Question 1

Figure 9-3  
-In Figure 9-3,at $5,000 billion GDP,inventories will be

Accepted Answer

A)  falling,signaling businesses to increase production. 
B)  accumulating,signaling businesses to increase production. 
C)  accumulating,signaling businesses to cut production. 
D)  falling,signaling businesses to cut production. 
A)  falling,signaling businesses to increase production. 
B)  accumulating,signaling businesses to increase production. 
C)  accumulating,signaling businesses to cut production. 
D)  falling,signaling businesses to cut production.

Question 2

In Table 9-1,inventories are being depleted as long as output is below

Accepted Answer

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

Question 3

When aggregate demand exceeds current production

Accepted Answer

A)  both output and the price level are in equilibrium. 
B)  output is not in equilibrium,but the price level is. 
C)  prices are not in equilibrium,but output is. 
D)  neither output nor the price level is in equilibrium. 
A)  both output and the price level are in equilibrium. 
B)  output is not in equilibrium,but the price level is. 
C)  prices are not in equilibrium,but output is. 
D)  neither output nor the price level is in equilibrium.

Question 4

Leakages from the circular flow include saving and imports.

Accepted Answer

A) True 
 B)False

Question 5

Equilibrium is the point where total spending equals total output,or GDP.

Accepted Answer

A) True 
 B)False

Question 6

Each C + I + G + (X − IM)expenditure schedule is drawn assuming a specific

Accepted Answer

A)  income level. 
B)  spending level. 
C)  production level. 
D)  price level. 
A)  income level. 
B)  spending level. 
C)  production level. 
D)  price level.

Question 7

If net exports decrease,the expenditure schedule will

Accepted Answer

A)  get steeper. 
B)  get flatter. 
C)  shift upward. 
D)  shift downward. 
A)  get steeper. 
B)  get flatter. 
C)  shift upward. 
D)  shift downward.

Question 8

If an economy at the equilibrium level of GDP experiences an increase in the amount of investment spending,then inventories will be

Accepted Answer

A)  depleted,causing firms to cut production. 
B)  accumulated,causing firms to cut production. 
C)  depleted,causing firms to increase production. 
D)  accumulated,causing firms to expand production. 
A)  depleted,causing firms to cut production. 
B)  accumulated,causing firms to cut production. 
C)  depleted,causing firms to increase production. 
D)  accumulated,causing firms to expand production.

Question 9

Equilibrium GDP will not exist where output exceeds aggregate demand because businesses will notice that

Accepted Answer

A)  their profits are positive. 
B)  inventory stocks are building up. 
C)  inventory stocks are being depleted. 
D)  their level of depreciation is rising. 
A)  their profits are positive. 
B)  inventory stocks are building up. 
C)  inventory stocks are being depleted. 
D)  their level of depreciation is rising.

Question 10

If we observe that every increase in income of $120 million generates an increase in consumption of $80 million,then the simple multiplier is

Accepted Answer

A)  2/3. 
B)  3/2. 
C)  2. 
D)  3. 
E)  8. 
A)  2/3. 
B)  3/2. 
C)  2. 
D)  3. 
E)  8.

Question 11

High unemployment and high rates of inflation are examples of coordination successes.

Accepted Answer

A) True 
 B)False

Question 12

According to Baumol and Blinder,from the demand side an increase 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 13

The multiplier principle illustrates that

Accepted Answer

A)  an increase in investment spending will be multiplied into a larger increase in GDP. 
B)  an increase in GDP will be multiplied into a larger amount of investment spending. 
C)  an increase in GDP will be multiplied into a larger increase in consumer spending. 
D)  investment spending is always a multiple of consumer spending. 
A)  an increase in investment spending will be multiplied into a larger increase in GDP. 
B)  an increase in GDP will be multiplied into a larger amount of investment spending. 
C)  an increase in GDP will be multiplied into a larger increase in consumer spending. 
D)  investment spending is always a multiple of consumer spending.

Question 14

Inventory reductions are a signal indicating that

Accepted Answer

A)  the economy is close to disaster. 
B)  the Dow Jones Industrial Average will fall. 
C)  manufacturers need to increase production. 
D)  All of the above are true. 
A)  the economy is close to disaster. 
B)  the Dow Jones Industrial Average will fall. 
C)  manufacturers need to increase production. 
D)  All of the above are true.

