Question 1

Suppose only 7 percent of Turkey's products go to the United States.Hence, an increase in U.S.imports from Turkey:

Accepted Answer

A) would have no significant effect on Turkey's domestic income. 
B) would significantly increase Turkey's domestic income. 
C) would significantly decrease Turkey's domestic income. 
D) would significantly increase U.S.domestic income. 
E) would significantly decrease U.S.domestic income. 
A) would have no significant effect on Turkey's domestic income. 
B) would significantly increase Turkey's domestic income. 
C) would significantly decrease Turkey's domestic income. 
D) would significantly increase U.S.domestic income. 
E) would significantly decrease U.S.domestic income.

Question 2

Assume that potential GDP is $200 billion and the multiplier equals 5.The recessionary gap is $10 billion.What is the actual level of equilibrium income?

Accepted Answer

A) $200 billion 
B) $150 billion 
C) $100 billion 
D) $80 billion 
E) $50 billion 
A) $200 billion 
B) $150 billion 
C) $100 billion 
D) $80 billion 
E) $50 billion

Question 3

Scenario 10.1 Imagine an economy that does not have international trade and is originally in equilibrium.Then the government increases the level of spending by $350 million because it received a gift from abroad.In this economy, only 65 cents of every dollar is spent, and the rest is saved.
Refer to Scenario 10.1.What is the marginal propensity to save for this economy?

Accepted Answer

A) 0.5 
B) 0.25 
C) 0.65 
D) 0.35 
E) Cannot be determined 
A) 0.5 
B) 0.25 
C) 0.65 
D) 0.35 
E) Cannot be determined

Question 4

Assume we are at an income level where the C+I+G+X (consumption+investment+government spending+net exports)function lies above the 45-degree line.We can conclude that at this income level:

Accepted Answer

A) unplanned inventories are likely to accumulate. 
B) the economy is in equilibrium. 
C) households will save more money than they spend. 
D) aggregate expenditures are less than output. 
E) there will be pressure to expand production. 
A) unplanned inventories are likely to accumulate. 
B) the economy is in equilibrium. 
C) households will save more money than they spend. 
D) aggregate expenditures are less than output. 
E) there will be pressure to expand production.

Question 5

Scenario 10.2 A hypothetical open economy has a marginal propensity to import (MPI)equal to 0.2 and a marginal propensity to consume equal to 0.7.Assume that the economy is initially in equilibrium.
Refer to Scenario 10.2.If a tourist visits the country and spends $100 that she brought with her, then what will happen to the equilibrium real GDP?

Accepted Answer

A) It will not change 
B) It will increase by $100 
C) It will increase by $200 
D) It will increase by $143 
E) It will increase by $90 
A) It will not change 
B) It will increase by $100 
C) It will increase by $200 
D) It will increase by $143 
E) It will increase by $90

Question 6

The table given below shows the real GDP, aggregate expenditures, saving, and imports of an economy. Table 10.4
  Refer to Table 10.4.Suppose the economy is currently in equilibrium and the potential GDP of the economy is $6, 000.The current GDP gap equals _____.

Accepted Answer

A) $400 
B) $1, 000 
C) $2, 000 
D) $3, 000 
E) $6, 000 
A) $400 
B) $1, 000 
C) $2, 000 
D) $3, 000 
E) $6, 000

Question 7

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.If autonomous government expenditures increase by $250 billion, equilibrium real GDP will:

Accepted Answer

A) rise by $250 billion. 
B) fall by 300 billion 
C) rise by $500 billion. 
D) rise by $75 billion. 
E) rise by $100 billion. 
A) rise by $250 billion. 
B) fall by 300 billion 
C) rise by $500 billion. 
D) rise by $75 billion. 
E) rise by $100 billion.

Question 8

The aggregate demand curve shows:

Accepted Answer

A) how the equilibrium level of aggregate expenditure changes in response to changes in production. 
B) the amount people spend at different real GDP levels. 
C) the positive relationship between the price level and real GDP. 
D) the negative relationship between aggregate expenditure and real GDP. 
E) how the equilibrium level of aggregate expenditure changes as the price level changes. 
A) how the equilibrium level of aggregate expenditure changes in response to changes in production. 
B) the amount people spend at different real GDP levels. 
C) the positive relationship between the price level and real GDP. 
D) the negative relationship between aggregate expenditure and real GDP. 
E) how the equilibrium level of aggregate expenditure changes as the price level changes.

Question 9

Suppose in an economy, investment = $40, saving = $50, government spending+export = $100 and taxes+imports = $110.Then for this economy, total leakages exceed total injections by:

Accepted Answer

A) $30. 
B) $25. 
C) $10. 
D) $45. 
E) $20. 
A) $30. 
B) $25. 
C) $10. 
D) $45. 
E) $20.

Question 10

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.Calculate the value of leakages from the economy when the economy is in equilibrium.

