Question 1

The economy of Finland experienced a setback in 2016 because:

Accepted Answer

A)  of the advent of digital technology. 
B)  a drop in the price of oil. 
C)  of poor business practices at Nokia. 
D)  of climate change. 
A)  of the advent of digital technology. 
B)  a drop in the price of oil. 
C)  of poor business practices at Nokia. 
D)  of climate change.

Question 2

The accelerator principle states that planned investment spending by firms is:

Accepted Answer

A)  positively related to the expected growth of real GDP. 
B)  negatively related to the expected growth of real GDP. 
C)  negatively related to the current level of real GDP. 
D)  positively related to the current level of real GDP. 
A)  positively related to the expected growth of real GDP. 
B)  negatively related to the expected growth of real GDP. 
C)  negatively related to the current level of real GDP. 
D)  positively related to the current level of real GDP.

Question 3

If the marginal propensity to save is 0.3, the size of the multiplier is:

Accepted Answer

A)  3.3. 
B)  2.3. 
C)  1.3. 
D)  0.7. 
A)  3.3. 
B)  2.3. 
C)  1.3. 
D)  0.7.

Question 4

According to the _____, there is a positive relationship between planned investment spending and the expected growth rate of real GDP.

Accepted Answer

A)  paradox of thrift 
B)  life-cycle hypothesis 
C)  multiplier effect 
D)  accelerator principle 
A)  paradox of thrift 
B)  life-cycle hypothesis 
C)  multiplier effect 
D)  accelerator principle

Question 5

Income-expenditure equilibrium occurs when:

Accepted Answer

A)  real GDP equals planned aggregate spending. 
B)  real GDP equals actual aggregate spending. 
C)  real GDP equals unplanned aggregate expenditure. 
D)  consumption and investment are equal. 
A)  real GDP equals planned aggregate spending. 
B)  real GDP equals actual aggregate spending. 
C)  real GDP equals unplanned aggregate expenditure. 
D)  consumption and investment are equal.

Question 6

If real GDP is less than aggregate expenditure, then inventories will _____, and firms will _____.

Accepted Answer

A)  increase; cut back on future production 
B)  fall; decrease the prices of their products 
C)  increase; lower their product prices 
D)  fall; increase their future production 
A)  increase; cut back on future production 
B)  fall; decrease the prices of their products 
C)  increase; lower their product prices 
D)  fall; increase their future production

Question 7

The marginal propensity to consume plus the marginal propensity to save must:

Accepted Answer

A)  equal each other. 
B)  equal 1. 
C)  be less than 1. 
D)  be greater than 1. 
A)  equal each other. 
B)  equal 1. 
C)  be less than 1. 
D)  be greater than 1.

Question 8

The higher the production capacity of the economy:

Accepted Answer

A)  the higher is planned investment spending. 
B)  the lower is planned investment spending. 
C)  the higher is actual production. 
D)  the lower is current production. 
A)  the higher is planned investment spending. 
B)  the lower is planned investment spending. 
C)  the higher is actual production. 
D)  the lower is current production.

Question 9

An increase in the marginal propensity to consume:

Accepted Answer

A)  increases the multiplier. 
B)  shifts the autonomous investment line upward. 
C)  decreases the multiplier. 
D)  shifts the autonomous investment line downward. 
A)  increases the multiplier. 
B)  shifts the autonomous investment line upward. 
C)  decreases the multiplier. 
D)  shifts the autonomous investment line downward.

Question 10

Suppose that the government increases spending by $100 billion as a stimulus package. If the marginal propensity to consume is 0.6, then real GDP will:

Accepted Answer

A)  decrease by $250 billion. 
B)  increase by $250 billion. 
C)  increase by $600 billion. 
D)  decrease by $400 billion. 
A)  decrease by $250 billion. 
B)  increase by $250 billion. 
C)  increase by $600 billion. 
D)  decrease by $400 billion.

Question 11

Other things being equal, investment spending _____ when _____.

