Question 1

Suppose that a mixed open economy is producing at its equilibrium level of income and that net exports are zero.If at the equilibrium income level the public sector's budget shows a surplus:

Accepted Answer

A)   Ca + Ig + Xn + G must exceed GDP.
B)   planned investment must exceed saving.
C)   a recessionary expenditure gap must exist.
D)   saving must exceed planned investment.E) A) and D)
F) None of the above

Question 2

Refer to the information below.The multiplier for this economy:

Accepted Answer

A)   is 2.
B)   is 2.5.
C)   is 3.
D)   is 4.E) A) and B)
F) C) and D)

Question 3

In an aggregate expenditures diagram the imposition of a lump-sum tax (T) will:

Accepted Answer

A)   not affect the C + Ig + Xn line.
B)   shift the C + Ig + Xn line upward by an amount equal to T.
C)   shift the C + Ig + Xn line downward by an amount equal to T.
D)   shift the C + Ig + Xn line downward by an amount equal to T × MPC.E) All of the above
F) B) and D)

Question 4

-Refer to the above diagram for a private closed economy.At the $200 level of GDP:

Accepted Answer

A)   consumption is $200 and planned investment is $50 so that aggregate expenditures are $250.
B)   consumption is $200 and planned investment is $100 so that aggregate expenditures are $300.
C)   consumption is $250 and actual investment is $50 so that aggregate expenditures are $300.
D)   aggregate expenditures is equal to the GDP.E) C) and D)
F) None of the above

Question 5

If a lump-sum income tax of $25 billion is levied and the MPS is 0.20,the:

Accepted Answer

A)   saving schedule will shift upward by $5 billion.
B)   consumption schedule will shift downward by $25 billion.
C)   consumption schedule will shift downward by $20 billion.
D)   consumption schedule will shift upward by $25 billion.E) A) and B)
F) B) and C)

Question 6

The open economy multiplier is:

Accepted Answer

A)   larger than the simple multiplier because the latter embodies fewer leakages.
B)   larger than the simple multiplier because the latter embodies more leakages.
C)   smaller than the simple multiplier because the latter embodies fewer leakages.
D)   smaller than the simple multiplier because the latter embodies more leakages.E) C) and D)
F) B) and D)

Question 7

Actual investment equals saving:

Accepted Answer

A)   at all levels of GDP.
B)   at all below-equilibrium levels of GDP.
C)   at all above-equilibrium levels of GDP.
D)   only at the equilibrium GDP.E) C) and D)
F) A) and D)

Question 8

-Refer to the above diagram for a private closed economy.The equilibrium level of GDP in this economy:

Accepted Answer

A)   is $60 billion.
B)   is $180 billion.
C)   is between $60 and $180 billion.
D)   cannot be determined from the information given.E) A) and D)
F) A) and B)

Question 9

An upward shift of the aggregate expenditures schedule might be caused by:

Accepted Answer

A)   a decrease in exports,with no change in imports.
B)   a decrease in imports,with no change in exports.
C)   an increase in exports,with an equal decrease in investment spending.
D)   an increase in imports,with no change in exports.E) A) and B)
F) B) and D)

Question 10

Which of the following statements is incorrect?

Accepted Answer

A)   Given the economy's MPS,a $15 billion reduction in government spending will reduce the equilibrium GDP by more than would a $15 billion increase in taxes.
B)   Other things unchanged,a tax reduction of $10 billion will increase the equilibrium GDP by $25 billion when the MPS is 0.4.
C)   If the MPC is 0.8 and GDP has declined by $40 billion,this was caused by a decline in aggregate expenditures of $8 billion.
D)   A government surplus is anti-inflationary;a government deficit is expansionary.E) All of the above
F) A) and B)

Question 11

All else equal,a large decline in the real interest rate will shift the:

Accepted Answer

A)   investment-demand curve leftward.
B)   investment-demand curve rightward.
C)   investment schedule upward.
D)   investment schedule downward.E) None of the above
F) A) and B)

Question 12

-Refer to the above diagram for a private closed economy.The equilibrium level of GDP is:

Accepted Answer

A)   $400
B)   $300
C)   $250
D)   $375E) B) and D)
F) A) and D)

Question 13

Unplanned changes in inventories:

Accepted Answer

A)   cause the economy to move away from the equilibrium GDP.
B)   must be subtracted from planned investment to determine actual investment.
C)   bring actual investment and saving into equality only at the equilibrium level of GDP.
D)   bring actual investment and saving into equality at all levels of GDP.E) A) and B)
F) None of the above

