Question 1

John Maynard Keynes developed the ideas underlying the aggregate expenditures model:

Accepted Answer

A)   In the 1960s
B)   In the 1980s
C)   As a reinforcement of Say's Law
D)   As a critique of classical economicsE) A) and B)
F) A) and D)

Question 2

The marginal propensity to save is 0.2. Equilibrium GDP will decrease by $50 billion if aggregate expenditures schedule decrease by:

Accepted Answer

A)   $10 billion
B)   $15 billion
C)   $16 billion
D)   $40 billionE) All of the above
F) B) and D)

Question 3

If the stock of available capital in the economy is running too low, then the:

Accepted Answer

A)   Investment schedule will shift upward
B)   Investment schedule will shift downward
C)   Consumption schedule will shift upward
D)   Consumption schedule will shift downwardE) A) and D)
F) A) and B)

Question 4

All figures below are in billions of dollars.  Refer to the table above. Suppose investment is $12 billion and the economy revises its saving plans so as to save $4 billion less at all levels of income. The new equilibrium GDP will be:

Accepted Answer

A)   $260 billion
B)   $270 billion
C)   $280 billion
D)   $290 billionE) A) and B)
F) All of the above

Question 5

If planned investment is larger than saving, then real GDP will increase as the economy adjusts towards equilibrium.

Accepted Answer

A) True 
 B)False

Question 6

In the Great Recession of 2007-2009, consumption C and investment Ig fell while government G expanded.

Accepted Answer

A) True 
 B)False

Question 7

An increase in a lump-sum tax has the same effect on equilibrium GDP as an equal decrease in government purchases.

Accepted Answer

A) True 
 B)False

Question 8

The data below are for a private (no government)  closed economy. All figures are in billions of dollars.  Refer to the table above. If planned investment is $25 billion, the equilibrium level of GDP will be:

Accepted Answer

A)   $600 billion
B)   $620 billion
C)   $640 billion
D)   $660 billionE) B) and C)
F) A) and B)

Question 9

When aggregate expenditure is greater than GDP, then there will be an:

Accepted Answer

A)   Unplanned increase in inventories and GDP will increase
B)   Unplanned decrease in inventories and GDP will increase
C)   Unplanned increase in inventories and GDP will decrease
D)   Unplanned decrease in inventories and GDP will decreaseE) A) and C)
F) None of the above

Question 10

Refer to the graph above for a private closed economy. At the equilibrium level of GDP, saving will be:

Accepted Answer

A)   $50 billion
B)   $100 billion
C)   $150 billion
D)   Cannot be determined from the information givenE) None of the above
F) A) and C)

Question 11

The most basic premise of the aggregate expenditures model is that:

Accepted Answer

A)   The total output produced in the economy depends directly on the level of total spending
B)   The level of employment in the economy depends inversely on the real wage rate
C)   The total output produced depends mostly on the total capacity of firms to produce
D)   The unemployment level in the economy is inversely related to the inflation rateE) A) and B)
F) A) and C)

Question 12

The table shows the consumption schedule for a hypothetical economy. All figures are in billions of dollars.  Refer to the above table. If planned investments were fixed at $16, taxes were zero, government purchases of goods and services were zero, and net exports were zero, then equilibrium real GDP would be $630 initially. If government purchases were then raised from $0 to $10, and lump-sum taxes also increased from $0 to $10, other things constant, then the equilibrium real GDP would become:

Accepted Answer

A)   $660
B)   $630
C)   $640
D)   $650E) None of the above
F) B) and C)

Question 13

g is an investment schedule that assumes that the investment plans of business are independent of the current level of income, whereas Ig does not B)  Ig is an investment schedule that assumes that the investment plans of business are independent of the current level of income, whereas I'g does not C)  The equilibrium level of investment is determined at the point where investment schedule I'g crosses the Ig investment schedule D)  Investment schedule I'g shows the inverse relationship between real domestic product and investment" class="answers-bank-image d-inline" rel="preload" > The graph above indicates that:

