Question 1

The following schedule contains data for a private closed economy.All figures are in billions.Use these data in answering the question.   GDP ‾C‾$140$150180180220210260240300270\begin{array}{l}\underline{	ext { GDP }}& \underline{C} \\$140&\$150\180 & 180 \220 & 210 \260 & 240\300 &270 \\end{array} GDP ​$140180220260300​C​$150180210240270​  Refer to the data.If gross investment is $10 at all levels of GDP,the equilibrium GDP will be:

Accepted Answer

A)   $300.
B)   $260.
C)   $220.
D)   $180. E) None of the above
F) All of the above

Question 2

Assume that in a private closed economy consumption is $240 billion and investment is $50 billion,both at the $280 billion level of domestic output.Thus:

Accepted Answer

A)   saving is $10 billion.
B)   unplanned decreases in inventories of $10 billion will occur.
C)   the MPC is .80.
D)   unplanned increases in inventories of $10 billion will occur.E) A) and B)
F) All of the above

Question 3

Assume in a private closed economy that the equilibrium level of income is $380 and the MPS is .25.Now suppose government collects taxes of $50 and spends the entire amount.As a result:

Accepted Answer

A)   the equilibrium level of real income and the price level will both remain unchanged.
B)   the equilibrium level of income will remain unchanged.
C)   the equilibrium level of income will rise to $420.
D)   the equilibrium level of income will rise to $430.E) C) and D)
F) A) and C)

Question 4

If government decreases its purchases by $20 billion and the MPC is .8,equilibrium GDP will decrease by $100 billion.

Accepted Answer

A) True 
 B)False

Question 5

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) A) and D)
F) A) and C)

Question 6

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

Question 7

A recessionary expenditure gap in a mixed open economy can be measured as the extent to which aggregate expenditures (Ca + Ig + Xn + G)fall short of real GDP at the full-employment level of real GDP.

Accepted Answer

A) True 
 B)False

Question 8

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 any given level of GDP.
C)   saving exceeds investment at the full-employment GDP.
D)   aggregate expenditures exceed the full-employment level of GDP.E) A) and B)
F) A) and C)

Question 9

Viewed through the aggregate expenditures model,the U.S.recession of 2007-2009 resulted mainly from:

Accepted Answer

A)   a fall in the average propensity to save.
B)   insufficient aggregate expenditures.
C)   reduced government spending.
D)   increased taxes.E) B) and C)
F) A) and D)

Question 10

Suppose that a mixed open economy is producing at its equilibrium income and that net exports are zero.If at the equilibrium income the public sector's budget shows a surplus:

Accepted Answer

A)   Ca + Ig + Xn + G must exceed GDP.
B)   planned investment must exceed saving.
C)   a recessionary expenditure gap must exist.
D)   saving must exceed planned investment.E) C) and D)
F) B) and C)

Question 11

Equal increases in government expenditures and tax collections will leave the equilibrium GDP unchanged.

Accepted Answer

A) True 
 B)False

Question 12

When C + Ig = GDP in a private closed economy,S = Ig and there are no unplanned changes in inventories.

Accepted Answer

A) True 
 B)False

Question 13

If C + Ig exceeds GDP in a private closed economy,GDP will decline.

Accepted Answer

A) True 
 B)False

Question 14

Other things equal,if $100 billion of government purchases (G) is added to private spending (C + Ig + Xn) ,GDP will:

Accepted Answer

A)   increase by $100 billion.
B)   increase by less than $100 billion.
C)   increase by more than $100 billion.
D)   fall by $100 billion.E) B) and C)
F) A) and D)

Question 15

If the MPC is 2/3,the initial impact of an increase of $12 billion in lump-sum taxes will be to cause:

Accepted Answer

A)   a rightward shift in the investment demand schedule.
B)   an $8 billion downshift in the consumption schedule.
C)   a $4 billion upshift in the consumption schedule.
D)   a $12 billion downshift in the consumption schedule.E) All of the above
F) A) and D)

Question 16

In the aggregate expenditures model,technological progress will shift the investment schedule:

Accepted Answer

A)   downward and increase aggregate expenditures.
B)   downward and decrease aggregate expenditures.
C)   upward and increase aggregate expenditures.
D)   upward and decrease aggregate expenditures.E) B) and D)
F) B) and C)

Question 17

Unintended changes in inventories:

Accepted Answer

A)   cause the economy to move away from the equilibrium GDP.
B)   are treated as components of consumption.
C)   bring actual investment and saving into equality only at the equilibrium level of GDP.
D)   bring actual investment and saving into equality at all levels of GDP.E) C) and D)
F) All of the above

Question 18

Answer the question on the basis of the following table:  The MPC and MPS in the economy:

Accepted Answer

A)   are .4 and .6 respectively.
B)   are .6 and .4 respectively.
C)   are .8 and .2 respectively.
D)   cannot be determined from the information given.E) C) and D)
F) B) and C)

Question 19

If the MPC is .8 in a private closed economy,a $30 billion increase in planned investment will increase equilibrium real GDP by $120 billion.

