Question 1

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

Question 2

Refer to the above diagram.International trade has an expansionary effect on this economy.

Accepted Answer

A) True 
 B)False

Question 3

Refer to the above diagram for a private closed economy.At the $400 level of GDP:

Accepted Answer

A)  aggregate expenditures exceed GDP with the result that GDP will rise.
B)  consumption is $350 and planned investment is zero so that aggregate expenditures are $350.
C)  consumption is $300 and planned investment is $50 so that aggregate expenditures are $350.
D)  consumption is $300 and actual investment is $100 so that aggregate expenditures are $400.E) A) and D)
F) B) and D)

Question 4

If the multiplier in an economy is 5, a $20 billion increase in net exports will:

Accepted Answer

A)  increase GDP by $100 billion.
B)  reduce GDP by $20 billion.
C)  decrease GDP by $100 billion.
D)  increase GDP by $20 billion.E) B) and C)
F) A) and D)

Question 5

The equilibrium level of GDP in the above open economy:

Accepted Answer

A)  is $100.
B)  is $250.
C)  is $350.
D)  is $500.E) C) and D)
F) A) and D)

Question 6

Exports are added to, and imports are subtracted from, aggregate expenditures in moving from a closed to an open economy.

Accepted Answer

A) True 
 B)False

Question 7

Refer to the above diagram for a private closed economy.Planned and actual investment will be equal at:

Accepted Answer

A)  all levels of GDP below $200.
B)  all levels of GDP above $200.
C)  all levels of GDP between $200 and $600.
D)  $600 only.E) All of the above
F) A) and D)

Question 8

Refer to the above diagram for a private closed economy.At the $200 level of GDP:

Accepted Answer

A)  consumption will equal GDP.
B)  planned investment will equal saving and unintended investment will be zero.
C)  aggregate expenditures will exceed GDP, causing GDP to rise.
D)  GDP will exceed aggregate expenditures, causing GDP to fall.E) A) and B)
F) B) and C)

Question 9

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

Question 10

Suppose the economy is operating at its full-employment-noninflationary GDP and the MPC is 0.75.The federal government now finds that it must increase spending on military goods by $21 billion in response to a deterioration in the international political situation.To sustain full-employment-noninflationary GDP government must:

Accepted Answer

A)  reduce taxes by $28 billion.
B)  reduce transfer payments by $21 billion.
C)  increase taxes by $21 billion.
D)  increase taxes by $28 billion.E) C) and D)
F) None of the above

Question 11

Other things equal, if a change in the tastes of Canadian consumers causes them to purchase more foreign goods at each level of Canadian GDP:

Accepted Answer

A)  unemployment will decrease domestically.
B)  Canadian GDP will fall.
C)  inflation will occur domestically.
D)  Canadian real GDP will rise.E) None of the above
F) A) and D)

Question 12

Equal increases in government purchases and taxes will:

Accepted Answer

A)  increase the equilibrium GDP and the size of that increase varies directly with the size of the MPC.
B)  increase the equilibrium GDP and the size of that increase is independent of the size of the MPC.
C)  increase the equilibrium GDP and the size of that increase varies inversely with the size of the MPC.
D)  decrease the equilibrium GDP and the size of that decrease is independent of the size of the MPC.E) All of the above
F) None of the above

Question 13

The economy will expand when:

Accepted Answer

A)  actual GDP is less than potential GDP.
B)  planned investment exceeds saving.
C)  saving exceeds planned investment.
D)  unplanned investment occurs.E) A) and D)
F) None of the above

Question 14

The following information is for a closed economy:  Refer to the above information.The introduction of $80 billion of government spending has:

Accepted Answer

A)  lowered the multiplier from 2.5 to 2.0.
B)  increased the multiplier from 2.5 to 3.0.
C)  increased the multiplier from 2.0 to 2.5.
D)  had no effect on the size of the multiplier.E) B) and C)
F) A) and B)

Question 15

What will be the effect of an excess of planned investment over saving in a private closed economy with unemployed resources?

Accepted Answer

A)  a decline in the rate of interest
B)  an unplanned accumulation of inventories by businesses
C)  a rise in the real GDP
D)  the federal budget will automatically move toward a deficitE) A) and B)
F) B) and D)

Question 16

Actual investment is $62 billion at an equilibrium output level of $620 billion in a private closed economy.The average propensity to save at this level of output:

Accepted Answer

A)  is 0.10.
B)  is 10.
C)  is 0.62.
D)  cannot be determined on the basis of the information given.E) None of the above
F) B) and C)

Question 17

If net exports are positive:

Accepted Answer

A)  the equilibrium GDP must be greater than the full-employment GDP.
B)  imports must exceed exports.
C)  aggregate expenditures are greater at each level of GDP than when net exports are zero or negative.
D)  some other component of aggregate expenditures must be negative.E) C) and D)
F) B) and D)

Question 18

The basic assumption of the Keynesian aggregate expenditures model is that prices are fixed.This assumption is based on the observation that prices did not change sufficiently during:

Accepted Answer

A)  the Great Depression.
B)  the financial crisis of 2008-2009.
C)  World War I.
D)  World War II.E) A) and D)
F) All of the above

Question 19

In a private closed economy, aggregate expenditures will equal GDP where:

Accepted Answer

A)  consumption equals investment.
B)  consumption plus investment equals aggregate expenditures.
C)  planned investment equals saving.
D)  disposable income equals consumption minus saving.E) B) and D)
F) All of the above

Question 20

The table shows a private, open economy.All figures are in billions of dollars.  Refer to the above table.If the marginal propensity to consume in this economy is 0.8, a $10 increase in its net exports would increase its equilibrium real GDP by:

Accepted Answer

A)  $25
B)  $50
C)  $100
D)  $200E) C) and D)
F) A) and C)

Exam 11: Part B: The Aggregate Expenditures Model

Other things equal, if a change in the tastes of Canadian consumers causes them to purchase more foreign goods at each level of Canadian GDP:

Correct Answer
verified

In a private closed economy, aggregate expenditures will equal GDP where:

Correct Answer
verified

The following information is for a closed economy: Refer to the above information.The introduction of $80 billion of government spending has:

Correct Answer
verified

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

Correct Answer
verified

Equal increases in government purchases and taxes will:

Correct Answer
verified

What will be the effect of an excess of planned investment over saving in a private closed economy with unemployed resources?

Correct Answer
verified

Refer to the above diagram.International trade has an expansionary effect on this economy.

Correct Answer
verified

Actual investment is $62 billion at an equilibrium output level of $620 billion in a private closed economy.The average propensity to save at this level of output:

Correct Answer
verified

If net exports are positive:

Correct Answer
verified

Exports are added to, and imports are subtracted from, aggregate expenditures in moving from a closed to an open economy.

Correct Answer
verified

If the multiplier in an economy is 5, a $20 billion increase in net exports will:

Correct Answer
verified

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

Correct Answer
verified

The basic assumption of the Keynesian aggregate expenditures model is that prices are fixed.This assumption is based on the observation that prices did not change sufficiently during:

Correct Answer
verified

Correct Answer
verified

Refer to the above diagram for a private closed economy.Planned and actual investment will be equal at:

Correct Answer
verified

Refer to the above diagram for a private closed economy.At the $400 level of GDP:

Correct Answer
verified

The table shows a private, open economy.All figures are in billions of dollars. Refer to the above table.If the marginal propensity to consume in this economy is 0.8, a $10 increase in its net exports would increase its equilibrium real GDP by:

Correct Answer
verified

The economy will expand when:

Correct Answer
verified

The equilibrium level of GDP in the above open economy:

Correct Answer
verified

Refer to the above diagram for a private closed economy.At the $200 level of GDP:

Correct Answer
verified

Exam 11: Part B: The Aggregate Expenditures Model

Other things equal, if a change in the tastes of Canadian consumers causes them to purchase more foreign goods at each level of Canadian GDP:

Correct AnswerverifiedShow Answer

In a private closed economy, aggregate expenditures will equal GDP where:

Correct AnswerverifiedShow Answer

The following information is for a closed economy: Refer to the above information.The introduction of $80 billion of government spending has:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Equal increases in government purchases and taxes will:

Correct AnswerverifiedShow Answer

What will be the effect of an excess of planned investment over saving in a private closed economy with unemployed resources?

Correct AnswerverifiedShow Answer

Refer to the above diagram.International trade has an expansionary effect on this economy.

Correct AnswerverifiedShow Answer

Actual investment is $62 billion at an equilibrium output level of $620 billion in a private closed economy.The average propensity to save at this level of output:

Correct AnswerverifiedShow Answer

If net exports are positive:

Correct AnswerverifiedShow Answer

Exports are added to, and imports are subtracted from, aggregate expenditures in moving from a closed to an open economy.

Correct AnswerverifiedShow Answer

If the multiplier in an economy is 5, a $20 billion increase in net exports will:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The basic assumption of the Keynesian aggregate expenditures model is that prices are fixed.This assumption is based on the observation that prices did not change sufficiently during:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Refer to the above diagram for a private closed economy.Planned and actual investment will be equal at:

Correct AnswerverifiedShow Answer

Refer to the above diagram for a private closed economy.At the $400 level of GDP:

Correct AnswerverifiedShow Answer

The table shows a private, open economy.All figures are in billions of dollars. Refer to the above table.If the marginal propensity to consume in this economy is 0.8, a $10 increase in its net exports would increase its equilibrium real GDP by:

Correct AnswerverifiedShow Answer

The economy will expand when:

Correct AnswerverifiedShow Answer

The equilibrium level of GDP in the above open economy:

Correct AnswerverifiedShow Answer

Refer to the above diagram for a private closed economy.At the $200 level of GDP:

Correct AnswerverifiedShow Answer

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