Question 1

Using the saving-investment approach,which of the following describes an equilibrium condition of GDP?

Accepted Answer

A)  I = X − IM 
B)  S = X − IM 
C)  I = S + (X − IM) 
D)  S = I + (X − IM) 
A)  I = X − IM 
B)  S = X − IM 
C)  I = S + (X − IM) 
D)  S = I + (X − IM)

Question 2

Figure 9-1
  
-In Figure 9-1,

Accepted Answer

A)  the 45-degree line represents all points where spending equals output. 
B)  to the left of equilibrium GDP, inventories will fall. 
C)  to the right of equilibrium GDP, inventories will rise. 
D)  All of the above are correct. 
A)  the 45-degree line represents all points where spending equals output. 
B)  to the left of equilibrium GDP, inventories will fall. 
C)  to the right of equilibrium GDP, inventories will rise. 
D)  All of the above are correct.

Question 3

Figure 9-4
  
-In Figure 9-4,which expenditure level will result in a recessionary gap?

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  There will be no deflationary gap. 
A)  1 
B)  2 
C)  3 
D)  There will be no deflationary gap.

Question 4

If the price level rises,the effect on the expenditure schedule and equilibrium real GDP is to

Accepted Answer

A)  increase both. 
B)  decrease both. 
C)  shift the expenditure schedule upward and decrease equilibrium real GDP. 
D)  shift the expenditure schedule downward and increase equilibrium real GDP. 
A)  increase both. 
B)  decrease both. 
C)  shift the expenditure schedule upward and decrease equilibrium real GDP. 
D)  shift the expenditure schedule downward and increase equilibrium real GDP.

Question 5

The reason for the multiplier effect is that

Accepted Answer

A)  businesses make decisions about investment projects based on anticipated profits. 
B)  one person's additional expenditure creates a new source of income for another person, and this additional income leads to still more spending. 
C)  changes in government spending typically deepen recessions and exacerbate inflationary conditions in the economy. 
D)  additional spending lowers the rate of interest and leads to further borrowing and spending. 
A)  businesses make decisions about investment projects based on anticipated profits. 
B)  one person's additional expenditure creates a new source of income for another person, and this additional income leads to still more spending. 
C)  changes in government spending typically deepen recessions and exacerbate inflationary conditions in the economy. 
D)  additional spending lowers the rate of interest and leads to further borrowing and spending.

Question 6

Which of the following occurs when party A would like to change his behavior if party B would change hers,and vice versa,and yet the two changes do not take place because the decisions of A and B are made independently?

Accepted Answer

A)  Moral hazard 
B)  Coordination failure 
C)  Leakage 
D)  Lemon problem 
A)  Moral hazard 
B)  Coordination failure 
C)  Leakage 
D)  Lemon problem

Question 7

Assume that the MPC is .75,and investment spending rises by $25 billion.How much will real GDP change?

Accepted Answer

A)  $25 billion 
B)  $75 billion 
C)  $100 billion 
D)  $175 billion 
A)  $25 billion 
B)  $75 billion 
C)  $100 billion 
D)  $175 billion

Question 8

An expenditure schedule model with no government sector shows the relationship between

Accepted Answer

A)  C and national product. 
B)  C and disposable income. 
C)  C + I and national income. 
D)  GDP and disposable income. 
A)  C and national product. 
B)  C and disposable income. 
C)  C + I and national income. 
D)  GDP and disposable income.

Question 9

By definition,total production must always equal total

Accepted Answer

A)  sales. 
B)  demand. 
C)  purchases. 
D)  income. 
A)  sales. 
B)  demand. 
C)  purchases. 
D)  income.

Question 10

The multiplier can be expressed as the ratio of the change in Y over the change in I.

Accepted Answer

A) True 
 B)False

Question 11

If we observe that every increase in income of $120 million generates an increase in consumption of $80 million,then the simple multiplier is

Accepted Answer

A)  2/3. 
B)  3/2. 
C) 2. 
D) 3. 
E) 8. 
A)  2/3. 
B)  3/2. 
C) 2. 
D) 3. 
E) 8.

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

The equilibrium level of GDP is always accompanied by full employment and stable prices.

Accepted Answer

A) True 
 B)False

Question 14

If the government increases defense spending by $1 billion and the MPC is 0.8,how much additional spending will occur in the third "round" of spending?