Question 14

When investment remains the same at each level of GDP in a private closed economy,the slope of the aggregate expenditures schedule:

Accepted Answer

A)   exceeds the MPC.
B)   is less than the MPC.
C)   equals the MPS.
D)   equals the MPC.E) None of the above
F) C) and D)

Question 15

The following information is for a closed economy:
 
-Refer to the above information.The addition of a $100 billion lump-sum tax:

Accepted Answer

A)   reduces the MPC and increases the multiplier.
B)   increases the MPC and decreases the multiplier.
C)   increases both the MPC and the multiplier.
D)   has no effect on either the MPC or the multiplier.E) B) and D)
F) A) and B)

Question 16

-Refer to the above diagram.The level of government spending:

Accepted Answer

A)   is equal to tax collections at each level of GDP.
B)   is the same at all levels of GDP.
C)   varies inversely with the level of GDP.
D)   varies directly with the level of GDP.E) C) and D)
F) A) and B)

Question 17

Achieving aggregate equilibrium in the economy is indicated by:

Accepted Answer

A)   an equality of saving and planned investment.
B)   an equality of aggregate expenditures and domestic output.
C)   the absence of unplanned investment or disinvestment.
D)   all of the above.E) None of the above
F) All of the above

Question 18

-Refer to the above diagram for a private closed economy.At the equilibrium level of GDP saving is:

Accepted Answer

A)   $10
B)   $20
C)   $30
D)   $50E) C) and D)
F) B) and D)

Question 19

Refer to the diagram below.The change in aggregate expenditures as shown from (C + Ig + Xn2) to (C + Ig + Xn1) might be caused by: g + Xn2) to (C + Ig + Xn1) might be caused by:   A)  an appreciation of this nation's currency relative to the currencies of its trading partners. B)  a depreciation of this nation's currency relative to the currencies of its trading partners. C)  a decrease in this nation's price level relative to price levels abroad. D)  a rightward shift in this nation's aggregate supply curve." class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)   an appreciation of this nation's currency relative to the currencies of its trading partners.
B)   a depreciation of this nation's currency relative to the currencies of its trading partners.
C)   a decrease in this nation's price level relative to price levels abroad.
D)   a rightward shift in this nation's aggregate supply curve.E) A) and D)
F) None of the above

Question 20

The following information is for a closed economy:
 
-Refer to the above information.The introduction of $80 billion of government spending has:

Accepted Answer

A)   lowered the multiplier from 2.5 to 2.0.
B)   increased the multiplier from 2.5 to 3.0.
C)   increased the multiplier from 2.0 to 2.5.
D)   had no effect on the size of the multiplier.E) A) and B)
F) B) and D)

Exam 11: The Aggregate Expenditures Model

Unplanned changes in inventories:

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If a lump-sum income tax of $25 billion is levied and the MPS is 0.20,the:

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When investment remains the same at each level of GDP in a private closed economy,the slope of the aggregate expenditures schedule:

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-Refer to the above diagram for a private closed economy.The equilibrium level of GDP in this economy:

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The following information is for a closed economy: -Refer to the above information.The addition of a $100 billion lump-sum tax:

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Refer to the information below.The multiplier for this economy:

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-Refer to the above diagram for a private closed economy.The equilibrium level of GDP is:

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Achieving aggregate equilibrium in the economy is indicated by:

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-Refer to the above diagram for a private closed economy.At the equilibrium level of GDP saving is:

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Refer to the diagram below.The change in aggregate expenditures as shown from (C + Ig + Xn2) to (C + Ig + Xn1) might be caused by:

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The following information is for a closed economy: -Refer to the above information.The introduction of $80 billion of government spending has:

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All else equal,a large decline in the real interest rate will shift the:

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Suppose that a mixed open economy is producing at its equilibrium level of income and that net exports are zero.If at the equilibrium income level the public sector's budget shows a surplus:

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-Refer to the above diagram for a private closed economy.At the $200 level of GDP:

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In an aggregate expenditures diagram the imposition of a lump-sum tax (T) will:

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Which of the following statements is incorrect?

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Actual investment equals saving:

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An upward shift of the aggregate expenditures schedule might be caused by:

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The open economy multiplier is:

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-Refer to the above diagram.The level of government spending:

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Refer to the diagram below.The change in aggregate expenditures as shown from (C + I_g + X_n2) to (C + I_g + X_n1) might be caused by:

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