Question 1

The recessionary gap is given by the difference between potential GDP and real GDP.

Accepted Answer

A) True 
 B)False

Question 2

The figure given below represents the leakages and injections in an economy.?Figure 10.2??In the figure:?I, I1: Investment;?G: Government spending;?EX, EX1: Exports;?T: Taxes; and?M: Imports.
  
-Refer to Figure 10.2. A decline in total injections, from $20 to $10:

Accepted Answer

A)  will cause equilibrium income to rise to $400. 
B)  will result in a disequilibrium of $200 in the economy. 
C)  will cause the total leakages curve to shift inward. 
D)  will cause equilibrium income to fall to $300. 
E)  will not affect equilibrium income. 
A)  will cause equilibrium income to rise to $400. 
B)  will result in a disequilibrium of $200 in the economy. 
C)  will cause the total leakages curve to shift inward. 
D)  will cause equilibrium income to fall to $300. 
E)  will not affect equilibrium income.

Question 3

In general, autonomous spending increases have a lower multiplier effect on real GDP when the economy is open to international trade.

Accepted Answer

A) True 
 B)False

Question 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
  
-According to Figure 10.1, when real GDP is at G:

Accepted Answer

A)  there is pressure for the economy to expand. 
B)  there are unplanned reductions in inventory. 
C)  aggregate expenditures are less than real GDP. 
D)  the economy is at the macroeconomic equilibrium. 
E)  there is pressure for the economy to contract. 
A)  there is pressure for the economy to expand. 
B)  there are unplanned reductions in inventory. 
C)  aggregate expenditures are less than real GDP. 
D)  the economy is at the macroeconomic equilibrium. 
E)  there is pressure for the economy to contract.

Question 5

Injections represent outflows of planned expenditures from the real GDP stream.

Accepted Answer

A) True 
 B)False

Question 6

If equilibrium income is $500 billion, MPC = 0.8, MPI = 0.2 and autonomous government spending increases by $20 billion, the new equilibrium income will be _____.

Accepted Answer

A)  $600 billion 
B)  $550 billion 
C)  $525 billion 
D)  $520 billion 
E)  $500 billion 
A)  $600 billion 
B)  $550 billion 
C)  $525 billion 
D)  $520 billion 
E)  $500 billion

Question 7

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
  
-According to Figure 10.1, the economy will expand when aggregate expenditures are at:

Accepted Answer

A)  point D. 
B)  point A. 
C)  point B. 
D)  point C. 
E)  point E. 
A)  point D. 
B)  point A. 
C)  point B. 
D)  point C. 
E)  point E.

Question 8

The figure given below shows the macroeconomic equilibrium of a country.
Figure 10.7
In the figure, 
C: Consumption
I: Investment
G: Government expenditure
X: Net Exports
  
-In Figure 10.7, the spending multiplier equals _____.

Accepted Answer

A)  2 
B)  4 
C)  5 
D)  10 
E)  20 
A)  2 
B)  4 
C)  5 
D)  10 
E)  20

Question 9

Leakages are greater than injections when total planned expenditures exceed real GDP.

Accepted Answer

A) True 
 B)False

Question 10

The paradox of thrift explains that increased savings by households could actually lower savings for the economy as a whole.

Accepted Answer

A) True 
 B)False

Question 11

The figure given below represents the macroeconomic equilibrium in the aggregate income and aggregate expenditure framework. Assume that MPI is equal to zero.
  
-In Figure 10.4, calculate the marginal propensity to consume.

Accepted Answer

A)  0.67 
B)  0.50 
C)  0.25 
D)  0.33 
E)  4 
A)  0.67 
B)  0.50 
C)  0.25 
D)  0.33 
E)  4

Question 12

Foreign repercussions of changes in domestic spending may cause:

Accepted Answer

A)  the GDP gap to be larger than the recessionary gap. 
B)  the equilibrium income to increase by an amount equal to the change in net exports. 
C)  the actual spending multiplier to be larger than the reciprocal of the marginal propensity to save plus the marginal propensity to import. 
D)  equilibrium income to rise by a smaller amount than evidenced by the multiplier effect of autonomous spending increase. 
E)  the real GDP to be larger than potential GDP. 
A)  the GDP gap to be larger than the recessionary gap. 
B)  the equilibrium income to increase by an amount equal to the change in net exports. 
C)  the actual spending multiplier to be larger than the reciprocal of the marginal propensity to save plus the marginal propensity to import. 
D)  equilibrium income to rise by a smaller amount than evidenced by the multiplier effect of autonomous spending increase. 
E)  the real GDP to be larger than potential GDP.

