Question 1

Figure 9-3  
-In Figure 9-3,equilibrium GDP is

Accepted Answer

A)  $2,000 billion. 
B)  $3,000 billion. 
C)  $4,000 billion. 
D)  $5,000 billion. 
A)  $2,000 billion. 
B)  $3,000 billion. 
C)  $4,000 billion. 
D)  $5,000 billion.

Question 2

What is a multiplier? How does the multiplier effect occur?

Accepted Answer

The multiplier is the ratio of the chang

Question 3

If the multiplier is 4,a decrease in spending equal to $80 billion will be accompanied by a decrease in GDP of

Accepted Answer

A)  $480 billion. 
B)  $320 billion. 
C)  $240 billion. 
D)  $84 billion. 
E)  $48 billion. 
A)  $480 billion. 
B)  $320 billion. 
C)  $240 billion. 
D)  $84 billion. 
E)  $48 billion.

Question 4

Assume that the MPC is 0.85 and investment spending rises by $100 million.How much consumption spending will this generate in the second round of spending?

Accepted Answer

A)  $15 million 
B)  $85 million 
C)  $100 million 
D)  $118 million 
E)  $185 million 
A)  $15 million 
B)  $85 million 
C)  $100 million 
D)  $118 million 
E)  $185 million

Question 5

Market economies are likely to suffer from recessions and inflation because the government plans all economic activity.

Accepted Answer

A) True 
 B)False

Question 6

An increase in the U.S.price level will

Accepted Answer

A)  increase the slope of the expenditure schedule. 
B)  decrease the slope of the expenditure schedule. 
C)  shift the expenditure schedule upward. 
D)  shift the expenditure schedule downward. 
A)  increase the slope of the expenditure schedule. 
B)  decrease the slope of the expenditure schedule. 
C)  shift the expenditure schedule upward. 
D)  shift the expenditure schedule downward.

Question 7

The economy will reach equilibrium in a simple economy only if saving is

Accepted Answer

A)  greater than investment. 
B)  less than investment. 
C)  equal to investment. 
D)  equal to disposable income. 
A)  greater than investment. 
B)  less than investment. 
C)  equal to investment. 
D)  equal to disposable income.

Question 8

Describe the role of business inventory change in determining the equilibrium level of GDP and changes in the level of GDP.

Accepted Answer

Inventories work as buffers in the econo

Question 9

In Table 9-1,inventories will be increasing as long as output is above

Accepted Answer

A)  1,000. 
B)  1,500. 
C)  2,000. 
D)  3,000. 
A)  1,000. 
B)  1,500. 
C)  2,000. 
D)  3,000.

Question 10

In the basic 45-degree line model,what is the effect of a decrease in the price level?

Accepted Answer

A)  The expenditure line will shift downward. 
B)  The expenditure line will shift upward. 
C)  There will be movement to the left on the expenditure line. 
D)  There will be movement to the right on the expenditure line. 
A)  The expenditure line will shift downward. 
B)  The expenditure line will shift upward. 
C)  There will be movement to the left on the expenditure line. 
D)  There will be movement to the right on the expenditure line.

Question 11

For a given price level,a downward 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.

Question 12

An inflationary gap will exist when the full employment level of GDP is

Accepted Answer

A)  equal to equilibrium GDP. 
B)  greater than equilibrium GDP. 
C)  less than equilibrium GDP. 
D)  greater than disposable income. 
A)  equal to equilibrium GDP. 
B)  greater than equilibrium GDP. 
C)  less than equilibrium GDP. 
D)  greater than disposable income.

Question 13

Why does an increase in the price level cause a decrease in real GDP demanded?

Accepted Answer

A)  Consumer wealth increases. 
B)  Net exports will increase. 
C)  Interest rates decrease and cause higher investment. 
D)  Net exports will decrease. 
A)  Consumer wealth increases. 
B)  Net exports will increase. 
C)  Interest rates decrease and cause higher investment. 
D)  Net exports will decrease.

Question 14

The counterpart to the unsold output of firms is the lack of jobs for workers willing to work.

Accepted Answer

A) True 
 B)False

Question 15

Investment spending is a leakage from the circular flow model.

