Question 1

The amount by which an aggregate expenditures schedule must shift upward to achieve the full-employment GDP is a(n):

Accepted Answer

A)  Inflationary expenditure gap 
B)  Recessionary expenditure gap 
C)  Expenditure multiplier gap 
D)  Negative net export gap

Question 2

From the perspective of classical macroeconomic theory, if aggregate spending was temporarily less than output:

Accepted Answer

A)  Product price would increase, but resource prices would decrease 
B)  Product price would decrease, but resource prices would increase 
C)  Product and resource prices would decrease, so that aggregate spending would rise, expanding output 
D)  Product and resource prices would increase, so that aggregate spending would equal output

Question 3

All figures in the table below are in billions of dollars.  Refer to the above data. If this economy were an open economy, the equilibrium GDP will be:

Accepted Answer

A)  $650 billion 
B)  $600 billion 
C)  $550 billion 
D)  $500 billion

Question 4

When the Federal government provides tax rebate checks to taxpayers, as it did in 2008, the intent is to push the aggregate expenditures schedule in the economy upwards.

Accepted Answer

A) True 
 B)False

Question 5

When there are unplanned increases in inventories, then actual investment ends up being less than planned investment.

Accepted Answer

A) True 
 B)False

Question 6

In the aggregate expenditures model of a private closed economy, we analyze a consumption schedule and an investment schedule both of which indicate that as income increases then consumption and investment will increase.

Accepted Answer

A) True 
 B)False

Question 7

Leakages from the income-expenditure stream are:

Accepted Answer

A)  Consumption, saving, and transfer payments 
B)  Saving, taxes, and investment 
C)  Saving, taxes, and imports 
D)  Imports, taxes, and transfer payments

Question 8

If households and firms in an economy would save all extra income that they receive so that MPC = 0, then the multiplier in that economy is zero.

Accepted Answer

A) True 
 B)False

Question 9

In a closed private economy, an unplanned decrease in inventories will cause firms to increase real GDP.

Accepted Answer

A) True 
 B)False

Question 10

In a private closed economy, the two components of aggregate expenditures are:

Accepted Answer

A)  Consumption and government spending 
B)  Consumption and net exports 
C)  Consumption, investment, and net exports 
D)  Consumption and investment

Question 11

Say's law in classical economics suggests that, over a period of time:

Accepted Answer

A)  Aggregate spending would tend to exceed total output and income 
B)  Aggregate spending would tend to fall short of total output and income 
C)  Aggregate spending would tend to equal total output and income 
D)  Aggregate spending would tend to deviate from total output and income

Question 12

The table shows a private closed economy. All figures are in billions of dollars.  Refer to the table above. An increase in the real interest rate from 2% to 6% will:

Accepted Answer

A)  Decrease the equilibrium level of GDP by $200 billion 
B)  Decrease the equilibrium level of GDP by $300 billion 
C)  Decrease the equilibrium level of GDP by $400 billion 
D)  Increase the equilibrium level of GDP by $400 billion

Question 13

Assume that the marginal propensity to consume in an economy is 0.75. If the economy's full-employment real GDP is $900 billion and its equilibrium real GDP is $800 billion, there is a recessionary expenditure gap of:

Accepted Answer

A)  $25 billion 
B)  $100 billion 
C)  $133 billion 
D)  $400 billion

Question 14

In the aggregate expenditures model, we note that an increase in government purchases G and an increase in lump-sum taxes T of the same amount will have:

Accepted Answer

A)  The same magnitudes of impact on equilibrium GDP, though in opposite directions 
B)  Different effects on GDP, with the change in G having a larger impact than the change in T 
C)  Different effects on GDP, with the change in T having a larger impact than the change in G 
D)  Essentially the same effect on equilibrium GDP, both in magnitude and in direction

Question 15

Refer to the above graph. If this economy was an open economy without a government sector, the level of GDP would be:

Accepted Answer

A)  $100 billion 
B)  $200 billion 
C)  $300 billion 
D)  $400 billion

Question 16

If the MPC in an economy is 0.8, government could close a recessionary expenditure gap of $100 billion by cutting taxes by:

Accepted Answer

A)  $80 billion 
B)  $100 billion 
C)  $125 billion 
D)  $200 billion

Question 17

Which event would most likely decrease an economy's exports?

Accepted Answer

A)  A decline in the tariff on products imported from abroad 
B)  An increase the prosperity of trading partners for this economy 
C)  An appreciation of the nation's currency relative to foreign currencies 
D)  A depreciation of the nation's currency relative to foreign currencies

Question 18

In an open mixed economy, the inflationary expenditure gap may be described as the:

Accepted Answer

A)  Excess of GDP over Ca + Ig + Xn + G at the full-employment output 
B)  Excess of Sa + M + T over Ig + X + G at the full-employment GDP 
C)  Extra consumption that occurs when investment increases in a full-employment economy 
D)  Excess of Ca + Ig + Xn + G at the full-employment GDP

Question 19

Over time, an increase in the real output and incomes of the trading partners of the United States will most likely:

Accepted Answer

A)  Increase U.S. exports 
B)  Decrease U.S. exports 
C)  Increase imports of the U.S. 
D)  Decrease imports of the U.S.

Question 20

The amount by which aggregate expenditures exceed those associated with the full-employment level of domestic output can best be described as:

Accepted Answer

A)  A recessionary expenditure gap 
B)  An inflationary expenditure gap 
C)  The multiplier 
D)  The average propensity to save

Exam 11: The Aggregate Expenditures Model

The amount by which an aggregate expenditures schedule must shift upward to achieve the full-employment GDP is a(n) :

From the perspective of classical macroeconomic theory, if aggregate spending was temporarily less than output:

All figures in the table below are in billions of dollars. Refer to the above data. If this economy were an open economy, the equilibrium GDP will be:

When the Federal government provides tax rebate checks to taxpayers, as it did in 2008, the intent is to push the aggregate expenditures schedule in the economy upwards.

When there are unplanned increases in inventories, then actual investment ends up being less than planned investment.

In the aggregate expenditures model of a private closed economy, we analyze a consumption schedule and an investment schedule both of which indicate that as income increases then consumption and investment will increase.

Leakages from the income-expenditure stream are:

If households and firms in an economy would save all extra income that they receive so that MPC = 0, then the multiplier in that economy is zero.

In a closed private economy, an unplanned decrease in inventories will cause firms to increase real GDP.

In a private closed economy, the two components of aggregate expenditures are:

Say's law in classical economics suggests that, over a period of time:

The table shows a private closed economy. All figures are in billions of dollars. Refer to the table above. An increase in the real interest rate from 2% to 6% will:

Assume that the marginal propensity to consume in an economy is 0.75. If the economy's full-employment real GDP is $900 billion and its equilibrium real GDP is $800 billion, there is a recessionary expenditure gap of:

In the aggregate expenditures model, we note that an increase in government purchases G and an increase in lump-sum taxes T of the same amount will have:

Refer to the above graph. If this economy was an open economy without a government sector, the level of GDP would be:

If the MPC in an economy is 0.8, government could close a recessionary expenditure gap of $100 billion by cutting taxes by:

Which event would most likely decrease an economy's exports?

In an open mixed economy, the inflationary expenditure gap may be described as the:

Over time, an increase in the real output and incomes of the trading partners of the United States will most likely:

The amount by which aggregate expenditures exceed those associated with the full-employment level of domestic output can best be described as: