Question 1

An increase in imports, other things constant, would tend to raise the equilibrium level of GDP.

Accepted Answer

A) True 
 B)False

Question 2

John Maynard Keynes expressed his ideas about the macroeconomy and attacked classical economics in his book, The

Accepted Answer

A) Affluent Society. 
B) Wealth of Nations. 
C) Theory and Practice of Economics in Capitalism. 
D) General Theory of Employment, Interest, and Money. 
A) Affluent Society. 
B) Wealth of Nations. 
C) Theory and Practice of Economics in Capitalism. 
D) General Theory of Employment, Interest, and Money.

Question 3

If MPC = 0.5, a simultaneous increase in both taxes and government spending of $20 will

Accepted Answer

A) decrease GDP by $20. 
B) decrease GDP by $40. 
C) increase GDP by $20. 
D) increase GDP by $40. 
A) decrease GDP by $20. 
B) decrease GDP by $40. 
C) increase GDP by $20. 
D) increase GDP by $40.

Question 4

Recently, the level of GDP has declined by $60 billion in an economy where the marginal propensity to consume is 0.75.Aggregate expenditures must have fallen by

Accepted Answer

A) $45 billion. 
B) $30 billion. 
C) $15 billion. 
D) $60 billion. 
A) $45 billion. 
B) $30 billion. 
C) $15 billion. 
D) $60 billion.

Question 5

If a government raises its expenditures by $50 billion and at the same time levies a lump-sum tax of $50 billion, the net effect on the economy will be to

Accepted Answer

A) increase GDP by less than $50 billion. 
B) increase GDP by more than $50 billion. 
C) increase GDP by $50 billion. 
D) make no change in GDP. 
A) increase GDP by less than $50 billion. 
B) increase GDP by more than $50 billion. 
C) increase GDP by $50 billion. 
D) make no change in GDP.

Question 6

Say's law in classical economics suggests that, over a period of time,

Accepted Answer

A) aggregate spending would tend to exceed total output and income. 
B) aggregate spending would tend to fall short of total output and income. 
C) aggregate spending would tend to equal total output and income. 
D) aggregate spending would tend to deviate from total output and income. 
A) aggregate spending would tend to exceed total output and income. 
B) aggregate spending would tend to fall short of total output and income. 
C) aggregate spending would tend to equal total output and income. 
D) aggregate spending would tend to deviate from total output and income.

Question 7

The investment schedule shows the

Accepted Answer

A) inverse relationship between the expected rate of return and the quantity of investment demanded. 
B) positive relationship between the expected rate of return and the quantity of investment demanded. 
C) amounts business firms collectively intend to invest at each possible level of GDP. 
D) rate of interest that business firms must pay when they make investments in capital goods. 
A) inverse relationship between the expected rate of return and the quantity of investment demanded. 
B) positive relationship between the expected rate of return and the quantity of investment demanded. 
C) amounts business firms collectively intend to invest at each possible level of GDP. 
D) rate of interest that business firms must pay when they make investments in capital goods.

Question 8

If a nation imposes tariffs and quotas on foreign products, the immediate effect will be to

Accepted Answer

A) reduce the rate of domestic inflation. 
B) increase efficiency in the world economy. 
C) increase domestic output and employment. 
D) reduce domestic output and employment. 
A) reduce the rate of domestic inflation. 
B) increase efficiency in the world economy. 
C) increase domestic output and employment. 
D) reduce domestic output and employment.

Question 9

Assume the current equilibrium level of income is $200 billion as compared to the full-employment income level of $240 billion.If the MPC is 0.625, what change in aggregate expenditures is needed to achieve full employment?

Accepted Answer

A) a decrease of $12 billion 
B) an increase of $25 billion 
C) an increase of $10 billion 
D) an increase of $15 billion 
A) a decrease of $12 billion 
B) an increase of $25 billion 
C) an increase of $10 billion 
D) an increase of $15 billion

Question 10

In an aggregate expenditures diagram, equal increases in government spending and in lump-sum taxes will

Accepted Answer

A) shift the aggregate expenditures line downward. 
B) shift the aggregate expenditures line upward. 
C) leave the aggregate expenditures line unchanged. 
D) reduce the equilibrium GDP. 
A) shift the aggregate expenditures line downward. 
B) shift the aggregate expenditures line upward. 
C) leave the aggregate expenditures line unchanged. 
D) reduce the equilibrium GDP.

Question 11

Ca = 25 + 0.75 (Y - T) Ig = 50 Xn = 10
G = 70
T = 30
(Advanced analysis) The accompanying equations are for a mixed open economy.The letters Y, Ca, Ig, Xn, G, and T stand for GDP, consumption, gross investment, net exports, government purchases, and net taxes, respectively.Figures are in billions of dollars.The equilibrium level of GDP for this economy is

Accepted Answer

A) $600. 
B) $530. 
C) $415. 
D) $400. 
A) $600. 
B) $530. 
C) $415. 
D) $400.

Question 12

Refer to the accompanying table.The MPC and MPS in the economy

Accepted Answer

A) are 0.4 and 0.6, respectively. 
B) are 0.6 and 0.4, respectively. 
C) are 0.8 and 0.2, respectively. 
D) cannot be determined from the information given. 
A) are 0.4 and 0.6, respectively. 
B) are 0.6 and 0.4, respectively. 
C) are 0.8 and 0.2, respectively. 
D) cannot be determined from the information given.

Question 13

If government increases its purchases by $15 billion and the MPC is 2/3, then we would expect the equilibrium GDP to

Accepted Answer

A) increase by $30 billion. 
B) increase by $45 billion. 
C) decrease by $35 billion. 
D) increase by $50 billion. 
A) increase by $30 billion. 
B) increase by $45 billion. 
C) decrease by $35 billion. 
D) increase by $50 billion.

Question 14

Saving is $40 billion and planned investment is $28 billion at the $175 billion level of output in a private closed economy.At this level,

Accepted Answer

A) consumption will be $147 billion. 
B) actual investment will be $28 billion. 
C) unplanned investment will be positive $12 billion. 
D) unplanned investment will be negative $12 billion. 
A) consumption will be $147 billion. 
B) actual investment will be $28 billion. 
C) unplanned investment will be positive $12 billion. 
D) unplanned investment will be negative $12 billion.

Question 15

(Last Word) Say's law and classical macroeconomics were disputed by

Accepted Answer

A) Adam Smith. 
B) Jeremy Bentham. 
C) John Stuart Mill. 
D) John Maynard Keynes. 
A) Adam Smith. 
B) Jeremy Bentham. 
C) John Stuart Mill. 
D) John Maynard Keynes.

Question 16

In the Great Recession of 2007-2009, consumption, C, and investment, I g, fell, while government, G, expanded.

Accepted Answer

A) True 
 B)False

Question 17

Investment and saving are, respectively,

Accepted Answer

A) income and wealth. 
B) stocks and flows. 
C) injections and leakages. 
D) leakages and injections. 
A) income and wealth. 
B) stocks and flows. 
C) injections and leakages. 
D) leakages and injections.

Question 18

Imports have the same effect on the current size of GDP as

Accepted Answer

A) exports. 
B) investment. 
C) consumption. 
D) saving. 
A) exports. 
B) investment. 
C) consumption. 
D) saving.

Question 19

Other things equal, the multiplier effect associated with a change in government spending is

Accepted Answer

A) the same as that associated with a change in taxes. 
B) equal to that associated with a change in investment or consumption. 
C) less than that associated with a change in investment. 
D) greater than that associated with a change in investment. 
A) the same as that associated with a change in taxes. 
B) equal to that associated with a change in investment or consumption. 
C) less than that associated with a change in investment. 
D) greater than that associated with a change in investment.

Exam 31: The Aggregate Expenditures Model

An increase in imports, other things constant, would tend to raise the equilibrium level of GDP.

John Maynard Keynes expressed his ideas about the macroeconomy and attacked classical economics in his book, The

If MPC = 0.5, a simultaneous increase in both taxes and government spending of $20 will

Recently, the level of GDP has declined by $60 billion in an economy where the marginal propensity to consume is 0.75.Aggregate expenditures must have fallen by

If a government raises its expenditures by $50 billion and at the same time levies a lump-sum tax of $50 billion, the net effect on the economy will be to

Say's law in classical economics suggests that, over a period of time,

The investment schedule shows the

If a nation imposes tariffs and quotas on foreign products, the immediate effect will be to

Assume the current equilibrium level of income is $200 billion as compared to the full-employment income level of $240 billion.If the MPC is 0.625, what change in aggregate expenditures is needed to achieve full employment?

In an aggregate expenditures diagram, equal increases in government spending and in lump-sum taxes will

Refer to the accompanying table.The MPC and MPS in the economy

If government increases its purchases by $15 billion and the MPC is 2/3, then we would expect the equilibrium GDP to

Saving is $40 billion and planned investment is $28 billion at the $175 billion level of output in a private closed economy.At this level,

(Last Word) Say's law and classical macroeconomics were disputed by

In the Great Recession of 2007-2009, consumption, C, and investment, I g, fell, while government, G, expanded.

Investment and saving are, respectively,

Imports have the same effect on the current size of GDP as

Other things equal, the multiplier effect associated with a change in government spending is

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

Elasticity

Utility Maximization

Behavioral Economics

Businesses and the Costs of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Technology, Rd, and Efficiency

The Demand for Resources

Wage Determination

Rent, Interest, and Profit

Natural Resource and Energy Economics

Public Finance: Expenditures and Taxes

Antitrust Policy and Regulation

Agriculture: Economics and Policy

Income Inequality, Poverty, and Discrimination

Health Care

Immigration

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, and Debt

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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