Question 1

Assume that the MPC is .9 and investment falls by $30 billion.What is the change in real GDP?

Accepted Answer

A)  −$300 billion 
B)  −$270 billion 
C)  −$93 billion 
D)  −$39 billion 
A)  −$300 billion 
B)  −$270 billion 
C)  −$93 billion 
D)  −$39 billion

Question 2

The aggregate demand curve has an upward slope due to the positive relationship between the price level and aggregate quantity demanded.

Accepted Answer

A) True 
 B)False

Question 3

In Table 9-1,at output of 4,000,inventories are

Accepted Answer

A)  decreasing by 200. 
B)  increasing by 200. 
C)  increasing by 300. 
D)  decreasing by 300. 
A)  decreasing by 200. 
B)  increasing by 200. 
C)  increasing by 300. 
D)  decreasing by 300.

Question 4

Free markets coordinate economic activity in such a way as to eliminate the possibility of inflation or unemployment.

Accepted Answer

A) True 
 B)False

Question 5

Figure 9-3  
-In Figure 9-3,saving at equilibrium GDP is.

Accepted Answer

A)  $1,200 billion. 
B)  $1,000 billion. 
C)  $800 billion. 
D)  $600 billion. 
E)  $400 billion. 
A)  $1,200 billion. 
B)  $1,000 billion. 
C)  $800 billion. 
D)  $600 billion. 
E)  $400 billion.

Question 6

If saving exceeds investment,then the level of GDP will

Accepted Answer

A)  increase. 
B)  remain constant. 
C)  decrease. 
D)  rise above potential GDP. 
A)  increase. 
B)  remain constant. 
C)  decrease. 
D)  rise above potential GDP.

Question 7

Figure 9-4  
-In Figure 9-4,which expenditure level will cause an inflationary gap?

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  There will be no inflationary gap. 
A)  1 
B)  2 
C)  3 
D)  There will be no inflationary gap.

Question 8

A recessionary gap exists when the equilibrium level of GDP exceeds potential GDP.

Accepted Answer

A) True 
 B)False

Question 9

Total output equals total income

Accepted Answer

A)  only at equilibrium. 
B)  always. 
C)  only at non-equilibrium levels of income. 
D)  never. 
A)  only at equilibrium. 
B)  always. 
C)  only at non-equilibrium levels of income. 
D)  never.

Question 10

The equilibrium level of GDP is always accompanied by full employment and stable prices.

Accepted Answer

A) True 
 B)False

Question 11

One of the primary functions of markets could be labeled

Accepted Answer

A)  stimulation. 
B)  coordination. 
C)  planification. 
D)  decentralization. 
A)  stimulation. 
B)  coordination. 
C)  planification. 
D)  decentralization.

Question 12

An increase in autonomous consumption has the same equilibrium effect as a(n)

Accepted Answer

A)  decrease in investment. 
B)  increase in investment. 
C)  decrease in net exports. 
D)  increase in taxes. 
A)  decrease in investment. 
B)  increase in investment. 
C)  decrease in net exports. 
D)  increase in taxes.

Question 13

Leakages are offset by investment and government spending in the circular flow model.

Accepted Answer

A) True 
 B)False

Question 14

If the expenditure schedule must be shifted upward to reach potential GDP,then the economy is experiencing a(n)

Accepted Answer

A)  inflationary gap. 
B)  precautionary gap. 
C)  recessionary gap. 
D)  expansionary gap. 
A)  inflationary gap. 
B)  precautionary gap. 
C)  recessionary gap. 
D)  expansionary gap.

Question 15

Which of the following questions are not answered by the process of demand side GDP determination?

Accepted Answer

A)  How large is equilibrium GDP? 
B)  Does the economy have unemployment? 
C)  Is demand side equilibrium consistent with supply side equilibrium? 
D)  Does the economy have inflation? 
E)  All of the above are not answered. 
A)  How large is equilibrium GDP? 
B)  Does the economy have unemployment? 
C)  Is demand side equilibrium consistent with supply side equilibrium? 
D)  Does the economy have inflation? 
E)  All of the above are not answered.

