Question 1

Refer to the above diagrams.Other things equal, an interest rate decrease will:

Accepted Answer

A)  shift curve A to the right and shift curve B upward.
B)  shift curve A to the left and shift curve B downward.
C)  leave curve A in place but shift curve B downward.
D)  leave curve A in place but shift curve A upward.E) A) and B)
F) B) and D)

Question 2

Suppose the economy's multiplier is 2.Other things equal, a $25 billion decrease in government expenditures on national defence will cause equilibrium GDP to:

Accepted Answer

A)  decrease by $50 billion.
B)  decrease by $150 billion.
C)  remain unchanged since spending on military goods is unproductive and usually wasteful.
D)  decrease by $25 billion.E) A) and C)
F) All of the above

Question 3

Cyclical unemployment in Canada is essentially the consequence of:

Accepted Answer

A)  procyclical fiscal policies.
B)  a deficient level of aggregate expenditures.
C)  rapid technological progress.
D)  the geographic immobility of the labor force.E) All of the above
F) B) and C)

Question 4

The table shows the consumption schedule for a hypothetical economy.All figures are in billions of dollars.  Refer to the above table.If taxes were zero, government purchases of goods and services $10, planned investment $6, and net exports zero, equilibrium real GDP would be:

Accepted Answer

A)  $620
B)  $630
C)  $640
D)  $650E) B) and C)
F) A) and D)

Question 5

Refer to the above diagram for a private closed economy.In this economy, aggregate expenditures:

Accepted Answer

A)  do not change as GDP increases.
B)  increase by $2 for every $5 increase in GDP.
C)  increase by $2 for every $4 increase in GDP.
D)  increase by $2 for every $3 increase in GDP.E) B) and C)
F) B) and D)

Question 6

A recessionary expenditure gap exists if:

Accepted Answer

A)  planned investment exceeds saving at the full-employment GDP.
B)  the aggregate expenditures schedule lies below the 45-degree line at the full-employment GDP.
C)  the aggregate expenditures schedule intersects the 45-degree line at any level of GDP.
D)  the aggregate expenditures schedule lies above the 45-degree line at the full-employment GDP.E) B) and D)
F) None of the above

Question 7

Refer to the above diagrams.Curve A:

Accepted Answer

A)  is an investment schedule and curve B is a consumption of fixed capital schedule.
B)  is an investment demand curve and curve B is an investment schedule.
C)  and B are totally unrelated.
D)  shifts to the left when curve B shifts upward.E) B) and C)
F) A) and D)

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

The table shows a private, open economy.All figures are in billions of dollars.  Refer to the above table.If net exports increased by $10 billion at each level of GDP, the equilibrium real GDP would be:

Accepted Answer

A)  $550
B)  $600
C)  $650
D)  $700E) A) and D)
F) A) and B)

Question 10

Refer to the data below.If gross investment is $10 at all levels of GDP, the equilibrium GDP will be: The following schedule contains data for a private closed economy.All figures are in billions.

Accepted Answer

A)  $300
B)  $220
C)  $260
D)  $180E) None of the above
F) All of the above

Question 11

An exchange rate:

Accepted Answer

A)  is the ratio of the dollar volume of a nation's exports to the dollar volume of its imports.
B)  measures the interest rate ratios of any two nations.
C)  is the amount which one nation must export to obtain $1 worth of imports.
D)  is the price at which the currencies of any two nations exchange for one another.E) All of the above
F) A) and C)

Question 12

Refer to the diagram below for a private closed economy.At income level D:

Accepted Answer

A)  planned investment is GH.
B)  unplanned investment is GH.
C)  unplanned disinvestment is GH.
D)  saving equals planned investment.E) B) and D)
F) C) and D)

Question 13

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

Question 14

In a private closed economy, the equilibrium GDP is achieved where GDP equals:

Accepted Answer

A)  C + Ig.
B)  C - Ig.
C)  C + S.
D)  C - S.E) None of the above
F) B) and C)

Question 15

Planned 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) All of the above
F) A) and B)

Question 16

In the economy in the above diagram, international trade:

Accepted Answer

A)  does not occur.
B)  has a contractionary effect on GDP.
C)  has an expansionary effect on GDP.
D)  has no impact on GDP.E) None of the above
F) A) and C)

Question 17

Assume in a private economy that the equilibrium level of income is $380 and the MPS is 0.25.Now suppose government collects taxes of $50 and spends the entire amount.As a result:

Accepted Answer

A)  the equilibrium level of real income and the price level will both remain unchanged.
B)  nominal wage rates will fall.
C)  the equilibrium level of income will rise to $420.
D)  the equilibrium level of income will rise to $430.E) A) and B)
F) All of the above

Question 18

Which of the following would increase GDP by the greatest amount?

Accepted Answer

A)  a $20 billion reduction in taxes
B)  $20 billion increases in both government spending and taxes
C)  $20 billion decreases in both government spending and taxes
D)  a $20 billion increase in government spendingE) None of the above
F) C) and D)

Question 19

Suppose the economy is operating at its full-employment-noninflationary GDP and the MPC is 0.75.The federal government now finds that it must increase spending on military goods by $21 billion in response to a deterioration in the international political situation.To sustain full-employment-noninflationary GDP government must:

Accepted Answer

A)  reduce taxes by $28 billion.
B)  reduce transfer payments by $21 billion.
C)  increase taxes by $21 billion.
D)  increase taxes by $28 billion.E) C) and D)
F) B) and D)

Question 20

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) A) and B)
F) None of the above

Exam 11: B: The Aggregate Expenditures Model

Correct Answer
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Which of the following would increase GDP by the greatest amount?

Correct Answer
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Refer to the above diagrams.Curve A:

Correct Answer
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Planned investment equals saving:

Correct Answer
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Suppose the economy's multiplier is 2.Other things equal, a $25 billion decrease in government expenditures on national defence will cause equilibrium GDP to:

Correct Answer
verified

Refer to the above diagram for a private closed economy.In this economy, aggregate expenditures:

Correct Answer
verified

The table shows the consumption schedule for a hypothetical economy.All figures are in billions of dollars. Refer to the above table.If taxes were zero, government purchases of goods and services $10, planned investment $6, and net exports zero, equilibrium real GDP would be:

Correct Answer
verified

Cyclical unemployment in Canada is essentially the consequence of:

Correct Answer
verified

Refer to the above diagrams.Other things equal, an interest rate decrease will:

Correct Answer
verified

Refer to the diagram below for a private closed economy.At income level D:

Correct Answer
verified

The table shows a private, open economy.All figures are in billions of dollars. Refer to the above table.If net exports increased by $10 billion at each level of GDP, the equilibrium real GDP would be:

Correct Answer
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An exchange rate:

Correct Answer
verified

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

Correct Answer
verified

A recessionary expenditure gap exists if:

Correct Answer
verified

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

Correct Answer
verified

Refer to the data below.If gross investment is $10 at all levels of GDP, the equilibrium GDP will be: The following schedule contains data for a private closed economy.All figures are in billions.

Correct Answer
verified

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

Correct Answer
verified

In the economy in the above diagram, international trade:

Correct Answer
verified

Assume in a private economy that the equilibrium level of income is $380 and the MPS is 0.25.Now suppose government collects taxes of $50 and spends the entire amount.As a result:

Correct Answer
verified

In a private closed economy, the equilibrium GDP is achieved where GDP equals:

Correct Answer
verified

Exam 11: B: The Aggregate Expenditures Model

Correct AnswerverifiedShow Answer

Which of the following would increase GDP by the greatest amount?

Correct AnswerverifiedShow Answer

Refer to the above diagrams.Curve A:

Correct AnswerverifiedShow Answer

Planned investment equals saving:

Correct AnswerverifiedShow Answer

Suppose the economy's multiplier is 2.Other things equal, a $25 billion decrease in government expenditures on national defence will cause equilibrium GDP to:

Correct AnswerverifiedShow Answer

Refer to the above diagram for a private closed economy.In this economy, aggregate expenditures:

Correct AnswerverifiedShow Answer

The table shows the consumption schedule for a hypothetical economy.All figures are in billions of dollars. Refer to the above table.If taxes were zero, government purchases of goods and services $10, planned investment $6, and net exports zero, equilibrium real GDP would be:

Correct AnswerverifiedShow Answer

Cyclical unemployment in Canada is essentially the consequence of:

Correct AnswerverifiedShow Answer

Refer to the above diagrams.Other things equal, an interest rate decrease will:

Correct AnswerverifiedShow Answer

Refer to the diagram below for a private closed economy.At income level D:

Correct AnswerverifiedShow Answer

The table shows a private, open economy.All figures are in billions of dollars. Refer to the above table.If net exports increased by $10 billion at each level of GDP, the equilibrium real GDP would be:

Correct AnswerverifiedShow Answer

An exchange rate:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A recessionary expenditure gap exists if:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Refer to the data below.If gross investment is $10 at all levels of GDP, the equilibrium GDP will be: The following schedule contains data for a private closed economy.All figures are in billions.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In the economy in the above diagram, international trade:

Correct AnswerverifiedShow Answer

Assume in a private economy that the equilibrium level of income is $380 and the MPS is 0.25.Now suppose government collects taxes of $50 and spends the entire amount.As a result:

Correct AnswerverifiedShow Answer

In a private closed economy, the equilibrium GDP is achieved where GDP equals:

Correct AnswerverifiedShow Answer

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