Question 1

Refer to the above diagram which is for a private closed economy.All figures are in billions of dollars.If gross investment is $15, the equilibrium level of GDP:

Accepted Answer

A)  is $30.
B)  is $380.
C)  is $300.
D)  is $340.E) B) and D)
F) None of the above

Question 2

Refer to the above diagram.The impact of the public sector on the equilibrium GDP:

Accepted Answer

A)  is expansionary.
B)  is contractionary.
C)  is neutral.
D)  cannot be determined from the information given.E) All of the above
F) C) and D)

Question 3

If aggregate expenditures exceed the domestic output in a private closed economy:

Accepted Answer

A)  leakages will exceed injections.
B)  planned investment will exceed saving.
C)  unplanned investment in inventories will occur.
D)  saving will exceed planned investment.E) B) and C)
F) A) and C)

Question 4

The letters Y, C, Ig, X, and M stand for GDP, consumption, gross investment, exports, and imports respectively.Figures are in billions of dollars.Ca = 25.75(Y - T )  Ig = Ig0 = 50
Xn = Xn0 = 10
G = G0 = 70
T = T0 = 30
Refer to the above information.If the economy's tax schedule was T = 0.2Y rather than T = T0 = 30, the equilibrium GDP would be:

Accepted Answer

A)  $387.3.
B)  $518.5.
C)  $316
D)  $412E) A) and B)
F) A) and D)

Question 5

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) A) and D)
F) All of the above

Question 6

Which of the following equations hold true at equilibrium GDP in a private closed economy?

Accepted Answer

A)  S = Ig
B)  S - Ig 
C)  S + Ig = 1
D)  S > IgE) A) and B)
F) None of the above

Question 7

Taxes represent:

Accepted Answer

A)  a leakage of purchasing power, like saving.
B)  an injection of purchasing power, like investment.
C)  an injection of purchasing power, like government spending.
D)  a leakage of purchasing power, like government spending.E) A) and B)
F) B) and D)

Question 8

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

Accepted Answer

A)  a $20 billion increase 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 decrease in government spendingE) None of the above
F) A) and C)

Question 9

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 D)
F) A) and C)

Question 10

The investment schedule of an economy is:

Accepted Answer

A)  horizontal.
B)  vertical.
C)  downward sloping.
D)  upward sloping.E) A) and D)
F) All of the above

Question 11

Refer to the above information.When the real interest rate is 10 percent, unplanned changes in inventories are equal to:

Accepted Answer

A)  $40
B)  -$30.
C)  $20
D)  -$60.E) C) and D)
F) B) and D)

Question 12

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 C)
F) B) and D)

Question 13

Refer to the above diagram for a private closed economy.At the $300 level of GDP:

Accepted Answer

A)  aggregate expenditures and GDP are equal.
B)  consumption is $250 and planned investment is $50.
C)  saving equals investment.
D)  all of the above are true.E) B) and C)
F) A) and D)

Question 14

What do investment and government expenditures have in common?

Accepted Answer

A)  Both represent injections to the circular flow.
B)  Both represent leakages from the circular flow.
C)  Neither is subject to the multiplier effect.
D)  Both represent a decline in indebtedness.E) All of the above
F) C) and D)

Question 15

If the marginal propensity to save in a closed economy is 0.25 and a lump-sum tax is imposed, the slope of the economy's aggregate expenditures schedule will be:

Accepted Answer

A)  .25.
B)  less than the slope before the imposition of the tax.
C)  greater than the slope before the imposition of the tax.
D)  .75.E) B) and C)
F) C) and D)

Question 16

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

Question 17

Assume the MPC is .8.If government were to impose $50 billion of new taxes on household income, consumption spending would decrease by:

Accepted Answer

A)  $100 billion.
B)  $40 billion.
C)  $90 billion
D)  $50 billion.E) B) and D)
F) A) and D)

Question 18

The Sa + M + T schedule has a negative slope.

Accepted Answer

A) True 
 B)False

Question 19

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

Question 20

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

Exam 11: Part B: The Aggregate Expenditures Model

If aggregate expenditures exceed the domestic output in a private closed economy:

Correct Answer
verified

Refer to the above information.When the real interest rate is 10 percent, unplanned changes in inventories are equal to:

Correct Answer
verified

Assume the MPC is .8.If government were to impose $50 billion of new taxes on household income, consumption spending would decrease by:

Correct Answer
verified

If the marginal propensity to save in a closed economy is 0.25 and a lump-sum tax is imposed, the slope of the economy's aggregate expenditures schedule will be:

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

Which of the following equations hold true at equilibrium GDP in a private closed economy?

Correct Answer
verified

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:

Correct Answer
verified

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

Correct Answer
verified

The investment schedule of an economy is:

Correct Answer
verified

Refer to the above diagram for a private closed economy.At the $300 level of GDP:

Correct Answer
verified

Refer to the above diagram which is for a private closed economy.All figures are in billions of dollars.If gross investment is $15, the equilibrium level of GDP:

Correct Answer
verified

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

Correct Answer
verified

Refer to the above diagram.The impact of the public sector on the equilibrium GDP:

Correct Answer
verified

Correct Answer
verified

Taxes represent:

Correct Answer
verified

If an unplanned increase in business inventories occurs:

Correct Answer
verified

The S_a + M + T schedule has a negative slope.

Correct Answer
verified

What do investment and government expenditures have in common?

Correct Answer
verified

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

Correct Answer
verified

Exam 11: Part B: The Aggregate Expenditures Model

If aggregate expenditures exceed the domestic output in a private closed economy:

Correct AnswerverifiedShow Answer

Refer to the above information.When the real interest rate is 10 percent, unplanned changes in inventories are equal to:

Correct AnswerverifiedShow Answer

Assume the MPC is .8.If government were to impose $50 billion of new taxes on household income, consumption spending would decrease by:

Correct AnswerverifiedShow Answer

If the marginal propensity to save in a closed economy is 0.25 and a lump-sum tax is imposed, the slope of the economy's aggregate expenditures schedule will be:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following equations hold true at equilibrium GDP in a private closed economy?

Correct AnswerverifiedShow Answer

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:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The investment schedule of an economy is:

Correct AnswerverifiedShow Answer

Refer to the above diagram for a private closed economy.At the $300 level of GDP:

Correct AnswerverifiedShow Answer

Refer to the above diagram which is for a private closed economy.All figures are in billions of dollars.If gross investment is $15, the equilibrium level of GDP:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Refer to the above diagram.The impact of the public sector on the equilibrium GDP:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Taxes represent:

Correct AnswerverifiedShow Answer

If an unplanned increase in business inventories occurs:

Correct AnswerverifiedShow Answer

The Sa + M + T schedule has a negative slope.

Correct AnswerverifiedShow Answer

What do investment and government expenditures have in common?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct Answer
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The S_a + M + T schedule has a negative slope.

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified