Question 1

A rightward shift of the investment demand curve will:

Accepted Answer

A)   Shift the investment schedule downward
B)   Shift the investment schedule upward
C)   Decrease the quantity of investment
D)   Decrease the real rate of interestE) None of the above
F) B) and C)

Question 2

The data below is the consumption schedule in an economy. All figures are in billions of dollars.  Refer to the above table. If a government sector is introduced and a lump-sum tax of $30 billion is imposed at all levels of GDP, then the consumption column in the table becomes:

Accepted Answer

A)   $420, 460, 500, 540, 580
B)   $426, 466, 506, 546, 586
C)   $430, 470, 510, 550, 590
D)   $432, 472, 512, 552, 592E) A) and B)
F) C) and D)

Question 3

Classical economists held the view that in the economy:

Accepted Answer

A)   Demand creates its own supply
B)   Unemployment is temporary and is soon eliminated
C)   There is an imbalance between saving and investment
D)   It is difficult for an economy to adjust because wages and prices are inflexibleE) A) and C)
F) A) and D)

Question 4

If the real interest rate falls, then the:

Accepted Answer

A)   Investment schedule will shift upward
B)   Investment schedule will shift downward
C)   Point moves along the investment schedule to the right
D)   Consumption schedule will shift downwardE) A) and C)
F) None of the above

Question 5

One basic assumption of the aggregate expenditures model is that:

Accepted Answer

A)   The economy is operating at full employment
B)   There is inflation in the economy
C)   There is no public sector in the economy
D)   The average price level in the economy is fixedE) A) and D)
F) C) and D) D

Question 6

Which of the following statements is correct?

Accepted Answer

A)   An increase in exports will tend to increase, and an increase in imports will tend to decrease, the equilibrium GDP
B)   An increase in exports and an increase in imports will both tend to increase the equilibrium GDP
C)   An increase in exports and an increase in imports will both tend to decrease the equilibrium GDP
D)   An increase in exports will tend to decrease, and an increase in imports will tend to increase, the equilibrium GDPE) A) and C)
F) B) and D)

Question 7

If the expected rates of return from investment decrease in an economy, there would most likely be a downward shift in the investment schedule for that economy.

Accepted Answer

A) True 
 B)False

Question 8

If the marginal propensity to consume is .80 and both taxes and government purchases increase by $50 billion, GDP will:

Accepted Answer

A)   Increase by $50 billion
B)   Decrease by $50 billion
C)   Increase by $10 billion
D)   Decrease by $10 billionE) All of the above
F) B) and D)

Question 9

Injections into the income-expenditure stream include:

Accepted Answer

A)   Transfer payments and imports
B)   Government purchases and exports
C)   Taxes and imports
D)   Taxes and transfer paymentsE) A) and B)
F) All of the above

Question 10

In the aggregate expenditures model, the equilibrium GDP is:

Accepted Answer

A)   Assumed to be equal to the potential GDP level
B)   Not necessarily equal to the full-employment GDP
C)   Always above the potential GDP level
D)   Always less than the full-employment GDP levelE) C) and D)
F) None of the above B

Question 11

Other things constant, if domestic consumers purchase fewer foreign goods at each level of GDP in the short run:

Accepted Answer

A)   GDP will rise
B)   GDP will fall
C)   Foreign countries' GDP will rise
D)   There will be no change in GDP in this countryE) B) and D)
F) A) and D)

Question 12

In the aggregate expenditures model of the economy, equilibrium is attained when planned aggregate spending equals total output.

Accepted Answer

A) True 
 B)False

Question 13

One basic assumption of the aggregate expenditures model is that the price level in the economy is fixed.

Accepted Answer

A) True 
 B)False

Question 14

All figures in the table below are in billions.  Refer to the above data. If exports increased by $15 billion at each level of GDP, all other factors constant, then the equilibrium level of GDP would be:

Accepted Answer

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

Question 15

Refer to the graph above for a private closed economy. When output or income is $350 billion there will be:

Accepted Answer

A)   Equilibrium GDP
B)   Saving exceeding planned investment
C)   Unplanned increases in inventories
D)   Unplanned decreases in inventoriesE) None of the above
F) A) and D)

Question 16

When planned investment exceeds saving in a private closed economy:

Accepted Answer

A)   Aggregate expenditures will equal GDP
B)   Aggregate expenditures will exceed GDP
C)   Aggregate expenditures will be less than GDP
D)   Consumption plus investment will equal GDPE) A) and B)
F) C) and D)