Accepted Answer

A) $770 
B) $720 
C) $790 
D) $600 
E) $410 
A) $770 
B) $720 
C) $790 
D) $600 
E) $410

Question 11

A decrease in the general price level is associated with an upward shift in the aggregate expenditures function.

Accepted Answer

A) True 
 B)False

Question 12

Assume that an increase of $300 in exports leads to an increase of $750 in equilibrium income.If the marginal propensity to import equals 1/10, the marginal propensity to save must be _____.

Accepted Answer

A) 0.60 
B) 0.50 
C) 0.40 
D) 0.30 
E) 0.25 
A) 0.60 
B) 0.50 
C) 0.40 
D) 0.30 
E) 0.25

Question 13

When total planned expenditures are more than real GDP, there will be inventory accumulation.

Accepted Answer

A) True 
 B)False

Question 14

The figure given below shows the macroeconomic equilibrium of a country. Figure 10.7   In Figure 10.7, the spending multiplier equals _____.

Accepted Answer

A) 2 
B) 4 
C) 5 
D) 10 
E) 20 
A) 2 
B) 4 
C) 5 
D) 10 
E) 20

Question 15

Foreign repercussions of changes in domestic imports cause the true domestic spending multiplier to be less than 1/(MPS+MPI)

Accepted Answer

A) True 
 B)False

Question 16

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.Assume that the economy is at equilibrium in both years.What are net exports for year 2?

Accepted Answer

A) $60 
B) $125 
C) $70 
D) $55 
E) $195 
A) $60 
B) $125 
C) $70 
D) $55 
E) $195

Question 17

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 real GDP in year 1?

Accepted Answer

A) $940 
B) $1, 040 
C) $1, 100 
D) $1, 050 
E) $920 
A) $940 
B) $1, 040 
C) $1, 100 
D) $1, 050 
E) $920

Question 18

If equilibrium in the economy is merely a function of aggregate demand, the aggregate supply curve must be:

Accepted Answer

A) upward-sloping. 
B) downward-sloping. 
C) in the Keynesian region. 
D) vertical. 
E) at the full-capacity level. 
A) upward-sloping. 
B) downward-sloping. 
C) in the Keynesian region. 
D) vertical. 
E) at the full-capacity level.

Question 19

At the equilibrium level of income, which of the following is true?

Accepted Answer

A) Unplanned inventory changes are positive 
B) Firms are unable to produce the desired rate of output 
C) Autonomous consumption spending is equal to induced consumption spending 
D) Aggregate expenditures equal real GDP 
E) Unplanned investment spending is positive 
A) Unplanned inventory changes are positive 
B) Firms are unable to produce the desired rate of output 
C) Autonomous consumption spending is equal to induced consumption spending 
D) Aggregate expenditures equal real GDP 
E) Unplanned investment spending is positive

Question 20

The spending multiplier equals 1/marginal propensity to save if an economy:

Accepted Answer

A) has a trade surplus. 
B) is open to international trade. 
C) produces and consumes only domestic goods and services. 
D) has a higher level of saving than consumption. 
E) reduces its investment expenditures to zero. 
A) has a trade surplus. 
B) is open to international trade. 
C) produces and consumes only domestic goods and services. 
D) has a higher level of saving than consumption. 
E) reduces its investment expenditures to zero.

Exam 15: Income and Expenditures Equilibrium

Suppose only 7 percent of Turkey's products go to the United States.Hence, an increase in U.S.imports from Turkey:

Assume that potential GDP is $200 billion and the multiplier equals 5.The recessionary gap is $10 billion.What is the actual level of equilibrium income?

Assume we are at an income level where the C+I+G+X (consumption+investment+government spending+net exports)function lies above the 45-degree line.We can conclude that at this income level:

The table given below shows the real GDP, aggregate expenditures, saving, and imports of an economy. Table 10.4 Refer to Table 10.4.Suppose the economy is currently in equilibrium and the potential GDP of the economy is $6, 000.The current GDP gap equals _____.

The aggregate demand curve shows:

Suppose in an economy, investment = $40, saving = $50, government spending+export = $100 and taxes+imports = $110.Then for this economy, total leakages exceed total injections by:

A decrease in the general price level is associated with an upward shift in the aggregate expenditures function.

Assume that an increase of $300 in exports leads to an increase of $750 in equilibrium income.If the marginal propensity to import equals 1/10, the marginal propensity to save must be _____.

When total planned expenditures are more than real GDP, there will be inventory accumulation.

The figure given below shows the macroeconomic equilibrium of a country. Figure 10.7 In Figure 10.7, the spending multiplier equals _____.

Foreign repercussions of changes in domestic imports cause the true domestic spending multiplier to be less than 1/(MPS+MPI)

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.Assume that the economy is at equilibrium in both years.What are net exports for year 2?

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 real GDP in year 1?

If equilibrium in the economy is merely a function of aggregate demand, the aggregate supply curve must be:

At the equilibrium level of income, which of the following is true?

The spending multiplier equals 1/marginal propensity to save if an economy:

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

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