Question 1

One of the possible consequences of the expenditure schedule lying below the level of full employment GDP is

Accepted Answer

A) unemployment. 
B) rising prices. 
C) increasing production. 
D) decreasing inventories. 
A) unemployment. 
B) rising prices. 
C) increasing production. 
D) decreasing inventories.

Question 2

The expenditure schedule includes the consumption function.

Accepted Answer

A) True 
 B)False

Question 3

Table 9-1   ​
-In Table 9-1, the equilibrium level of output is

Accepted Answer

A) 2,500. 
B) 3,000. 
C) 3,500. 
D) 4,000. 
A) 2,500. 
B) 3,000. 
C) 3,500. 
D) 4,000.

Question 4

Investment spending

Accepted Answer

A) cannot be stimulated by decreasing the interest rate. 
B) is often the cause of business fluctuations in the United States. 
C) is a remarkably stable function of the level of real GDP. 
D) is the primary solution to recessions and inflations, according to John Maynard Keynes. 
A) cannot be stimulated by decreasing the interest rate. 
B) is often the cause of business fluctuations in the United States. 
C) is a remarkably stable function of the level of real GDP. 
D) is the primary solution to recessions and inflations, according to John Maynard Keynes.

Question 5

Which one of the following could cause an inflationary gap?

Accepted Answer

A) Net exports are decreasing. 
B) Price levels are too low. 
C) Government spending is too high. 
D) Unemployment occurs. 
A) Net exports are decreasing. 
B) Price levels are too low. 
C) Government spending is too high. 
D) Unemployment occurs.

Question 6

Table 9-1   ​
-In Table 9-1, at output of 4,000, inventories are

Accepted Answer

A) decreasing by 200. 
B) increasing by 200. 
C) increasing by 300. 
D) decreasing by 300. 
A) decreasing by 200. 
B) increasing by 200. 
C) increasing by 300. 
D) decreasing by 300.

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

The U.S.economy in 2009 was characterized by an excess level of output.This corresponds to a recessionary gap.

Accepted Answer

A) True 
 B)False

Question 9

Total output equals total income

Accepted Answer

A) in the income-expenditures diagram. 
B) in the circular demand diagram. 
C) in the circular sales diagram. 
D) in the spending-output diagram. 
A) in the income-expenditures diagram. 
B) in the circular demand diagram. 
C) in the circular sales diagram. 
D) in the spending-output diagram.

Question 10

A recessionary gap exists when potential GDP

Accepted Answer

A) falls short of equilibrium GDP. 
B) exceeds equilibrium GDP. 
C) equals equilibrium GDP. 
D) inflation leads to economic disequilibrium. 
A) falls short of equilibrium GDP. 
B) exceeds equilibrium GDP. 
C) equals equilibrium GDP. 
D) inflation leads to economic disequilibrium.

Question 11

Leakages are offset by investment and government spending in the circular flow model.

Accepted Answer

A) True 
 B)False

Question 12

Figure 9-5
​  
-In Figure 9-5, if the second round effect of an increase in autonomous spending of $100,000 is $75,000, then the multiplier is

Accepted Answer

A) 400,000. 
B) 6. 
C) 4. 
D) 4/5. 
A) 400,000. 
B) 6. 
C) 4. 
D) 4/5.

Question 13

When demand for goods and services is high, firms are more likely to hire more workers.

Accepted Answer

A) True 
 B)False

Question 14

Total expenditures can be written as C + I + G + (X − IM).

Accepted Answer

A) True 
 B)False

Question 15

When businesses are cutting back production, then it is probably true that

Accepted Answer

A) total spending is greater than total output. 
B) total output is greater than total income. 
C) total spending is less than total output. 
D) inventory levels are decreasing. 
A) total spending is greater than total output. 
B) total output is greater than total income. 
C) total spending is less than total output. 
D) inventory levels are decreasing.

Question 16

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 17

What is a multiplier? How does the multiplier effect occur?

Accepted Answer

The multiplier is the ratio of the chang

Question 18

In a simple, private economy, suppose that the MPC is 0.8 and investment rises by $20 million.At the new equilibrium, how much will saving have increased?

Accepted Answer

A) $8 million 
B) $16 million 
C) $20 million 
D) $80 million 
E) $100 million 
A) $8 million 
B) $16 million 
C) $20 million 
D) $80 million 
E) $100 million

Question 19

Recessionary gaps are most likely to be accompanied by

Accepted Answer

A) inflation. 
B) inventory reductions. 
C) unemployment. 
D) expanding output. 
A) inflation. 
B) inventory reductions. 
C) unemployment. 
D) expanding output.

Question 20

Real wealth changes with

Accepted Answer

A) disposable income. 
B) consumption. 
C) the price level. 
D) GDP. 
A) disposable income. 
B) consumption. 
C) the price level. 
D) GDP.

Exam 25: Demand-Side Equilibrium: Unemployment or Inflation

One of the possible consequences of the expenditure schedule lying below the level of full employment GDP is

The expenditure schedule includes the consumption function.

Table 9-1 ​ -In Table 9-1, the equilibrium level of output is

Investment spending

Which one of the following could cause an inflationary gap?

Table 9-1 ​ -In Table 9-1, at output of 4,000, inventories are

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

The U.S.economy in 2009 was characterized by an excess level of output.This corresponds to a recessionary gap.

Total output equals total income

A recessionary gap exists when potential GDP

Leakages are offset by investment and government spending in the circular flow model.

Figure 9-5 ​ -In Figure 9-5, if the second round effect of an increase in autonomous spending of $100,000 is $75,000, then the multiplier is

When demand for goods and services is high, firms are more likely to hire more workers.

Total expenditures can be written as C + I + G + (X − IM).

When businesses are cutting back production, then it is probably true that

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

What is a multiplier? How does the multiplier effect occur?

In a simple, private economy, suppose that the MPC is 0.8 and investment rises by $20 million.At the new equilibrium, how much will saving have increased?

Recessionary gaps are most likely to be accompanied by

Real wealth changes with

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 Table 9-1, the equilibrium level of output is

Table 9-1 -In Table 9-1, at output of 4,000, inventories are

Figure 9-5 -In Figure 9-5, if the second round effect of an increase in autonomous spending of $100,000 is $75,000, then the multiplier is