Accepted Answer

A)   I'g is an investment schedule that assumes that the investment plans of business are independent of the current level of income, whereas Ig does not
B)   Ig is an investment schedule that assumes that the investment plans of business are independent of the current level of income, whereas I'g does not
C)   The equilibrium level of investment is determined at the point where investment schedule I'g crosses the Ig investment schedule
D)   Investment schedule I'g shows the inverse relationship between real domestic product and investmentE) A) and B)
F) A) and C)

Question 14

Net exports are negative when:

Accepted Answer

A)   Net exports exceed imports
B)   Depreciation exceeds exports
C)   Exports exceed imports
D)   Imports exceed exportsE) A) and B)
F) B) and D)

Question 15

If the MPC in an economy is 0.75 and aggregate expenditures increase by $5 billion, then equilibrium GDP will increase by:

Accepted Answer

A)   $3.75 billion
B)   $6.7 billion
C)   $8.75 billion
D)   $20 billionE) None of the above
F) B) and D)

Question 16

John Maynard Keynes developed the aggregate expenditures model in order to understand the:

Accepted Answer

A)   Second World War
B)   Great Depression
C)   Oil crises of the 1970s and 1980s
D)   Great Recession of 2007-2009E) A) and B)
F) A) and C)

Question 17

In the Great Recession of 2007-2009, the aggregate expenditures schedule in the U.S. economy dropped, mostly due to a fall in:

Accepted Answer

A)   Consumption spending
B)   Investment expenditures
C)   Government spending
D)   Net exportsE) A) and B)
F) All of the above

Question 18

If the government increases its purchases by $200 billion but at the same time raises lump-sum taxes by $200 billion, then equilibrium GDP will remain constant.

Accepted Answer

A) True 
 B)False

Question 19

All figures in the table below are in billions of dollars.  Refer to the above data. Gross investment is $8 billion, net exports are $4 billion, and government collects a lump-sum tax of $30 billion and spends $30 billion. Assume all taxes are personal taxes and that government spending does not entail shifts in the consumption and investment schedules. The equilibrium GDP will be:

Accepted Answer

A)   $280 billion
B)   $290 billion
C)   $300 billion
D)   $310 billionE) A) and B)
F) B) and C)

Question 20

The data below are for a private (no government)  closed economy. All figures are in billions of dollars.  Refer to the table above. If planned investment is $18 billion, then at the $660 billion level of disposable income, there will be an:

Accepted Answer

A)   Unplanned increase in inventories of $12 billion
B)   Unplanned increase in inventories of $30 billion
C)   Unplanned decrease in inventories of $12 billion
D)   Unplanned decrease in inventories of $30 billionE) B) and C)
F) None of the above

Exam 11: The Aggregate Expenditures Model

Net exports are negative when:

Correct Answer
verified

All figures below are in billions of dollars. Refer to the table above. Suppose investment is $12 billion and the economy revises its saving plans so as to save $4 billion less at all levels of income. The new equilibrium GDP will be:

Correct Answer
verified

John Maynard Keynes developed the ideas underlying the aggregate expenditures model:

Correct Answer
verified

When aggregate expenditure is greater than GDP, then there will be an:

Correct Answer
verified

Correct Answer
verified

The data below are for a private (no government) closed economy. All figures are in billions of dollars. Refer to the table above. If planned investment is $25 billion, the equilibrium level of GDP will be:

Correct Answer
verified

If the MPC in an economy is 0.75 and aggregate expenditures increase by $5 billion, then equilibrium GDP will increase by:

Correct Answer
verified

The data below are for a private (no government) closed economy. All figures are in billions of dollars. Refer to the table above. If planned investment is $18 billion, then at the $660 billion level of disposable income, there will be an:

Correct Answer
verified

In the Great Recession of 2007-2009, the aggregate expenditures schedule in the U.S. economy dropped, mostly due to a fall in:

Correct Answer
verified

John Maynard Keynes developed the aggregate expenditures model in order to understand the:

Correct Answer
verified

The graph above indicates that:

Correct Answer
verified

If the stock of available capital in the economy is running too low, then the:

Correct Answer
verified

An increase in a lump-sum tax has the same effect on equilibrium GDP as an equal decrease in government purchases.

