Question 1

If the economy is suffering a recession,inventories are probably falling.

Accepted Answer

A) True 
 B)False

Question 2

The amount by which equilibrium real GDP exceeds full-employment GDP is known as

Accepted Answer

A)  stagflation. 
B)  employment. 
C)  a recessionary gap. 
D)  an inflationary gap. 
A)  stagflation. 
B)  employment. 
C)  a recessionary gap. 
D)  an inflationary gap.

Question 3

Recessionary gaps are most likely to be accompanied by

Accepted Answer

A)  inflation. 
B)  inventory reductions. 
C)  unemployment. 
D)  expanding output. 
A)  inflation. 
B)  inventory reductions. 
C)  unemployment. 
D)  expanding output.

Question 4

The multiplier can be expressed as the ratio of the change in Y over the change in I.

Accepted Answer

A) True 
 B)False

Question 5

When equilibrium real GDP falls short of potential GDP,there is a(n)

Accepted Answer

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

Question 6

An economic recession in Japan will cause the aggregate demand curve in the United States to shift to the right.

Accepted Answer

A) True 
 B)False

Question 7

The basic reason for the multiplier effect is that,when you spend money,

Accepted Answer

A)  another person receives income. 
B)  another person must pay for it. 
C)  your money balances are reduced. 
D)  your net worth decreases. 
A)  another person receives income. 
B)  another person must pay for it. 
C)  your money balances are reduced. 
D)  your net worth decreases.

Question 8

Economists before Keynes assumed that equilibrium GDP occurred

Accepted Answer

A)  automatically. 
B)  only with the help of government stabilization. 
C)  if spending was generally greater than output. 
D)  only in socialist economies with central planning. 
A)  automatically. 
B)  only with the help of government stabilization. 
C)  if spending was generally greater than output. 
D)  only in socialist economies with central planning.

Question 9

Suppose the economy is suffering in a recessionary period.Firms are facing increasing inventories and individual consumers are increasing their saving to prepare for hard times ahead.What is likely to happen to the economy and can it correct itself and grow toward full employment in the short run?

Accepted Answer

The Keynesian view of the economy would

Question 10

When income rises,total expenditures remain constant.

Accepted Answer

A) True 
 B)False

Question 11

In the circular flow diagram saving

Accepted Answer

A)  is a leakage and investment is an injection. 
B)  and investment are both injections. 
C)  is an injection and investment is a leakage. 
D)  and investment are both leakages. 
A)  is a leakage and investment is an injection. 
B)  and investment are both injections. 
C)  is an injection and investment is a leakage. 
D)  and investment are both leakages.

Question 12

One of the main conclusions of Keynes in The General Theory of Employment,Interest,and Money is that the economy

Accepted Answer

A)  will usually be at full employment. 
B)  will not automatically gravitate to full employment. 
C)  will automatically move quickly toward full employment without inflation. 
D)  is usually on the verge of a major depression or hyperinflation. 
A)  will usually be at full employment. 
B)  will not automatically gravitate to full employment. 
C)  will automatically move quickly toward full employment without inflation. 
D)  is usually on the verge of a major depression or hyperinflation.

Question 13

Using the standard 45-degree line diagram,how does a decrease in net exports effect the expenditure schedule?

Accepted Answer

A)  It increases the slope of the expenditure schedule. 
B)  It decreases the slope of the expenditure schedule. 
C)  It shifts the expenditure schedule upward. 
D)  It shifts the expenditure schedule downward. 
A)  It increases the slope of the expenditure schedule. 
B)  It decreases the slope of the expenditure schedule. 
C)  It shifts the expenditure schedule upward. 
D)  It shifts the expenditure schedule downward.

Question 14

Which one of the following could cause a recessionary gap?

Accepted Answer

A)  Interest rates are too low. 
B)  Consumers spend more than they earn. 
C)  Price levels are too high. 
D)  Businesses spend more than they save. 
A)  Interest rates are too low. 
B)  Consumers spend more than they earn. 
C)  Price levels are too high. 
D)  Businesses spend more than they save.

Question 15

According to Baumol and Blinder,from the demand side a decrease in the price level causes aggregate expenditures to

Accepted Answer

A)  fall,resulting in a lower level of equilibrium income. 
B)  fall,resulting in a higher level of equilibrium income. 
C)  rise,resulting in a higher level of equilibrium income. 
D)  rise,resulting in a lower level of equilibrium income. 
A)  fall,resulting in a lower level of equilibrium income. 
B)  fall,resulting in a higher level of equilibrium income. 
C)  rise,resulting in a higher level of equilibrium income. 
D)  rise,resulting in a lower level of equilibrium income.

