Question 1

A depreciation of the U.S.dollar will result in an increase in aggregate expenditures in the country.

Accepted Answer

A) True 
 B)False  False

Question 2

The figure given below represents the leakages and injections in an economy. Figure 10.3   In the figure:
S1 and S2: Saving functions
I: Investment
G: Government spending
EX: Net exports
Refer to Figure 10.3.The paradox of thrift might not be a problem if:

Accepted Answer

A) the average price level does not change in the short run. 
B) the I + G + EX line were downward-sloping. 
C) the I + G + EX line were constant at an intercept of $30. 
D) the increase in saving was used to fund investment expenditures. 
E) the I + G + EX line were constant at an intercept of $50. 
A) the average price level does not change in the short run. 
B) the I + G + EX line were downward-sloping. 
C) the I + G + EX line were constant at an intercept of $30. 
D) the increase in saving was used to fund investment expenditures. 
E) the I + G + EX line were constant at an intercept of $50. D

Question 3

The table given below states the value of the GDP and the different components of aggregate expenditure for two years. Table 10.1
  Refer to Table 10.1.What would be the new equilibrium level of real GDP in year 2 if net exports equaled zero?

Accepted Answer

A) $1, 205 
B) $1, 095 
C) $1, 050 
D) $1, 170 
E) $1, 120 
A) $1, 205 
B) $1, 095 
C) $1, 050 
D) $1, 170 
E) $1, 120 B

Question 4

The figure given below depicts macroeconomic equilibrium in a closed economy.Assume that the spending multiplier in this economy is 1.5. Figure 10.5   Refer to Figure 10.5.If the target or potential level of real GDP is $1, 200, then at an equilibrium real GDP level of $900:

Accepted Answer

A) the GDP gap is zero. 
B) there exists a recessionary gap that could be closed by a $200 decrease in planned aggregate expenditures. 
C) the GDP gap is $200. 
D) actual real GDP exceeds potential real GDP by $300. 
E) there exists a recessionary gap that could be closed by a $200 increase in autonomous investment spending. 
A) the GDP gap is zero. 
B) there exists a recessionary gap that could be closed by a $200 decrease in planned aggregate expenditures. 
C) the GDP gap is $200. 
D) actual real GDP exceeds potential real GDP by $300. 
E) there exists a recessionary gap that could be closed by a $200 increase in autonomous investment spending.

Question 5

Which of the following will not increase aggregate expenditures?

Accepted Answer

A) A decrease in domestic prices 
B) A decrease in the interest rate 
C) An increase in real wealth 
D) An increase in income taxes 
E) An increase in autonomous net exports 
A) A decrease in domestic prices 
B) A decrease in the interest rate 
C) An increase in real wealth 
D) An increase in income taxes 
E) An increase in autonomous net exports

Question 6

The table given below shows the levels of national income (Y)and the corresponding levels of saving (S), investment (I), export (X), and import (M)of an open economy. Table 10.2
  Consider the economy described in Table 10.2.If autonomous saving decreases by $200, what will happen at the current equilibrium level of income?

Accepted Answer

A) Autonomous consumption spending will also decrease by $200, and so no change in equilibrium income occurs. 
B) Total leakages in the economy will exceed total injections. 
C) There will be pressure on real GDP to rise. 
D) There will be pressure on the economy to contract. 
E) Unplanned inventories in the economy will grow. 
A) Autonomous consumption spending will also decrease by $200, and so no change in equilibrium income occurs. 
B) Total leakages in the economy will exceed total injections. 
C) There will be pressure on real GDP to rise. 
D) There will be pressure on the economy to contract. 
E) Unplanned inventories in the economy will grow.

Question 7

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.When total injections equal $20, the equilibrium level of real GDP is:

Accepted Answer

A) $100. 
B) $200. 
C) $300. 
D) $400. 
E) $500. 
A) $100. 
B) $200. 
C) $300. 
D) $400. 
E) $500.

