Question 1

A lump-sum tax causes the after-tax consumption schedule to be flatter than the before-tax consumption schedule.

Accepted Answer

A) True 
 B)False

Question 2

An upward shift of the aggregate expenditures schedule might be caused by:

Accepted Answer

A)   a decrease in exports, with no change in imports.
B)   a decrease in imports, with no change in exports.
C)   an increase in exports, with an equal decrease in investment spending.
D)   an increase in imports, with no change in exports.E) A) and B)
F) C) and D)

Question 3

The marginal propensity to import is:

Accepted Answer

A)   the change in imports divided by a change by exports.
B)   the change in imports divided by a change in consumption.
C)   the change in imports divided by a change in GDP.
D)   the change in imports multiplied by a change in GDP.E) B) and C)
F) A) and C)

Question 4

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

Question 5

In a recessionary expenditure gap, the equilibrium level of real GDP is:

Accepted Answer

A)   less than planned investment.
B)   equal to full-employment GDP.
C)   greater than full-employment GDP.
D)   less than full-employment GDP.E) None of the above
F) A) and B)

Question 6

The inequality of saving and planned investment:

Accepted Answer

A)   is attributable to a low MPC.
B)   may be of considerable significance because of the subsequent changes in income, employment, and the price level.
C)   is of no consequence because a compensating inequality of tax collections and government spending will always occur.
D)   is of no consequence because saving and actual investment will always be equal.E) All of the above
F) B) and D)

Question 7

Actual 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) A) and D)
F) None of the above

Question 8

3, the: A)  inflationary GDP gap is BC. B)  recessionary GDP gap is BC. C)  recessionary GDP gap is AB. D)  inflationary expenditure gap is ed." 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 GDP gap is BC.
B)   recessionary GDP gap is BC.
C)   recessionary GDP gap is AB.
D)   inflationary expenditure gap is ed.E) B) and D)
F) B) and C)

Question 9

The following information is for a closed economy:
 
-Refer to the above information. If in addition to spending $80 billion at each level of GDP, government imposes a lump-sum tax of $100:

Accepted Answer

A)   equilibrium GDP will now be $350.
B)   equilibrium GDP will now be $400.
C)   equilibrium GDP will now be $300.
D)   the equilibrium GDP cannot be determined.E) C) and D)
F) A) and B)

Question 10

Assume that an economy is operating at less than its full-employment level of output. Which event would most likely increase an economy's exports?

Accepted Answer

A)   a rise in the tariff on products imported from abroad
B)   a fall in the prosperity of trading partners for this economy
C)   an appreciation of a nation's currency relative to foreign currencies
D)   a depreciation of a nation's currency relative to foreign currenciesE) None of the above
F) B) and C)

Question 11

Other things equal, the multiplier effect associated with a change in government spending is:

Accepted Answer

A)   the same as that associated with a change in taxes.
B)   equal to that associated with a change in investment or consumption.
C)   less than that associated with a change in investment.
D)   greater than that associated with a change in investment.E) A) and D)
F) A) and C)

Question 12

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)   $160.E) C) and D)
F) All of the above

Question 13

Saving is always equal to:

Accepted Answer

A)   planned less unintended investment.
B)   actual investment.
C)   planned investment.
D)   unintended investment.E) All of the above
F) C) and D)

Question 14

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

Question 15

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 effect of the public budget is to: A)  lower the equilibrium level of GDP from Y4 to Y2. B)  raise the equilibrium level of GDP from Y2 to Y4. C)  lower the equilibrium level of GDP from Y4 to Y3. D)  raise the equilibrium level of GDP from Y2 to Y3." 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 effect of the public budget is to:

Accepted Answer

A)   lower the equilibrium level of GDP from Y4 to Y2.
B)   raise the equilibrium level of GDP from Y2 to Y4.
C)   lower the equilibrium level of GDP from Y4 to Y3.
D)   raise the equilibrium level of GDP from Y2 to Y3.E) A) and B)
F) A) and C)

Question 16

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

Question 17

-In equilibrium in the above private open economy:

Accepted Answer

A)   imports exceed exports.
B)   net exports are a positive amount.
C)   a balance of payments surplus exists.
D)   exports exceed imports.E) C) and D)
F) A) and D)

Question 18

-The equilibrium level of GDP in the economy in the above diagram:

Accepted Answer

A)   is $100.
B)   is $200.
C)   is $240.
D)   is $320.E) B) and D)
F) A) and B)

Question 19

Refer to the below data. Equilibrium Y = (GDP)  is: The letters Y, C, and, I are used to represent GDP, consumption, and, investment respectively.

Accepted Answer

A)   $100.
B)   $200.
C)   $300.
D)   $400.E) C) and D)
F) A) and B)

Question 20

-Refer to the above diagrams. Other things equal, an interest rate increase 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 C)
F) B) and C)

Exam 9: The Aggregate Expenditures Model

-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 effect of the public budget is to:

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Actual investment equals saving:

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Other things equal, the multiplier effect associated with a change in government spending is:

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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:

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A lump-sum tax causes the after-tax consumption schedule to be flatter than the before-tax consumption schedule.

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The following information is for a closed economy: -Refer to the above information. If in addition to spending $80 billion at each level of GDP, government imposes a lump-sum tax of $100:

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The marginal propensity to import is:

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-The equilibrium level of GDP in the economy in the above diagram:

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

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An upward shift of the aggregate expenditures schedule might be caused by:

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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 below data. Equilibrium Y = (GDP) is: The letters Y, C, and, I are used to represent GDP, consumption, and, investment respectively.

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The inequality of saving and planned investment:

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

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In a recessionary expenditure gap, the equilibrium level of real GDP is:

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

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

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Assume that an economy is operating at less than its full-employment level of output. Which event would most likely increase an economy's exports?

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Saving is always equal to:

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-In equilibrium in the above private open economy:

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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 effect of the public budget is to:

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

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