Question 1

In a closed economy that does not have international trade, the spending multiplier equals _____.

Accepted Answer

A)  1/MPS 
B)  1/MPC 
C)  1/(MPC-1) 
D)  1/(1-MPS) 
E)  1/(1+MPS) 
A)  1/MPS 
B)  1/MPC 
C)  1/(MPC-1) 
D)  1/(1-MPS) 
E)  1/(1+MPS)

Question 2

The figure given below represents the leakages and injections in an economy.
Figure 10.6
  
-In Figure 10.6, if 0L is the potential level of real GDP, then KL represents:

Accepted Answer

A)  excess GDP. 
B)  real GDP. 
C)  the multiplier effect. 
D)  the GDP gap. 
E)  the recessionary gap. 
A)  excess GDP. 
B)  real GDP. 
C)  the multiplier effect. 
D)  the GDP gap. 
E)  the recessionary gap.

Question 3

The table given below states the value of the GDP and the different components of aggregate expenditure for two years.?
  
-Refer to Table 10.1. What is the level of imports in year 2, if the economy is in equilibrium?

Accepted Answer

A)  $20 
B)  $50 
C)  $70 
D)  $100 
E)  $120 
A)  $20 
B)  $50 
C)  $70 
D)  $100 
E)  $120

Question 4

The Keynesian region of the aggregate supply curve is:

Accepted Answer

A)  horizontal. 
B)  downward-sloping. 
C)  upward-sloping. 
D)  vertical. 
E)  a 45-degree line. 
A)  horizontal. 
B)  downward-sloping. 
C)  upward-sloping. 
D)  vertical. 
E)  a 45-degree line.

Question 5

The figure given below represents the leakages and injections in an economy.?Figure 10.3??In the figure:?S₁ and S₂: Saving functions?I: Investment?G: Government spending?EX: Net exports
  
-In Figure 10.3, which of the following represents the paradox of thrift?

Accepted Answer

A)  A shift of the saving curve from S₂ to S₁ 
B)  A shift of the saving curve from S₁ to S₂ 
C)  A change in equilibrium real GDP from $100 to $200 
D)  A change in equilibrium real GDP from $300 to $100 
E)  A change in equilibrium real GDP from $100 to $400 
A)  A shift of the saving curve from S₂ to S₁ 
B)  A shift of the saving curve from S₁ to S₂ 
C)  A change in equilibrium real GDP from $100 to $200 
D)  A change in equilibrium real GDP from $300 to $100 
E)  A change in equilibrium real GDP from $100 to $400

Question 6

The figure given below represents the macroeconomic equilibrium in the aggregate income and aggregate expenditure framework. Assume that MPI is equal to zero.
  
-Refer to Figure 10.4. The spending multiplier is _____.

Accepted Answer

A)  2 
B)  3 
C)  6 
D)  0.5 
E)  1.2 
A)  2 
B)  3 
C)  6 
D)  0.5 
E)  1.2

Question 7

If the equilibrium level of income is solely a function of aggregate supply, then the aggregate supply curve must be in the Keynesian region.

Accepted Answer

A) True 
 B)False

Question 8

Ceteris paribus, a downward shift in the net exports function will cause:

Accepted Answer

A)  equilibrium real GDP to decrease. 
B)  equilibrium real GDP to increase. 
C)  savings to decrease. 
D)  net exports to increase. 
E)  government budget deficit to decline. 
A)  equilibrium real GDP to decrease. 
B)  equilibrium real GDP to increase. 
C)  savings to decrease. 
D)  net exports to increase. 
E)  government budget deficit to decline.

Question 9

The figure given below represents the leakages and injections in an economy.
Figure 10.6
  
-In Figure 10.6, the economy is in equilibrium at point _____.

Accepted Answer

A)  S 
B)  Q 
C)  N 
D)  R 
E)  M 
A)  S 
B)  Q 
C)  N 
D)  R 
E)  M

Question 10

When total planned expenditures are more than real GDP, there will be inventory accumulation.