Question 8

When the purchasing power of money declines:

Accepted Answer

A) demand for money increases and interest rates fall. 
B) the supply of bonds increases and interest rates fall. 
C) demand for money increases and interest rates rise. 
D) the supply of bonds decreases and interest rates rise. 
E) demand for money decreases and interest rates rise. 
A) demand for money increases and interest rates fall. 
B) the supply of bonds increases and interest rates fall. 
C) demand for money increases and interest rates rise. 
D) the supply of bonds decreases and interest rates rise. 
E) demand for money decreases and interest rates rise.

Question 9

The figure given below represents the macroeconomic equilibrium in the aggregate income and aggregate expenditure framework.Assume that MPI is equal to zero. Figure 10.4   In the figure:
C: Consumption
I1 and I2: Investment
G: Government Spending
X: Exports
Refer to Figure 10.4.The spending multiplier is _____.

Accepted Answer

A) 2 
B) 3 
C) 6 
D) 0.5 
E) 1.2 
A) 2 
B) 3 
C) 6 
D) 0.5 
E) 1.2

Question 10

The interest rate effect states that an increase in the price level will cause:

Accepted Answer

A) a decline in the interest rate. 
B) a decrease in investment and aggregate expenditures. 
C) an increase in the equilibrium level of income. 
D) a decrease in the supply of financial assets. 
E) an increase in real wealth. 
A) a decline in the interest rate. 
B) a decrease in investment and aggregate expenditures. 
C) an increase in the equilibrium level of income. 
D) a decrease in the supply of financial assets. 
E) an increase in real wealth.

Question 11

The table given below states the value of the GDP and the different components of aggregate expenditure for two years. Table 10.1
  Refer to Table 10.1.If real GDP equals $1, 000 in year 1, then:

Accepted Answer

A) unplanned inventory investment is zero. 
B) unplanned inventories increase by $50. 
C) inventories decrease by $100. 
D) inventories increase by $60. 
E) real GDP is less than aggregate expenditure. 
A) unplanned inventory investment is zero. 
B) unplanned inventories increase by $50. 
C) inventories decrease by $100. 
D) inventories increase by $60. 
E) real GDP is less than aggregate expenditure.

Question 12

A change in the price level in an economy will be depicted by a movement along the AE curve and not by a leftward or rightward movement of the curve.

Accepted Answer

A) True 
 B)False

Question 13

A horizontal aggregate supply curve indicates that equilibrium real GDP is determined by aggregate supply.

Accepted Answer

A) True 
 B)False

Question 14

If the spending multiplier equals 6 and equilibrium real GDP is $32 billion below potential real GDP, then total planned expenditures need to decrease by approximately $5.33 billion to close the recessionary gap.

Accepted Answer

A) True 
 B)False

Question 15

The figure given below represents the leakages and injections of an economy. Figure 10.6   In Figure 10.6, if 0L is the potential level of real GDP, then KL represents:

Accepted Answer

A) excess GDP. 
B) real GDP. 
C) the multiplier effect. 
D) the GDP gap. 
E) the recessionary gap. 
A) excess GDP. 
B) real GDP. 
C) the multiplier effect. 
D) the GDP gap. 
E) the recessionary gap.

Question 16

The Keynesian aggregate expenditures model assumes that:

Accepted Answer

A) production does not adjust to changes in aggregate expenditures. 
B) aggregate supply is autonomous. 
C) prices do not decrease when aggregate demand decreases. 
D) aggregate supply determines the equilibrium level of real GDP. 
E) prices are positively related to aggregate demand. 
A) production does not adjust to changes in aggregate expenditures. 
B) aggregate supply is autonomous. 
C) prices do not decrease when aggregate demand decreases. 
D) aggregate supply determines the equilibrium level of real GDP. 
E) prices are positively related to aggregate demand.

Question 17

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 18

Ceteris paribus, a decline in the general price level in the United States will make foreign-produced goods relatively more expensive to U.S.residents and increase the aggregate demand of domestic goods.

Accepted Answer

A) True 
 B)False

Question 19

The figure given below represents the macroeconomic equilibrium in the aggregate income and aggregate expenditure framework.Assume that MPI is equal to zero. Figure 10.4   In the figure:
C: Consumption
I1 and I2: Investment
G: Government Spending
X: Exports
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 20

The table given below states the value of the GDP and the different components of aggregate expenditure for two years. Table 10.1
  Refer to Table 10.1.What is the equilibrium level of imports in year 2?