Question 13

When the price level in an economy falls, the demand for bonds and other nonmonetary financial assets rises.

Accepted Answer

A) True 
 B)False

Question 14

Scenario 10.2?A hypothetical open economy has a marginal propensity to import (MPI) equal to 0.2 and a marginal propensity to consume equal to 0.7. Assume that the economy is initially in equilibrium.
-Refer to Scenario 10.2. What is the marginal propensity to save of this economy?

Accepted Answer

A)  0.2 
B)  0.3 
C)  0.7 
D)  0.9 
E)  0.6 
A)  0.2 
B)  0.3 
C)  0.7 
D)  0.9 
E)  0.6

Question 15

The figure given below represents the leakages and injections in an economy.?Figure 10.2??In the figure:?I, I1: Investment;?G: Government spending;?EX, EX1: Exports;?T: Taxes; and?M: Imports.
  
-According to Figure 10.2, real GDP of $200 indicates a point where:

Accepted Answer

A)  total leakages exceed total injections. 
B)  aggregate expenditures exceed total output. 
C)  consumers engage in dissaving. 
D)  the economy is in macroeconomic equilibrium. 
E)  unplanned inventory changes will be positive. 
A)  total leakages exceed total injections. 
B)  aggregate expenditures exceed total output. 
C)  consumers engage in dissaving. 
D)  the economy is in macroeconomic equilibrium. 
E)  unplanned inventory changes will be positive.

Question 16

The table given below shows the real GDP, aggregate expenditures, saving, and imports of an economy.?
  
-Calculate the marginal propensity to consume 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 17

Assume that the marginal propensity to consume equals 0.75 and the marginal propensity to import equals 0.10. By how much does spending on domestic goods increase if income increases by $300?

Accepted Answer

A)  $195 
B)  $225 
C)  $30 
D)  $300 
E)  $75 
A)  $195 
B)  $225 
C)  $30 
D)  $300 
E)  $75

Question 18

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. Assume that the economy is initially at the equilibrium level E3. The economy can reach equilibrium level E1 if aggregate expenditure:

Accepted Answer

A)  decreases by $200. 
B)  increases by $200. 
C)  decreases by $100. 
D)  increases by $100. 
E)  increases by $50. 
A)  decreases by $200. 
B)  increases by $200. 
C)  decreases by $100. 
D)  increases by $100. 
E)  increases by $50.

Question 19

The table given below shows the real GDP, aggregate expenditures, saving, and imports of an economy.?
  
-Refer to Table 10.4. Given a potential GDP of $6,000, the recessionary gap equals _____.

Accepted Answer

A)  $200 
B)  $400 
C)  $1,000 
D)  $2,000 
E)  $5,000 
A)  $200 
B)  $400 
C)  $1,000 
D)  $2,000 
E)  $5,000

Question 20

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. Assume that the economy is at equilibrium in both years. What are net exports for year 2?

Accepted Answer

A)  $60 
B)  $125 
C)  $70 
D)  $55 
E)  $195 
A)  $60 
B)  $125 
C)  $70 
D)  $55 
E)  $195

The recessionary gap is given by the difference between potential GDP and real GDP.

The figure given below represents the leakages and injections in an economy.?Figure 10.2??In the figure:?I, I1: Investment;?G: Government spending;?EX, EX1: Exports;?T: Taxes; and?M: Imports. -Refer to Figure 10.2. A decline in total injections, from $20 to $10:

In general, autonomous spending increases have a lower multiplier effect on real GDP when the economy is open to international trade.

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 -According to Figure 10.1, when real GDP is at G:

Injections represent outflows of planned expenditures from the real GDP stream.

If equilibrium income is $500 billion, MPC = 0.8, MPI = 0.2 and autonomous government spending increases by $20 billion, the new equilibrium income will be _____.