Accepted Answer

A) True 
 B)False

Question 11

The table given below shows the real GDP, aggregate expenditures, saving, and imports of an economy.?
  
-Calculate the marginal propensity to save for the economy from the information given in Table 10.4.

Accepted Answer

A)  0.9 
B)  0.8 
C)  0.5 
D)  0.2 
E)  0.1 
A)  0.9 
B)  0.8 
C)  0.5 
D)  0.2 
E)  0.1

Question 12

The figure given below shows the aggregate expenditure curve of an open economy.?Figure 10.1??In the figure:?C₁: Consumption?I1: Investment?G1: Government spending?X1: Net Exports
  
-Consider the economy described in Figure 10.1. Which of the following is true if the real GDP is equal to 0H?

Accepted Answer

A)  Aggregate expenditures are greater than total income, when the real GDP is equal to OH. 
B)  All economic resources are being used efficiently, when the real GDP is equal to OH. 
C)  Households are dissaving an amount equal to DC, when the real GDP is equal to OH. 
D)  Businesses accumulate unwanted inventories, when the real GDP is equal to OH. 
E)  Unplanned investment decline, when the real GDP is equal to OH. 
A)  Aggregate expenditures are greater than total income, when the real GDP is equal to OH. 
B)  All economic resources are being used efficiently, when the real GDP is equal to OH. 
C)  Households are dissaving an amount equal to DC, when the real GDP is equal to OH. 
D)  Businesses accumulate unwanted inventories, when the real GDP is equal to OH. 
E)  Unplanned investment decline, when the real GDP is equal to OH.

Question 13

Given a constant GDP gap, the higher the spending multiplier, the smaller will be the recessionary gap.

Accepted Answer

A) True 
 B)False

Question 14

Suppose only 7 percent of Turkey's products go to the United States. Hence, an increase in U.S. imports from Turkey:

Accepted Answer

A)  would have no significant effect on Turkey's domestic income. 
B)  would significantly increase Turkey's domestic income. 
C)  would significantly decrease Turkey's domestic income. 
D)  would significantly increase U.S. domestic income. 
E)  would significantly decrease U.S. domestic income. 
A)  would have no significant effect on Turkey's domestic income. 
B)  would significantly increase Turkey's domestic income. 
C)  would significantly decrease Turkey's domestic income. 
D)  would significantly increase U.S. domestic income. 
E)  would significantly decrease U.S. domestic income.

Question 15

The percentage of a change in income that is spent domestically is:

Accepted Answer

A)  the sum of the MPC and the MPI. 
B)  the sum of the MPC and the MPS. 
C)  the difference between the MPC and the MPI. 
D)  the product of the MPC and the MPI. 
E)  the sum of the MPS and the MPI. 
A)  the sum of the MPC and the MPI. 
B)  the sum of the MPC and the MPS. 
C)  the difference between the MPC and the MPI. 
D)  the product of the MPC and the MPI. 
E)  the sum of the MPS and the MPI.

Question 16

The figure given below represents the macroeconomic equilibrium in the aggregate income and aggregate expenditure framework. Assume that MPI is equal to zero.
  
-Refer to Figure 10.4. Compute the increase in investment spending from I1 to I2.

Accepted Answer

A)  $600 
B)  $100 
C)  $200 
D)  $400 
E)  $300 
A)  $600 
B)  $100 
C)  $200 
D)  $400 
E)  $300

Question 17

Suppose for an economy, investment = $40; saving = $50, government spending + exports = 100; and taxes + imports = $110. Then for this economy, total leakages exceed total injections by $20, so there will be pressure for the economy to contract.

Accepted Answer

A) True 
 B)False

Question 18

Assume that the multiplier effect for Mexico is 0.85 for an increase in spending by the U.S. government by $1. Therefore, a $20 billion decrease in spending by the U.S. government results in:

Accepted Answer

A)  a $23.5 billion increase in Mexican real GDP. 
B)  a $133.3 billion decrease in Mexican real GDP. 
C)  a $3 billion decrease in Mexican real GDP. 
D)  a $17 billion decrease in Mexican real GDP. 
E)  a $23.5 billion decrease in Mexican real GDP. 
A)  a $23.5 billion increase in Mexican real GDP. 
B)  a $133.3 billion decrease in Mexican real GDP. 
C)  a $3 billion decrease in Mexican real GDP. 
D)  a $17 billion decrease in Mexican real GDP. 
E)  a $23.5 billion decrease in Mexican real GDP.