Accepted Answer

A) True 
 B)False

Question 16

In a capitalist market economy,recessions and inflation can occur because of coordination failures.

Accepted Answer

A) True 
 B)False

Question 17

The formula for the multiplier can be written as change in

Accepted Answer

A)  Y/change in I. 
B)  I/change in Y. 
C)  Y/change in C. 
D)  Y/change in GDP. 
A)  Y/change in I. 
B)  I/change in Y. 
C)  Y/change in C. 
D)  Y/change in GDP.

Question 18

Figure 9-4  
-In Figure 9-4,which expenditure level will result in a recessionary gap?

Accepted Answer

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

Question 19

Figure 9-5  
-In Figure 9-5,if the second round effect of an increase in autonomous spending of $100,000 is $75,000,then the multiplier is

Accepted Answer

A)  400,000. 
B)  6. 
C)  4. 
D)  4/5. 
A)  400,000. 
B)  6. 
C)  4. 
D)  4/5.

Question 20

A higher price level would mean ____ for a person who has a bank deposit of $2 million.

Accepted Answer

A)  an increase in real income 
B)  a decrease in real wealth 
C)  a decrease in nominal income 
D)  an increase in nominal income 
A)  an increase in real income 
B)  a decrease in real wealth 
C)  a decrease in nominal income 
D)  an increase in nominal income

Figure 9-3 -In Figure 9-3,equilibrium GDP is

What is a multiplier? How does the multiplier effect occur?

If the multiplier is 4,a decrease in spending equal to $80 billion will be accompanied by a decrease in GDP of

Assume that the MPC is 0.85 and investment spending rises by $100 million.How much consumption spending will this generate in the second round of spending?

Market economies are likely to suffer from recessions and inflation because the government plans all economic activity.

An increase in the U.S.price level will

The economy will reach equilibrium in a simple economy only if saving is

Describe the role of business inventory change in determining the equilibrium level of GDP and changes in the level of GDP.

In Table 9-1,inventories will be increasing as long as output is above

In the basic 45-degree line model,what is the effect of a decrease in the price level?

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

An inflationary gap will exist when the full employment level of GDP is

Why does an increase in the price level cause a decrease in real GDP demanded?

The counterpart to the unsold output of firms is the lack of jobs for workers willing to work.

Investment spending is a leakage from the circular flow model.

In a capitalist market economy,recessions and inflation can occur because of coordination failures.

The formula for the multiplier can be written as change in

Figure 9-4 -In Figure 9-4,which expenditure level will result in a recessionary gap?

Figure 9-5 -In Figure 9-5,if the second round effect of an increase in autonomous spending of $100,000 is $75,000,then the multiplier is

A higher price level would mean ____ for a person who has a bank deposit of $2 million.

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

Exam 9: Demand Side Equilibrium Unemployment Or Inflation

Figure 9-3 -In Figure 9-3,equilibrium GDP is

What is a multiplier? How does the multiplier effect occur?

If the multiplier is 4,a decrease in spending equal to $80 billion will be accompanied by a decrease in GDP of

Assume that the MPC is 0.85 and investment spending rises by $100 million.How much consumption spending will this generate in the second round of spending?

Market economies are likely to suffer from recessions and inflation because the government plans all economic activity.

An increase in the U.S.price level will

The economy will reach equilibrium in a simple economy only if saving is

Describe the role of business inventory change in determining the equilibrium level of GDP and changes in the level of GDP.

In Table 9-1,inventories will be increasing as long as output is above

In the basic 45-degree line model,what is the effect of a decrease in the price level?

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

An inflationary gap will exist when the full employment level of GDP is

Why does an increase in the price level cause a decrease in real GDP demanded?

The counterpart to the unsold output of firms is the lack of jobs for workers willing to work.

Investment spending is a leakage from the circular flow model.

In a capitalist market economy,recessions and inflation can occur because of coordination failures.

The formula for the multiplier can be written as change in

Figure 9-4 -In Figure 9-4,which expenditure level will result in a recessionary gap?

Figure 9-5 -In Figure 9-5,if the second round effect of an increase in autonomous spending of $100,000 is $75,000,then the multiplier is

A higher price level would mean ____ for a person who has a bank deposit of $2 million.

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