Question 1

The circular flow principle guarantees that in equilibrium

Accepted Answer

A)  the level of aggregate demand will be greater than output. 
B)  the level of investment spending will be equal to the level of household saving. 
C)  the level of aggregate demand will be equal to output. 
D)  the level of government spending will be equal to tax revenue. 
A)  the level of aggregate demand will be greater than output. 
B)  the level of investment spending will be equal to the level of household saving. 
C)  the level of aggregate demand will be equal to output. 
D)  the level of government spending will be equal to tax revenue. C

Question 2

The term (Y*-C-T) in the flow of funds equation represents

Accepted Answer

A)  household saving in the economy. 
B)  public saving in the economy. 
C)  foreign saving in the economy. 
D)  total saving in the economy. 
A)  household saving in the economy. 
B)  public saving in the economy. 
C)  foreign saving in the economy. 
D)  total saving in the economy. A

Question 3

If domestic businesses become more pessimistic about the future, r would equal

Accepted Answer

A)      Io x (Ir + X     r ) 
B)      Io / (Ir + X     r ) 
C)      Io x (Ir - X     r ) 
D)      -Io / (Ir + X     r ) 
A)      Io x (Ir + X     r ) 
B)      Io / (Ir + X     r ) 
C)      Io x (Ir - X     r ) 
D)      -Io / (Ir + X     r ) B

Question 4

The change in investment spending (     I) which occurs as a result of a change in government purchases (     G) is equal to

Accepted Answer

A)  Ir x      r 
B)  -Ir x    r 
C)  -Ir x     G 
D)  Ir x     G 
A)  Ir x      r 
B)  -Ir x    r 
C)  -Ir x     G 
D)  Ir x     G

Question 5

The change in investment spending (   I) which occurs as a result of a change in government purchases (   G) is equal to

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 6

The equilibrium interest rate will ________ if government spending increases and foreign income decreases.

Accepted Answer

A)  decrease 
B)  remain unchanged 
C)  increase 
D)  either increase or decrease, depending which effect dominates. 
A)  decrease 
B)  remain unchanged 
C)  increase 
D)  either increase or decrease, depending which effect dominates.

Question 7

If the foreign interest rate increases,

Accepted Answer

A)  consumption spending and the domestic interest rate would increase. 
B)  the domestic interest rate would increase and investment spending would decrease. 
C)  the domestic interest rate would decrease and investment spending would increase. 
D)  net exports would decrease and the exchange rate would increase. 
A)  consumption spending and the domestic interest rate would increase. 
B)  the domestic interest rate would increase and investment spending would decrease. 
C)  the domestic interest rate would decrease and investment spending would increase. 
D)  net exports would decrease and the exchange rate would increase.

Question 8

The questions with which Chapter 7 is concerned include each of the following except:

Accepted Answer

A)  In the flexible-price model, what keeps aggregate demand and the level of production equal to potential output? 
B)  In the flexible-price model, what makes the supply of funds - saving - equal to the demand for funds - . investment - in the financial markets? 
C)  When saving or investment demand changes, what happens in the fixed-price model to the real output level, and why? 
D)  As government policies, the international economic environment, or other features of policy change or the economic environment change, what happens in the flexible-price model to consumption, investment, government, and net export spending? 
A)  In the flexible-price model, what keeps aggregate demand and the level of production equal to potential output? 
B)  In the flexible-price model, what makes the supply of funds - saving - equal to the demand for funds - . investment - in the financial markets? 
C)  When saving or investment demand changes, what happens in the fixed-price model to the real output level, and why? 
D)  As government policies, the international economic environment, or other features of policy change or the economic environment change, what happens in the flexible-price model to consumption, investment, government, and net export spending?

Question 9

The term (T-G) in the flow of funds equation represents

Accepted Answer

A)  household saving in the economy. 
B)  public saving in the economy. 
C)  foreign saving in the economy. 
D)  total saving in the economy. 
A)  household saving in the economy. 
B)  public saving in the economy. 
C)  foreign saving in the economy. 
D)  total saving in the economy.

Question 10

The _________ plays the key balancing role in making sure that the economy reaches and stays at equilibrium at the potential output level.