Accepted Answer

A) True 
 B)False

Question 20

(Advanced analysis) Answer the question on the basis of the following information for a mixed open economy.The letters Y,Ca,Ig,Xn,G,and T stand for GDP,consumption,gross investment,net exports,government purchases,and net taxes respectively.Figures are in billions of dollars.  Ca=25+0.75(Y−T) Ig=Ig0=50Xn=Xn0=10G=G0=70T=T0=30\begin{aligned}C _ { a } & = 25 + 0.75 ( Y - T )  \I _ { g } & = I _ { g 0 } = 50 \X _ { n } & = X _ { n 0 } = 10 \G & = G _ { 0 } = 70 \T & = T _ { 0 } = 30\end{aligned}Ca​Ig​Xn​GT​=25+0.75(Y−T) =Ig0​=50=Xn0​=10=G0​=70=T0​=30​  Refer to the information.If government desired to raise the equilibrium GDP to $650,it could:

Accepted Answer

A)   raise G by $45 and reduce T by $10.
B)   raise G by $40 and reduce T by $30.
C)   raise G by $30 or reduce T by $40.
D)   raise both G and T by $40. E) All of the above
F) B) and D)

Exam 30: The Aggregate Expenditures Model

Correct Answer
verified

If the MPC is .8 in a private closed economy,a $30 billion increase in planned investment will increase equilibrium real GDP by $120 billion.

Correct Answer
verified

Suppose that a mixed open economy is producing at its equilibrium income and that net exports are zero.If at the equilibrium income the public sector's budget shows a surplus:

Correct Answer
verified

Answer the question on the basis of the following table: The MPC and MPS in the economy:

Correct Answer
verified

An inflationary expenditure gap is the amount by which:

Correct Answer
verified

Correct Answer
verified

Unintended changes in inventories:

Correct Answer
verified

Equal increases in government expenditures and tax collections will leave the equilibrium GDP unchanged.

Correct Answer
verified

When C + I_g = GDP in a private closed economy,S = I_g and there are no unplanned changes in inventories.

Correct Answer
verified

Assume that in a private closed economy consumption is $240 billion and investment is $50 billion,both at the $280 billion level of domestic output.Thus:

Correct Answer
verified

Viewed through the aggregate expenditures model,the U.S.recession of 2007-2009 resulted mainly from:

Correct Answer
verified

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

Correct Answer
verified

Other things equal,if $100 billion of government purchases (G) is added to private spending (C + I_g + X_n) ,GDP will:

Correct Answer
verified

In the aggregate expenditures model,technological progress will shift the investment schedule:

Correct Answer
verified

Assume in a private closed economy that the equilibrium level of income is $380 and the MPS is .25.Now suppose government collects taxes of $50 and spends the entire amount.As a result:

Correct Answer
verified

A recessionary expenditure gap in a mixed open economy can be measured as the extent to which aggregate expenditures (C_a + I_g + X_n + G)fall short of real GDP at the full-employment level of real GDP.

Correct Answer
verified

If the MPC is 2/3,the initial impact of an increase of $12 billion in lump-sum taxes will be to cause:

Correct Answer
verified

If C + I_g exceeds GDP in a private closed economy,GDP will decline.

Correct Answer
verified

If government decreases its purchases by $20 billion and the MPC is .8,equilibrium GDP will decrease by $100 billion.

Correct Answer
verified

Equal increases in government purchases and taxes will:

Correct Answer
verified

Exam 30: The Aggregate Expenditures Model

Correct AnswerverifiedShow Answer

If the MPC is .8 in a private closed economy,a $30 billion increase in planned investment will increase equilibrium real GDP by $120 billion.

Correct AnswerverifiedShow Answer

Suppose that a mixed open economy is producing at its equilibrium income and that net exports are zero.If at the equilibrium income the public sector's budget shows a surplus:

Correct AnswerverifiedShow Answer

Answer the question on the basis of the following table: The MPC and MPS in the economy:

Correct AnswerverifiedShow Answer

An inflationary expenditure gap is the amount by which:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Unintended changes in inventories:

Correct AnswerverifiedShow Answer

Equal increases in government expenditures and tax collections will leave the equilibrium GDP unchanged.

Correct AnswerverifiedShow Answer

When C + Ig = GDP in a private closed economy,S = Ig and there are no unplanned changes in inventories.

Correct AnswerverifiedShow Answer

Assume that in a private closed economy consumption is $240 billion and investment is $50 billion,both at the $280 billion level of domestic output.Thus:

Correct AnswerverifiedShow Answer

Viewed through the aggregate expenditures model,the U.S.recession of 2007-2009 resulted mainly from:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Other things equal,if $100 billion of government purchases (G) is added to private spending (C + Ig + Xn) ,GDP will:

Correct AnswerverifiedShow Answer

In the aggregate expenditures model,technological progress will shift the investment schedule:

Correct AnswerverifiedShow Answer

Assume in a private closed economy that the equilibrium level of income is $380 and the MPS is .25.Now suppose government collects taxes of $50 and spends the entire amount.As a result:

Correct AnswerverifiedShow Answer

A recessionary expenditure gap in a mixed open economy can be measured as the extent to which aggregate expenditures (Ca + Ig + Xn + G)fall short of real GDP at the full-employment level of real GDP.

Correct AnswerverifiedShow Answer

If the MPC is 2/3,the initial impact of an increase of $12 billion in lump-sum taxes will be to cause:

Correct AnswerverifiedShow Answer

If C + Ig exceeds GDP in a private closed economy,GDP will decline.

Correct AnswerverifiedShow Answer

If government decreases its purchases by $20 billion and the MPC is .8,equilibrium GDP will decrease by $100 billion.

Correct AnswerverifiedShow Answer

Equal increases in government purchases and taxes will:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified

When C + I_g = GDP in a private closed economy,S = I_g and there are no unplanned changes in inventories.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Other things equal,if $100 billion of government purchases (G) is added to private spending (C + I_g + X_n) ,GDP will:

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

A recessionary expenditure gap in a mixed open economy can be measured as the extent to which aggregate expenditures (C_a + I_g + X_n + G)fall short of real GDP at the full-employment level of real GDP.

Correct Answer
verified

Correct Answer
verified

If C + I_g exceeds GDP in a private closed economy,GDP will decline.

Correct Answer
verified

Correct Answer
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Correct Answer
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