Question 1

If the government spending multiplier is 7, the tax multiplier must be

Accepted Answer

A)  -6. 
B)  -3. 
C)  3. 
D)  7. 
A)  -6. 
B)  -3. 
C)  3. 
D)  7.

Question 2

-Refer to Figure 11.4. Which diagram illustrates the effect of a decrease in the marginal propensity to consume?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
A)  A 
B)  B 
C)  C 
D)  D

Question 3

Let C = 800 + 0.6y and I = 100. Assume no government or foreign sectors. If investment decreases by 40, the equilibrium output decreases by a total of

Accepted Answer

A)  800. 
B)  480. 
C)  100. 
D)  25. 
A)  800. 
B)  480. 
C)  100. 
D)  25.

Question 4

-Refer to Figure 11.2. Suppose that Ca = 40, MPC = 0.8, I = 10. The slope of the consumption function is

Accepted Answer

A)  0.1. 
B)  0.2. 
C)  0.8. 
D)  0.9. 
A)  0.1. 
B)  0.2. 
C)  0.8. 
D)  0.9.

Question 5

Table 11.1
  
-Refer to Table 11.1. What is the value of the tax multiplier?

Accepted Answer

A)  -0.67 
B)  -1.875 
C)  2.33 
D)  3 
A)  -0.67 
B)  -1.875 
C)  2.33 
D)  3

Question 6

The level of GDP at which planned expenditure equals the amount of output produced is the

Accepted Answer

A)  potential output. 
B)  long-run output. 
C)  autonomous output. 
D)  equilibrium output. 
A)  potential output. 
B)  long-run output. 
C)  autonomous output. 
D)  equilibrium output.

Question 7

Table 11.1
  
-Refer to Table 11.1. What is the equilibrium level of output, y*?

Accepted Answer

A)  1,775 
B)  2,375 
C)  7,100 
D)  9,500 
A)  1,775 
B)  2,375 
C)  7,100 
D)  9,500

Question 8

If an economy is producing a level of output which is higher than the equilibrium level, planned expenditures ________ total output and ________ goods and services are being produced than are being demanded.

Accepted Answer

A)  exceed; more 
B)  exceed; fewer 
C)  are less than; more 
D)  are less than; fewer 
A)  exceed; more 
B)  exceed; fewer 
C)  are less than; more 
D)  are less than; fewer

Question 9

The multiplier for government spending is the same as the

Accepted Answer

A)  tax multiplier. 
B)  multiplier for autonomous consumption. 
C)  marginal propensity to import. 
D)  marginal propensity to save. 
A)  tax multiplier. 
B)  multiplier for autonomous consumption. 
C)  marginal propensity to import. 
D)  marginal propensity to save.

Question 10

Table 11.1
  
-Refer to Table 11.1. If the marginal propensity to consume decreases to 0.05 (MPC = 0.05), what is the new equilibrium level of output?

Accepted Answer

A)  2,366.67 
B)  3,166.67 
C)  3,550.00 
D)  4,750.00 
A)  2,366.67 
B)  3,166.67 
C)  3,550.00 
D)  4,750.00

Question 11

Recall the Application about the difficulty in estimating the size of multipliers and the historical record of the size of multipliers to answer the following question(s).
-According to this Application, economists Robert Barro and Charles Redlick found multipliers for defense spending were typically

Accepted Answer

A)  negative. 
B)  less than 1. 
C)  between 3 and 5. 
D)  greater than 5. 
A)  negative. 
B)  less than 1. 
C)  between 3 and 5. 
D)  greater than 5.

Question 12

Recall the Application about the U.S. "Locomotive Effect": how U.S. growth affects foreign economies and the demand for foreign products, to answer the following question(s). From the early 1990s until quite recently, the U.S. economy grew faster than the rest of the world, with its share of the world economy increasing from approximately 26 percent in 1992 to over 32 percent in 2001. Because the U.S. economy is such an important part of the world economy, its growth promoted growth in foreign countries.
-According to this Application, from the early 1990s until quite recently, the U.S. economy grew. This growth in the U.S economy

Accepted Answer

A)  caused the level of U.S. exports to decline. 
B)  decreased foreign investment in the U.S. 
C)  increased the U.S. demand for foreign products. 
D)  decreased imports to the United States. 
A)  caused the level of U.S. exports to decline. 
B)  decreased foreign investment in the U.S. 
C)  increased the U.S. demand for foreign products. 
D)  decreased imports to the United States.

Question 13

Recall the Application about the U.S. "Locomotive Effect": how U.S. growth affects foreign economies and the demand for foreign products, to answer the following question(s). From the early 1990s until quite recently, the U.S. economy grew faster than the rest of the world, with its share of the world economy increasing from approximately 26 percent in 1992 to over 32 percent in 2001. Because the U.S. economy is such an important part of the world economy, its growth promoted growth in foreign countries.
-According to this Application, growth in China and India caused U.S. exports to increase. Because of this increase in U.S. exports, U.S. income will

Accepted Answer

A)  increase by the same amount. 
B)  increase by a larger amount. 
C)  decrease by the same amount. 
D)  decrease by a larger amount. 
A)  increase by the same amount. 
B)  increase by a larger amount. 
C)  decrease by the same amount. 
D)  decrease by a larger amount.

Question 14

In all economies, investment spending fluctuates.

Accepted Answer

A) True 
 B)False

Question 15

What would happen to an economy if the government funded an increase in spending with an equivalent increase in taxes ?

Accepted Answer

Because the government spending multipli

Question 16

Increases in consumer wealth will cause an increase in autonomous consumption.

Accepted Answer

A) True 
 B)False

Question 17

The value of the multiplier ________ as the marginal propensity to save decreases.

Accepted Answer

A)  is constant 
B)  decreases 
C)  increases 
D)  becomes negative 
A)  is constant 
B)  decreases 
C)  increases 
D)  becomes negative

Question 18

Let C = 800 + 0.6y and I = 100. Assume no government or foreign sectors. If investment decreases by 40, then the value of the multiplier is

Accepted Answer

A)  -2.5. 
B)  -1.67. 
C)  1.67. 
D)  2.5. 
A)  -2.5. 
B)  -1.67. 
C)  1.67. 
D)  2.5.

Question 19

-Refer to Figure 11.4. Which diagram illustrates the effect of a decrease in government spending?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
A)  A 
B)  B 
C)  C 
D)  D

Question 20

The marginal propensity to consume (MPC)is the

Accepted Answer

A)  ratio of consumption to savings. 
B)  fraction of additional income that is spent. 
C)  ratio of consumption to income. 
D)  fraction of additional consumption that is not based on the level of income. 
A)  ratio of consumption to savings. 
B)  fraction of additional income that is spent. 
C)  ratio of consumption to income. 
D)  fraction of additional consumption that is not based on the level of income.

If the government spending multiplier is 7, the tax multiplier must be

-Refer to Figure 11.4. Which diagram illustrates the effect of a decrease in the marginal propensity to consume?

Let C = 800 + 0.6y and I = 100. Assume no government or foreign sectors. If investment decreases by 40, the equilibrium output decreases by a total of

-Refer to Figure 11.2. Suppose that Ca = 40, MPC = 0.8, I = 10. The slope of the consumption function is

Table 11.1 -Refer to Table 11.1. What is the value of the tax multiplier?

The level of GDP at which planned expenditure equals the amount of output produced is the

Table 11.1 -Refer to Table 11.1. What is the equilibrium level of output, y*?

If an economy is producing a level of output which is higher than the equilibrium level, planned expenditures total output and goods and services are being produced than are being demanded.

The multiplier for government spending is the same as the

Table 11.1 -Refer to Table 11.1. If the marginal propensity to consume decreases to 0.05 (MPC = 0.05), what is the new equilibrium level of output?

In all economies, investment spending fluctuates.

What would happen to an economy if the government funded an increase in spending with an equivalent increase in taxes ?

Increases in consumer wealth will cause an increase in autonomous consumption.

The value of the multiplier ________ as the marginal propensity to save decreases.

Let C = 800 + 0.6y and I = 100. Assume no government or foreign sectors. If investment decreases by 40, then the value of the multiplier is

-Refer to Figure 11.4. Which diagram illustrates the effect of a decrease in government spending?

The marginal propensity to consume (MPC)is the

Introduction: What Is Economics?

The Key Principles of Economics

Exchange and Markets

Demand, Supply, and Market Equilibrium

Measuring a Nation's Production and Income

Unemployment and Inflation

The Economy at Full Employment

Why Do Economies Grow?

Aggregate Demand and Aggregate Supply

Fiscal Policy

Investment and Financial Markets

Money and the Banking System

The Federal Reserve and Monetary Policy

Modern Macroeconomics: From the Short Run to the Long Run

The Dynamics of Inflation and Unemployment

Macroeconomic Policy Debates

International Trade and Public Policy

The World of International Finance

Filters

Exam 11: The Income-Expenditure Model

If the government spending multiplier is 7, the tax multiplier must be

-Refer to Figure 11.4. Which diagram illustrates the effect of a decrease in the marginal propensity to consume?

Let C = 800 + 0.6y and I = 100. Assume no government or foreign sectors. If investment decreases by 40, the equilibrium output decreases by a total of

-Refer to Figure 11.2. Suppose that Ca = 40, MPC = 0.8, I = 10. The slope of the consumption function is

Table 11.1 -Refer to Table 11.1. What is the value of the tax multiplier?

The level of GDP at which planned expenditure equals the amount of output produced is the

Table 11.1 -Refer to Table 11.1. What is the equilibrium level of output, y*?

If an economy is producing a level of output which is higher than the equilibrium level, planned expenditures ________ total output and ________ goods and services are being produced than are being demanded.

The multiplier for government spending is the same as the

Table 11.1 -Refer to Table 11.1. If the marginal propensity to consume decreases to 0.05 (MPC = 0.05), what is the new equilibrium level of output?

In all economies, investment spending fluctuates.

What would happen to an economy if the government funded an increase in spending with an equivalent increase in taxes ?

Increases in consumer wealth will cause an increase in autonomous consumption.

The value of the multiplier ________ as the marginal propensity to save decreases.

Let C = 800 + 0.6y and I = 100. Assume no government or foreign sectors. If investment decreases by 40, then the value of the multiplier is

-Refer to Figure 11.4. Which diagram illustrates the effect of a decrease in government spending?

The marginal propensity to consume (MPC)is the

Introduction: What Is Economics?

The Key Principles of Economics

Exchange and Markets

Demand, Supply, and Market Equilibrium

Measuring a Nation's Production and Income

Unemployment and Inflation

The Economy at Full Employment

Why Do Economies Grow?

Aggregate Demand and Aggregate Supply

Fiscal Policy

Investment and Financial Markets

Money and the Banking System

The Federal Reserve and Monetary Policy

Modern Macroeconomics: From the Short Run to the Long Run

The Dynamics of Inflation and Unemployment

Macroeconomic Policy Debates

International Trade and Public Policy

The World of International Finance

Filters

If an economy is producing a level of output which is higher than the equilibrium level, planned expenditures total output and goods and services are being produced than are being demanded.