Correct Answer
verified

The most basic premise of the aggregate expenditures model is that:

Correct Answer
verified

Refer to the graph above for a private closed economy. At the equilibrium level of GDP, saving will be:

Correct Answer
verified

If planned investment is larger than saving, then real GDP will increase as the economy adjusts towards equilibrium.

Correct Answer
verified

The marginal propensity to save is 0.2. Equilibrium GDP will decrease by $50 billion if aggregate expenditures schedule decrease by:

Correct Answer
verified

In the Great Recession of 2007-2009, consumption C and investment I_g fell while government G expanded.

Correct Answer
verified

Correct Answer
verified

If the government increases its purchases by $200 billion but at the same time raises lump-sum taxes by $200 billion, then equilibrium GDP will remain constant.

Correct Answer
verified

Exam 11: The Aggregate Expenditures Model

Net exports are negative when:

Correct AnswerverifiedShow Answer

All figures below are in billions of dollars. Refer to the table above. Suppose investment is $12 billion and the economy revises its saving plans so as to save $4 billion less at all levels of income. The new equilibrium GDP will be:

Correct AnswerverifiedShow Answer

John Maynard Keynes developed the ideas underlying the aggregate expenditures model:

Correct AnswerverifiedShow Answer

When aggregate expenditure is greater than GDP, then there will be an:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The data below are for a private (no government) closed economy. All figures are in billions of dollars. Refer to the table above. If planned investment is $25 billion, the equilibrium level of GDP will be:

Correct AnswerverifiedShow Answer

If the MPC in an economy is 0.75 and aggregate expenditures increase by $5 billion, then equilibrium GDP will increase by:

Correct AnswerverifiedShow Answer

The data below are for a private (no government) closed economy. All figures are in billions of dollars. Refer to the table above. If planned investment is $18 billion, then at the $660 billion level of disposable income, there will be an:

Correct AnswerverifiedShow Answer

In the Great Recession of 2007-2009, the aggregate expenditures schedule in the U.S. economy dropped, mostly due to a fall in:

Correct AnswerverifiedShow Answer

John Maynard Keynes developed the aggregate expenditures model in order to understand the:

Correct AnswerverifiedShow Answer

The graph above indicates that:

Correct AnswerverifiedShow Answer

If the stock of available capital in the economy is running too low, then the:

Correct AnswerverifiedShow Answer

An increase in a lump-sum tax has the same effect on equilibrium GDP as an equal decrease in government purchases.

Correct AnswerverifiedShow Answer

The most basic premise of the aggregate expenditures model is that:

Correct AnswerverifiedShow Answer

Refer to the graph above for a private closed economy. At the equilibrium level of GDP, saving will be:

Correct AnswerverifiedShow Answer

If planned investment is larger than saving, then real GDP will increase as the economy adjusts towards equilibrium.

Correct AnswerverifiedShow Answer

The marginal propensity to save is 0.2. Equilibrium GDP will decrease by $50 billion if aggregate expenditures schedule decrease by:

Correct AnswerverifiedShow Answer

In the Great Recession of 2007-2009, consumption C and investment Ig fell while government G expanded.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the government increases its purchases by $200 billion but at the same time raises lump-sum taxes by $200 billion, then equilibrium GDP will remain constant.

Correct AnswerverifiedShow Answer

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In the Great Recession of 2007-2009, consumption C and investment I_g fell while government G expanded.

Correct Answer
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Correct Answer
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