Question 16

Figure 9-1  
-In Figure 9-1,

Accepted Answer

A)  the 45-degree line represents all points where spending equals output. 
B)  to the left of equilibrium GDP,inventories will fall. 
C)  to the right of equilibrium GDP,inventories will rise. 
D)  All of the above are correct. 
A)  the 45-degree line represents all points where spending equals output. 
B)  to the left of equilibrium GDP,inventories will fall. 
C)  to the right of equilibrium GDP,inventories will rise. 
D)  All of the above are correct.

Question 17

A recessionary gap exists when potential GDP

Accepted Answer

A)  falls short of equilibrium GDP. 
B)  exceeds equilibrium GDP. 
C)  equals equilibrium GDP. 
D)  All of the above are correct. 
A)  falls short of equilibrium GDP. 
B)  exceeds equilibrium GDP. 
C)  equals equilibrium GDP. 
D)  All of the above are correct.

Question 18

By definition,total production must always equal total

Accepted Answer

A)  sales. 
B)  demand. 
C)  purchases. 
D)  income. 
A)  sales. 
B)  demand. 
C)  purchases. 
D)  income.

Question 19

From the demand side,the equilibrium level of GDP is one at which

Accepted Answer

A)  everyone who wants a job has one and firms are not looking for extra workers. 
B)  the only unemployment is frictional. 
C)  aggregate demand equals production. 
D)  the only unemployment is cyclical. 
A)  everyone who wants a job has one and firms are not looking for extra workers. 
B)  the only unemployment is frictional. 
C)  aggregate demand equals production. 
D)  the only unemployment is cyclical.

Question 20

Which of the following shows the relationship between national income (GDP)and total spending?

Accepted Answer

A)  Demand schedule 
B)  Consumption curve 
C)  Expenditure schedule 
D)  Balance schedule 
A)  Demand schedule 
B)  Consumption curve 
C)  Expenditure schedule 
D)  Balance schedule

Assume that the MPC is .9 and investment falls by $30 billion.What is the change in real GDP?

The aggregate demand curve has an upward slope due to the positive relationship between the price level and aggregate quantity demanded.

In Table 9-1,at output of 4,000,inventories are

Free markets coordinate economic activity in such a way as to eliminate the possibility of inflation or unemployment.

Figure 9-3 -In Figure 9-3,saving at equilibrium GDP is.

If saving exceeds investment,then the level of GDP will

Figure 9-4 -In Figure 9-4,which expenditure level will cause an inflationary gap?

A recessionary gap exists when the equilibrium level of GDP exceeds potential GDP.

Total output equals total income

The equilibrium level of GDP is always accompanied by full employment and stable prices.

One of the primary functions of markets could be labeled

An increase in autonomous consumption has the same equilibrium effect as a(n)

Leakages are offset by investment and government spending in the circular flow model.

If the expenditure schedule must be shifted upward to reach potential GDP,then the economy is experiencing a(n)

Which of the following questions are not answered by the process of demand side GDP determination?

Figure 9-1 -In Figure 9-1,

A recessionary gap exists when potential GDP

By definition,total production must always equal total

From the demand side,the equilibrium level of GDP is one at which

Which of the following shows the relationship between national income (GDP)and total spending?

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

Assume that the MPC is .9 and investment falls by $30 billion.What is the change in real GDP?

The aggregate demand curve has an upward slope due to the positive relationship between the price level and aggregate quantity demanded.

In Table 9-1,at output of 4,000,inventories are

Free markets coordinate economic activity in such a way as to eliminate the possibility of inflation or unemployment.

Figure 9-3 -In Figure 9-3,saving at equilibrium GDP is.

If saving exceeds investment,then the level of GDP will

Figure 9-4 -In Figure 9-4,which expenditure level will cause an inflationary gap?

A recessionary gap exists when the equilibrium level of GDP exceeds potential GDP.

Total output equals total income

The equilibrium level of GDP is always accompanied by full employment and stable prices.

One of the primary functions of markets could be labeled

An increase in autonomous consumption has the same equilibrium effect as a(n)

Leakages are offset by investment and government spending in the circular flow model.

If the expenditure schedule must be shifted upward to reach potential GDP,then the economy is experiencing a(n)

Which of the following questions are not answered by the process of demand side GDP determination?

Figure 9-1 -In Figure 9-1,

A recessionary gap exists when potential GDP

By definition,total production must always equal total

From the demand side,the equilibrium level of GDP is one at which

Which of the following shows the relationship between national income (GDP)and total spending?

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