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	ext { when } I _ { g } + X + G 	ext { exceeds } S _ { a } + M + T when Ig​+X+G exceeds Sa​+M+T 
B)     when Sa+T+M exceeds Ig+G+X	ext { when } S _ { a } + T + M 	ext { exceeds } I _ { g } + G + X when Sa​+T+M exceeds Ig​+G+X 
C)     when GDP exceeds Ca+Ig+G+Xn	ext { when GDP exceeds } C _ { a } + I _ { g } + G + X _ { n } when GDP exceeds Ca​+Ig​+G+Xn​ 
D)     when Ig+M+T exceeds Ca+X+S	ext { when } I _ { g } + M + T 	ext { exceeds } C _ { a } + X + S when Ig​+M+T exceeds Ca​+X+SE) A) and D)
F) A) and C)

Question 2

Ig = 80 
SA=−80 + 0.4Y
(Advanced analysis)  The equations refer to a private closed economy, where Ig is gross investment, S
Is saving, and Y is gross domestic product (GDP) . The equilibrium GDP will be

Accepted Answer

A)   $160.
B)   $400.
C)   $360.
D)   $480.E) B) and C)
F) A) and D)

Question 3

Which two aggregate expenditure schedules AE in the diagram for a private closed economy have the same MPC, assuming investment is the same at each level of income?

Accepted Answer

A)   AE1 and AE2
B)   AE2 and AE3
C)   AE1 and AE4
D)   AE3 and AE4E) A) and B)
F) All of the above

Question 4

Other things equal, if a change in the tastes of American consumers causes them to purchase more foreign goods at each level of U.S. GDP, then

Accepted Answer

A)   unemployment will decrease domestically.
B)   U.S. real GDP will fall.
C)   inﬂation will occur domestically.
D)   U.S. real GDP will rise.E) C) and D)
F) A) and C)

Question 5

At the $180 billion equilibrium level of income, saving is $38 billion in a private closed economy. Planned investment must be

Accepted Answer

A)   $138 billion.
B)   $126 billion.
C)   $38 billion.
D)   $180 billion.E) A) and B)
F) None of the above

Question 6

C = 40 + 0.8Y Ig = 60 − 2i
I = 10
(Advanced analysis)  The equations are for a private closed economy, where C is consumption, Y is the
Gross domestic product, Ig is gross investment, and i is the interest rate. Given that the interest rate is
10 (percent) , the amount that businesses will want to invest will be

Accepted Answer

A)   $58.
B)   $60.
C)   $40.
D)   $20.E) A) and D)
F) A) and C)

Question 7

SA=−20 + 0.4Y 
Ig = 25 − 3i
(Advanced analysis)  The equations refer to a private closed economy, where S is saving, Ig is gross
Investment, i is the real interest rate, and Y is GDP. In equilibrium, the level of consumption will be

Accepted Answer

A)   $80.
B)   $95.
C)   $65.
D)   $70.E) A) and C)
F) B) and D)

Question 8

In a private closed economy, when aggregate expenditures exceed GDP,

Accepted Answer

A)   GDP will decline.
B)   business inventories will rise.
C)   saving will decline.
D)   business inventories will fall.E) A) and B)
F) B) and D)

Question 9

Saving is always equal to

Accepted Answer

A)   planned investment less unintended increases in inventories.
B)   actual investment.
C)   planned investment.
D)   unintended changes in inventories.E) A) and C)
F) A) and B)

Question 10

If an unintended increase in business inventories occurs at some level of GDP, then GDP

Accepted Answer

A)   entails a rate of aggregate expenditures in excess of the rate of aggregate production.
B)   may be either above or below the equilibrium output.
C)   is too low for equilibrium.
D)   is too high for equilibrium.E) B) and D)
F) C) and D)

Question 11

In a mixed open economy, the equilibrium GDP is determined at that point where

Accepted Answer

A)    Sa+M+T=Ig+X+GS _ { \mathrm { a } } + M + T = \mathrm { I } _ { \mathrm { g } } + X + GSa​+M+T=Ig​+X+G 
B)   the 45-degree line and the saving schedule intersect.
C)    Sa+X+G=Ig+TS _ { a } + X + G = I _ { g } + TSa​+X+G=Ig​+T 
D)    Sa+Ig+X=G+TS _ { a } + I _ { g } + X = G + TSa​+Ig​+X=G+TE) C) and D)
F) A) and C)

