Question 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

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 3

Which of the following shows the relationship between national income (GDP) and total spending?

Accepted Answer

A)  Demand schedule 
B)  Consumption curve 
C)  Expenditure schedule 
D)  Balance schedule 
A)  Demand schedule 
B)  Consumption curve 
C)  Expenditure schedule 
D)  Balance schedule

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

Coordination failures can exist in both capitalist and socialist economies.

Accepted Answer

A) True 
 B)False

Question 7

In the simplified circular flow diagram, leakage can occur when consumers save some income.

Accepted Answer

A) True 
 B)False

Question 8

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

If the level of investment spending increases by $100 and the MPC in the economy is 0.8, then the cumulative spending increase after three rounds of spending is

Accepted Answer

A)  $280. 
B)  $260. 
C)  $244. 
D)  $220. 
A)  $280. 
B)  $260. 
C)  $244. 
D)  $220.

Question 10

A change in the price level will cause a shift in the expenditure schedule.

Accepted Answer

A) True 
 B)False

Question 11

If an economy at the equilibrium level of GDP experiences an increase in the amount of investment spending, then inventories will be

Accepted Answer

A)  depleted, causing firms to cut production. 
B)  accumulated, causing firms to cut production. 
C)  depleted, causing firms to increase production. 
D)  accumulated, causing firms to expand production. 
A)  depleted, causing firms to cut production. 
B)  accumulated, causing firms to cut production. 
C)  depleted, causing firms to increase production. 
D)  accumulated, causing firms to expand production.

Question 12

The total expenditure schedule in Macroland begins with these initial levels (in billions of dollars): Income = 1,000; Consumption = 900; Investment = 200; Government = 300; Net Exports = −100. If the MPC = 0.75 and income increases in increments of 200, find the equilibrium level of income. If full employment requires an income level of 2,000, what (if anything) should the government do? Indicate both the direction of the spending change and the size of the spending change.

Accepted Answer

Initially, total expenditures equal 1,30

Question 13

Table 9-1   In Table 9-1, inventories are being depleted as long as output is below

Accepted Answer

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

Question 14

One of the main conclusions of Keynes in The General Theory of Employment, Interest, and Money is that the economy

Accepted Answer

A)  will usually be at full employment. 
B)  will not automatically gravitate to full employment. 
C)  will automatically move quickly toward full employment without inflation. 
D)  is usually on the verge of a major depression or hyperinflation. 
A)  will usually be at full employment. 
B)  will not automatically gravitate to full employment. 
C)  will automatically move quickly toward full employment without inflation. 
D)  is usually on the verge of a major depression or hyperinflation.

Question 15

In a simple economy (no government sector), the equilibrium level of GDP will be less than the full employment level of income if, at the full employment level of income, the

Accepted Answer

A)  saving that consumers want to do is less than investing that businesses want to do. 
B)  saving that consumers want to do is greater than investing that businesses want to do. 
C)  saving that consumers want to do is less than spending that consumers want to do. 
D)  inventories are being depleted. 
A)  saving that consumers want to do is less than investing that businesses want to do. 
B)  saving that consumers want to do is greater than investing that businesses want to do. 
C)  saving that consumers want to do is less than spending that consumers want to do. 
D)  inventories are being depleted.

Question 16

If total spending exceeds total output, then

Accepted Answer

A)  inventory levels will rise. 
B)  inventory levels will remain constant. 
C)  inventory levels will fall. 
D)  output will eventually decrease. 
A)  inventory levels will rise. 
B)  inventory levels will remain constant. 
C)  inventory levels will fall. 
D)  output will eventually decrease.

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

Recessionary gaps are most likely to be accompanied by

Which of the following shows the relationship between national income (GDP) and total spending?

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

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

Coordination failures can exist in both capitalist and socialist economies.

In the simplified circular flow diagram, leakage can occur when consumers save some income.

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

If the level of investment spending increases by $100 and the MPC in the economy is 0.8, then the cumulative spending increase after three rounds of spending is

A change in the price level will cause a shift in the expenditure schedule.

If an economy at the equilibrium level of GDP experiences an increase in the amount of investment spending, then inventories will be

Table 9-1 In Table 9-1, inventories are being depleted as long as output is below

One of the main conclusions of Keynes in The General Theory of Employment, Interest, and Money is that the economy

In a simple economy (no government sector), the equilibrium level of GDP will be less than the full employment level of income if, at the full employment level of income, the

If total spending exceeds total output, then

What Is Economics

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: an Initial Look

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 Us Economy

Filters

Exam 25: Demand-Side Equilibrium: Unemployment or Inflation

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

Recessionary gaps are most likely to be accompanied by

Which of the following shows the relationship between national income (GDP) and total spending?

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

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

Coordination failures can exist in both capitalist and socialist economies.

In the simplified circular flow diagram, leakage can occur when consumers save some income.

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

If the level of investment spending increases by $100 and the MPC in the economy is 0.8, then the cumulative spending increase after three rounds of spending is

A change in the price level will cause a shift in the expenditure schedule.

If an economy at the equilibrium level of GDP experiences an increase in the amount of investment spending, then inventories will be

Table 9-1 In Table 9-1, inventories are being depleted as long as output is below

One of the main conclusions of Keynes in The General Theory of Employment, Interest, and Money is that the economy

In a simple economy (no government sector), the equilibrium level of GDP will be less than the full employment level of income if, at the full employment level of income, the

If total spending exceeds total output, then

What Is Economics

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: an Initial Look

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 Us Economy

Filters