Question 1

If the consumption function is C = 20 + 0.5YD,then an increase in disposable income by $100 will result in an increase in consumer expenditure by ________.

Accepted Answer

A)  $25 
B)  $70 
C)  $50 
D)  $100

Question 2

In the Keynesian framework,as long as output is ________ the equilibrium level,unplanned inventory investment will remain positive and firms will continue to ________ production.

Accepted Answer

A)  below; lower 
B)  above; lower 
C)  below; raise 
D)  above; raise

Question 3

In the Keynesian framework,as long as output is above the equilibrium level,unplanned inventory investment will remain ________ and firms will continue to ________ production.

Accepted Answer

A)  negative; lower 
B)  negative; raise 
C)  positive; lower 
D)  positive; raise

Question 4

If Canadian university students decide that drinking Mexican-brewed beer helps one get noticed,net exports will tend to fall,causing aggregate demand to ________ and the ________ curve to shift to the left,everything else held constant.

Accepted Answer

A)  fall; LM 
B)  fall; IS 
C)  rise; LM 
D)  rise; IS

Question 5

Aggregate output is ________ related to autonomous consumer expenditure,and is ________ related to planned investment spending.

Accepted Answer

A)  negatively; negatively 
B)  negatively; positively 
C)  positively; negatively 
D)  positively; positively

Question 6

When interest rates fall in the United States (with the price level fixed),the value of the dollar ________,domestic goods become ________ expensive,and net exports ________.

Accepted Answer

A)  falls; less; fall 
B)  falls; less; rise 
C)  falls; more; fall 
D)  rises; less; fall

Question 7

If young business professionals in Canada suddenly decide that driving German-made cars is an important status symbol,net exports will tend to ________ causing aggregate demand to ________,everything else held constant.

Accepted Answer

A)  fall; fall 
B)  fall; rise 
C)  rise; fall 
D)  rise; rise

Question 8

If aggregate demand equals output,________.

Accepted Answer

A)  the economy is in a recession 
B)  output will increase 
C)  output will fall 
D)  the economy is at its equilibrium level

Question 9

There are two types of investment: ________ investment-the spending by business firms on equipment and structures,and planned spending on residential houses-and ________ investment-spending by business firms on additional holdings of raw materials,parts,and finished goods.

Accepted Answer

A)  planned; gross 
B)  planned; inventory 
C)  fixed; gross 
D)  fixed; inventory

Question 10

When the interest rate rises,________.

Accepted Answer

A)  planned investment falls 
B)  planned investment rises 
C)  planned investment will be unaffected 
D)  equilibrium income increases

Question 11

A shift in tastes toward foreign goods ________ net exports in Canada and causes the IS curve to shift to the ________ in Canada everything else held constant.

Accepted Answer

A)  decreases; right 
B)  decreases; left 
C)  increases; right 
D)  increases; left

Question 12

In the Keynesian framework,as long as output is ________ the equilibrium level,unplanned inventory investment will remain negative and firms will continue to ________ production.

Accepted Answer

A)  below; lower 
B)  above; lower 
C)  below; raise 
D)  above; raise

Question 13

Everything else held constant,a shift in tastes in Canada towards Canadian goods will ________ net exports in Canada and cause the quantity of aggregate output demanded to ________ in Mexico.

Accepted Answer

A)  decrease; rise 
B)  decrease; fall 
C)  increase; rise 
D)  increase; fall

Question 14

If aggregate demand is less than the level of aggregate output,then ________ inventory investment will be ________.

Accepted Answer

A)  planned; positive 
B)  actual; positive 
C)  actual; negative 
D)  planned; negative

Question 15

If actual output is less than equilibrium output,firms will ________ output to keep from ________ inventories.

Accepted Answer

A)  increase; accumulating 
B)  increase; depleting 
C)  decrease; depleting 
D)  decrease; accumulating

Question 16

In the Keynesian framework,as long as output is below the equilibrium level,unplanned inventory investment will remain ________ and firms will continue to ________ production.

Accepted Answer

A)  negative; lower 
B)  negative; raise 
C)  positive; lower 
D)  positive; raise

Question 17

Aggregate output is increased by a decrease in ________.

Accepted Answer

A)  autonomous consumption 
B)  government spending 
C)  planned investment 
D)  net taxes

Question 18

A decrease in interest rates ________.

Accepted Answer

A)  increases the value of the dollar, net exports, and equilibrium output 
B)  increases the value of the dollar, reducing net exports and equilibrium output 
C)  reduces the value of the dollar, net exports, and equilibrium output 
D)  reduces the value of the dollar, increasing net exports and equilibrium output

Question 19

If aggregate demand falls short of current output,business firms will ________ production to ________ inventories.

Accepted Answer

A)  cut; keep from accumulating 
B)  expand; keep from accumulating 
C)  cut; build up 
D)  expand; build up

Question 20

A tax cut ________ disposable income,________ consumption expenditure,and shifts the IS curve to the ________,everything else held constant.

Accepted Answer

A)  increases; increases; right 
B)  increases; decreases; right 
C)  decreases; increases; left 
D)  decreases; decreases; left

Exam 22: The Is Curve

If the consumption function is C = 20 + 0.5YD,then an increase in disposable income by $100 will result in an increase in consumer expenditure by ________.

In the Keynesian framework,as long as output is the equilibrium level,unplanned inventory investment will remain positive and firms will continue to production.

In the Keynesian framework,as long as output is above the equilibrium level,unplanned inventory investment will remain and firms will continue to production.