Question 17

A constitutional amendment is passed that requires the government to have an annually balanced budget in the sense that changes in spending should be matched by equivalent changes in taxes. Should the government desire to increase GDP by $25 billion and meet the provisions of the law it:

Accepted Answer

A)   Cannot possibly reach its objective without breaking the law
B)   Could increase spending by $25 billion and reduce taxes by $25 billion
C)   Could increase spending by $25 billion and increase taxes by $25 billion
D)   Could increase spending by $30 billion and increase taxes by $25 billionE) B) and C)
F) A) and D)

Question 18

When saving is less than planned investment in the aggregate expenditures model of a private closed economy then:

Accepted Answer

A)   Real GDP will decrease
B)   The rate of interest will decline
C)   There will be a decline in the price level
D)   There will be a rise in real GDPE) B) and D)
F) A) and B)

Question 19

Assume that the marginal propensity to consume in an economy is 0.9. If the economy's full-employment real GDP is $500 billion and its equilibrium real GDP is $550 billion, there is an inflationary expenditure gap of:

Accepted Answer

A)   $5 billion
B)   $50 billion
C)   $100 billion
D)   $500 billionE) A) and B)
F) A) and C) A

Question 20

If the economy has a recessionary expenditure gap of $15 billion and the MPS is 0.3, then the equilibrium level of GDP is:

Accepted Answer

A)   $16 billion below the full-employment level
B)   $21 billion below the full-employment level
C)   $50 billion below the full-employment level
D)   $50 billion above the full-employment levelE) All of the above
F) B) and C)

Exam 11: The Aggregate Expenditures Model

A rightward shift of the investment demand curve will:

Correct AnswerverifiedShow Answer

The data below is the consumption schedule in an economy. All figures are in billions of dollars. Refer to the above table. If a government sector is introduced and a lump-sum tax of $30 billion is imposed at all levels of GDP, then the consumption column in the table becomes:

Correct AnswerverifiedShow Answer

Classical economists held the view that in the economy:

Correct AnswerverifiedShow Answer

If the real interest rate falls, then the:

Correct AnswerverifiedShow Answer

One basic assumption of the aggregate expenditures model is that:

Correct AnswerverifiedD

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

If the expected rates of return from investment decrease in an economy, there would most likely be a downward shift in the investment schedule for that economy.

Correct AnswerverifiedShow Answer

If the marginal propensity to consume is .80 and both taxes and government purchases increase by $50 billion, GDP will:

Correct AnswerverifiedShow Answer

Injections into the income-expenditure stream include:

Correct AnswerverifiedShow Answer

In the aggregate expenditures model, the equilibrium GDP is:

Correct AnswerverifiedB

Other things constant, if domestic consumers purchase fewer foreign goods at each level of GDP in the short run:

Correct AnswerverifiedShow Answer

In the aggregate expenditures model of the economy, equilibrium is attained when planned aggregate spending equals total output.

Correct AnswerverifiedShow Answer

One basic assumption of the aggregate expenditures model is that the price level in the economy is fixed.

Correct AnswerverifiedShow Answer

All figures in the table below are in billions. Refer to the above data. If exports increased by $15 billion at each level of GDP, all other factors constant, then the equilibrium level of GDP would be:

Correct AnswerverifiedShow Answer

Refer to the graph above for a private closed economy. When output or income is $350 billion there will be:

Correct AnswerverifiedShow Answer

When planned investment exceeds saving in a private closed economy:

Correct AnswerverifiedShow Answer

A constitutional amendment is passed that requires the government to have an annually balanced budget in the sense that changes in spending should be matched by equivalent changes in taxes. Should the government desire to increase GDP by $25 billion and meet the provisions of the law it:

Correct AnswerverifiedShow Answer

When saving is less than planned investment in the aggregate expenditures model of a private closed economy then:

Correct AnswerverifiedShow Answer

Assume that the marginal propensity to consume in an economy is 0.9. If the economy's full-employment real GDP is $500 billion and its equilibrium real GDP is $550 billion, there is an inflationary expenditure gap of:

Correct AnswerverifiedA

If the economy has a recessionary expenditure gap of $15 billion and the MPS is 0.3, then the equilibrium level of GDP is:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
D

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
B

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A

Correct Answer
verified