Question 1

Refer to the diagrams. Curve A

Accepted Answer

A)  is an investment schedule, and curve B is a consumption of ﬁxed capital schedule. 
B)  is an investment demand curve, and curve B is an investment schedule. 
C)  and curve B are totally unrelated. 
D)  shifts to the left when curve B shifts upward. 
A)  is an investment schedule, and curve B is a consumption of ﬁxed capital schedule. 
B)  is an investment demand curve, and curve B is an investment schedule. 
C)  and curve B are totally unrelated. 
D)  shifts to the left when curve B shifts upward.

Question 2

Suppose the economy's multiplier is 2. Other things equal, a $25 billion decrease in government expenditures on national defense will cause equilibrium GDP to

Accepted Answer

A)  decrease by $50 billion. 
B)  decrease by $150 billion. 
C)  remain unchanged since spending on military goods is unproductive and usually wasteful. 
D)  decrease by $25 billion. 
A)  decrease by $50 billion. 
B)  decrease by $150 billion. 
C)  remain unchanged since spending on military goods is unproductive and usually wasteful. 
D)  decrease by $25 billion.

Question 3

Refer to the diagram. If aggregate expenditures in this economy are ( $\left( C + I _ { g } + X _ { n 2 } \right)$ ), then the equilibrium
Levels of GDP and aggregate expenditures will be

Accepted Answer

A)  0A and 0E, respectively. 
B)  0B and 0F, respectively. 
C)  0A and AH, respectively. 
D)  0D and DJ, respectively. 
A)  0A and 0E, respectively. 
B)  0B and 0F, respectively. 
C)  0A and AH, respectively. 
D)  0D and DJ, respectively.

Question 4

SA=−20 + 0.4Y 
Ig = 25 − 3i
(Advanced analysis) The equations refer to a private closed economy, where S is saving, Ig is gross
Investment, i is the real interest rate, and Y is GDP. In equilibrium, the level of saving will be

Accepted Answer

A)  $10. 
B)  $15. 
C)  $20. 
D)  $30. 
A)  $10. 
B)  $15. 
C)  $20. 
D)  $30.

Question 5

When investment remains the same at each level of GDP in a private closed economy, the slope of the aggregate expenditures schedule

Accepted Answer

A)  exceeds the MPC. 
B)  is less than the MPC. 
C)  equals the MPS. 
D)  equals the MPC. 
A)  exceeds the MPC. 
B)  is less than the MPC. 
C)  equals the MPS. 
D)  equals the MPC.

Question 6

Unintended changes in inventories

Accepted Answer

A)  cause the economy to move away from the equilibrium GDP. 
B)  are treated as components of consumption. 
C)  bring actual investment and saving into equality only at the equilibrium level of GDP. 
D)  bring actual investment and saving into equality at all levels of GDP. 
A)  cause the economy to move away from the equilibrium GDP. 
B)  are treated as components of consumption. 
C)  bring actual investment and saving into equality only at the equilibrium level of GDP. 
D)  bring actual investment and saving into equality at all levels of GDP.

Question 7

If the dollar appreciates relative to foreign currencies, we would expect the

Accepted Answer

A)  multiplier to decrease. 
B)  country's exports and imports to both fall. 
C)  country's net exports to rise. 
D)  country's net exports to fall. 
A)  multiplier to decrease. 
B)  country's exports and imports to both fall. 
C)  country's net exports to rise. 
D)  country's net exports to fall.

Question 8

(Advanced analysis) Assume the saving schedule for a private closed economy is S = −20 + 0.2Y, where S is saving and Y is gross domestic product. The multiplier for this economy is

Accepted Answer

A)  3. 
B)  4. 
C)  5. 
D)  10. 
A)  3. 
B)  4. 
C)  5. 
D)  10.

Question 9

Refer to the diagrams. The location of curve B depends on the

Accepted Answer

A)  level of real GDP. 
B)  location of curve A only. 
C)  interest rate only. 
D)  interest rate together with the location of curve A. 
A)  level of real GDP. 
B)  location of curve A only. 
C)  interest rate only. 
D)  interest rate together with the location of curve A.

Question 10

(Advanced analysis) The given equations describe consumption and investment (in billions of dollars) for a private closed economy.
C = 60 + 0.6Y
I = I0 = 30
In equilibrium, the level of saving will be

Accepted Answer

A)  30. 
B)  26. 
C)  25. 
D)  60. 
A)  30. 
B)  26. 
C)  25. 
D)  60.

Question 11

(Advanced analysis) The given equations describe consumption and investment (in billions of dollars) for a private closed economy.
C = 60 + 0.6Y
I = I0 = 30
In this economy, the equilibrium level of income (Y) is

Accepted Answer

A)  360. 
B)  225. 
C)  200. 
D)  135. 
A)  360. 
B)  225. 
C)  200. 
D)  135.

Question 12

Refer to the diagram for a private closed economy. The upward shift of the aggregate expenditures schedule from $\left( \mathrm { C } + I _ { g } \right) _ { 1 }$ to $\left( \mathrm { C } + I _ { g } \right) _ { 2 }$ reflects

Accepted Answer

A)  an increase in investment expenditures. 
B)  a decrease in consumption expenditures. 
C)  an increase in the MPC. 
D)  an increase in the APS. 
A)  an increase in investment expenditures. 
B)  a decrease in consumption expenditures. 
C)  an increase in the MPC. 
D)  an increase in the APS.

Question 13

(Advanced analysis) If S = −60 + 0.25Y and Ig = 60, where S is saving, Ig is gross investment, and Y is gross domestic product (GDP), then the equilibrium level of GDP is

Accepted Answer

A)  $200. 
B)  $320. 
C)  $360. 
D)  $480. 
A)  $200. 
B)  $320. 
C)  $360. 
D)  $480.

Question 14

Refer to the diagram for a private closed economy. At the $200 level of GDP,

Accepted Answer

A)  consumption is $200 and planned investment is $50, so aggregate expenditures are $250. 
B)  consumption is $200 and planned investment is $100, so aggregate expenditures are $300. 
C)  consumption is $250 and actual investment is $50, so aggregate expenditures are $300. 
D)  aggregate expenditures fall short of GDP, with the result that GDP will decline. 
A)  consumption is $200 and planned investment is $50, so aggregate expenditures are $250. 
B)  consumption is $200 and planned investment is $100, so aggregate expenditures are $300. 
C)  consumption is $250 and actual investment is $50, so aggregate expenditures are $300. 
D)  aggregate expenditures fall short of GDP, with the result that GDP will decline.

Question 15

Refer to the diagram. The impact of the public sector on the equilibrium GDP

Accepted Answer

A)  is expansionary. 
B)  is contractionary. 
C)  is neutral. 
D)  cannot be determined from the information given. 
A)  is expansionary. 
B)  is contractionary. 
C)  is neutral. 
D)  cannot be determined from the information given.

Question 16

For a private closed economy, an unintended decline in inventories suggests that

Accepted Answer

A)  aggregate expenditures are less than the business sector expected them to be. 
B)  aggregate expenditures exceed production. 
C)  actual investment exceeds saving. 
D)  planned investment is greater than consumption. 
A)  aggregate expenditures are less than the business sector expected them to be. 
B)  aggregate expenditures exceed production. 
C)  actual investment exceeds saving. 
D)  planned investment is greater than consumption.

Question 17

$$\begin{array}{l}
\begin{array} { | c | c | } 
\hline \text { Gross Domestic Product } & \text { Consumption } \
\hline \$ 100 & \$ 100 \
\hline 200 & 160 \
\hline 300 & 220 \
\hline 400 & 280 \
\hline 500 & 340 \
\hline 600 & 440 \
\hline
\end{array}\\
\begin{array} { | c | c | } 
\hline \text { Expected Rate of Return } & \text { Amount of Investment } \
\hline 15 \% & \$ 0 \
\hline 12 & 40 \
\hline 9 & 80 \
\hline 6 & 120 \
\hline 3 & 160 \
\hline 0 & 200 \
\hline
\end{array}
\end{array}$$ Refer to the tables of information for a private closed economy. In this economy, a 3 percentage point decrease in the interest rate will

