Question 1

Other things equal,an increase in an economy's exports will:

Accepted Answer

A)   lower the marginal propensity to import.
B)   have no effect on domestic GDP because imports will change by an offsetting amount.
C)   decrease its domestic aggregate expenditures and therefore decrease its equilibrium GDP.
D)   increase its domestic aggregate expenditures and therefore increase its equilibrium GDP.E) A) and B)
F) A) and C)

Question 2

If APC = .6 and MPC = .7,the immediate impact of an increase in personal taxes of $20 will be to:

Accepted Answer

A)   have no effect on consumption.
B)   decrease consumption by $14.
C)   decrease consumption by $12.
D)   increase consumption by $14.E) A) and C)
F) C) and D)

Question 3

-Refer to the above diagram.In equilibrium net exports are positive.

Accepted Answer

A) True 
 B)False

Question 4

The equilibrium level of GDP is associated with:

Accepted Answer

A)   an excess of planned investment over saving.
B)   no unintended investment in inventories.
C)   an unintended decrease in business inventories.
D)   an unintended increase in business inventories.E) A) and D)
F) None of the above

Question 5

In the aggregate expenditures model,a reduction in taxes may:

Accepted Answer

A)   increase saving.
B)   increase real GDP.
C)   reduce unemployment.
D)   do all of the above.E) None of the above
F) C) and D)

Question 6

-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) A) and B)
F) A) and C)

Question 7

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 B)

Question 8

Exports are added to,and imports are subtracted from,aggregate expenditures in moving from a closed to an open economy.

Accepted Answer

A) True 
 B)False

Question 9

-Refer to the above table.If an additional lump-sum tax of $20 were imposed,we would expect:

Accepted Answer

A)   equilibrium GDP to fall by $30.
B)   equilibrium GDP to fall by $20.
C)   equilibrium GDP to fall by $50.
D)   equilibrium GDP to rise by $24.E) None of the above
F) B) and C)

Question 10

Refer to the diagram below for a private closed economy.The multiplier is:

Accepted Answer

A)   GF/DE.
B)   GF/GB.
C)   FE/GF.
D)   AB/GF.E) B) and D)
F) All of the above

Question 11

An "inflationary expenditure gap" is the amount by which:

Accepted Answer

A)   equilibrium GDP falls short of the full-employment GDP.
B)   aggregate expenditures exceed those just necessary to achieve full-employment GDP.
C)   saving exceeds investment at the full-employment GDP.
D)   aggregate expenditures are less than the full-employment GDP.E) B) and D)
F) B) and C)

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

The following information is consumption and investment data for a private closed economy.Figures are in billions of dollars.
C = 60 + .6Y
I = I0 = 30
-Refer to the above data.In equilibrium,the level of consumption spending will be:

Accepted Answer

A)   170
B)   270
C)   160
D)   195E) A) and B)
F) A) and C)

Question 14

-The above diagram represents a:

Accepted Answer

A)   mixed closed economy.
B)   mixed open economy.
C)   private closed economy.
D)   private open economy.E) C) and D)
F) A) and B)

Question 15

If an unplanned increase in business inventories occurs:

Accepted Answer

A)   we can expect aggregate production to be unaffected.
B)   we can expect businesses to increase the level of production.
C)   we can expect businesses to lower the level of production.
D)   aggregate expenditures must exceed the domestic output.E) C) and D)
F) B) and C)

Question 16

The following information is for a closed economy:
 
-Refer to the above information.If government now spends $80 billion at each level of GDP and taxes remain at zero,the equilibrium GDP:

Accepted Answer

A)   will rise to $700.
B)   will rise to $600.
C)   will rise to $500.
D)   may either rise or fall.E) None of the above
F) B) and D)

Question 17

The following schedule contains data for a private closed economy.All figures are in billions.
Assume that gross investment is $10 billion.
 
