Question 1

If the dollar appreciates relative to foreign currencies, we would expect:

Accepted Answer

A)  the multiplier to decrease.
B)  a country's exports and imports to both fall.
C)  a country's net exports to rise.
D)  a country's net exports to fall.E) C) and D)
F) None of the above

Question 2

Assuming the MPC is .75, an equal $10 billion increases in government spending and tax collections will:

Accepted Answer

A)  leave the equilibrium GDP unchanged.
B)  increase the equilibrium GDP by $10 billion.
C)  increase the equilibrium GDP by $2.5 billion.
D)  reduce the equilibrium GDP by $10 billion.E) All of the above
F) None of the above

Question 3

If the MPC in an economy is .75, a $1 billion increase in taxes will reduce the GDP by:

Accepted Answer

A)  $1 billion.
B)  $.75 billion.
C)  $3 billion.
D)  $4 billion.E) C) and D)
F) A) and B)

Question 4

In a private closed economy, where aggregate expenditures exceed domestic output:

Accepted Answer

A)  domestic output will decline to the break-even level.
B)  business inventories will rise.
C)  saving exceeds planned investment.
D)  planned investment exceeds saving.E) None of the above
F) A) and D)

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

Question 6

If a lump-sum tax of $40 billion is imposed and the MPC is 0.6, the saving schedule will:

Accepted Answer

A)  shift downward by $24 billion.
B)  shift upward by $24 billion.
C)  shift downward by $16 billion.
D)  shift upward by $16 billion.E) C) and D)
F) A) and D)

Question 7

In which of the following situations for a private closed economy will the level of GDP expand?

Accepted Answer

A)  when planned investment exceeds saving
B)  when planned investment exceeds consumption
C)  when saving exceeds consumption
D)  when consumption exceeds investmentE) All of the above
F) A) and B)

Question 8

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) All of the above

Question 9

Refer to the diagram below for a private closed economy.Saving and planned investment are equal:

Accepted Answer

A)  only at the $300 level of GDP.
B)  only at the $250 level of GDP.
C)  at all levels of GDP.
D)  only at the $375 level of GDP.E) C) and D)
F) None of the above

Question 10

Which event would most likely decrease an economy's exports?

Accepted Answer

A)  a decline in the tariff on products imported from abroad
B)  an increase 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) C) and D)
F) None of the above

Question 11

Refer to the information below.The multiplier in this economy is:

Accepted Answer

A)  4
B)  5
C)  1.5.
D)  3E) A) and B)
F) A) and D)

Question 12

The following information is for a private closed economy, where Ig is gross investment, S is saving, and Y is gross domestic product (GDP) .Ig = 80 S = -80 + 0.4Y
Refer to the above information.In equilibrium, consumption will be:

Accepted Answer

A)  $400.
B)  $280.
C)  $320.
D)  $360.E) A) and D)
F) C) and D)

Question 13

If government increases its tax revenues by $15 billion and the MPC is 2/3, then we can expect the equilibrium GDP to:

Accepted Answer

A)  decrease by $30 billion.
B)  decrease by $45 billion.
C)  decrease by $35 billion.
D)  decrease by $55 billion.E) A) and B)
F) All of the above

Question 14

If a nation imposes tariffs and quotas on foreign products, the immediate effect, if no retaliation is immediately imposed by other countries will be to:

Accepted Answer

A)  reduce the rate of domestic inflation.
B)  increase efficiency in the world economy.
C)  increase domestic output and employment.
D)  reduce domestic output and employment.E) None of the above
F) B) and C)

Question 15

The following information is for a closed economy:  Refer to the above information.If both government spending and taxes are zero, the equilibrium level of GDP:

Accepted Answer

A)  is $200.
B)  is $300.
C)  is $400.
D)  is $500.E) None of the above
F) A) and D)

Question 16

C = 40 + .8Y _
Ig = Ig = 40
_
X = X = 20
_
M = M = 30
Refer to the above information.In equilibrium, the level of consumption is:

Accepted Answer

A)  $230
B)  $320
C)  $400
D)  $150E) B) and D)
F) A) and D)

Question 17

During the recession of 2008 - 2009:

Accepted Answer

A)  the federal government undertook various policies intended to stimulate private spending and investment.
B)  the federal government undertook various policies that ultimately resulted in an inflationary expenditure gap.
C)  the federal government was able to achieve a balanced budget even though it undertook various policies to stimulate the economy.
D)  the federal government took no action to stimulate the economy, and instead left it to the private sector to try to eliminate the recessionary gap.E) None of the above
F) B) and C)

Question 18

In an open economy, the multiplier is 1 divided by:

Accepted Answer

A)  MPS + MPM.
B)  MPS.
C)  MPM.
D)  MPC.E) C) and D)
F) A) and B)

Question 19

If unplanned investment in business inventories occurs, we can expect:

Accepted Answer

A)  a decline in GDP.
B)  inflation.
C)  an increase in consumption.
D)  an offsetting increase in planned investment.E) A) and B)
F) A) and C)

Question 20

4. B) Y3. C) Y2. D) Y1." class="answers-bank-image d-inline" rel="preload" > The equilibrium level of GDP for the above private open economy is:

Accepted Answer

A)  Y4.
B)  Y3.
C)  Y2.
D)  Y1.E) C) and D)
F) A) and B)

Exam 11: B: The Aggregate Expenditures Model

If unplanned investment in business inventories occurs, we can expect:

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If a lump-sum tax of $40 billion is imposed and the MPC is 0.6, the saving schedule will:

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The equilibrium level of GDP for the above private open economy is:

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

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Assuming the MPC is .75, an equal $10 billion increases in government spending and tax collections will:

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In an open economy, the multiplier is 1 divided by:

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The following information is for a private closed economy, where Ig is gross investment, S is saving, and Y is gross domestic product (GDP) .Ig = 80 S = -80 + 0.4Y Refer to the above information.In equilibrium, consumption will be:

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During the recession of 2008 - 2009:

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If a nation imposes tariffs and quotas on foreign products, the immediate effect, if no retaliation is immediately imposed by other countries will be to:

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If the dollar appreciates relative to foreign currencies, we would expect:

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If the MPC in an economy is .75, a $1 billion increase in taxes will reduce the GDP by:

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Refer to the diagram below for a private closed economy.Saving and planned investment are equal:

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In a private closed economy, where aggregate expenditures exceed domestic output:

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The following information is for a closed economy: Refer to the above information.If both government spending and taxes are zero, the equilibrium level of GDP:

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Which event would most likely decrease an economy's exports?

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In which of the following situations for a private closed economy will the level of GDP expand?

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Refer to the information below.The multiplier in this economy is:

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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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If government increases its tax revenues by $15 billion and the MPC is 2/3, then we can expect the equilibrium GDP to:

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C = 40 + .8Y _ Ig = Ig = 40 _ X = X = 20 _ M = M = 30 Refer to the above information.In equilibrium, the level of consumption is:

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The following information is for a private closed economy, where I_g is gross investment, S is saving, and Y is gross domestic product (GDP) .I_g = 80 S = -80 + 0.4Y Refer to the above information.In equilibrium, consumption will be:

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C = 40 + .8Y _ I_g = I_g = 40 _ X = X = 20 _ M = M = 30 Refer to the above information.In equilibrium, the level of consumption is:

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