Accepted Answer

A)  $640 million 
B)  $800 million 
C)  $1 billion 
D)  $1.8 billion 
A)  $640 million 
B)  $800 million 
C)  $1 billion 
D)  $1.8 billion

Question 15

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 16

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 17

Figure 9-1
  
-In Figure 9-1,the economy is

Accepted Answer

A)  experiencing an inflationary gap, shown by the horizontal distance EB. 
B)  at full employment without inflation. 
C)  experiencing a recessionary gap, shown by the horizontal distance EB. 
D)  experiencing a recessionary gap, shown by the distance between EF. 
A)  experiencing an inflationary gap, shown by the horizontal distance EB. 
B)  at full employment without inflation. 
C)  experiencing a recessionary gap, shown by the horizontal distance EB. 
D)  experiencing a recessionary gap, shown by the distance between EF.

Question 18

In the real world,the actual multiplier is ____ the simplified multiplier.

Accepted Answer

A)  much larger than 
B)  slightly larger than 
C)  equal to 
D)  slightly smaller than 
E)  much smaller than 
A)  much larger than 
B)  slightly larger than 
C)  equal to 
D)  slightly smaller than 
E)  much smaller than

Question 19

If the multiplier is 4,a decrease in spending equal to $80 billion will be accompanied by a decrease in GDP of

Accepted Answer

A)  $480 billion. 
B)  $320 billion. 
C)  $240 billion. 
D)  $84 billion. 
E)  $48 billion. 
A)  $480 billion. 
B)  $320 billion. 
C)  $240 billion. 
D)  $84 billion. 
E)  $48 billion.

Question 20

In a simple,private economy,suppose that the MPC is .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

Using the saving-investment approach,which of the following describes an equilibrium condition of GDP?

Figure 9-1 -In Figure 9-1,

Figure 9-4 -In Figure 9-4,which expenditure level will result in a recessionary gap?

If the price level rises,the effect on the expenditure schedule and equilibrium real GDP is to

The reason for the multiplier effect is that

Which of the following occurs when party A would like to change his behavior if party B would change hers,and vice versa,and yet the two changes do not take place because the decisions of A and B are made independently?

Assume that the MPC is .75,and investment spending rises by $25 billion.How much will real GDP change?

An expenditure schedule model with no government sector shows the relationship between

By definition,total production must always equal total

The multiplier can be expressed as the ratio of the change in Y over the change in I.

If we observe that every increase in income of $120 million generates an increase in consumption of $80 million,then the simple multiplier is

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

The equilibrium level of GDP is always accompanied by full employment and stable prices.

If the government increases defense spending by $1 billion and the MPC is 0.8,how much additional spending will occur in the third "round" of spending?

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

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

Figure 9-1 -In Figure 9-1,the economy is

In the real world,the actual multiplier is ____ the simplified multiplier.

If the multiplier is 4,a decrease in spending equal to $80 billion will be accompanied by a decrease in GDP of

In a simple,private economy,suppose that the MPC is .8 and investment rises by $20 million.At the new equilibrium,how much will saving have increased?

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?

Using the saving-investment approach,which of the following describes an equilibrium condition of GDP?

Figure 9-1 -In Figure 9-1,

Figure 9-4 -In Figure 9-4,which expenditure level will result in a recessionary gap?

If the price level rises,the effect on the expenditure schedule and equilibrium real GDP is to

The reason for the multiplier effect is that

Which of the following occurs when party A would like to change his behavior if party B would change hers,and vice versa,and yet the two changes do not take place because the decisions of A and B are made independently?

Assume that the MPC is .75,and investment spending rises by $25 billion.How much will real GDP change?

An expenditure schedule model with no government sector shows the relationship between

By definition,total production must always equal total

The multiplier can be expressed as the ratio of the change in Y over the change in I.

If we observe that every increase in income of $120 million generates an increase in consumption of $80 million,then the simple multiplier is

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

The equilibrium level of GDP is always accompanied by full employment and stable prices.

If the government increases defense spending by $1 billion and the MPC is 0.8,how much additional spending will occur in the third "round" of spending?

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

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

Figure 9-1 -In Figure 9-1,the economy is

In the real world,the actual multiplier is ____ the simplified multiplier.

If the multiplier is 4,a decrease in spending equal to $80 billion will be accompanied by a decrease in GDP of

In a simple,private economy,suppose that the MPC is .8 and investment rises by $20 million.At the new equilibrium,how much will saving have increased?

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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