Question 1

If saving exceeds investment, then the level of GDP will

Accepted Answer

A) increase. 
B) remain constant. 
C) decrease. 
D) rise above potential GDP. 
A) increase. 
B) remain constant. 
C) decrease. 
D) rise above potential GDP.

Question 2

If inventory levels are decreasing, then we should expect business firms to

Accepted Answer

A) decrease prices. 
B) decrease output. 
C) lay off workers. 
D) increase output. 
A) decrease prices. 
B) decrease output. 
C) lay off workers. 
D) increase output.

Question 3

John Maynard Keynes concluded that investment spending is not determined by

Accepted Answer

A) business confidence. 
B) government incentives. 
C) psychological perceptions about the economy. 
D) economic expectations. 
A) business confidence. 
B) government incentives. 
C) psychological perceptions about the economy. 
D) economic expectations.

Question 4

Figure 9-3
​  
-In Figure 9-3, at $3,000 billion GDP,

Accepted Answer

A) inventories will be falling, signaling businesses to decrease production. 
B) inventories will be falling, signaling businesses to increase production. 
C) planned saving increases planned investment. 
D) inventories will be accumulating, signaling businesses to increase production. 
A) inventories will be falling, signaling businesses to decrease production. 
B) inventories will be falling, signaling businesses to increase production. 
C) planned saving increases planned investment. 
D) inventories will be accumulating, signaling businesses to increase production.

Question 5

If the economy automatically tends toward full employment, then government stabilization policy

Accepted Answer

A) must be constantly in force. 
B) will be necessary only in recessions. 
C) will be necessary only in inflationary periods. 
D) will not be necessary. 
A) must be constantly in force. 
B) will be necessary only in recessions. 
C) will be necessary only in inflationary periods. 
D) will not be necessary.

Question 6

Figure 9-3
​  
-In Figure 9-3, investment plus net exports equals

Accepted Answer

A) $200 billion. 
B) $400 billion. 
C) $600 billion. 
D) $800 billion. 
E) $1,200 billion. 
A) $200 billion. 
B) $400 billion. 
C) $600 billion. 
D) $800 billion. 
E) $1,200 billion.

Question 7

What is meant by the concept of a "coordination failure" in macroeconomics?

Accepted Answer

When individual members of an economy re

Question 8

Assume a simple macroeconomic model.When inventories rise unexpectedly,

Accepted Answer

A) income is above its equilibrium value. 
B) income will rise until it reaches its equilibrium value. 
C) total spending is higher than total output. 
D) total output is less than spending. 
A) income is above its equilibrium value. 
B) income will rise until it reaches its equilibrium value. 
C) total spending is higher than total output. 
D) total output is less than spending.

Question 9

Recessions and depressions are the principal examples of

Accepted Answer

A) market failure. 
B) coordination failure. 
C) central planning. 
D) socialist contradictions. 
A) market failure. 
B) coordination failure. 
C) central planning. 
D) socialist contradictions.

Question 10

Figure 9-1
​  
-In Figure 9-1, at $3,000 billion real GDP,

Accepted Answer

A) spending exceeds total output and inventories will fall. 
B) inventories are constant. 
C) aggregate demand equals aggregate supply. 
D) spending falls short of output and inventories will rise. 
A) spending exceeds total output and inventories will fall. 
B) inventories are constant. 
C) aggregate demand equals aggregate supply. 
D) spending falls short of output and inventories will rise.

Question 11

Describe the role of business inventory change in determining the equilibrium level of GDP and changes in the level of GDP.

Accepted Answer

Inventories work as buffers in the econo

Question 12

A decrease in autonomous consumption would have the same effect on the expenditures schedule as a(n)

Accepted Answer

A) decrease in investment. 
B) increase in government purchases. 
C) increase in net exports. 
D) decrease in taxes. 
A) decrease in investment. 
B) increase in government purchases. 
C) increase in net exports. 
D) decrease in taxes.

Question 13

High unemployment and high rates of inflation are examples of coordination successes.

Accepted Answer

A) True 
 B)False

Question 14

Figure 9-1
​  
-Using the standard 45° line diagram, how does an increase in investment spending effect the expenditure schedule?

Accepted Answer

A) It shifts the expenditure schedule downward. 
B) It shifts the expenditure schedule upward. 
C) It increases the slope of the expenditure schedule. 
D) It decreases the slope of the expenditure schedule. 
A) It shifts the expenditure schedule downward. 
B) It shifts the expenditure schedule upward. 
C) It increases the slope of the expenditure schedule. 
D) It decreases the slope of the expenditure schedule.

