Question 1

In which of the following situations for a mixed open economy will the level of GDP expand?

Accepted Answer

A)  when Ig + X + G exceeds Sa + M + T
B)  when Sa + T + M exceeds Ig + G + X
C)  when domestic output exceeds Ca + Ig + G + Xn
D)  when Ig + M + T exceeds Ca + X + SE) A) and B)
F) A) and D)

Question 2

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) None of the above
F) C) and D)

Question 3

The following information is consumption and investment data for a private closed economy.Figures are in billions of dollars.C = 60 + .6Y I = I0 = 30
Refer to the above data.The equilibrium level of income (Y )  is:

Accepted Answer

A)  360
B)  225
C)  200
D)  135E) A) and B)
F) C) and D)

Question 4

Which of the following will cause the investment schedule to shift downward?

Accepted Answer

A)  an increase in the real interest rate
B)  a decline in wage rates
C)  a significant decline in the real interest rate
D)  a new technological advance which cuts the price of steel by one-halfE) None of the above
F) A) and B)

Question 5

An increase in taxes will have a greater effect on the equilibrium GDP:

Accepted Answer

A)  if the tax revenues are redistributed through transfer payments.
B)  the larger the MPS.
C)  the smaller the MPC.
D)  the larger the MPC.E) A) and D)
F) B) and C)

Question 6

Refer to the above data.If gross investment is $120, the equilibrium level of GDP will be:

Accepted Answer

A)  $380
B)  $370
C)  $360
D)  $400E) A) and B)
F) A) and C)

Question 7

For given data the aggregate expenditures-domestic output and the saving-investment approaches will yield the same equilibrium level of GDP.

Accepted Answer

A) True 
 B)False

Question 8

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) All of the above

Question 9

Planned investment equals saving:

Accepted Answer

A)  at all levels of GDP.
B)  at all below-equilibrium levels of GDP.
C)  at all above-equilibrium levels of GDP.
D)  only at the equilibrium GDP.E) B) and C)
F) None of the above

Question 10

C = 40 + .8Y _
Ig = Ig = 40
_
X = X = 20
_
M = M = 30
The equilibrium level of GDP = (Y)  in the above economy is:

Accepted Answer

A)  $200
B)  $245
C)  $320
D)  $350E) A) and B)
F) A) and C)

Question 11

Refer to the above diagram for a private closed economy.At the equilibrium level of GDP saving is:

Accepted Answer

A)  $10
B)  $20
C)  $30
D)  $50E) B) and C)
F) A) and D)

Question 12

The above diagram represents a:

Accepted Answer

A)  mixed closed economy.
B)  mixed open economy.
C)  private closed economy.
D)  private open economy.E) C) and D)
F) B) and D)

Question 13

In a mixed open economy, which of the following affect the equilibrium GDP in the same direction?

Accepted Answer

A)  Ca, Ig, Sa, and M
B)  Sa, T, and M
C)  Ig, T, and Ca
D)  Sa, Ig, and XE) B) and C)
F) A) and B)

Question 14

If an increase in aggregate expenditures results in no increase in real GDP we can conclude that the:

Accepted Answer

A)  economy is in a deep recession.
B)  MPC equals 1.
C)  economy is already operating at full employment.
D)  price level has fallen.E) C) and D)
F) A) and D)

Question 15

Refer to the above diagram.The equilibrium level of GDP for this private open economy is Y3.

Accepted Answer

A) True 
 B)False

Question 16

Refer to the above diagrams.Other things equal, an interest rate decrease will:

Accepted Answer

A)  shift curve A to the right and shift curve B upward.
B)  shift curve A to the left and shift curve B downward.
C)  leave curve A in place but shift curve B downward.
D)  leave curve A in place but shift curve A upward.E) C) and D)
F) A) and D)

Question 17

Refer to the above diagram.The value of the multiplier for this economy is:

Accepted Answer

A)  BC/hg.
B)  BC/AB.
C)  ed/di.
D)  df/BC.E) None of the above
F) C) and D)

Question 18

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 multiplier for the above economy is:

Accepted Answer

A)  4.60.
B)  3.33.
C)  5.00.
D)  4.00.E) A) and C)
F) All of the above

Question 19

A "recessionary expenditure gap" is:

Accepted Answer

A)  the amount by which the full-employment GDP exceeds equilibrium GDP.
B)  the amount by which aggregate expenditures fall short of those required to achieve the full-employment GDP.
C)  the amount by which investment exceeds saving at the full-employment GDP.
D)  the amount by which aggregate expenditures exceed the full-employment level of domestic output.E) B) and D)
F) A) and B)

Question 20

Suppose the multiplier is 4 and lump-sum taxes are increased by $16 in a closed economy.We can predict that:

Accepted Answer

A)  GDP will increase by $64.
B)  GDP will decrease by $64.
C)  the aggregate expenditures schedule will shift downward by $12.
D)  inflation will occur.E) A) and D)
F) None of the above

Exam 11: Part B: The Aggregate Expenditures Model

Planned investment equals saving:

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The following information is consumption and investment data for a private closed economy.Figures are in billions of dollars.C = 60 + .6Y I = I0 = 30 Refer to the above data.The equilibrium level of income (Y ) is:

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Refer to the above diagram.The equilibrium level of GDP for this private open economy is Y3.

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A recessionary expenditure gap exists if:

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Refer to the above diagram.The value of the multiplier for this economy is:

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The above diagram represents a:

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Refer to the above diagram for a private closed economy.At the equilibrium level of GDP saving is:

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Refer to the above data.If gross investment is $120, the equilibrium level of GDP will be:

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Suppose the multiplier is 4 and lump-sum taxes are increased by $16 in a closed economy.We can predict that:

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Which of the following will cause the investment schedule to shift downward?

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In a mixed open economy, which of the following affect the equilibrium GDP in the same direction?

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Refer to the above diagrams.Other things equal, an interest rate decrease will:

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C = 40 + .8Y _ Ig = Ig = 40 _ X = X = 20 _ M = M = 30 The equilibrium level of GDP = (Y) in the above economy is:

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

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For given data the aggregate expenditures-domestic output and the saving-investment approaches will yield the same equilibrium level of GDP.

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If an increase in aggregate expenditures results in no increase in real GDP we can conclude that the:

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A "recessionary expenditure gap" is:

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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 multiplier for the above economy is:

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In which of the following situations for a mixed open economy will the level of GDP expand?

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An increase in taxes will have a greater effect on the equilibrium GDP:

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The following information is consumption and investment data for a private closed economy.Figures are in billions of dollars.C = 60 + .6Y I = I₀ = 30 Refer to the above data.The equilibrium level of income (Y ) is:

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Refer to the above diagram.The equilibrium level of GDP for this private open economy is Y₃.

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C = 40 + .8Y _ I_g = I_g = 40 _ X = X = 20 _ M = M = 30 The equilibrium level of GDP = (Y) in the above 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 The multiplier for the above economy is:

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