Question 1

The recessionary gap is the

Accepted Answer

A)  amount of unemployment compensation required during a recession. 
B)  budget deficit encountered during a recession. 
C)  amount of government spending needed to end a recession. 
D)  distance between the equilibrium level of output and the full employment level of output. 
A)  amount of unemployment compensation required during a recession. 
B)  budget deficit encountered during a recession. 
C)  amount of government spending needed to end a recession. 
D)  distance between the equilibrium level of output and the full employment level of output.

Question 2

Equilibrium GDP on the demand side occurs when total spending

Accepted Answer

A)  equals total production, and inventories are zero. 
B)  equals total production, and firms are unable to adjust inventories. 
C)  exceeds total production, and inventories are rising. 
D)  equals total production, and inventories remain at desired levels. 
E)  is less than total production, and inventories are falling. 
A)  equals total production, and inventories are zero. 
B)  equals total production, and firms are unable to adjust inventories. 
C)  exceeds total production, and inventories are rising. 
D)  equals total production, and inventories remain at desired levels. 
E)  is less than total production, and inventories are falling.

Question 3

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 4

When equilibrium real GDP falls short of potential GDP,there is a(n)

Accepted Answer

A)  inflationary gap. 
B)  potential gap. 
C)  recessionary gap. 
D)  precautionary gap. 
A)  inflationary gap. 
B)  potential gap. 
C)  recessionary gap. 
D)  precautionary gap.

Question 5

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 6

Figure 9-4
  
-In Figure 9-4,if the economy is in a recessionary gap,what must happen to reach potential GDP?

Accepted Answer

A)  The expenditure level must fall and/or the price level must rise. 
B)  The expenditure level must rise and/or the price level must fall. 
C)  The expenditure level must rise and/or the price level must rise. 
D)  The expenditure level must fall and /or the price level must fall. 
A)  The expenditure level must fall and/or the price level must rise. 
B)  The expenditure level must rise and/or the price level must fall. 
C)  The expenditure level must rise and/or the price level must rise. 
D)  The expenditure level must fall and /or the price level must fall.

Question 7

Free markets coordinate economic activity in such a way as to eliminate the possibility of inflation or unemployment.

Accepted Answer

A) True 
 B)False

Question 8

A recessionary gap exists when the equilibrium level of GDP

Accepted Answer

A)  falls short of potential GDP. 
B)  equals potential GDP. 
C)  exceeds potential GDP. 
D)  causes inventory levels to fall. 
A)  falls short of potential GDP. 
B)  equals potential GDP. 
C)  exceeds potential GDP. 
D)  causes inventory levels to fall.

Question 9

Movements along the consumption function are called

Accepted Answer

A)  autonomous consumption. 
B)  leakage consumption. 
C)  induced consumption. 
D)  injected consumption. 
A)  autonomous consumption. 
B)  leakage consumption. 
C)  induced consumption. 
D)  injected consumption.

Question 10

The equilibrium level of GDP is the level at which

Accepted Answer

A)  aggregate demand exceeds output. 
B)  aggregate demand equals output. 
C)  aggregate demand is less than output. 
D)  inventories are being depleted to meet demand. 
A)  aggregate demand exceeds output. 
B)  aggregate demand equals output. 
C)  aggregate demand is less than output. 
D)  inventories are being depleted to meet demand.

Question 11

Government stabilization policy would be unnecessary if the economy automatically gravitated toward

Accepted Answer

A)  full inflation. 
B)  full employment. 
C)  full recession. 
D)  an inflationary gap. 
A)  full inflation. 
B)  full employment. 
C)  full recession. 
D)  an inflationary gap.

Question 12

The expenditure schedule and the aggregate demand curve show much the same thing,with one crucial difference-the price level.How does the price level affect the two schedules?

Accepted Answer

The expenditure schedule is drawn assumi

Question 13

An expenditure schedule shows the relationship between GDP and total output.

Accepted Answer

A) True 
 B)False

Question 14

Figure 9-1
  
-Using the standard 45-degree 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

Which of the following questions are not answered by the process of demand side GDP determination?