Question 16

The basic idea behind the multiplier is that an increase in

Accepted Answer

A)  GDP brings about an additional,larger increase in GDP. 
B)  consumer spending causes a larger increase in investment spending. 
C)  government spending causes a larger increase in tax revenues. 
D)  spending will cause an even larger increase in equilibrium GDP. 
A)  GDP brings about an additional,larger increase in GDP. 
B)  consumer spending causes a larger increase in investment spending. 
C)  government spending causes a larger increase in tax revenues. 
D)  spending will cause an even larger increase in equilibrium GDP.

Question 17

Given the slope of the aggregate demand curve,real GDP demanded will decrease when

Accepted Answer

A)  real income rises. 
B)  real income falls. 
C)  the price level falls. 
D)  the price level rises. 
A)  real income rises. 
B)  real income falls. 
C)  the price level falls. 
D)  the price level rises.

Question 18

Define the terms recessionary gap and inflationary gap.Why do they occur?

Accepted Answer

A recessionary gap exists when the expen

Question 19

Using the standard 45-degree line diagram,how does a decrease in investment spending effect the expenditure schedule?

Accepted Answer

A)  It increases the slope of the expenditure schedule. 
B)  It decreases the slope of the expenditure schedule. 
C)  It shifts the expenditure schedule downward. 
D)  It shifts the expenditure schedule upward. 
A)  It increases the slope of the expenditure schedule. 
B)  It decreases the slope of the expenditure schedule. 
C)  It shifts the expenditure schedule downward. 
D)  It shifts the expenditure schedule upward.

Question 20

If the economy is in equilibrium,it must be

Accepted Answer

A)  on the 45° line. 
B)  on the 60° line. 
C)  below the 45° line. 
D)  below the 60° line. 
A)  on the 45° line. 
B)  on the 60° line. 
C)  below the 45° line. 
D)  below the 60° line.

If the economy is suffering a recession,inventories are probably falling.

The amount by which equilibrium real GDP exceeds full-employment GDP is known as

Recessionary gaps are most likely to be accompanied by

The multiplier can be expressed as the ratio of the change in Y over the change in I.

When equilibrium real GDP falls short of potential GDP,there is a(n)

An economic recession in Japan will cause the aggregate demand curve in the United States to shift to the right.

The basic reason for the multiplier effect is that,when you spend money,

Economists before Keynes assumed that equilibrium GDP occurred

Suppose the economy is suffering in a recessionary period.Firms are facing increasing inventories and individual consumers are increasing their saving to prepare for hard times ahead.What is likely to happen to the economy and can it correct itself and grow toward full employment in the short run?

When income rises,total expenditures remain constant.

In the circular flow diagram saving

One of the main conclusions of Keynes in The General Theory of Employment,Interest,and Money is that the economy

Using the standard 45-degree line diagram,how does a decrease in net exports effect the expenditure schedule?

Which one of the following could cause a recessionary gap?

According to Baumol and Blinder,from the demand side a decrease in the price level causes aggregate expenditures to

The basic idea behind the multiplier is that an increase in

Given the slope of the aggregate demand curve,real GDP demanded will decrease when

Define the terms recessionary gap and inflationary gap.Why do they occur?

Using the standard 45-degree line diagram,how does a decrease in investment spending effect the expenditure schedule?

If the economy is in equilibrium,it must be

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

If the economy is suffering a recession,inventories are probably falling.

The amount by which equilibrium real GDP exceeds full-employment GDP is known as

Recessionary gaps are most likely to be accompanied by

The multiplier can be expressed as the ratio of the change in Y over the change in I.

When equilibrium real GDP falls short of potential GDP,there is a(n)

An economic recession in Japan will cause the aggregate demand curve in the United States to shift to the right.

The basic reason for the multiplier effect is that,when you spend money,

Economists before Keynes assumed that equilibrium GDP occurred

Suppose the economy is suffering in a recessionary period.Firms are facing increasing inventories and individual consumers are increasing their saving to prepare for hard times ahead.What is likely to happen to the economy and can it correct itself and grow toward full employment in the short run?

When income rises,total expenditures remain constant.

In the circular flow diagram saving

One of the main conclusions of Keynes in The General Theory of Employment,Interest,and Money is that the economy

Using the standard 45-degree line diagram,how does a decrease in net exports effect the expenditure schedule?

Which one of the following could cause a recessionary gap?

According to Baumol and Blinder,from the demand side a decrease in the price level causes aggregate expenditures to

The basic idea behind the multiplier is that an increase in

Given the slope of the aggregate demand curve,real GDP demanded will decrease when

Define the terms recessionary gap and inflationary gap.Why do they occur?

Using the standard 45-degree line diagram,how does a decrease in investment spending effect the expenditure schedule?

If the economy is in equilibrium,it must be

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