Question 15

45° line diagrams show how

Accepted Answer

A)  investment varies with income. 
B)  expenditures vary with income. 
C)  investment spending rises when GDP rises. 
D)  GDP is affected by government purchases. 
A)  investment varies with income. 
B)  expenditures vary with income. 
C)  investment spending rises when GDP rises. 
D)  GDP is affected by government purchases.

Question 16

If the expenditure schedule lies above the level of potential GDP,then there is a(n)

Accepted Answer

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

Question 17

The reason for the multiplier effect is that

Accepted Answer

A)  businesses make decisions about investment projects based on anticipated profits. 
B)  one person's additional expenditure creates a new source of income for another person,and this additional income leads to still more spending. 
C)  changes in government spending typically deepen recessions and exacerbate inflationary conditions in the economy. 
D)  additional spending lowers the rate of interest and leads to further borrowing and spending. 
A)  businesses make decisions about investment projects based on anticipated profits. 
B)  one person's additional expenditure creates a new source of income for another person,and this additional income leads to still more spending. 
C)  changes in government spending typically deepen recessions and exacerbate inflationary conditions in the economy. 
D)  additional spending lowers the rate of interest and leads to further borrowing and spending.

Question 18

If inventories are being depleted,firms may respond by cutting prices.

Accepted Answer

A) True 
 B)False

Question 19

When the price level in the United States rises,then net exports should

Accepted Answer

A)  rise and equilibrium real GDP should increase. 
B)  fall and equilibrium real GDP should increase. 
C)  fall and equilibrium real GDP should decrease. 
D)  rise and equilibrium real GDP should decrease. 
A)  rise and equilibrium real GDP should increase. 
B)  fall and equilibrium real GDP should increase. 
C)  fall and equilibrium real GDP should decrease. 
D)  rise and equilibrium real GDP should decrease.

Question 20

When constructing a basic macroeconomic model,several assumptions (not realistic,but necessary to simplify the analysis)are made.Which of the following are assumed to be constant?

Accepted Answer

A)  the price level 
B)  the rate of interest 
C)  the foreign exchange rate 
D)  the level of government spending 
E)  All of the above are held constant. 
A)  the price level 
B)  the rate of interest 
C)  the foreign exchange rate 
D)  the level of government spending 
E)  All of the above are held constant.

Figure 9-3 -In Figure 9-3,at $5,000 billion GDP,inventories will be

In Table 9-1,inventories are being depleted as long as output is below

When aggregate demand exceeds current production

Leakages from the circular flow include saving and imports.

Equilibrium is the point where total spending equals total output,or GDP.

Each C + I + G + (X − IM)expenditure schedule is drawn assuming a specific

If net exports decrease,the expenditure schedule will

If an economy at the equilibrium level of GDP experiences an increase in the amount of investment spending,then inventories will be

Equilibrium GDP will not exist where output exceeds aggregate demand because businesses will notice that

If we observe that every increase in income of $120 million generates an increase in consumption of $80 million,then the simple multiplier is

High unemployment and high rates of inflation are examples of coordination successes.

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

The multiplier principle illustrates that

Inventory reductions are a signal indicating that

45° line diagrams show how

If the expenditure schedule lies above the level of potential GDP,then there is a(n)

The reason for the multiplier effect is that

If inventories are being depleted,firms may respond by cutting prices.

When the price level in the United States rises,then net exports should

When constructing a basic macroeconomic model,several assumptions (not realistic,but necessary to simplify the analysis)are made.Which of the following are assumed to be constant?

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,at $5,000 billion GDP,inventories will be

In Table 9-1,inventories are being depleted as long as output is below

When aggregate demand exceeds current production

Leakages from the circular flow include saving and imports.

Equilibrium is the point where total spending equals total output,or GDP.

Each C + I + G + (X − IM)expenditure schedule is drawn assuming a specific

If net exports decrease,the expenditure schedule will

If an economy at the equilibrium level of GDP experiences an increase in the amount of investment spending,then inventories will be

Equilibrium GDP will not exist where output exceeds aggregate demand because businesses will notice that

If we observe that every increase in income of $120 million generates an increase in consumption of $80 million,then the simple multiplier is

High unemployment and high rates of inflation are examples of coordination successes.

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

The multiplier principle illustrates that

Inventory reductions are a signal indicating that

45° line diagrams show how

If the expenditure schedule lies above the level of potential GDP,then there is a(n)

The reason for the multiplier effect is that

If inventories are being depleted,firms may respond by cutting prices.

When the price level in the United States rises,then net exports should

When constructing a basic macroeconomic model,several assumptions (not realistic,but necessary to simplify the analysis)are made.Which of the following are assumed to be constant?

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