Accepted Answer

A)  decreases; firms expect sales to fall 
B)  increases; firms have excessive production capacity 
C)  increases; the rate of growth of real GDP is low 
D)  decreases; the obsolete or worn out physical capital increases 
A)  decreases; firms expect sales to fall 
B)  increases; firms have excessive production capacity 
C)  increases; the rate of growth of real GDP is low 
D)  decreases; the obsolete or worn out physical capital increases

Question 12

If a store has 10,000 CDs at the start of the period and 15,000 CDs at the end, then its inventory investment during the period was _____ CDs.

Accepted Answer

A)  -5,000 
B)  0.67 
C)  1.5 
D)  5,000 
A)  -5,000 
B)  0.67 
C)  1.5 
D)  5,000

Question 13

In a simple, closed economy (no government or foreign sector), if the marginal propensity to save decreases, the marginal propensity to consume will:

Accepted Answer

A)  increase. 
B)  decrease. 
C)  remain constant. 
D)  fluctuate randomly. 
A)  increase. 
B)  decrease. 
C)  remain constant. 
D)  fluctuate randomly.

Question 14

Which factor will cause a decrease in unplanned inventory investment?

Accepted Answer

A)  an increase in interest rates 
B)  an unexpected increase in consumer spending 
C)  an increase in the growth rate of real GDP 
D)  a sudden decrease in consumer wealth 
A)  an increase in interest rates 
B)  an unexpected increase in consumer spending 
C)  an increase in the growth rate of real GDP 
D)  a sudden decrease in consumer wealth

Question 15

Which formula MOST accurately depicts the expenditure multiplier?

Accepted Answer

A)  1/(1- MPS) 
B)  1/(MPC - 1) 
C)  1/(1 - MP
C)  
D)  1/(1 + MP
C)  
A)  1/(1- MPS) 
B)  1/(MPC - 1) 
C)  1/(1 - MP
C)  
D)  1/(1 + MP
C)

Question 16

In a simple, closed economy (no government or foreign sector), if disposable income increases by $1,000 and consumption increases by $600, the marginal propensity to consume is:

Accepted Answer

A)  $600. 
B)  $400. 
C)  1.67. 
D)  0.60. 
A)  $600. 
B)  $400. 
C)  1.67. 
D)  0.60.

Question 17

Planned investment spending will decrease if:

Accepted Answer

A)  the interest rate rises. 
B)  firms expect the growth of real GDP to increase. 
C)  firms are producing near full capacity. 
D)  consumer expectations about wealth grow more optimistic. 
A)  the interest rate rises. 
B)  firms expect the growth of real GDP to increase. 
C)  firms are producing near full capacity. 
D)  consumer expectations about wealth grow more optimistic.

Question 18

If aggregate expenditures equal $800 billion and real GDP equals $600 billion:

Accepted Answer

A)  unplanned inventory accumulation equals $200 billion. 
B)  unplanned inventory accumulation equals -$200 billion. 
C)  consumption plus investment equals $200 billion. 
D)  actual investment equals -$200 billion. 
A)  unplanned inventory accumulation equals $200 billion. 
B)  unplanned inventory accumulation equals -$200 billion. 
C)  consumption plus investment equals $200 billion. 
D)  actual investment equals -$200 billion.

Question 19

If your disposable personal income increases from $10,000 to $15,000 and your consumption increases from $9,000 to $13,000, your marginal propensity to consume is:

Accepted Answer

A)  0.2. 
B)  0.4. 
C)  0.6. 
D)  0.8. 
A)  0.2. 
B)  0.4. 
C)  0.6. 
D)  0.8.

Question 20

In an income-expenditure equilibrium:

Accepted Answer

A)  there are no inventories. 
B)  there is no unplanned inventory investment. 
C)  inventory investment equals consumption. 
D)  there are no savings. 
A)  there are no inventories. 
B)  there is no unplanned inventory investment. 
C)  inventory investment equals consumption. 
D)  there are no savings.

The economy of Finland experienced a setback in 2016 because:

The accelerator principle states that planned investment spending by firms is:

If the marginal propensity to save is 0.3, the size of the multiplier is:

According to the _____, there is a positive relationship between planned investment spending and the expected growth rate of real GDP.

