Question 1

For a private closed economy,an unplanned decline in inventories suggests that:

Accepted Answer

A)   aggregate expenditures are less than the business sector expected them to be.
B)   planned investment is greater than saving.
C)   actual investment exceeds saving.
D)   planned investment is greater than consumption.E) None of the above
F) B) and C)

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

The equilibrium level of GDP always coincides with the full-employment GDP.

Accepted Answer

A) True 
 B)False

Question 4

If Canada wants to increase its net exports,other things equal,it might take steps to:

Accepted Answer

A)   increase its GDP.
B)   reduce existing tariffs and import quotas.
C)   decrease the dollar price of foreign currencies.
D)   increase the dollar price of foreign currencies.E) A) and B)
F) A) and C)

Question 5

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 6

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

Question 7

Imports have the same macroeconomic effect on GDP as:

Accepted Answer

A)   exports.
B)   investment.
C)   consumption.
D)   saving.E) A) and D)
F) B) and D)

Question 8

The letters Y,C,S,and I are used to represent GDP,consumption,saving,and investment respectively.
 0 = 30." class="answers-bank-image d-inline" rel="preload" >
-The equation representing the investment schedule for the above economy is:

Accepted Answer

A)   I = .3Y.
B)   I = 80 -.3Y.
C)   I = 30 + .1Y.
D)   I = I0 = 30.E) A) and B)
F) A) and C)

Question 9

The investment schedule tends to be relatively stable over time.

Accepted Answer

A) True 
 B)False

Question 10

Suppose the economy's multiplier is 2.Other things equal,a $25 billion decrease in government expenditures on national defence will cause equilibrium GDP to:

Accepted Answer

A)   decrease by $50 billion.
B)   decrease by $150 billion.
C)   remain unchanged since spending on military goods is unproductive and usually wasteful.
D)   decrease by $25 billion.E) B) and C)
F) A) and D)

Question 11

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

Question 12

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

Question 13

The letters Y,C,Ig,X,and M stand for GDP,consumption,gross investment,exports,and imports respectively.Figures are in billions of dollars.
C = 26 + .75Y
Ig = 60
X = 24
M = 10
-The equilibrium level of GDP for the above open economy is:

Accepted Answer

A)   $390
B)   $375
C)   $320
D)   $400E) B) and C)
F) A) and B)

Question 14

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) B) and C)

Question 15

The letters Y,C,Ig,X,and M stand for GDP,consumption,gross investment,exports,and imports respectively.Figures are in billions of dollars.
C = 26 + .75Y
Ig = 60
X = 24
M = 10
-Refer to the above information.The multiplier for this economy:

Accepted Answer

A)   is 4.
B)   is 3.
C)   is 2.
D)   is 2.33.E) None of the above
F) C) and D)

Question 16

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

Question 17

Which of the following is a correct statement of the impacts of a lump-sum tax?

Accepted Answer

A)   Disposable income will increase by the amount of the tax and consumption at each level of GDP will decline by the amount of the tax multiplied by the MPC.
B)   Disposable income will decline by the amount of the tax and consumption at each level of GDP will decline by the amount of the tax multiplied by the multiplier.
C)   Disposable income will decline by the amount of the tax and consumption at each level of GDP will also decline by the amount of the tax.
D)   Disposable income will decline by the amount of the tax and consumption at each level of GDP will decline by the amount of the tax multiplied by the MPC.E) A) and B)
F) B) and C)

Question 18

Cyclical unemployment in Canada is essentially the consequence of:

Accepted Answer

A)   procyclical fiscal policies.
B)   a deficient level of aggregate expenditures.
C)   rapid technological progress.
D)   the geographic immobility of the labor force.E) A) and D)
F) B) and C)

Question 19

A lump-sum tax causes the after-tax consumption schedule:

Accepted Answer

A)   and the before-tax consumption schedule to coincide.
B)   to be steeper than the before-tax consumption schedule.
C)   to be flatter than the before-tax consumption schedule.
D)   to be parallel to the before-tax consumption schedule.E) None of the above
F) B) and C)

Question 20

-Refer to the above diagram for a private closed economy.At the $100 level of GDP:

Accepted Answer

A)   aggregate expenditures will exceed GDP,causing GDP to fall.
B)   planned investment will exceed saving,but actual investment will be equal to saving.
C)   households will consume more than their income.
D)   saving will be $40.E) None of the above
F) A) and C)

Exam 11: 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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The equilibrium level of GDP always coincides with the full-employment GDP.

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Suppose the economy's multiplier is 2.Other things equal,a $25 billion decrease in government expenditures on national defence will cause equilibrium GDP to:

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The letters Y,C,Ig,X,and M stand for GDP,consumption,gross investment,exports,and imports respectively.Figures are in billions of dollars. C = 26 + .75Y Ig = 60 X = 24 M = 10 -The equilibrium level of GDP for the above open economy is:

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Imports have the same macroeconomic effect on GDP as:

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During the recession of 2008 - 2009:

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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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A lump-sum tax causes the after-tax consumption schedule:

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

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The investment schedule tends to be relatively stable over time.

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For a private closed economy,an unplanned decline in inventories suggests that:

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-Refer to the above diagram for a private closed economy.At the $100 level of GDP:

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Cyclical unemployment in Canada is essentially the consequence of:

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If Canada wants to increase its net exports,other things equal,it might take steps to:

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

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

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

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Which of the following is a correct statement of the impacts of a lump-sum tax?

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The letters Y,C,Ig,X,and M stand for GDP,consumption,gross investment,exports,and imports respectively.Figures are in billions of dollars. C = 26 + .75Y Ig = 60 X = 24 M = 10 -Refer to the above information.The multiplier for this economy:

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The letters Y,C,S,and I are used to represent GDP,consumption,saving,and investment respectively. -The equation representing the investment schedule for the above economy is:

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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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The letters Y,C,I_g,X,and M stand for GDP,consumption,gross investment,exports,and imports respectively.Figures are in billions of dollars. C = 26 + .75Y I_g = 60 X = 24 M = 10 -The equilibrium level of GDP for the above open economy is:

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The letters Y,C,I_g,X,and M stand for GDP,consumption,gross investment,exports,and imports respectively.Figures are in billions of dollars. C = 26 + .75Y I_g = 60 X = 24 M = 10 -Refer to the above information.The multiplier for this economy:

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Correct Answer
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