Question 15

Figure 9-1
​  
-In Figure 9-1,

Accepted Answer

A) the 45° line represents all points where spending equals output. 
B) to the left of equilibrium GDP, inventories will rise. 
C) to the right of equilibrium GDP, inventories will fall. 
D) the level of equilibrium GDP equals potential GDP. 
A) the 45° line represents all points where spending equals output. 
B) to the left of equilibrium GDP, inventories will rise. 
C) to the right of equilibrium GDP, inventories will fall. 
D) the level of equilibrium GDP equals potential GDP.

Question 16

When constructing a basic macroeconomic model, several assumptions (not realistic, but necessary to simplify the analysis) are made.Which of the following are assumed to be constant?

Accepted Answer

A) The price level 
B) Consumption spending 
C) The value of fixed-money assets 
D) Taxes 
A) The price level 
B) Consumption spending 
C) The value of fixed-money assets 
D) Taxes

Question 17

Two variables that affect the slope of the aggregate demand curve are

Accepted Answer

A) government purchases and real taxes. 
B) tax rates and interest rates. 
C) government purchases and interest rates. 
D) exchange rates and income rates. 
A) government purchases and real taxes. 
B) tax rates and interest rates. 
C) government purchases and interest rates. 
D) exchange rates and income rates.

Question 18

Investment spending might be larger when GDP is higher.Such added investment as GDP rises is called

Accepted Answer

A) mutual investment. 
B) induced investment. 
C) positive investment. 
D) net investment. 
A) mutual investment. 
B) induced investment. 
C) positive investment. 
D) net investment.

Question 19

If an increase in investment of $100 billion generates an increase of $500 billion in real GDP, the multiplier is

Accepted Answer

A) 20 
B) 50 
C) 1.50. 
D) 5.00. 
A) 20 
B) 50 
C) 1.50. 
D) 5.00.

Question 20

The basic idea behind the multiplier is that an increase in

Accepted Answer

A) GDP brings about an additional, larger increase in GDP. 
B) consumer spending causes a larger increase in investment spending. 
C) government spending causes a larger increase in tax revenues. 
D) spending will cause an even larger increase in equilibrium GDP. 
A) GDP brings about an additional, larger increase in GDP. 
B) consumer spending causes a larger increase in investment spending. 
C) government spending causes a larger increase in tax revenues. 
D) spending will cause an even larger increase in equilibrium GDP.

Exam 25: Demand-Side Equilibrium: Unemployment or Inflation

If saving exceeds investment, then the level of GDP will

If inventory levels are decreasing, then we should expect business firms to

John Maynard Keynes concluded that investment spending is not determined by

Figure 9-3 ​ -In Figure 9-3, at $3,000 billion GDP,

If the economy automatically tends toward full employment, then government stabilization policy

Figure 9-3 ​ -In Figure 9-3, investment plus net exports equals

What is meant by the concept of a "coordination failure" in macroeconomics?

Assume a simple macroeconomic model.When inventories rise unexpectedly,

Recessions and depressions are the principal examples of

Figure 9-1 ​ -In Figure 9-1, at $3,000 billion real GDP,

Describe the role of business inventory change in determining the equilibrium level of GDP and changes in the level of GDP.

A decrease in autonomous consumption would have the same effect on the expenditures schedule as a(n)

High unemployment and high rates of inflation are examples of coordination successes.

Figure 9-1 ​ -Using the standard 45° line diagram, how does an increase in investment spending effect the expenditure schedule?

Figure 9-1 ​ -In Figure 9-1,

When constructing a basic macroeconomic model, several assumptions (not realistic, but necessary to simplify the analysis) are made.Which of the following are assumed to be constant?

Two variables that affect the slope of the aggregate demand curve are

Investment spending might be larger when GDP is higher.Such added investment as GDP rises is called

If an increase in investment of $100 billion generates an increase of $500 billion in real GDP, the multiplier is

The basic idea behind the multiplier is that an increase in

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

Figure 9-3 -In Figure 9-3, at $3,000 billion GDP,

Figure 9-3 -In Figure 9-3, investment plus net exports equals

Figure 9-1 -In Figure 9-1, at $3,000 billion real GDP,

Figure 9-1 -Using the standard 45° line diagram, how does an increase in investment spending effect the expenditure schedule?

Figure 9-1 -In Figure 9-1,