Income-expenditure equilibrium occurs when:

If real GDP is less than aggregate expenditure, then inventories will _, and firms will _.

The marginal propensity to consume plus the marginal propensity to save must:

The higher the production capacity of the economy:

An increase in the marginal propensity to consume:

Suppose that the government increases spending by $100 billion as a stimulus package. If the marginal propensity to consume is 0.6, then real GDP will:

Other things being equal, investment spending _ when _.

If a store has 10,000 CDs at the start of the period and 15,000 CDs at the end, then its inventory investment during the period was _____ CDs.

In a simple, closed economy (no government or foreign sector), if the marginal propensity to save decreases, the marginal propensity to consume will:

Which factor will cause a decrease in unplanned inventory investment?

Which formula MOST accurately depicts the expenditure multiplier?

In a simple, closed economy (no government or foreign sector), if disposable income increases by $1,000 and consumption increases by $600, the marginal propensity to consume is:

Planned investment spending will decrease if:

If aggregate expenditures equal $800 billion and real GDP equals $600 billion:

If your disposable personal income increases from $10,000 to $15,000 and your consumption increases from $9,000 to $13,000, your marginal propensity to consume is:

In an income-expenditure equilibrium:

First Principles

Economic Models: Trade-Offs and Trade

Supply and Demand

Price Controls and Quotas: Meddling With Markets

International Trade

Macroeconomics: the Big Picture

GDP and the CPI: Tracking the Macroeconomy

Unemployment and Inflation

Long-Run Economic Growth

Savings, Investment Spending, and the Financial Syst

Aggregate Demand and Aggregate Supply

Fiscal Policy

Money, Banking, and the Federal Reserve System

Monetary Policy

Inflation, Disinflation, and Deflation

Macroeconomics: Events and Ideas

International Macroeconomics

Filters

Exam 11: Income and Expenditure

The economy of Finland experienced a setback in 2016 because:

The accelerator principle states that planned investment spending by firms is:

If the marginal propensity to save is 0.3, the size of the multiplier is:

According to the _____, there is a positive relationship between planned investment spending and the expected growth rate of real GDP.

Income-expenditure equilibrium occurs when:

If real GDP is less than aggregate expenditure, then inventories will _____, and firms will _____.

The marginal propensity to consume plus the marginal propensity to save must:

The higher the production capacity of the economy:

An increase in the marginal propensity to consume:

Suppose that the government increases spending by $100 billion as a stimulus package. If the marginal propensity to consume is 0.6, then real GDP will:

Other things being equal, investment spending _____ when _____.

If a store has 10,000 CDs at the start of the period and 15,000 CDs at the end, then its inventory investment during the period was _____ CDs.

In a simple, closed economy (no government or foreign sector), if the marginal propensity to save decreases, the marginal propensity to consume will:

Which factor will cause a decrease in unplanned inventory investment?

Which formula MOST accurately depicts the expenditure multiplier?

In a simple, closed economy (no government or foreign sector), if disposable income increases by $1,000 and consumption increases by $600, the marginal propensity to consume is:

Planned investment spending will decrease if:

If aggregate expenditures equal $800 billion and real GDP equals $600 billion:

If your disposable personal income increases from $10,000 to $15,000 and your consumption increases from $9,000 to $13,000, your marginal propensity to consume is:

In an income-expenditure equilibrium:

First Principles

Economic Models: Trade-Offs and Trade

Supply and Demand

Price Controls and Quotas: Meddling With Markets

International Trade

Macroeconomics: the Big Picture

GDP and the CPI: Tracking the Macroeconomy

Unemployment and Inflation

Long-Run Economic Growth

Savings, Investment Spending, and the Financial Syst

Aggregate Demand and Aggregate Supply

Fiscal Policy

Money, Banking, and the Federal Reserve System

Monetary Policy

Inflation, Disinflation, and Deflation

Macroeconomics: Events and Ideas

International Macroeconomics

Filters

If real GDP is less than aggregate expenditure, then inventories will _, and firms will _.

Other things being equal, investment spending _ when _.