-Refer to the above data.If gross investment remains at $10 at all levels of GDP,the after-tax equilibrium level of GDP will be:

Accepted Answer

A)   $220
B)   $190
C)   $180
D)   $160E) All of the above
F) None of the above

Question 18

g1 increases to Ig2,the equilibrium GDP will increase by: A)  FE. B)  AB. C)  AD. D)  GE." class="answers-bank-image d-inline" rel="preload" >
-Refer to the above diagram,which applies to a private closed economy.If the initial gross investment Ig1 increases to Ig2,the equilibrium GDP will increase by:

Accepted Answer

A)   FE.
B)   AB.
C)   AD.
D)   GE.E) None of the above
F) A) and C)

Question 19

For a private closed economy aggregate expenditures consist of:

Accepted Answer

A)   C + Ig.
B)   C - Ig.
C)   C + S.
D)   C - S.E) All of the above
F) A) and D)

Question 20

g is gross investment,X is exports,G is government purchases,S and Sa are saving before and after taxes respectively,M is imports,and T is net taxes,that is,taxes less transfers.The equilibrium level of GDP for this economy is: A)  Y4. B)  Y3. C)  Y2. D)  Y1." class="answers-bank-image d-inline" rel="preload" >
-Refer to the above diagram where Ig is gross investment,X is exports,G is government purchases,S and Sa are saving before and after taxes respectively,M is imports,and T is net taxes,that is,taxes less transfers.The equilibrium level of GDP for this economy is:

Accepted Answer

A)   Y4.
B)   Y3.
C)   Y2.
D)   Y1.E) None of the above
F) A) and B)

Exam 11: The Aggregate Expenditures Model

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

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If an unplanned increase in business inventories occurs:

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-Refer to the above diagram where Ig is gross investment,X is exports,G is government purchases,S and Sa are saving before and after taxes respectively,M is imports,and T is net taxes,that is,taxes less transfers.The equilibrium level of GDP for this economy is:

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In the aggregate expenditures model,a reduction in taxes may:

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-The above diagram represents a:

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The following information is for a closed economy: -Refer to the above information.If government now spends $80 billion at each level of GDP and taxes remain at zero,the equilibrium GDP:

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For a private closed economy aggregate expenditures consist of:

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Other things equal,an increase in an economy's exports will:

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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:

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-Refer to the above diagrams.Curve A:

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The following schedule contains data for a private closed economy.All figures are in billions. Assume that gross investment is $10 billion. -Refer to the above data.If gross investment remains at $10 at all levels of GDP,the after-tax equilibrium level of GDP will be:

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-Refer to the above diagram,which applies to a private closed economy.If the initial gross investment Ig1 increases to Ig2,the equilibrium GDP will increase by:

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If APC = .6 and MPC = .7,the immediate impact of an increase in personal taxes of $20 will be to:

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Exports are added to,and imports are subtracted from,aggregate expenditures in moving from a closed to an open economy.

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The equilibrium level of GDP is associated with:

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An "inflationary expenditure gap" is the amount by which:

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Refer to the diagram below for a private closed economy.The multiplier is:

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The following information is consumption and investment data for a private closed economy.Figures are in billions of dollars. C = 60 + .6Y I = I0 = 30 -Refer to the above data.In equilibrium,the level of consumption spending will be:

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-Refer to the above diagram.In equilibrium net exports are positive.

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-Refer to the above table.If an additional lump-sum tax of $20 were imposed,we would expect:

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-Refer to the above diagram where I_g is gross investment,X is exports,G is government purchases,S and S_a are saving before and after taxes respectively,M is imports,and T is net taxes,that is,taxes less transfers.The equilibrium level of GDP for this economy is:

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-Refer to the above diagram,which applies to a private closed economy.If the initial gross investment I_g1 increases to I_g2,the equilibrium GDP will increase by:

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The following information is consumption and investment data for a private closed economy.Figures are in billions of dollars. C = 60 + .6Y I = I₀ = 30 -Refer to the above data.In equilibrium,the level of consumption spending will be:

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