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 -According to Figure 10.1, the economy will expand when aggregate expenditures are at:

The figure given below shows the macroeconomic equilibrium of a country. Figure 10.7 In the figure, C: Consumption I: Investment G: Government expenditure X: Net Exports -In Figure 10.7, the spending multiplier equals _____.

Leakages are greater than injections when total planned expenditures exceed real GDP.

The paradox of thrift explains that increased savings by households could actually lower savings for the economy as a whole.

The figure given below represents the macroeconomic equilibrium in the aggregate income and aggregate expenditure framework. Assume that MPI is equal to zero. -In Figure 10.4, calculate the marginal propensity to consume.

Foreign repercussions of changes in domestic spending may cause:

When the price level in an economy falls, the demand for bonds and other nonmonetary financial assets rises.

Scenario 10.2?A hypothetical open economy has a marginal propensity to import (MPI) equal to 0.2 and a marginal propensity to consume equal to 0.7. Assume that the economy is initially in equilibrium. -Refer to Scenario 10.2. What is the marginal propensity to save of this economy?

The figure given below represents the leakages and injections in an economy.?Figure 10.2??In the figure:?I, I1: Investment;?G: Government spending;?EX, EX1: Exports;?T: Taxes; and?M: Imports. -According to Figure 10.2, real GDP of $200 indicates a point where:

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

Assume that the marginal propensity to consume equals 0.75 and the marginal propensity to import equals 0.10. By how much does spending on domestic goods increase if income increases by $300?

The table given below shows the real GDP, aggregate expenditures, saving, and imports of an economy.? -Refer to Table 10.4. Given a potential GDP of $6,000, the recessionary gap equals _____.

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. Assume that the economy is at equilibrium in both years. What are net exports for year 2?

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

Exam 10: Income and Expenditures Equilibrium

The recessionary gap is given by the difference between potential GDP and real GDP.

The figure given below represents the leakages and injections in an economy.?Figure 10.2??In the figure:?I, I1: Investment;?G: Government spending;?EX, EX1: Exports;?T: Taxes; and?M: Imports. -Refer to Figure 10.2. A decline in total injections, from $20 to $10:

In general, autonomous spending increases have a lower multiplier effect on real GDP when the economy is open to international trade.

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 -According to Figure 10.1, when real GDP is at G:

Injections represent outflows of planned expenditures from the real GDP stream.

If equilibrium income is $500 billion, MPC = 0.8, MPI = 0.2 and autonomous government spending increases by $20 billion, the new equilibrium income will be _____.

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 -According to Figure 10.1, the economy will expand when aggregate expenditures are at:

The figure given below shows the macroeconomic equilibrium of a country. Figure 10.7 In the figure, C: Consumption I: Investment G: Government expenditure X: Net Exports -In Figure 10.7, the spending multiplier equals _____.

Leakages are greater than injections when total planned expenditures exceed real GDP.

The paradox of thrift explains that increased savings by households could actually lower savings for the economy as a whole.

The figure given below represents the macroeconomic equilibrium in the aggregate income and aggregate expenditure framework. Assume that MPI is equal to zero. -In Figure 10.4, calculate the marginal propensity to consume.

Foreign repercussions of changes in domestic spending may cause:

When the price level in an economy falls, the demand for bonds and other nonmonetary financial assets rises.

Scenario 10.2?A hypothetical open economy has a marginal propensity to import (MPI) equal to 0.2 and a marginal propensity to consume equal to 0.7. Assume that the economy is initially in equilibrium. -Refer to Scenario 10.2. What is the marginal propensity to save of this economy?

The figure given below represents the leakages and injections in an economy.?Figure 10.2??In the figure:?I, I1: Investment;?G: Government spending;?EX, EX1: Exports;?T: Taxes; and?M: Imports. -According to Figure 10.2, real GDP of $200 indicates a point where:

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

Assume that the marginal propensity to consume equals 0.75 and the marginal propensity to import equals 0.10. By how much does spending on domestic goods increase if income increases by $300?

The table given below shows the real GDP, aggregate expenditures, saving, and imports of an economy.? -Refer to Table 10.4. Given a potential GDP of $6,000, the recessionary gap equals _____.

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. Assume that the economy is at equilibrium in both years. What are net exports for year 2?

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