Question 1

During the recession of 2008 - 2009:

Accepted Answer

A)   both after-tax consumption and government expenditures declined.
B)   both after-tax consumption and investment expenditures declined.
C)   both government expenditures and investment expenditures declined.
D)   government expenditures declined but after- tax consumptionE) B) and C)
F) None of the above

Question 2

In the aggregate expenditures model, it is assumed that the planned investment:

Accepted Answer

A)   automatically changes in response to changes in the current level of real domestic output.
B)   changes by less in percentage terms than changes in the level of real domestic output.
C)   does not respond to changes in interest rates.
D)   does not change when the level of real domestic output changes.E) None of the above
F) A) and B)

Question 3

-Refer to the above diagrams. Curve A:

Accepted Answer

A)   is an investment schedule and curve B is a consumption of fixed capital schedule.
B)   is an investment demand curve and curve B is an investment schedule.
C)   and B are totally unrelated.
D)   shifts to the left when curve B shifts upward.E) A) and C)
F) A) and D)

Question 4

If government decreases its purchases by $20 billion and the MPC is 0.8, equilibrium GDP will decrease by $100 billion.

Accepted Answer

A) True 
 B)False

Question 5

If APC = .6 and MPC = .7, the immediate impact of an increase in personal taxes of $20 will be to:

Accepted Answer

A)   have no effect on consumption.
B)   decrease consumption by $14.
C)   decrease consumption by $12.
D)   increase consumption by $14.E) A) and B)
F) A) and C)

Question 6

Complete the following table and answer the next question(s)  on the basis of the resulting data. All figures are in billions of dollars.
 
-If the above economy was closed to international trade, the equilibrium GDP and the multiplier would be:

Accepted Answer

A)   $300 and 5.
B)   $350 and 4.
C)   $400 and 4.
D)   $350 and 5.E) A) and D)
F) B) and C)

Question 7

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

Accepted Answer

A)   0E/0A.
B)   BD/FG.
C)   FG/BD.
D)   BD/AD.E) None of the above
F) A) and B)

Question 8

Refer to the diagram below for a private closed economy. At income level D:

Accepted Answer

A)   planned investment is GH.
B)   unplanned investment is GH.
C)   unplanned disinvestment is GH.
D)   saving equals planned investment.E) B) and C)
F) C) and D)

Question 9

Refer to the diagram below. The equilibrium condition for a private closed economy is Ig = S.

Accepted Answer

A) True 
 B)False

Question 10

-Refer to the above diagram for a private closed economy. In this economy investment:

Accepted Answer

A)   decreases as GDP increases.
B)   increases as GDP increases.
C)   is $40 billion at all levels of GDP.
D)   is $60 billion at all levels of GDP.E) A) and B)
F) A) and C)

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

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

A recessionary expenditure gap exists if:

Accepted Answer

A)   planned investment exceeds saving at the full-employment GDP.
B)   the aggregate expenditures schedule lies below the 45-degree line at the full-employment GDP.
C)   the aggregate expenditures schedule intersects the 45-degree line at any level of GDP.
D)   the aggregate expenditures schedule lies above the 45-degree line at the full-employment GDP.E) B) and D)
F) C) and D)

Question 14

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

Accepted Answer

A)   a $20 billion reduction 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 increase in government spendingE) A) and D)
F) B) and C)

Question 15

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 + .4Y
-Refer to the above information. In equilibrium, saving will be:

Accepted Answer

A)   $40.
B)   $120.
C)   $60.
D)   $80.E) None of the above
F) A) and B)

Question 16

-The multiplier for the economy in the above diagram:

Accepted Answer

A)   is 3.
B)   is 4.
C)   is 4.8.
D)   is 5.4.E) B) and D)
F) A) and B)

Question 17

Exports have the same macroeconomic effect on GDP as:

Accepted Answer

A)   imports.
B)   investment.
C)   taxes.
D)   saving.E) A) and D)
F) A) and B)

Question 18

The following information is for a closed economy:
 
-Refer to the above information. The addition of a $100 billion lump-sum tax:

Accepted Answer

A)   reduces the MPC and increases the multiplier.
B)   increases the MPC and decreases the multiplier.
C)   increases both the MPC and the multiplier.
D)   has no effect on either the MPC or the multiplier.E) B) and D)
F) C) and D)

Question 19

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

Question 20

Complete the following table and answer the next question(s)  on the basis of the resulting data. All figures are in billions of dollars.
 
-Refer to the above table. For the open economy the equilibrium GDP and the multiplier will be:

Accepted Answer

A)   $300 and 2.5.
B)   $450 and 5.
C)   $400 and 4.
D)   $400 and 5.E) None of the above
F) All of the above

Exam 9: The Aggregate Expenditures Model

Exports have the same macroeconomic effect on GDP as:

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Complete the following table and answer the next question(s) on the basis of the resulting data. All figures are in billions of dollars. -Refer to the above table. For the open economy the equilibrium GDP and the multiplier will be:

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Refer to the diagram below for a private closed economy. At income level D:

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The following information is for a closed economy: -Refer to the above information. The addition of a $100 billion lump-sum tax:

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If government decreases its purchases by $20 billion and the MPC is 0.8, equilibrium GDP will decrease by $100 billion.

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Refer to the diagram below. The equilibrium condition for a private closed economy is Ig = S.

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Complete the following table and answer the next question(s) on the basis of the resulting data. All figures are in billions of dollars. -If the above economy was closed to international trade, the equilibrium GDP and the multiplier would be:

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-The multiplier for the economy in the above diagram:

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

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-Refer to the above diagram for a private closed economy. In this economy investment:

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A recessionary expenditure gap exists if:

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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 + .4Y -Refer to the above information. In equilibrium, saving will be:

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If APC = .6 and MPC = .7, the immediate impact of an increase in personal taxes of $20 will be to:

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During the recession of 2008 - 2009:

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

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In the aggregate expenditures model, it is assumed that the planned investment:

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-Refer to the above diagrams. Curve A:

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

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

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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:

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Refer to the diagram below. The equilibrium condition for a private closed economy is I_g = S.

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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 + .4Y -Refer to the above information. In equilibrium, saving will be:

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