Question 1

Table 9-1   ​
-In the basic income-expenditures diagram, what will occur if the price level rises?

Accepted Answer

A) There will be movement to the left on the expenditure line. 
B) There will be movement to the right on the expenditure line. 
C) The expenditure schedule will shift down. 
D) The expenditure schedule will shift up. 
A) There will be movement to the left on the expenditure line. 
B) There will be movement to the right on the expenditure line. 
C) The expenditure schedule will shift down. 
D) The expenditure schedule will shift up.

Question 2

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 3

The recessionary gap is the

Accepted Answer

A) amount of unemployment compensation required during a recession. 
B) budget deficit encountered during a recession. 
C) amount of government spending needed to end a recession. 
D) distance between the equilibrium level of output and the full employment level of output. 
A) amount of unemployment compensation required during a recession. 
B) budget deficit encountered during a recession. 
C) amount of government spending needed to end a recession. 
D) distance between the equilibrium level of output and the full employment level of output.

Question 4

A higher price level would mean ____ for a person who has a bank deposit of $2 million.

Accepted Answer

A) an increase in real income 
B) a decrease in real wealth 
C) a decrease in nominal income 
D) an increase in nominal income 
A) an increase in real income 
B) a decrease in real wealth 
C) a decrease in nominal income 
D) an increase in nominal income

Question 5

Government spending and private sector funding toward new businesses have multiplied effects on GDP.

Accepted Answer

A) True 
 B)False

Question 6

The MPC in the U.S.economy has been estimated to be near 0.95.If this is an accurate measure, then the numerical value for the multiplier would be

Accepted Answer

A) 0.9. 
B) 1.8. 
C) 9.5. 
D) 10.0. 
E) 20.0. 
A) 0.9. 
B) 1.8. 
C) 9.5. 
D) 10.0. 
E) 20.0.

Question 7

The inflationary gap is the

Accepted Answer

A) inflation rate that will occur from excess aggregate demand. 
B) budget deficit that caused the inflation to occur. 
C) distance between the equilibrium level of output and the full employment level of output. 
D) gap between expected and actual inflation. 
A) inflation rate that will occur from excess aggregate demand. 
B) budget deficit that caused the inflation to occur. 
C) distance between the equilibrium level of output and the full employment level of output. 
D) gap between expected and actual inflation.

Question 8

Figure 9-4
​  
-If the amount that consumers wish to save at the full employment level of income is greater than the amount that businesses plan to invest, then

Accepted Answer

A) there will be an inflationary gap. 
B) there will be a recessionary gap. 
C) total demand will exceed potential GDP. 
D) the economy will move to a higher level of output. 
A) there will be an inflationary gap. 
B) there will be a recessionary gap. 
C) total demand will exceed potential GDP. 
D) the economy will move to a higher level of output.

Question 9

Inventory reductions caused by strong demand are signals to retailers to order more products.

Accepted Answer

A) True 
 B)False

Question 10

An inflationary gap will exist when the full employment level of GDP is

Accepted Answer

A) equal to equilibrium GDP. 
B) greater than equilibrium GDP. 
C) less than equilibrium GDP. 
D) greater than disposable income. 
A) equal to equilibrium GDP. 
B) greater than equilibrium GDP. 
C) less than equilibrium GDP. 
D) greater than disposable income.

Question 11

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 12

Figure 9-3
​  
-In Figure 9-3, equilibrium GDP is

Accepted Answer

A) $2,000 billion. 
B) $3,000 billion. 
C) $4,000 billion. 
D) $5,000 billion. 
A) $2,000 billion. 
B) $3,000 billion. 
C) $4,000 billion. 
D) $5,000 billion.

Question 13

If savings exceeds investment at full employment, demand will fall short of total output.

Accepted Answer

A) True 
 B)False

Question 14

The aggregate demand curve

Accepted Answer

A) slopes upward. 
B) slopes downward. 
C) is perfectly vertical. 
D) is perfectly horizontal. 
A) slopes upward. 
B) slopes downward. 
C) is perfectly vertical. 
D) is perfectly horizontal.

Question 15

A recessionary gap and an inflationary gap will not persist when the equilibrium level of GDP

Accepted Answer

A) everyone who wants a job has one and firms are not looking for extra workers. 
B) frictional unemployment is 0. 
C) equals potential output. 
D) the unemployment rate is 0. 
A) everyone who wants a job has one and firms are not looking for extra workers. 
B) frictional unemployment is 0. 
C) equals potential output. 
D) the unemployment rate is 0.

Exam 25: Demand-Side Equilibrium: Unemployment or Inflation

Table 9-1 ​ -In the basic income-expenditures diagram, what will occur if the price level rises?

If net exports decrease, the expenditure schedule will

The recessionary gap is the

A higher price level would mean ____ for a person who has a bank deposit of $2 million.

Government spending and private sector funding toward new businesses have multiplied effects on GDP.

The MPC in the U.S.economy has been estimated to be near 0.95.If this is an accurate measure, then the numerical value for the multiplier would be

The inflationary gap is the

Figure 9-4 ​ -If the amount that consumers wish to save at the full employment level of income is greater than the amount that businesses plan to invest, then

Inventory reductions caused by strong demand are signals to retailers to order more products.

An inflationary gap will exist when the full employment level of GDP is

When aggregate demand exceeds current production

Figure 9-3 ​ -In Figure 9-3, equilibrium GDP is

If savings exceeds investment at full employment, demand will fall short of total output.

The aggregate demand curve

A recessionary gap and an inflationary gap will not persist when the equilibrium level of GDP

What Is Economics

The Economony: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: an Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: the Importance of Marginal Analysis

The Financial Markets and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

The Case for Free Markets: the Price System

Monopoly

Between Competition and Monopoly

Limiting Market Power: Antitrust and Regulation

The Shortcomings of Free Markets

The Economics of the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

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

Contemporary Issues in the Useconomy

Filters

Table 9-1 -In the basic income-expenditures diagram, what will occur if the price level rises?

Figure 9-4 -If the amount that consumers wish to save at the full employment level of income is greater than the amount that businesses plan to invest, then

Figure 9-3 -In Figure 9-3, equilibrium GDP is