Accepted Answer

A) $20 
B) $50 
C) $70 
D) $100 
E) $120 
A) $20 
B) $50 
C) $70 
D) $100 
E) $120

Exam 15: Income and Expenditures Equilibrium

A depreciation of the U.S.dollar will result in an increase in aggregate expenditures in the country.

The figure given below represents the leakages and injections in an economy. Figure 10.3 In the figure: S1 and S2: Saving functions I: Investment G: Government spending EX: Net exports Refer to Figure 10.3.The paradox of thrift might not be a problem if:

The table given below states the value of the GDP and the different components of aggregate expenditure for two years. Table 10.1 Refer to Table 10.1.What would be the new equilibrium level of real GDP in year 2 if net exports equaled zero?

The figure given below depicts macroeconomic equilibrium in a closed economy.Assume that the spending multiplier in this economy is 1.5. Figure 10.5 Refer to Figure 10.5.If the target or potential level of real GDP is $1, 200, then at an equilibrium real GDP level of $900:

Which of the following will not increase aggregate expenditures?

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.When total injections equal $20, the equilibrium level of real GDP is:

When the purchasing power of money declines:

The interest rate effect states that an increase in the price level will cause:

The table given below states the value of the GDP and the different components of aggregate expenditure for two years. Table 10.1 Refer to Table 10.1.If real GDP equals $1, 000 in year 1, then:

A change in the price level in an economy will be depicted by a movement along the AE curve and not by a leftward or rightward movement of the curve.

A horizontal aggregate supply curve indicates that equilibrium real GDP is determined by aggregate supply.

If the spending multiplier equals 6 and equilibrium real GDP is $32 billion below potential real GDP, then total planned expenditures need to decrease by approximately $5.33 billion to close the recessionary gap.

The figure given below represents the leakages and injections of an economy. Figure 10.6 In Figure 10.6, if 0L is the potential level of real GDP, then KL represents:

The Keynesian aggregate expenditures model assumes that:

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:

Ceteris paribus, a decline in the general price level in the United States will make foreign-produced goods relatively more expensive to U.S.residents and increase the aggregate demand of domestic goods.

The table given below states the value of the GDP and the different components of aggregate expenditure for two years. Table 10.1 Refer to Table 10.1.What is the equilibrium level of imports in year 2?

Economics: The World Around You

Choice, Opportunity Costs, and Specialization

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

Elasticity: Demand and Supply

National Income Accounting

an Introduction to the Foreign Exchange Market and the Balance of Payments

Consumer Choice

Supply: The Costs of Doing Business

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Profit Maximization

Aggregate Expenditures

Perfect Competition

Monopoly

Fiscal Policy

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Money and Banking

Market Failures, Government Failures, and Rent Seeking

Monetary Policy

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Resource Markets

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

The Labor Market

Capital Markets

Economic Growth

Development Economics

the Land Market and Natural Resources

Aging, Social Security and Health Care

Globalization

Elasticity: Demand and Supply

Income Distribution, Poverty and Government Policy

World Trade Equilibrium

Consumer Choice

International Trade Restrictions

World Trade Equilibrium

Exchange Rates and Financial Links Between Countries

International Trade Restrictions

Supply: the Costs of Doing Business

Exchange Rates and Financial Links Between Countries

Profit Maximization

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Market Failures, Government Failures, and Rent Seeking

Resource Markets

The Labor Market

Capital Markets

The Land Market and Natural Resources

Aging, Social Security and Health Care

Income Distribution, Poverty and Government Policy

World Trade Equilibrium

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

Filters

The figure given below represents the leakages and injections in an economy. Figure 10.3 In the figure: S₁ and S₂: Saving functions I: Investment G: Government spending EX: Net exports Refer to Figure 10.3.The paradox of thrift might not be a problem if:

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.When total injections equal $20, the equilibrium level of real GDP is:

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: