Question 1

Figure 9-4
  
-In Figure 9-4, which expenditure level will result in a recessionary gap?

Accepted Answer

A) 1 
B) 2 
C) 3 
D) There will be no deflationary gap. 
A) 1 
B) 2 
C) 3 
D) There will be no deflationary gap.

Question 2

If the government increases defense spending by $1 billion and the MPC is 0.8, how much additional spending will occur in the third "round" of spending?

Accepted Answer

A) $640 million 
B) $800 million 
C) $1 billion 
D) $1.8 billion 
A) $640 million 
B) $800 million 
C) $1 billion 
D) $1.8 billion

Question 3

When income rises, total expenditures remain constant.

Accepted Answer

A) True 
 B)False

Question 4

If we observe that every increase in income of $120 million generates an increase in consumption of $80 million, then the simple multiplier is

Accepted Answer

A) 2/3. 
B) 3/2. 
C) 2. 
D) 3. 
E) 8. 
A) 2/3. 
B) 3/2. 
C) 2. 
D) 3. 
E) 8.

Question 5

A level of GDP cannot be at equilibrium when aggregate demand exceeds output because firms will notice that

Accepted Answer

A) inventory stocks are building up. 
B) inventory stocks are being depleted. 
C) their profits are negative. 
D) many of their workers have little to do. 
A) inventory stocks are building up. 
B) inventory stocks are being depleted. 
C) their profits are negative. 
D) many of their workers have little to do.

Question 6

Market economies are likely to suffer from recessions and inflation because the government plans all economic activity.

Accepted Answer

A) True 
 B)False

Question 7

If the unemployed were hired, they would have the monies to purchase goods which would otherwise be unsold.​

Accepted Answer

A) True 
 B)False

Question 8

Injections include saving and taxes.

Accepted Answer

A) True 
 B)False

Question 9

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 10

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 11

Assume a simple macroeconomic model.When inventories rise unexpectedly,

Accepted Answer

A) income is above its equilibrium value. 
B) income will rise until it reaches its equilibrium value. 
C) total spending is higher than total output. 
D) All of the above. 
A) income is above its equilibrium value. 
B) income will rise until it reaches its equilibrium value. 
C) total spending is higher than total output. 
D) All of the above.

Question 12

The aggregate demand curve has an upward slope due to the positive relationship between the price level and aggregate quantity demanded.

Accepted Answer

A) True 
 B)False

Question 13

Writing during the Great Depression, Keynes naturally focused on problems of

Accepted Answer

A) hyperinflation. 
B) budget deficits. 
C) trade deficits. 
D) unemployment. 
A) hyperinflation. 
B) budget deficits. 
C) trade deficits. 
D) unemployment.

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

Investment spending is a leakage from the circular flow model.

Accepted Answer

A) True 
 B)False

Question 16

Figure 9-1
  
-In Figure 9-1, at $3,000 billion real GDP,

Accepted Answer

A) spending exceeds total output and inventories will fall. 
B) inventories are constant. 
C) aggregate demand equals aggregate supply. 
D) spending falls short of output and inventories will rise. 
A) spending exceeds total output and inventories will fall. 
B) inventories are constant. 
C) aggregate demand equals aggregate supply. 
D) spending falls short of output and inventories will rise.

Question 17

U.S.exports:

Accepted Answer

A) rise as our GDP rises, and fall as our GDP falls​ 
B) ​fall as our GDP rises, and rise as our GDP falls 
C) ​are insensitive to our GDP 
D) ​have no relation to our GDP 
A) rise as our GDP rises, and fall as our GDP falls​ 
B) ​fall as our GDP rises, and rise as our GDP falls 
C) ​are insensitive to our GDP 
D) ​have no relation to our GDP

Question 18

If businesses spend an additional $150 billion for investment projects in 2010, what will be the impact on national income (Y) if the multiplier is 2?

Accepted Answer

A) Y will increase by $50 billion. 
B) Y will increase by $150 billion. 
C) Y will increase by $300 billion. 
D) Y will increase by $450 billion. 
A) Y will increase by $50 billion. 
B) Y will increase by $150 billion. 
C) Y will increase by $300 billion. 
D) Y will increase by $450 billion.

Question 19

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 20

Each C + I + G + (X − IM) expenditure schedule is drawn assuming a specific

Accepted Answer

A) income level. 
B) spending level. 
C) production level. 
D) price level. 
A) income level. 
B) spending level. 
C) production level. 
D) price level.

Exam 26: Demand-Side Equilibrium: Unemployment or Inflation

Figure 9-4 -In Figure 9-4, which expenditure level will result in a recessionary gap?

If the government increases defense spending by $1 billion and the MPC is 0.8, how much additional spending will occur in the third "round" of spending?

When income rises, total expenditures remain constant.

If we observe that every increase in income of $120 million generates an increase in consumption of $80 million, then the simple multiplier is

A level of GDP cannot be at equilibrium when aggregate demand exceeds output because firms will notice that

Market economies are likely to suffer from recessions and inflation because the government plans all economic activity.

If the unemployed were hired, they would have the monies to purchase goods which would otherwise be unsold.​

Injections include saving and taxes.

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

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

Assume a simple macroeconomic model.When inventories rise unexpectedly,

The aggregate demand curve has an upward slope due to the positive relationship between the price level and aggregate quantity demanded.

Writing during the Great Depression, Keynes naturally focused on problems of

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

Investment spending is a leakage from the circular flow model.

Figure 9-1 -In Figure 9-1, at $3,000 billion real GDP,

U.S.exports:

If businesses spend an additional $150 billion for investment projects in 2010, what will be the impact on national income (Y) if the multiplier is 2?

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

Each C + I + G + (X − IM) expenditure schedule is drawn assuming a specific

What Is Economics

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: an Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: the Importance of Marginal Analysis

Securities: Business Finance and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets: the Price System

The Shortcomings of Free Markets

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

Is Useconomic Leadership Threatened

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

He 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

If the unemployed were hired, they would have the monies to purchase goods which would otherwise be unsold.