Accepted Answer

A)  increase equilibrium GDP by $200. 
B)  increase equilibrium GDP by $50. 
C)  increase equilibrium GDP by $100. 
D)  decrease equilibrium GDP by $50. 
A)  increase equilibrium GDP by $200. 
B)  increase equilibrium GDP by $50. 
C)  increase equilibrium GDP by $100. 
D)  decrease equilibrium GDP by $50.

Question 18

$$\begin{array} { | c | c | c | } 
\hline G D P ( Y ) & \text { Consumption (C) } & \text { Investment (I) } \
\hline \$ 0 & \$ 60 & \$ 30 \
\hline 100 & 120 & 40 \
\hline 200 & 180 & 50 \
\hline 300 & 240 & 60 \
\hline 400 & 300 & 70 \
\hline 500 & 360 & 80 \
\hline
\end{array}$$ (Advanced analysis) The table gives data for a private closed economy. The letters Y, C, S, and I are used to represent real GDP, consumption, saving, and investment, respectively. The equation
Representing the investment schedule for the economy is

Accepted Answer

A)  I = 0.3Y. 
B)  I = 80 ? 0.3Y. 
C)  I = 30 + 0.1Y. 
D)  I = I0 = 30. 
A)  I = 0.3Y. 
B)  I = 80 ? 0.3Y. 
C)  I = 30 + 0.1Y. 
D)  I = I0 = 30.

Question 19

Assume the MPC is 0.8. If government were to impose $50 billion of new taxes on household income, consumption spending would initially decrease by

Accepted Answer

A)  $100 billion. 
B)  $90 billion. 
C)  $40 billion. 
D)  $50 billion. 
A)  $100 billion. 
B)  $90 billion. 
C)  $40 billion. 
D)  $50 billion.

Question 20

$$\begin{array}{l}
\begin{array} { | c | c | } 
\hline \text { Gross Domestic Product } & \text { Consumption } \
\hline \$ 100 & \$ 120 \
\hline 200 & 180 \
\hline 300 & 240 \
\hline 400 & 300 \
\hline 500 & 360 \
\hline
\end{array}\\
\begin{array} { | c | c | } 
\hline \text { Expected Rate of Return } & \text { Amount of Investment } \
\hline 25 \% & \$ 0 \
\hline 20 & 20 \
\hline 15 & 40 \
\hline 10 & 60 \
\hline 5 & 80 \
\hline
\end{array}
\end{array}$$ Refer to the tables of information for a private closed economy. The data suggest that

Accepted Answer

A)  the interest rate and the equilibrium GDP are directly related. 
B)  the interest rate and the equilibrium GDP are inversely related. 
C)  the interest rate and the equilibrium GDP are unrelated. 
D)  as the interest rate falls, investment also falls. 
A)  the interest rate and the equilibrium GDP are directly related. 
B)  the interest rate and the equilibrium GDP are inversely related. 
C)  the interest rate and the equilibrium GDP are unrelated. 
D)  as the interest rate falls, investment also falls.

Refer to the diagrams. Curve A

Suppose the economy's multiplier is 2. Other things equal, a $25 billion decrease in government expenditures on national defense will cause equilibrium GDP to

SA=−20 + 0.4Y Ig = 25 − 3i (Advanced analysis) The equations refer to a private closed economy, where S is saving, Ig is gross Investment, i is the real interest rate, and Y is GDP. In equilibrium, the level of saving will be

When investment remains the same at each level of GDP in a private closed economy, the slope of the aggregate expenditures schedule

Unintended changes in inventories

If the dollar appreciates relative to foreign currencies, we would expect the

(Advanced analysis) Assume the saving schedule for a private closed economy is S = −20 + 0.2Y, where S is saving and Y is gross domestic product. The multiplier for this economy is