Question 12

If at some level of GDP the economy is experiencing an unintended decrease in inventories,

Accepted Answer

A)   the aggregate level of saving will decline.
B)   the price level will fall.
C)   the business sector will lay off workers.
D)   domestic output will increase.E) B) and C)
F) A) and B)

Question 13

Refer to the diagram for a private closed economy. The marginal propensity to consume is

Accepted Answer

A)   GF/GB.
B)   DA/GB.
C)   FE/DE.
D)   FB/0B.E) B) and C)
F) None of the above

Question 14

In a private closed economy, when aggregate expenditures equal GDP,

Accepted Answer

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

Question 15

In the United States from 1929 to 1933, real GDP _____________ and the unemployment rate ________________.

Accepted Answer

A)   declined by 27 percent; rose to 25 percent.
B)   increased by 21 percent; fell to 2 percent.
C)   declined by 21 percent; rose to 27 percent.
D)   declined by 40 percent; rose to 50 percent.E) None of the above
F) B) and C)

Question 16

Gross Domestic Product  Consumption $100$120200180300240400300500360 Expected Rate of Return  Amount of Investment 25%$0202015401060580\begin{array}{l}\begin{array} { | c | c | } \hline 	ext { Gross Domestic Product } & 	ext { Consumption } \\hline \$ 100 & \$ 120 \\hline 200 & 180 \\hline 300 & 240 \\hline 400 & 300 \\hline 500 & 360 \\hline\end{array}\\\begin{array} { | c | c | } \hline 	ext { Expected Rate of Return } & 	ext { Amount of Investment } \\hline 25 \% & \$ 0 \\hline 20 & 20 \\hline 15 & 40 \\hline 10 & 60 \\hline 5 & 80 \\hline\end{array}\end{array} Gross Domestic Product $100200300400500​ Consumption $120180240300360​​ Expected Rate of Return 25%2015105​ Amount of Investment $020406080​​​  Refer to the tables of information for a private closed economy. If the real interest rate is 20 percent, the equilibrium GDP will be

Accepted Answer

A)   $100.
B)   $200.
C)   $300.
D)   $400. E) A) and D)
F) A) and C)

Question 17

Refer to the diagram. The change in aggregate expenditures as shown from  (C+Ig+Xn) \left( \mathrm { C } + I _ { g } + X _ { n } \right) (C+Ig​+Xn​)   to  (C+Ig+\left( \mathrm { C } + I _ { g } + \right.(C+Ig​+   Xn2X _ { n 2 }Xn2​  )  will produce

Accepted Answer

A)   a decrease in real GDP.
B)   an in?ationary expenditure gap if 0D is this nation's full-employment level of GDP.
C)   an increase in real GDP if 0A is this nation's full-employment level of GDP.
D)   an in?ationary expenditure gap if 0B is this nation's full-employment level of GDP. E) All of the above
F) A) and B)

Question 18

C=26+0.75YIg=60X=24M=10\begin{array} { l } C = 26 + 0.75 Y \I _ { g } = 60 \X = 24 \M = 10\end{array}C=26+0.75YIg​=60X=24M=10​  (Advanced analysis)  The equations give information for a private open economy. The letters Y, C, Ig, X, and M stand for GDP, consumption, gross investment, exports, and imports, respectively. Figures are in
Billions of dollars. The equilibrium GDP for the open economy is

Accepted Answer

A)   $390.
B)   $375.
C)   $320.
D)   $400. E) None of the above
F) A) and B)

Question 19

If an unintended increase in business inventories occurs,

Accepted Answer

A)   we can expect aggregate production to be unaffected.
B)   we can expect businesses to increase the level of production.
C)   we can expect businesses to lower the level of production.
D)   aggregate expenditures must exceed the domestic output.E) A) and D)
F) B) and C)

Question 20

An increase in taxes of a speciﬁc amount will have a smaller impact on the equilibrium GDP than will a decline in government spending of the same amount because

Accepted Answer

A)   the MPC is smaller in the private sector than it is in the public sector.
B)   declines in government spending always tend to stimulate private investment.
C)   disposable income will fall by some amount smaller than the tax increase.
D)   some of the tax increase will be paid out of income that would otherwise have been saved.E) A) and B)
F) A) and D)

Exam 11: The Aggregate Expenditures Model

Saving is always equal to

Correct Answer
verified

Other things equal, if a change in the tastes of American consumers causes them to purchase more foreign goods at each level of U.S. GDP, then

Correct Answer
verified

An increase in taxes of a speciﬁc amount will have a smaller impact on the equilibrium GDP than will a decline in government spending of the same amount because

Correct Answer
verified

If at some level of GDP the economy is experiencing an unintended decrease in inventories,

Correct Answer
verified

Correct Answer
verified

In the United States from 1929 to 1933, real GDP _ and the unemployment rate ____.

