Question 1

At equilibrium real GDP in a private closed economy:

Accepted Answer

A)   the MPC must equal the APC.
B)   the slope of the aggregate expenditures schedule equals the MPS.
C)   planned and actual investment are equal.
D)   planned saving and consumption are equal.E) A) and D)
F) A) and B)

Question 2

During the recession of 2008-2009, both after-tax consumption and government expenditures declined.

Accepted Answer

A) True 
 B)False

Question 3

Assume that in a private closed economy consumption is $240 billion and investment is $50 billion at the $280 billion level of domestic output. Thus:

Accepted Answer

A)   saving is $10 billion.
B)   unplanned disinvestment of $10 billion will occur.
C)   the MPC is .80.
D)   unplanned investment of $10 billion will occur.E) A) and C)
F) A) and D)

Question 4

-Refer to the above diagram for a private closed economy. Planned and actual investment will be equal at:

Accepted Answer

A)   all levels of GDP below $200.
B)   all levels of GDP above $200.
C)   all levels of GDP between $200 and $600.
D)   $600 only.E) All of the above
F) A) and B)

Question 5

Which of the following is a correct statement of the impacts of a lump-sum tax?

Accepted Answer

A)   Disposable income will increase by the amount of the tax and consumption at each level of GDP will decline by the amount of the tax multiplied by the MPC.
B)   Disposable income will decline by the amount of the tax and consumption at each level of GDP will decline by the amount of the tax multiplied by the multiplier.
C)   Disposable income will decline by the amount of the tax and consumption at each level of GDP will also decline by the amount of the tax.
D)   Disposable income will decline by the amount of the tax and consumption at each level of GDP will decline by the amount of the tax multiplied by the MPC.E) B) and C)
F) B) and D)

Question 6

If net exports are positive:

Accepted Answer

A)   the equilibrium GDP must be greater than the full-employment GDP.
B)   imports must exceed exports.
C)   aggregate expenditures are greater at each level of GDP than when net exports are zero or negative.
D)   some other component of aggregate expenditures must be negative.E) A) and B)
F) B) and C)

Question 7

In which of the following situations for a private closed economy will the level of GDP expand?

Accepted Answer

A)   when planned investment exceeds saving
B)   when planned investment exceeds consumption
C)   when saving exceeds consumption
D)   when consumption exceeds investmentE) B) and D)
F) C) and D)

Question 8

The equilibrium level of GDP in a private closed economy is where:

Accepted Answer

A)   MPC = APC.
B)   unemployment is about 3 percent of the labor force.
C)   planned consumption equals saving.
D)   saving equals planned investment.E) All of the above
F) B) and D)

Question 9

If the MPC is .50, all taxes are lump-sum taxes, and the equilibrium GDP is $40 billion below the full-employment GDP, then the size of the recessionary expenditure gap:

Accepted Answer

A)   is $40 billion.
B)   is $20 billion.
C)   is $60 billion.
D)   cannot be determined from the information given.E) None of the above
F) C) and D)

Question 10

If the MPC is .9, a $20 billion increase in a lump-sum tax will reduce GDP by $200 billion.

Accepted Answer

A) True 
 B)False

Question 11

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) C) and D)
F) B) and C)

Question 12

In an aggregate expenditures diagram equal increases in government spending and in lump-sum taxes will:

Accepted Answer

A)   shift the aggregate expenditures line downward.
B)   shift the aggregate expenditures line upward.
C)   not affect the aggregate expenditures line.
D)   reduce the equilibrium GDP.E) A) and B)
F) All of the above

Question 13

3, the: A)  inflationary expenditure gap is ed. B)  inflationary expenditure gap is BC. C)  recessionary expenditure gap is eg. D)  economy is in equilibrium, but at less than full employment." class="answers-bank-image d-inline" rel="preload" >
-Refer to the above diagram. If the full-employment level of GDP is B and aggregate expenditures are at AE3, the:

Accepted Answer

A)   inflationary expenditure gap is ed.
B)   inflationary expenditure gap is BC.
C)   recessionary expenditure gap is eg.
D)   economy is in equilibrium, but at less than full employment.E) B) and D)
F) B) and C)

Question 14

In the aggregate expenditures model, an increase in government spending will:

Accepted Answer

A)   decrease real GDP.
B)   increase output and employment.
C)   shift the aggregate expenditures schedule downward.
D)   do all of the above.E) A) and C)
F) B) and D)

Question 15

Refer to the below diagram, which aggregate expenditure (AE)  schedule for a private closed economy implies the largest MPC? 4 B)  AE3 C)  AE2 D)  AE1" class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)   AE4
B)   AE3
C)   AE2
D)   AE1E) A) and B)
F) A) and C)

Question 16

The following information is for a closed economy:
 
-Refer to the above information. If both government spending and taxes are zero, the equilibrium level of GDP:

Accepted Answer

A)   is $200.
B)   is $300.
C)   is $400.
D)   is $500.E) B) and C)
F) C) and D)

Question 17

If at some level of GDP the economy is experiencing an unplanned decrease in inventories:

Accepted Answer

A)   the aggregate level of saving will decline.
B)   the price level will fall.
C)   the business sector will lay off workers.
D)   domestic output will increase.E) A) and C)
F) A) and B)

Question 18

During the recession of 2008-2009 the federal government undertook various policies intended to stimulate private spending and investment.

Accepted Answer

A) True 
 B)False

Question 19

A $1 increase in government spending on goods and services will have a greater impact on the equilibrium GDP than will a $1 decline in taxes because:

Accepted Answer

A)   government spending is more employment-intensive than is either consumption or investment spending.
B)   government spending increases the money supply and a tax reduction does not.
C)   a portion of a tax cut will be saved.
D)   taxes vary directly with income.E) All of the above
F) C) and D)

Question 20

Refer to the information below. The multiplier in this economy is:

Accepted Answer

A)   4.
B)   5.
C)   1.5.
D)   3.E) B) and C)
F) None of the above

Exam 9: The Aggregate Expenditures Model

If the MPC is .50, all taxes are lump-sum taxes, and the equilibrium GDP is $40 billion below the full-employment GDP, then the size of the recessionary expenditure gap:

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Refer to the information below. The multiplier in this economy is:

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In the aggregate expenditures model, an increase in government spending will:

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Assume that in a private closed economy consumption is $240 billion and investment is $50 billion at the $280 billion level of domestic output. Thus:

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A $1 increase in government spending on goods and services will have a greater impact on the equilibrium GDP than will a $1 decline in taxes because:

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-Refer to the above diagram. If the full-employment level of GDP is B and aggregate expenditures are at AE3, the:

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In an aggregate expenditures diagram equal increases in government spending and in lump-sum taxes will:

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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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During the recession of 2008-2009, both after-tax consumption and government expenditures declined.

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Which of the following is a correct statement of the impacts of a lump-sum tax?

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If at some level of GDP the economy is experiencing an unplanned decrease in inventories:

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If net exports are positive:

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In which of the following situations for a private closed economy will the level of GDP expand?

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Refer to the below diagram, which aggregate expenditure (AE) schedule for a private closed economy implies the largest MPC?

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If the MPC is .9, a $20 billion increase in a lump-sum tax will reduce GDP by $200 billion.

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During the recession of 2008-2009 the federal government undertook various policies intended to stimulate private spending and investment.

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-Refer to the above diagram for a private closed economy. Planned and actual investment will be equal at:

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At equilibrium real GDP in a private closed economy:

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The equilibrium level of GDP in a private closed economy is where:

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The following information is for a closed economy: -Refer to the above information. If both government spending and taxes are zero, the equilibrium level of GDP:

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-Refer to the above diagram. If the full-employment level of GDP is B and aggregate expenditures are at AE₃, the:

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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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