Question 1

Investment increases by $200 million and the value of MPC is 0.75.What would be the total increase in spending?

Accepted Answer

A) $200 million 
B) $266 million 
C) $750 million 
D) $800 million 
A) $200 million 
B) $266 million 
C) $750 million 
D) $800 million

Question 2

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 3

The economic impact of the multiplier is ____, and then becomes ____.

Accepted Answer

A) slow, faster 
B) small, tiny 
C) large, smaller 
D) small, larger 
A) slow, faster 
B) small, tiny 
C) large, smaller 
D) small, larger

Question 4

Assume that the MPC is .75, and investment spending rises by $25 billion.How much will real GDP change?

Accepted Answer

A) $25 billion 
B) $75 billion 
C) $100 billion 
D) $175 billion 
A) $25 billion 
B) $75 billion 
C) $100 billion 
D) $175 billion

Question 5

Which of the following occurs when party A would like to change his behavior if party B would change hers, and vice versa, and yet the two changes do not take place because the decisions of A and B are made independently?

Accepted Answer

A) Moral hazard 
B) Coordination failure 
C) Leakage 
D) Lemon problem 
A) Moral hazard 
B) Coordination failure 
C) Leakage 
D) Lemon problem

Question 6

Identify the "oversimplified multiplier formula."

Accepted Answer

A) Multiplier = 1 divided by (1 − change in GDP) 
B) Multiplier = 1 divided by (1 − marginal propensity to consume) 
C) Multiplier = 1 divided by (1 − marginal propensity to save) 
D) Multiplier = 1 divided by (1 − rate of inflation) 
A) Multiplier = 1 divided by (1 − change in GDP) 
B) Multiplier = 1 divided by (1 − marginal propensity to consume) 
C) Multiplier = 1 divided by (1 − marginal propensity to save) 
D) Multiplier = 1 divided by (1 − rate of inflation)

Question 7

In a capitalist market economy, recessions and inflation can occur because of coordination failures.

Accepted Answer

A) True 
 B)False

Question 8

Equilibrium GDP occurs when total spending equals total output.

Accepted Answer

A) True 
 B)False

Question 9

The price level effects consumer spending through changes in real

Accepted Answer

A) disposable income. 
B) interest rates. 
C) wealth. 
D) GDP. 
A) disposable income. 
B) interest rates. 
C) wealth. 
D) GDP.

Question 10

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

Accepted Answer

A) inventories will be falling, signaling businesses to decrease production. 
B) inventories will be falling, signaling businesses to increase production. 
C) planned saving increases planned investment. 
D) inventories will be accumulating, signaling businesses to increase production. 
A) inventories will be falling, signaling businesses to decrease production. 
B) inventories will be falling, signaling businesses to increase production. 
C) planned saving increases planned investment. 
D) inventories will be accumulating, signaling businesses to increase production.

Question 11

An expenditure schedule model with no government sector shows the relationship between

Accepted Answer

A) C and national product. 
B) C and disposable income. 
C) C + I and national income. 
D) GDP and disposable income. 
A) C and national product. 
B) C and disposable income. 
C) C + I and national income. 
D) GDP and disposable income.

Question 12

Differentiate between an induced increase in consumption and an autonomous increase in consumption.How are they represented on a graph?

Accepted Answer

An induced increase in consumption is an

Question 13

If retail managers are ordering extra merchandise from their wholesale distributors, then it is probably true that

Accepted Answer

A) total output is greater than total spending. 
B) price levels are decreasing. 
C) inventory levels are increasing. 
D) inventory levels are decreasing. 
A) total output is greater than total spending. 
B) price levels are decreasing. 
C) inventory levels are increasing. 
D) inventory levels are decreasing.

Question 14

Suppose the economy is suffering in a recessionary period.Firms are facing increasing inventories and individual consumers are increasing their saving to prepare for hard times ahead.What is likely to happen to the economy and can it correct itself and grow toward full employment in the short run?

Accepted Answer

The Keynesian view of the economy would

Question 15

Using the standard 45-degree line diagram, how does an increase in investment spending effect the expenditure schedule?

Accepted Answer

A) It shifts the expenditure schedule downward. 
B) It shifts the expenditure schedule upward. 
C) It increases the slope of the expenditure schedule. 
D) It decreases the slope of the expenditure schedule. 
A) It shifts the expenditure schedule downward. 
B) It shifts the expenditure schedule upward. 
C) It increases the slope of the expenditure schedule. 
D) It decreases the slope of the expenditure schedule.

Question 16

In the income-expenditure model, at equilibrium GDP

Accepted Answer

A) either unemployment or inflation may occur. 
B) inflation can occur but unemployment cannot. 
C) unemployment can occur but inflation cannot. 
D) both unemployment and inflation are impossible. 
A) either unemployment or inflation may occur. 
B) inflation can occur but unemployment cannot. 
C) unemployment can occur but inflation cannot. 
D) both unemployment and inflation are impossible.

Exam 26: Demand-Side Equilibrium: Unemployment or Inflation

Investment increases by $200 million and the value of MPC is 0.75.What would be the total increase in spending?

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

The economic impact of the multiplier is ____, and then becomes ____.

Assume that the MPC is .75, and investment spending rises by $25 billion.How much will real GDP change?

Which of the following occurs when party A would like to change his behavior if party B would change hers, and vice versa, and yet the two changes do not take place because the decisions of A and B are made independently?

Identify the "oversimplified multiplier formula."

In a capitalist market economy, recessions and inflation can occur because of coordination failures.

Equilibrium GDP occurs when total spending equals total output.

The price level effects consumer spending through changes in real

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

An expenditure schedule model with no government sector shows the relationship between

Differentiate between an induced increase in consumption and an autonomous increase in consumption.How are they represented on a graph?

If retail managers are ordering extra merchandise from their wholesale distributors, then it is probably true that

Suppose the economy is suffering in a recessionary period.Firms are facing increasing inventories and individual consumers are increasing their saving to prepare for hard times ahead.What is likely to happen to the economy and can it correct itself and grow toward full employment in the short run?

Using the standard 45-degree line diagram, how does an increase in investment spending effect the expenditure schedule?

In the income-expenditure model, at equilibrium GDP

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

The economic impact of the multiplier is , and then becomes .