Refer to the diagrams. The location of curve B depends on the

(Advanced analysis) The given equations describe consumption and investment (in billions of dollars) for a private closed economy. C = 60 + 0.6Y I = I0 = 30 In equilibrium, the level of saving will be

(Advanced analysis) The given equations describe consumption and investment (in billions of dollars) for a private closed economy. C = 60 + 0.6Y I = I0 = 30 In this economy, the equilibrium level of income (Y) is

(Advanced analysis) If S = −60 + 0.25Y and Ig = 60, where S is saving, Ig is gross investment, and Y is gross domestic product (GDP), then the equilibrium level of GDP is

Refer to the diagram for a private closed economy. At the $200 level of GDP,

Refer to the diagram. The impact of the public sector on the equilibrium GDP

For a private closed economy, an unintended decline in inventories suggests that

Assume the MPC is 0.8. If government were to impose $50 billion of new taxes on household income, consumption spending would initially decrease by

Gross Domestic Product Consumption \ 100 \ 120 200 180 300 240 400 300 500 360 Expected Rate of Return Amount of Investment 25\% \ 0 20 20 15 40 10 60 5 80 Refer to the tables of information for a private closed economy. The data suggest that

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures Caused by Externalities Asymmetric Information

Public Goods, Public Choice, and Government Failure

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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Exam 11: The Aggregate Expenditures Model

Refer to the diagrams. Curve A

Suppose the economy's multiplier is 2. Other things equal, a $25 billion decrease in government expenditures on national defense will cause equilibrium GDP to

Refer to the diagram. If aggregate expenditures in this economy are ( (C+Ig+Xn2)\left( C + I _ { g } + X _ { n 2 } \right)(C+Ig​+Xn2​) ), then the equilibrium Levels of GDP and aggregate expenditures will be

SA=−20 + 0.4Y Ig = 25 − 3i (Advanced analysis) The equations refer to a private closed economy, where S is saving, Ig is gross Investment, i is the real interest rate, and Y is GDP. In equilibrium, the level of saving will be

When investment remains the same at each level of GDP in a private closed economy, the slope of the aggregate expenditures schedule

Unintended changes in inventories

If the dollar appreciates relative to foreign currencies, we would expect the

(Advanced analysis) Assume the saving schedule for a private closed economy is S = −20 + 0.2Y, where S is saving and Y is gross domestic product. The multiplier for this economy is

Refer to the diagrams. The location of curve B depends on the

(Advanced analysis) The given equations describe consumption and investment (in billions of dollars) for a private closed economy. C = 60 + 0.6Y I = I0 = 30 In equilibrium, the level of saving will be

(Advanced analysis) The given equations describe consumption and investment (in billions of dollars) for a private closed economy. C = 60 + 0.6Y I = I0 = 30 In this economy, the equilibrium level of income (Y) is

Refer to the diagram for a private closed economy. The upward shift of the aggregate expenditures schedule from (C+Ig)1\left( \mathrm { C } + I _ { g } \right) _ { 1 }(C+Ig​)1​ to (C+Ig)2\left( \mathrm { C } + I _ { g } \right) _ { 2 }(C+Ig​)2​ reflects

(Advanced analysis) If S = −60 + 0.25Y and Ig = 60, where S is saving, Ig is gross investment, and Y is gross domestic product (GDP), then the equilibrium level of GDP is

Refer to the diagram for a private closed economy. At the $200 level of GDP,

Refer to the diagram. The impact of the public sector on the equilibrium GDP

For a private closed economy, an unintended decline in inventories suggests that

Assume the MPC is 0.8. If government were to impose $50 billion of new taxes on household income, consumption spending would initially decrease by

Gross Domestic Product Consumption \ 100 \ 120 200 180 300 240 400 300 500 360 Expected Rate of Return Amount of Investment 25\% \ 0 20 20 15 40 10 60 5 80 Refer to the tables of information for a private closed economy. The data suggest that

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures Caused by Externalities Asymmetric Information

Public Goods, Public Choice, and Government Failure

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

Filters