Correct Answer
verified

Ig = 80 SA=−80 + 0.4Y (Advanced analysis) The equations refer to a private closed economy, where Ig is gross investment, S Is saving, and Y is gross domestic product (GDP) . The equilibrium GDP will be

Correct Answer
verified

Correct Answer
verified

In a private closed economy, when aggregate expenditures exceed GDP,

Correct Answer
verified

In a mixed open economy, the equilibrium GDP is determined at that point where

Correct Answer
verified

Which two aggregate expenditure schedules AE in the diagram for a private closed economy have the same MPC, assuming investment is the same at each level of income?

Correct Answer
verified

If an unintended increase in business inventories occurs,

Correct Answer
verified

At the $180 billion equilibrium level of income, saving is $38 billion in a private closed economy. Planned investment must be

Correct Answer
verified

Correct Answer
verified

SA=−20 + 0.4Y Ig = 25 − 3i (Advanced analysis) The equations refer to a private closed economy, where S is saving, Ig is gross Investment, i is the real interest rate, and Y is GDP. In equilibrium, the level of consumption will be

Correct Answer
verified

Correct Answer
verified

Refer to the diagram for a private closed economy. The marginal propensity to consume is

Correct Answer
verified

In a private closed economy, when aggregate expenditures equal GDP,

Correct Answer
verified

If an unintended increase in business inventories occurs at some level of GDP, then GDP

Correct Answer
verified

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

Correct Answer
verified

Exam 11: The Aggregate Expenditures Model

Saving is always equal to

Correct AnswerverifiedShow Answer

Other things equal, if a change in the tastes of American consumers causes them to purchase more foreign goods at each level of U.S. GDP, then

Correct AnswerverifiedShow Answer

An increase in taxes of a speciﬁc amount will have a smaller impact on the equilibrium GDP than will a decline in government spending of the same amount because

Correct AnswerverifiedShow Answer

If at some level of GDP the economy is experiencing an unintended decrease in inventories,

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In the United States from 1929 to 1933, real GDP _____________ and the unemployment rate ________________.

Correct AnswerverifiedShow Answer

Ig = 80 SA=−80 + 0.4Y (Advanced analysis) The equations refer to a private closed economy, where Ig is gross investment, S Is saving, and Y is gross domestic product (GDP) . The equilibrium GDP will be

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In a private closed economy, when aggregate expenditures exceed GDP,

Correct AnswerverifiedShow Answer

In a mixed open economy, the equilibrium GDP is determined at that point where

Correct AnswerverifiedShow Answer

Which two aggregate expenditure schedules AE in the diagram for a private closed economy have the same MPC, assuming investment is the same at each level of income?

Correct AnswerverifiedShow Answer

If an unintended increase in business inventories occurs,

Correct AnswerverifiedShow Answer

At the $180 billion equilibrium level of income, saving is $38 billion in a private closed economy. Planned investment must be

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

SA=−20 + 0.4Y Ig = 25 − 3i (Advanced analysis) The equations refer to a private closed economy, where S is saving, Ig is gross Investment, i is the real interest rate, and Y is GDP. In equilibrium, the level of consumption will be

Correct AnswerverifiedShow Answer

Refer to the diagram. The change in aggregate expenditures as shown from (C+Ig+Xn) \left( \mathrm { C } + I _ { g } + X _ { n } \right) (C+Ig​+Xn​) to (C+Ig+\left( \mathrm { C } + I _ { g } + \right.(C+Ig​+ Xn2X _ { n 2 }Xn2​ ) will produce

Correct AnswerverifiedShow Answer

Refer to the diagram for a private closed economy. The marginal propensity to consume is

Correct AnswerverifiedShow Answer

In a private closed economy, when aggregate expenditures equal GDP,

Correct AnswerverifiedShow Answer

If an unintended increase in business inventories occurs at some level of GDP, then GDP

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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In the United States from 1929 to 1933, real GDP _ and the unemployment rate ____.

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