If Canadian university students decide that drinking Mexican-brewed beer helps one get noticed,net exports will tend to fall,causing aggregate demand to and the curve to shift to the left,everything else held constant.

Aggregate output is related to autonomous consumer expenditure,and is related to planned investment spending.

When interest rates fall in the United States (with the price level fixed) ,the value of the dollar ,domestic goods become expensive,and net exports .

If young business professionals in Canada suddenly decide that driving German-made cars is an important status symbol,net exports will tend to causing aggregate demand to ,everything else held constant.

If aggregate demand equals output,________.

There are two types of investment: investment-the spending by business firms on equipment and structures,and planned spending on residential houses-and investment-spending by business firms on additional holdings of raw materials,parts,and finished goods.

When the interest rate rises,________.

A shift in tastes toward foreign goods net exports in Canada and causes the IS curve to shift to the in Canada everything else held constant.

In the Keynesian framework,as long as output is the equilibrium level,unplanned inventory investment will remain negative and firms will continue to production.

Everything else held constant,a shift in tastes in Canada towards Canadian goods will net exports in Canada and cause the quantity of aggregate output demanded to in Mexico.

If aggregate demand is less than the level of aggregate output,then inventory investment will be .

If actual output is less than equilibrium output,firms will output to keep from inventories.

In the Keynesian framework,as long as output is below the equilibrium level,unplanned inventory investment will remain and firms will continue to production.

Aggregate output is increased by a decrease in ________.

A decrease in interest rates ________.

If aggregate demand falls short of current output,business firms will production to inventories.

A tax cut disposable income, consumption expenditure,and shifts the IS curve to the ,everything else held constant.

Exam 22: The Is Curve

If the consumption function is C = 20 + 0.5YD,then an increase in disposable income by $100 will result in an increase in consumer expenditure by ________.

In the Keynesian framework,as long as output is ________ the equilibrium level,unplanned inventory investment will remain positive and firms will continue to ________ production.

In the Keynesian framework,as long as output is above the equilibrium level,unplanned inventory investment will remain ________ and firms will continue to ________ production.

If Canadian university students decide that drinking Mexican-brewed beer helps one get noticed,net exports will tend to fall,causing aggregate demand to ________ and the ________ curve to shift to the left,everything else held constant.

Aggregate output is ________ related to autonomous consumer expenditure,and is ________ related to planned investment spending.

When interest rates fall in the United States (with the price level fixed) ,the value of the dollar ________,domestic goods become ________ expensive,and net exports ________.

If young business professionals in Canada suddenly decide that driving German-made cars is an important status symbol,net exports will tend to ________ causing aggregate demand to ________,everything else held constant.

If aggregate demand equals output,________.

There are two types of investment: ________ investment-the spending by business firms on equipment and structures,and planned spending on residential houses-and ________ investment-spending by business firms on additional holdings of raw materials,parts,and finished goods.

When the interest rate rises,________.

A shift in tastes toward foreign goods ________ net exports in Canada and causes the IS curve to shift to the ________ in Canada everything else held constant.

In the Keynesian framework,as long as output is ________ the equilibrium level,unplanned inventory investment will remain negative and firms will continue to ________ production.

Everything else held constant,a shift in tastes in Canada towards Canadian goods will ________ net exports in Canada and cause the quantity of aggregate output demanded to ________ in Mexico.

If aggregate demand is less than the level of aggregate output,then ________ inventory investment will be ________.

If actual output is less than equilibrium output,firms will ________ output to keep from ________ inventories.

In the Keynesian framework,as long as output is below the equilibrium level,unplanned inventory investment will remain ________ and firms will continue to ________ production.

Aggregate output is increased by a decrease in ________.

A decrease in interest rates ________.

If aggregate demand falls short of current output,business firms will ________ production to ________ inventories.

A tax cut ________ disposable income,________ consumption expenditure,and shifts the IS curve to the ________,everything else held constant.

In the Keynesian framework,as long as output is the equilibrium level,unplanned inventory investment will remain positive and firms will continue to production.

In the Keynesian framework,as long as output is above the equilibrium level,unplanned inventory investment will remain and firms will continue to production.

If Canadian university students decide that drinking Mexican-brewed beer helps one get noticed,net exports will tend to fall,causing aggregate demand to and the curve to shift to the left,everything else held constant.

Aggregate output is related to autonomous consumer expenditure,and is related to planned investment spending.

When interest rates fall in the United States (with the price level fixed) ,the value of the dollar ,domestic goods become expensive,and net exports .

If young business professionals in Canada suddenly decide that driving German-made cars is an important status symbol,net exports will tend to causing aggregate demand to ,everything else held constant.

There are two types of investment: investment-the spending by business firms on equipment and structures,and planned spending on residential houses-and investment-spending by business firms on additional holdings of raw materials,parts,and finished goods.

A shift in tastes toward foreign goods net exports in Canada and causes the IS curve to shift to the in Canada everything else held constant.

In the Keynesian framework,as long as output is the equilibrium level,unplanned inventory investment will remain negative and firms will continue to production.

Everything else held constant,a shift in tastes in Canada towards Canadian goods will net exports in Canada and cause the quantity of aggregate output demanded to in Mexico.

If aggregate demand is less than the level of aggregate output,then inventory investment will be .

If actual output is less than equilibrium output,firms will output to keep from inventories.

In the Keynesian framework,as long as output is below the equilibrium level,unplanned inventory investment will remain and firms will continue to production.

If aggregate demand falls short of current output,business firms will production to inventories.

A tax cut disposable income, consumption expenditure,and shifts the IS curve to the ,everything else held constant.