Accepted Answer

A)  How large is equilibrium GDP? 
B)  Does the economy have unemployment? 
C)  Is demand side equilibrium consistent with supply side equilibrium? 
D)  Does the economy have inflation? 
E)  All of the above are not answered. 
A)  How large is equilibrium GDP? 
B)  Does the economy have unemployment? 
C)  Is demand side equilibrium consistent with supply side equilibrium? 
D)  Does the economy have inflation? 
E)  All of the above are not answered.

Question 16

Table 9-1
  
-In Table 9-1,inventories will be increasing as long as output is above

Accepted Answer

A)  1,000. 
B)  1,500. 
C)  2,000. 
D)  3,000. 
A)  1,000. 
B)  1,500. 
C)  2,000. 
D)  3,000.

Question 17

If total spending is less than total output,then price levels will

Accepted Answer

A)  rise and output will increase. 
B)  rise and output will decrease. 
C)  fall and output will increase. 
D)  fall and output will decrease. 
A)  rise and output will increase. 
B)  rise and output will decrease. 
C)  fall and output will increase. 
D)  fall and output will decrease.

Question 18

The full employment level of GDP is sometimes referred to as "potential GDP."

Accepted Answer

A) True 
 B)False

Question 19

Government stabilization policy

Accepted Answer

A)  cannot influence investment spending. 
B)  can stimulate aggregate demand and thereby induce businesses to invest, but the amount is not totally predictable. 
C)  can stimulate aggregate demand, but investment spending will not be affected. 
D)  can stimulate aggregate demand, but only in the long run. 
A)  cannot influence investment spending. 
B)  can stimulate aggregate demand and thereby induce businesses to invest, but the amount is not totally predictable. 
C)  can stimulate aggregate demand, but investment spending will not be affected. 
D)  can stimulate aggregate demand, but only in the long run.

Question 20

In the standard 45-degree line expenditure model,the C + I line and the C line are parallel because,

Accepted Answer

A)  all I is assumed to be autonomous. 
B)  all I is assumed to be induced. 
C)  consumption depends on disposable income. 
D)  I rises with GDP at the same rate as C. 
A)  all I is assumed to be autonomous. 
B)  all I is assumed to be induced. 
C)  consumption depends on disposable income. 
D)  I rises with GDP at the same rate as C.

The recessionary gap is the

Equilibrium GDP on the demand side occurs when total spending

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

When equilibrium real GDP falls short of potential GDP,there is a(n)

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

Figure 9-4 -In Figure 9-4,if the economy is in a recessionary gap,what must happen to reach potential GDP?

Free markets coordinate economic activity in such a way as to eliminate the possibility of inflation or unemployment.

A recessionary gap exists when the equilibrium level of GDP

Movements along the consumption function are called

The equilibrium level of GDP is the level at which

Government stabilization policy would be unnecessary if the economy automatically gravitated toward

The expenditure schedule and the aggregate demand curve show much the same thing,with one crucial difference-the price level.How does the price level affect the two schedules?

An expenditure schedule shows the relationship between GDP and total output.

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

Which of the following questions are not answered by the process of demand side GDP determination?

Table 9-1 -In Table 9-1,inventories will be increasing as long as output is above

If total spending is less than total output,then price levels will

The full employment level of GDP is sometimes referred to as "potential GDP."

Government stabilization policy

In the standard 45-degree line expenditure model,the C + I line and the C line are parallel because,

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?

The recessionary gap is the

Equilibrium GDP on the demand side occurs when total spending

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

When equilibrium real GDP falls short of potential GDP,there is a(n)

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

Figure 9-4 -In Figure 9-4,if the economy is in a recessionary gap,what must happen to reach potential GDP?

Free markets coordinate economic activity in such a way as to eliminate the possibility of inflation or unemployment.

A recessionary gap exists when the equilibrium level of GDP

Movements along the consumption function are called

The equilibrium level of GDP is the level at which

Government stabilization policy would be unnecessary if the economy automatically gravitated toward

The expenditure schedule and the aggregate demand curve show much the same thing,with one crucial difference-the price level.How does the price level affect the two schedules?

An expenditure schedule shows the relationship between GDP and total output.

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

Which of the following questions are not answered by the process of demand side GDP determination?

Table 9-1 -In Table 9-1,inventories will be increasing as long as output is above

If total spending is less than total output,then price levels will

The full employment level of GDP is sometimes referred to as "potential GDP."

Government stabilization policy

In the standard 45-degree line expenditure model,the C + I line and the C line are parallel because,

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

Filters