Question 1

Expenditure by households on final goods and services is referred to as:

Accepted Answer

A)  Investment. 
B)  Disposable income. 
C)  Consumption. 
D)  Aggregate demand. 
A)  Investment. 
B)  Disposable income. 
C)  Consumption. 
D)  Aggregate demand.

Question 2

The multiplier is equal to:

Accepted Answer

A)  1 - MPC. 
B)  MPS ÷ MPC. 
C)  1 ÷ MPS. 
D)  1 ÷ MPC. 
A)  1 - MPC. 
B)  MPS ÷ MPC. 
C)  1 ÷ MPS. 
D)  1 ÷ MPC.

Question 3

Keynes believed that aggregate demand would likely establish a full-employment equilibrium without government intervention.

Accepted Answer

A) True 
 B)False

Question 4

The following table shows a hypothetical relationship between consumption and income.Answer the indicated question(s)on the basis of this table.
Table 12.1-Income and consumption data  
-Based on Table 12.1,what is saving at a disposable income of $100 billion per year?

Accepted Answer

A)  Zero 
B)  $15 billion per year 
C)  $20 billion per year 
D)  $25 billion per year 
A)  Zero 
B)  $15 billion per year 
C)  $20 billion per year 
D)  $25 billion per year

Question 5

When calculating aggregate demand,government expenditure:

Accepted Answer

A)  Includes only federal government spending on goods and services. 
B)  Includes spending by federal,state,and local governments on goods and services. 
C)  Includes income transfers. 
D)  Represents the largest component of aggregate demand in the United States. 
A)  Includes only federal government spending on goods and services. 
B)  Includes spending by federal,state,and local governments on goods and services. 
C)  Includes income transfers. 
D)  Represents the largest component of aggregate demand in the United States.

Question 6

A tax cut causes a decrease in disposable income.

Accepted Answer

A) True 
 B)False

Question 7

Figure 12.2:   
-Using Figure 12.2,assume that Q2 is full employment and the economy is in equilibrium at point V.Ceteris paribus a shift in aggregate demand to AD2 will:

Accepted Answer

A)  Result in equilibrium at point W. 
B)  Result in equilibrium at point Y. 
C)  Reduce the GDP gap but would not close it. 
D)  Cause an AD shortfall. 
A)  Result in equilibrium at point W. 
B)  Result in equilibrium at point Y. 
C)  Reduce the GDP gap but would not close it. 
D)  Cause an AD shortfall.

Question 8

Net exports in the United States are:

Accepted Answer

A)  Always positive. 
B)  Greater than federal government expenditures as a percentage of GDP. 
C)  Included in the calculation of GDP. 
D)  The sum of exports and imports. 
A)  Always positive. 
B)  Greater than federal government expenditures as a percentage of GDP. 
C)  Included in the calculation of GDP. 
D)  The sum of exports and imports.

Question 9

Equilibrium:

Accepted Answer

A)  Will only occur at full employment. 
B)  Can occur at any output level. 
C)  Will occur at or below full employment. 
D)  Will occur at or above full employment. 
A)  Will only occur at full employment. 
B)  Can occur at any output level. 
C)  Will occur at or below full employment. 
D)  Will occur at or above full employment.

Question 10

If aggregate supply is upward sloping,fiscal stimulus causes _______ in aggregate demand and _______ in prices.

Accepted Answer

A)  A decrease;a decrease 
B)  A decrease;an increase 
C)  An increase;a decrease 
D)  An increase;an increase 
A)  A decrease;a decrease 
B)  A decrease;an increase 
C)  An increase;a decrease 
D)  An increase;an increase

Expenditure by households on final goods and services is referred to as:

The multiplier is equal to:

Keynes believed that aggregate demand would likely establish a full-employment equilibrium without government intervention.

The following table shows a hypothetical relationship between consumption and income.Answer the indicated question(s)on the basis of this table. Table 12.1-Income and consumption data -Based on Table 12.1,what is saving at a disposable income of $100 billion per year?

When calculating aggregate demand,government expenditure:

A tax cut causes a decrease in disposable income.

Figure 12.2: -Using Figure 12.2,assume that Q₂ is full employment and the economy is in equilibrium at point V.Ceteris paribus a shift in aggregate demand to AD₂ will:

Net exports in the United States are:

Equilibrium:

If aggregate supply is upward sloping,fiscal stimulus causes _ in aggregate demand and _ in prices.

The Challenge of Economics

The US Economy

Supply and Demand

Consumer Demand

Supply Decisions

Competition

Monopoly

The Labor Market

Government Intervention

The Business Cycle

Aggregate Supply and Demand

Money and Banks

Monetary Policy

Economic Growth

Theory and Reality

International Trade

Filters

Exam 12: Fiscal Policy

Expenditure by households on final goods and services is referred to as:

The multiplier is equal to:

Keynes believed that aggregate demand would likely establish a full-employment equilibrium without government intervention.

The following table shows a hypothetical relationship between consumption and income.Answer the indicated question(s)on the basis of this table. Table 12.1-Income and consumption data -Based on Table 12.1,what is saving at a disposable income of $100 billion per year?

When calculating aggregate demand,government expenditure:

A tax cut causes a decrease in disposable income.

Figure 12.2: -Using Figure 12.2,assume that Q2 is full employment and the economy is in equilibrium at point V.Ceteris paribus a shift in aggregate demand to AD2 will:

Net exports in the United States are:

Equilibrium:

If aggregate supply is upward sloping,fiscal stimulus causes _______ in aggregate demand and _______ in prices.

The Challenge of Economics

The US Economy

Supply and Demand

Consumer Demand

Supply Decisions

Competition

Monopoly

The Labor Market

Government Intervention

The Business Cycle

Aggregate Supply and Demand

Money and Banks

Monetary Policy

Economic Growth

Theory and Reality

International Trade

Filters

Figure 12.2: -Using Figure 12.2,assume that Q₂ is full employment and the economy is in equilibrium at point V.Ceteris paribus a shift in aggregate demand to AD₂ will:

If aggregate supply is upward sloping,fiscal stimulus causes _ in aggregate demand and _ in prices.