Question 19

Scenario 10.1
Imagine an economy that does not have international trade and is initially in equilibrium. Later the government increases the level of spending by $350 million because it received a gift from abroad. In this economy, only 65 cents of every dollar is spent, and the rest is saved.
-Refer to Scenario 10.1. The new equilibrium level of GDP for the economy will be higher by approximately:

Accepted Answer

A)  $1 billion. 
B)  $350 million. 
C)  $65 million. 
D)  $227.5 million. 
A)  $1 billion. 
B)  $350 million. 
C)  $65 million. 
D)  $227.5 million.

Question 20

The table given below shows the levels of national income (Y) and the corresponding levels of saving (S), investment (I), export (X), and import (M) of an open economy.?
  
-Consider the economy described in Table 10.2. At an income level of $2,100:

Accepted Answer

A)  leakages exceed injections by $800. 
B)  total output exceeds aggregate expenditures by $500. 
C)  injections exceed leakages by $500. 
D)  injections are equal to total output. 
E)  aggregate expenditures exceed total output by $500. 
A)  leakages exceed injections by $800. 
B)  total output exceeds aggregate expenditures by $500. 
C)  injections exceed leakages by $500. 
D)  injections are equal to total output. 
E)  aggregate expenditures exceed total output by $500.

In a closed economy that does not have international trade, the spending multiplier equals _____.

The figure given below represents the leakages and injections in an economy. Figure 10.6 -In Figure 10.6, if 0L is the potential level of real GDP, then KL represents:

The table given below states the value of the GDP and the different components of aggregate expenditure for two years.? -Refer to Table 10.1. What is the level of imports in year 2, if the economy is in equilibrium?

The Keynesian region of the aggregate supply curve is:

The figure given below represents the leakages and injections in an economy.?Figure 10.3??In the figure:?S₁ and S₂: Saving functions?I: Investment?G: Government spending?EX: Net exports -In Figure 10.3, which of the following represents the paradox of thrift?

The figure given below represents the macroeconomic equilibrium in the aggregate income and aggregate expenditure framework. Assume that MPI is equal to zero. -Refer to Figure 10.4. The spending multiplier is _____.

If the equilibrium level of income is solely a function of aggregate supply, then the aggregate supply curve must be in the Keynesian region.

Ceteris paribus, a downward shift in the net exports function will cause:

The figure given below represents the leakages and injections in an economy. Figure 10.6 -In Figure 10.6, the economy is in equilibrium at point _____.

When total planned expenditures are more than real GDP, there will be inventory accumulation.

The table given below shows the real GDP, aggregate expenditures, saving, and imports of an economy.? -Calculate the marginal propensity to save for the economy from the information given in Table 10.4.

The figure given below shows the aggregate expenditure curve of an open economy.?Figure 10.1??In the figure:?C₁: Consumption?I1: Investment?G1: Government spending?X1: Net Exports -Consider the economy described in Figure 10.1. Which of the following is true if the real GDP is equal to 0H?

Given a constant GDP gap, the higher the spending multiplier, the smaller will be the recessionary gap.

Suppose only 7 percent of Turkey's products go to the United States. Hence, an increase in U.S. imports from Turkey:

The percentage of a change in income that is spent domestically is:

The figure given below represents the macroeconomic equilibrium in the aggregate income and aggregate expenditure framework. Assume that MPI is equal to zero. -Refer to Figure 10.4. Compute the increase in investment spending from I1 to I2.

Suppose for an economy, investment = $40; saving = $50, government spending + exports = 100; and taxes + imports = $110. Then for this economy, total leakages exceed total injections by $20, so there will be pressure for the economy to contract.

