Question 1

According to Baumol and Blinder,the real-world multiplier will be smaller than 1/(1 − MPC)because the 1/(1 − MPC)measure is based on

Accepted Answer

A)  a model that ignores inflation associated with the expansion of income. 
B)  a model that ignores taxes that tend to change as income changes. 
C)  a model that ignores the effects of international trade. 
D)  all of the above. 
A)  a model that ignores inflation associated with the expansion of income. 
B)  a model that ignores taxes that tend to change as income changes. 
C)  a model that ignores the effects of international trade. 
D)  all of the above.

Question 2

The aggregate demand curve has an upward slope due to the positive relationship between the price level and aggregate quantity demanded.

Accepted Answer

A) True 
 B)False

Question 3

Figure 9-1
  
-Using the standard 45-degree line diagram,how does a decrease in investment spending effect the expenditure schedule?

Accepted Answer

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

Question 4

The U.S.fiscal stimulus in 2009 did not increase GDP substantially because

Accepted Answer

A)  the Federal Reserve was decreasing interest rates and real world estimates for the multiplier might be less than one. 
B)  the Federal Reserve was increasing interest rates and real world estimates for the multiplier might be less than one. 
C)  state governments were decreasing spending and real world estimates for the multiplier might be less than one. 
D)  state governments were increasing spending and real world estimates for the multiplier might be less than one. 
A)  the Federal Reserve was decreasing interest rates and real world estimates for the multiplier might be less than one. 
B)  the Federal Reserve was increasing interest rates and real world estimates for the multiplier might be less than one. 
C)  state governments were decreasing spending and real world estimates for the multiplier might be less than one. 
D)  state governments were increasing spending and real world estimates for the multiplier might be less than one.

Question 5

Market economies are likely to suffer from recessions and inflation because the government plans all economic activity.

Accepted Answer

A) True 
 B)False

Question 6

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 7

The expenditure schedule includes the consumption function.

Accepted Answer

A) True 
 B)False

Question 8

For a simple economy (no government,no foreign sector),the condition for equilibrium can be stated correctly as

Accepted Answer

A)  saving equals actual investment. 
B)  saving equals inventory accumulation. 
C)  saving equals planned investment. 
D)  inventory accumulation equals planned investment. 
A)  saving equals actual investment. 
B)  saving equals inventory accumulation. 
C)  saving equals planned investment. 
D)  inventory accumulation equals planned investment.

Question 9

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 10

When spending falls short of output,additional inventories are created.

Accepted Answer

A) True 
 B)False

Question 11

Assume that the MPC is 0.80 and investment rises by $50 million.How much additional saving will this generate in the second round of spending?

Accepted Answer

A)  $10 million 
B)  $40 million 
C)  $50 million 
D)  $62.5 million 
E)  $250 million 
A)  $10 million 
B)  $40 million 
C)  $50 million 
D)  $62.5 million 
E)  $250 million

Question 12

Suppose the economy is suffering in a recessionary period.Firms are facing increasing inventories and individual consumers are increasing their saving to prepare for hard times ahead.What is likely to happen to the economy and can it correct itself and grow toward full employment in the short run?

Accepted Answer

The Keynesian view of the economy would

Question 13

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 14

For a given price level,a downward shift of the expenditures schedule corresponds to an

Accepted Answer

A)  inward shift of the aggregate demand curve. 
B)  outward shift of the aggregate demand curve. 
C)  outward shift of the aggregate supply curve. 
D)  inward shift of the aggregate supply curve. 
A)  inward shift of the aggregate demand curve. 
B)  outward shift of the aggregate demand curve. 
C)  outward shift of the aggregate supply curve. 
D)  inward shift of the aggregate supply curve.

Question 15

Businesses in the United States cut their investment projects by $30 billion.If the MPC is 2,what will be the impact on the national income (Y)?

Accepted Answer

A)  Y will fall by $15 billion. 
B)  Y will fall by $30 billion. 
C)  Y will fall by $60 billion. 
D)  Y will fall by $120 billion. 
A)  Y will fall by $15 billion. 
B)  Y will fall by $30 billion. 
C)  Y will fall by $60 billion. 
D)  Y will fall by $120 billion.

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

The oversimplified multiplier formula assumes that the

Accepted Answer

A)  level of consumption spending is fixed. 
B)  price level is fixed. 
C)  government spending is fixed. 
D)  net exports depend on income. 
A)  level of consumption spending is fixed. 
B)  price level is fixed. 
C)  government spending is fixed. 
D)  net exports depend on income.

Question 18

Which of the following would be associated with an inflationary gap?

Accepted Answer

A)  interest rates too low 
B)  business expectations pessimistic 
C)  inventory levels too low 
D)  stock market crash 
E)  All of the above. 
A)  interest rates too low 
B)  business expectations pessimistic 
C)  inventory levels too low 
D)  stock market crash 
E)  All of the above.

Question 19

Figure 9-1
  
-Using the standard 45-degree line diagram,how does a decrease in net exports effect the expenditure schedule?

Accepted Answer

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

Question 20

When the expenditure level is above the full employment level of GDP,a possible consequence is

Accepted Answer

A)  falling prices. 
B)  rising prices. 
C)  falling disposable income. 
D)  high levels of unemployment. 
A)  falling prices. 
B)  rising prices. 
C)  falling disposable income. 
D)  high levels of unemployment.

According to Baumol and Blinder,the real-world multiplier will be smaller than 1/(1 − MPC)because the 1/(1 − MPC)measure is based on

The aggregate demand curve has an upward slope due to the positive relationship between the price level and aggregate quantity demanded.

Figure 9-1 -Using the standard 45-degree line diagram,how does a decrease in investment spending effect the expenditure schedule?

The U.S.fiscal stimulus in 2009 did not increase GDP substantially because

Market economies are likely to suffer from recessions and inflation because the government plans all economic activity.

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

The expenditure schedule includes the consumption function.

For a simple economy (no government,no foreign sector),the condition for equilibrium can be stated correctly as

The aggregate demand curve

When spending falls short of output,additional inventories are created.

Assume that the MPC is 0.80 and investment rises by $50 million.How much additional saving will this generate in the second round of spending?

Suppose the economy is suffering in a recessionary period.Firms are facing increasing inventories and individual consumers are increasing their saving to prepare for hard times ahead.What is likely to happen to the economy and can it correct itself and grow toward full employment in the short run?

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

For a given price level,a downward shift of the expenditures schedule corresponds to an

Businesses in the United States cut their investment projects by $30 billion.If the MPC is 2,what will be the impact on the national income (Y)?

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

The oversimplified multiplier formula assumes that the

Which of the following would be associated with an inflationary gap?

Figure 9-1 -Using the standard 45-degree line diagram,how does a decrease in net exports effect the expenditure schedule?

When the expenditure level is above the full employment level of GDP,a possible consequence is

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

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Exam 9: Demand-Side Equilibrium: Unemployment or Inflation?

According to Baumol and Blinder,the real-world multiplier will be smaller than 1/(1 − MPC)because the 1/(1 − MPC)measure is based on

The aggregate demand curve has an upward slope due to the positive relationship between the price level and aggregate quantity demanded.

Figure 9-1 -Using the standard 45-degree line diagram,how does a decrease in investment spending effect the expenditure schedule?

The U.S.fiscal stimulus in 2009 did not increase GDP substantially because

Market economies are likely to suffer from recessions and inflation because the government plans all economic activity.

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

The expenditure schedule includes the consumption function.

For a simple economy (no government,no foreign sector),the condition for equilibrium can be stated correctly as

The aggregate demand curve

When spending falls short of output,additional inventories are created.

Assume that the MPC is 0.80 and investment rises by $50 million.How much additional saving will this generate in the second round of spending?

Suppose the economy is suffering in a recessionary period.Firms are facing increasing inventories and individual consumers are increasing their saving to prepare for hard times ahead.What is likely to happen to the economy and can it correct itself and grow toward full employment in the short run?

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

For a given price level,a downward shift of the expenditures schedule corresponds to an

Businesses in the United States cut their investment projects by $30 billion.If the MPC is 2,what will be the impact on the national income (Y)?

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

The oversimplified multiplier formula assumes that the

Which of the following would be associated with an inflationary gap?

Figure 9-1 -Using the standard 45-degree line diagram,how does a decrease in net exports effect the expenditure schedule?

When the expenditure level is above the full employment level of GDP,a possible consequence is

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

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