Accepted Answer

A)  real exchange rate 
B)  real interest rate 
C)  real level of spending 
D)  the production function 
A)  real exchange rate 
B)  real interest rate 
C)  real level of spending 
D)  the production function

Question 11

The questions with which Chapter 7 is concerned include each of the following except:

Accepted Answer

A)  In the flexible-price model, what keeps aggregate demand and the level of production equal to potential output? 
B)  In the flexible-price model, what makes the supply of funds - saving - equal to the demand for funds - . consumption - in the financial markets? 
C)  When saving or investment demand changes, what happens in the flexible-price model to the real interest rate, and why? 
D)  As government policies, the international economic environment, or other features of policy change or the economic environment change, what happens in the flexible-price model to consumption, investment, government, and net export spending? 
A)  In the flexible-price model, what keeps aggregate demand and the level of production equal to potential output? 
B)  In the flexible-price model, what makes the supply of funds - saving - equal to the demand for funds - . consumption - in the financial markets? 
C)  When saving or investment demand changes, what happens in the flexible-price model to the real interest rate, and why? 
D)  As government policies, the international economic environment, or other features of policy change or the economic environment change, what happens in the flexible-price model to consumption, investment, government, and net export spending?

Question 12

If foreigners have more dollars than they need to buy our exports

Accepted Answer

A)  they can use them to buy land in the United States. 
B)  they can use them to buy bonds issued by United States businesses. 
C)  they can them to buys stocks of United States businesses. 
D)  all of the above. 
A)  they can use them to buy land in the United States. 
B)  they can use them to buy bonds issued by United States businesses. 
C)  they can them to buys stocks of United States businesses. 
D)  all of the above.

Question 13

The interest rate will ________ if ________ shifts to the _______.

Accepted Answer

A)  increase; the total saving curve; right 
B)  decrease; the investment demand curve; right 
C)  increase; the investment demand curve; right 
D)  decrease; the total saving curve; left 
A)  increase; the total saving curve; right 
B)  decrease; the investment demand curve; right 
C)  increase; the investment demand curve; right 
D)  decrease; the total saving curve; left

Question 14

The demand for funds is equal to

Accepted Answer

A)  tY*-G0. 
B)  (1-t-(1-t)Cy)Y*-C0. 
C)  (IMyY*) - (XyfYf) -     
D)  I0 - Ir r. 
A)  tY*-G0. 
B)  (1-t-(1-t)Cy)Y*-C0. 
C)  (IMyY*) - (XyfYf) -     
D)  I0 - Ir r.

Question 15

If net exports are less than zero,

Accepted Answer

A)  foreigners receive more dollars from us than they need to buy our exports, so they have a shortage of dollars. 
B)  foreigners receive less dollars from us than they need to buy our exports, so they have a shortage of dollars. 
C)  foreigners receive more dollars from us than they need to buy our exports, so they have a surplus of dollars. 
D)  foreigners receive less dollars from us than they need to buy our exports, so they have a surplus of dollars. 
A)  foreigners receive more dollars from us than they need to buy our exports, so they have a shortage of dollars. 
B)  foreigners receive less dollars from us than they need to buy our exports, so they have a shortage of dollars. 
C)  foreigners receive more dollars from us than they need to buy our exports, so they have a surplus of dollars. 
D)  foreigners receive less dollars from us than they need to buy our exports, so they have a surplus of dollars.

Question 16

The term -NX in the flow of funds equation represents

Accepted Answer

A)  household saving in the economy. 
B)  public saving in the economy. 
C)  foreign saving in the economy. 
D)  total saving in the economy. 
A)  household saving in the economy. 
B)  public saving in the economy. 
C)  foreign saving in the economy. 
D)  total saving in the economy.

Question 17

The change in total saving (   S) which occurs as a result of a change in government purchases (   G ) is equal to

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 18

In the flexible-price model, a decrease in the tax rate will result in

Accepted Answer

A)  an increase in potential output. 
B)  a decrease in household saving. 
C)  an increase in investment expenditures. 
D)  an increase in the interest rate. 
A)  an increase in potential output. 
B)  a decrease in household saving. 
C)  an increase in investment expenditures. 
D)  an increase in the interest rate.

Question 19

In the flexible-price model, an increase in government purchases will result in

Accepted Answer

A)  an increase in potential output. 
B)  an increase in the interest rate. 
C)  an increase in total saving. 
D)  an increase in investment expenditures. 
A)  an increase in potential output. 
B)  an increase in the interest rate. 
C)  an increase in total saving. 
D)  an increase in investment expenditures.

Question 20

Suppose there is an increase in government purchases of $300 billion. If Cy = .8; Ir = 9000; X = 600; t = .30;    r = 10,

Accepted Answer

A)      NX would equal $120 billion. 
B)      NX would equal -$1200 billion. 
C)      NX would equal -$12 billion. 
D)      NX would equal -$120 billion. 
A)      NX would equal $120 billion. 
B)      NX would equal -$1200 billion. 
C)      NX would equal -$12 billion. 
D)      NX would equal -$120 billion.

The circular flow principle guarantees that in equilibrium

The term (Y*-C-T) in the flow of funds equation represents

If domestic businesses become more pessimistic about the future, r would equal

The change in investment spending ( I) which occurs as a result of a change in government purchases ( G) is equal to

The change in investment spending ( I) which occurs as a result of a change in government purchases ( G) is equal to

The equilibrium interest rate will ________ if government spending increases and foreign income decreases.

If the foreign interest rate increases,

The questions with which Chapter 7 is concerned include each of the following except:

The term (T-G) in the flow of funds equation represents

The _________ plays the key balancing role in making sure that the economy reaches and stays at equilibrium at the potential output level.

The questions with which Chapter 7 is concerned include each of the following except:

If foreigners have more dollars than they need to buy our exports

The interest rate will __ if shifts to the _.

The demand for funds is equal to

If net exports are less than zero,

The term -NX in the flow of funds equation represents

The change in total saving ( S) which occurs as a result of a change in government purchases ( G ) is equal to

In the flexible-price model, a decrease in the tax rate will result in

In the flexible-price model, an increase in government purchases will result in

Suppose there is an increase in government purchases of $300 billion. If C_y = .8; I_r = 9000; X = 600; t = .30; _r= 10,

Introduction to Macroeconomics

Measuring the Macroeconomy

Thinking Like an Economist

The Theory of Economic Growth

The Reality of Economic Growth: History and Prospect

Building Blocks of the Flexible-Price Model

Money, Prices, and Inflation

The Sticky-Price Income-Expenditure Framework: Consumption and the Multiplier

Investment, Net Exports, and Interest Rates: The Is Curve

The Money Market and the LM Curve

The Phillips Curve, Expectations, and Monetary Policy

Stabilization Policy

Budget Balance, National Debt, and Investment

International Economic Policy

Changes in the Macroeconomy and Changes in Macroeconomic Policy

The Future of Macroeconomics

Epilogue

Filters

Exam 7: Equilibrium in the Flexible-Price M Odel

The circular flow principle guarantees that in equilibrium

The term (Y*-C-T) in the flow of funds equation represents

If domestic businesses become more pessimistic about the future, r would equal

The change in investment spending ( I) which occurs as a result of a change in government purchases ( G) is equal to

The change in investment spending ( I) which occurs as a result of a change in government purchases ( G) is equal to

The equilibrium interest rate will ________ if government spending increases and foreign income decreases.

If the foreign interest rate increases,

The questions with which Chapter 7 is concerned include each of the following except:

The term (T-G) in the flow of funds equation represents

The _________ plays the key balancing role in making sure that the economy reaches and stays at equilibrium at the potential output level.

The questions with which Chapter 7 is concerned include each of the following except:

If foreigners have more dollars than they need to buy our exports

The interest rate will ________ if ________ shifts to the _______.

The demand for funds is equal to

If net exports are less than zero,

The term -NX in the flow of funds equation represents

The change in total saving ( S) which occurs as a result of a change in government purchases ( G ) is equal to

In the flexible-price model, a decrease in the tax rate will result in

In the flexible-price model, an increase in government purchases will result in

Suppose there is an increase in government purchases of $300 billion. If Cy = .8; Ir = 9000; X = 600; t = .30; r = 10,

Introduction to Macroeconomics

Measuring the Macroeconomy

Thinking Like an Economist

The Theory of Economic Growth

The Reality of Economic Growth: History and Prospect

Building Blocks of the Flexible-Price Model

Money, Prices, and Inflation

The Sticky-Price Income-Expenditure Framework: Consumption and the Multiplier

Investment, Net Exports, and Interest Rates: The Is Curve

The Money Market and the LM Curve

The Phillips Curve, Expectations, and Monetary Policy

Stabilization Policy

Budget Balance, National Debt, and Investment

International Economic Policy

Changes in the Macroeconomy and Changes in Macroeconomic Policy

The Future of Macroeconomics

Epilogue

Filters

The interest rate will __ if shifts to the _.

Suppose there is an increase in government purchases of $300 billion. If C_y = .8; I_r = 9000; X = 600; t = .30; _r= 10,