Assume that the multiplier effect for Mexico is 0.85 for an increase in spending by the U.S. government by $1. Therefore, a $20 billion decrease in spending by the U.S. government results in:

The table given below shows the levels of national income (Y) and the corresponding levels of saving (S), investment (I), export (X), and import (M) of an open economy.? -Consider the economy described in Table 10.2. At an income level of $2,100:

The Wealth of Nations: Ownership and Economic Freedom

Scarcity and Opportunity Costs

The Market and Price System

The Aggregate Economy

National Income Accounting

An Introduction to the Foreign Exchapterange Market and the Balance of Payments

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Aggregate Expenditures

Fiscal Policy

Money and Banking

Monetary Policy

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

Economic Growth

Development Economics

Globalization

World Trade Equilibrium

International Trade Restrictions

Exchapterange Rates and Financial Links Between Countries

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Exam 10: Income and Expenditures Equilibrium

In a closed economy that does not have international trade, the spending multiplier equals _____.

The figure given below represents the leakages and injections in an economy. Figure 10.6 -In Figure 10.6, if 0L is the potential level of real GDP, then KL represents:

The table given below states the value of the GDP and the different components of aggregate expenditure for two years.? -Refer to Table 10.1. What is the level of imports in year 2, if the economy is in equilibrium?

The Keynesian region of the aggregate supply curve is:

The figure given below represents the leakages and injections in an economy.?Figure 10.3??In the figure:?S₁ and S₂: Saving functions?I: Investment?G: Government spending?EX: Net exports -In Figure 10.3, which of the following represents the paradox of thrift?

The figure given below represents the macroeconomic equilibrium in the aggregate income and aggregate expenditure framework. Assume that MPI is equal to zero. -Refer to Figure 10.4. The spending multiplier is _____.

If the equilibrium level of income is solely a function of aggregate supply, then the aggregate supply curve must be in the Keynesian region.

Ceteris paribus, a downward shift in the net exports function will cause:

The figure given below represents the leakages and injections in an economy. Figure 10.6 -In Figure 10.6, the economy is in equilibrium at point _____.

When total planned expenditures are more than real GDP, there will be inventory accumulation.

The table given below shows the real GDP, aggregate expenditures, saving, and imports of an economy.? -Calculate the marginal propensity to save for the economy from the information given in Table 10.4.

The figure given below shows the aggregate expenditure curve of an open economy.?Figure 10.1??In the figure:?C₁: Consumption?I1: Investment?G1: Government spending?X1: Net Exports -Consider the economy described in Figure 10.1. Which of the following is true if the real GDP is equal to 0H?

Given a constant GDP gap, the higher the spending multiplier, the smaller will be the recessionary gap.

Suppose only 7 percent of Turkey's products go to the United States. Hence, an increase in U.S. imports from Turkey:

The percentage of a change in income that is spent domestically is:

The figure given below represents the macroeconomic equilibrium in the aggregate income and aggregate expenditure framework. Assume that MPI is equal to zero. -Refer to Figure 10.4. Compute the increase in investment spending from I1 to I2.

Suppose for an economy, investment = $40; saving = $50, government spending + exports = 100; and taxes + imports = $110. Then for this economy, total leakages exceed total injections by $20, so there will be pressure for the economy to contract.

Assume that the multiplier effect for Mexico is 0.85 for an increase in spending by the U.S. government by $1. Therefore, a $20 billion decrease in spending by the U.S. government results in:

The table given below shows the levels of national income (Y) and the corresponding levels of saving (S), investment (I), export (X), and import (M) of an open economy.? -Consider the economy described in Table 10.2. At an income level of $2,100:

The Wealth of Nations: Ownership and Economic Freedom

Scarcity and Opportunity Costs

The Market and Price System

The Aggregate Economy

National Income Accounting

An Introduction to the Foreign Exchapterange Market and the Balance of Payments

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Aggregate Expenditures

Fiscal Policy

Money and Banking

Monetary Policy

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

Economic Growth

Development Economics

Globalization

World Trade Equilibrium

International Trade Restrictions

Exchapterange Rates and Financial Links Between Countries

Filters