports from the United States decrease by $10 billion.If the MPC is 0.75,how much less spending will occur in the U.S.economy in the second "round" of spending?

In comparison to the oversimplified formula for the multiplier,the real-world multiplier is

Identify the "oversimplified multiplier formula."

Equilibrium GDP occurs when total spending equals total output.

A given income-expenditure diagram always assumes a variable price level.

Writing during the Great Depression,Keynes naturally focused on problems of

The multiplier principle is built on the premise that one person's spending is another person's

Figure 9-4 -In Figure 9-4,if the economy is in a recessionary gap,what must happen to reach potential GDP?

Why do booms and recessions tend to be transmitted across national borders?

For a given price level,an upward shift of the expenditures schedule corresponds to an

What Is Economics

The Economy Myth and Reality

The Fundamental Economic Problem Scarcity and Choice

Supply and Demand An Initial Look

An Introduction To Macroeconomics

The Goals Of Macroeconomic Policy

Economic Growth Theory And Policy

Aggregate Demand and The Powerful Consumer

Bringing In The Supply Side Unemployment and Inflation

Managing Aggregate Demand Fiscal Policy

Money and The Banking System

Monetary Policy Conventional and Unconventional

The Financial Crisis and The Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits In The Short and Long Run

The Trade Off Between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System Order Or Disorder

Exchange Rates and The Macroeconomy

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Exam 9: Demand Side Equilibrium Unemployment Or Inflation

Which of the following would be associated with an inflationary gap?

Assume that the MPC is 0.80 and investment rises by $50 million.How much additional saving will this generate in the second round of spending?

The expenditure schedule includes the consumption function.

The inflationary gap is the

The expenditure schedule will shift upward when

If the multiplier is 4 and real GDP increases by $520 billion,the increase in investment spending must have been

The U.S.economy in 2009 was characterized by an excess level of output.This corresponds to a recessionary gap.

Government stabilization policy would be unnecessary if the economy automatically gravitated toward

In a simple economy (no government),the vertical distance between the consumption function and the expenditure schedule measures

Because of a recession in Japan,net exports from the United States decrease by $10 billion.If the MPC is 0.75,how much less spending will occur in the U.S.economy in the second "round" of spending?

In comparison to the oversimplified formula for the multiplier,the real-world multiplier is

Identify the "oversimplified multiplier formula."

Equilibrium GDP occurs when total spending equals total output.

A given income-expenditure diagram always assumes a variable price level.

Writing during the Great Depression,Keynes naturally focused on problems of

The multiplier principle is built on the premise that one person's spending is another person's

Figure 9-4 -In Figure 9-4,if the economy is in a recessionary gap,what must happen to reach potential GDP?

Why do booms and recessions tend to be transmitted across national borders?

For a given price level,an upward shift of the expenditures schedule corresponds to an

What Is Economics

The Economy Myth and Reality

The Fundamental Economic Problem Scarcity and Choice

Supply and Demand An Initial Look

An Introduction To Macroeconomics

The Goals Of Macroeconomic Policy

Economic Growth Theory And Policy

Aggregate Demand and The Powerful Consumer

Bringing In The Supply Side Unemployment and Inflation

Managing Aggregate Demand Fiscal Policy

Money and The Banking System

Monetary Policy Conventional and Unconventional

The Financial Crisis and The Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits In The Short and Long Run

The Trade Off Between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System Order Or Disorder

Exchange Rates and The Macroeconomy

Filters