Question 1

If the expenditure schedule must be shifted upward to reach potential GDP,then the economy is experiencing a(n)

Accepted Answer

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

Question 2

Figure 9-5
  
-In Figure 9-5,if the second round effect of an increase in autonomous spending of $100,000 is $75,000,then the multiplier is

Accepted Answer

A)  400,000. 
B) 6. 
C) 4. 
D)  4/5. 
A)  400,000. 
B) 6. 
C) 4. 
D)  4/5.

Question 3

Figure 9-5
  
-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 4

If the economy automatically tends toward full employment,then government stabilization policy

Accepted Answer

A)  must be constantly in force. 
B)  will be necessary only in recessions. 
C)  will be necessary only in inflationary periods. 
D)  will not be necessary. 
A)  must be constantly in force. 
B)  will be necessary only in recessions. 
C)  will be necessary only in inflationary periods. 
D)  will not be necessary.

Question 5

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 6

Assume that the MPC is .9 and investment falls by $30 billion.What is the change in real GDP?

Accepted Answer

A)  −$300 billion 
B)  −$270 billion 
C)  −$93 billion 
D)  −$39 billion 
A)  −$300 billion 
B)  −$270 billion 
C)  −$93 billion 
D)  −$39 billion

Question 7

Inventory reductions caused by strong demand are signals to retailers to order more products.

Accepted Answer

A) True 
 B)False

Question 8

When equilibrium GDP falls below potential GDP,an inflationary gap exists.

Accepted Answer

A) True 
 B)False

Question 9

Total output equals total income

Accepted Answer

A)  only at equilibrium. 
B)  always. 
C)  only at non-equilibrium levels of income. 
D)  never. 
A)  only at equilibrium. 
B)  always. 
C)  only at non-equilibrium levels of income. 
D)  never.

Question 10

Leakages are offset by investment and government spending in the circular flow model.

Accepted Answer

A) True 
 B)False

Question 11

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 12

According to Baumol and Blinder,from the demand side a decrease 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 13

An increase in the U.S.price level (foreign prices held constant)will cause a leftward shift in the aggregate demand curve.

Accepted Answer

A) True 
 B)False

Question 14

Leakages from the circular flow include saving and imports.

Accepted Answer

A) True 
 B)False

Question 15

An increase in the U.S.price level will

Accepted Answer

A)  increase the slope of the expenditure schedule. 
B)  decrease the slope of the expenditure schedule. 
C)  shift the expenditure schedule upward. 
D)  shift the expenditure schedule downward. 
A)  increase the slope of the expenditure schedule. 
B)  decrease the slope of the expenditure schedule. 
C)  shift the expenditure schedule upward. 
D)  shift the expenditure schedule downward.

Question 16

In the 2007-2009 period,the expenditure level in the United States intersected the 45-degree line below potential GDP,causing

Accepted Answer

A)  hyperinflation. 
B)  a growing trade deficit. 
C)  a government budget surplus. 
D)  unemployment. 
A)  hyperinflation. 
B)  a growing trade deficit. 
C)  a government budget surplus. 
D)  unemployment.

Question 17

The economy will reach equilibrium in a simple economy only if saving is

Accepted Answer

A)  greater than investment. 
B)  less than investment. 
C)  equal to investment. 
D)  equal to disposable income. 
A)  greater than investment. 
B)  less than investment. 
C)  equal to investment. 
D)  equal to disposable income.

Question 18

Inventory reductions are a signal indicating that

Accepted Answer

A)  the economy is close to disaster. 
B)  the Dow Jones Industrial Average will fall. 
C)  manufacturers need to increase production. 
D)  All of the above are t. 
A)  the economy is close to disaster. 
B)  the Dow Jones Industrial Average will fall. 
C)  manufacturers need to increase production. 
D)  All of the above are t.

Question 19

The multiplier principle illustrates that

Accepted Answer

A)  an increase in investment spending will be multiplied into a larger increase in GDP. 
B)  an increase in GDP will be multiplied into a larger amount of investment spending. 
C)  an increase in GDP will be multiplied into a larger increase in consumer spending. 
D)  investment spending is always a multiple of consumer spending. 
A)  an increase in investment spending will be multiplied into a larger increase in GDP. 
B)  an increase in GDP will be multiplied into a larger amount of investment spending. 
C)  an increase in GDP will be multiplied into a larger increase in consumer spending. 
D)  investment spending is always a multiple of consumer spending.

Question 20

The amount by which equilibrium real GDP exceeds full-employment GDP is known as

Accepted Answer

A)  stagflation. 
B)  employment. 
C)  a recessionary gap. 
D)  an inflationary gap. 
A)  stagflation. 
B)  employment. 
C)  a recessionary gap. 
D)  an inflationary gap.

If the expenditure schedule must be shifted upward to reach potential GDP,then the economy is experiencing a(n)

Figure 9-5 -In Figure 9-5,if the second round effect of an increase in autonomous spending of $100,000 is $75,000,then the multiplier is

Figure 9-5 -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

If the economy automatically tends toward full employment,then government stabilization policy

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

Assume that the MPC is .9 and investment falls by $30 billion.What is the change in real GDP?

Inventory reductions caused by strong demand are signals to retailers to order more products.

When equilibrium GDP falls below potential GDP,an inflationary gap exists.

Total output equals total income

Leakages are offset by investment and government spending in the circular flow model.

Recessionary gaps are most likely to be accompanied by

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

An increase in the U.S.price level (foreign prices held constant)will cause a leftward shift in the aggregate demand curve.

Leakages from the circular flow include saving and imports.

An increase in the U.S.price level will

In the 2007-2009 period,the expenditure level in the United States intersected the 45-degree line below potential GDP,causing

The economy will reach equilibrium in a simple economy only if saving is

Inventory reductions are a signal indicating that

The multiplier principle illustrates that

The amount by which equilibrium real GDP exceeds full-employment GDP is known as

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?

If the expenditure schedule must be shifted upward to reach potential GDP,then the economy is experiencing a(n)

Figure 9-5 -In Figure 9-5,if the second round effect of an increase in autonomous spending of $100,000 is $75,000,then the multiplier is

Figure 9-5 -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

If the economy automatically tends toward full employment,then government stabilization policy

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

Assume that the MPC is .9 and investment falls by $30 billion.What is the change in real GDP?

Inventory reductions caused by strong demand are signals to retailers to order more products.

When equilibrium GDP falls below potential GDP,an inflationary gap exists.

Total output equals total income

Leakages are offset by investment and government spending in the circular flow model.

Recessionary gaps are most likely to be accompanied by

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

An increase in the U.S.price level (foreign prices held constant)will cause a leftward shift in the aggregate demand curve.

Leakages from the circular flow include saving and imports.

An increase in the U.S.price level will

In the 2007-2009 period,the expenditure level in the United States intersected the 45-degree line below potential GDP,causing

The economy will reach equilibrium in a simple economy only if saving is

Inventory reductions are a signal indicating that

The multiplier principle illustrates that

The amount by which equilibrium real GDP exceeds full-employment GDP is known as

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