Question 1

g) are the private expenditures in the closed economy and Xn2 are the net exports in the open economy: A)  exports are negative. B)  net exports are positive. C)  net exports are negative. D)  exports are positive." class="answers-bank-image d-inline" rel="preload" >
-Refer to the above diagram.If (C + Ig) are the private expenditures in the closed economy and Xn2 are the net exports in the open economy:

Accepted Answer

A)   exports are negative.
B)   net exports are positive.
C)   net exports are negative.
D)   exports are positive.E) A) and B)
F) A) and C)

Question 2

In which of the following situations for a private closed economy will the level of GDP expand?

Accepted Answer

A)   when planned investment exceeds saving
B)   when planned investment exceeds consumption
C)   when saving exceeds consumption
D)   when consumption exceeds investmentE) B) and D)
F) All of the above

Question 3

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

Question 4

Actual investment is $62 billion at an equilibrium output level of $620 billion in a private closed economy.The average propensity to save at this level of output:

Accepted Answer

A)   is 0.10.
B)   is 10.
C)   is 0.62.
D)   cannot be determined on the basis of the information given.E) A) and B)
F) A) and C)

Question 5

When the public sector is added to the aggregate expenditures model:

Accepted Answer

A)   the equilibrium condition becomes G + S = T + Ig + X.
B)   the equilibrium condition becomes G + T = S + Ig + X.
C)   the equilibrium condition becomes Ca + Ig + Xn + G + T = GDP.
D)   we add a new leakage in the form of taxes and a new injection in the form of government spending.E) B) and C)
F) A) and C)

Question 6

If the marginal propensity to save in a closed economy is 0.25 and a lump-sum tax is imposed,the slope of the economy's aggregate expenditures schedule will be:

Accepted Answer

A)   .25.
B)   less than the slope before the imposition of the tax.
C)   greater than the slope before the imposition of the tax.
D)   .75.E) A) and B)
F) All of the above

Question 7

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

Question 8

In reality,if a nation imposes tariffs,then the final result will be that net exports and GDP will decrease.

Accepted Answer

A) True 
 B)False

Question 9

-Refer to the above diagram.The impact of the public sector on the equilibrium GDP:

Accepted Answer

A)   is expansionary.
B)   is contractionary.
C)   is neutral.
D)   cannot be determined from the information given.E) All of the above
F) A) and C)

Question 10

If the marginal propensity to consume is .80 and both taxes and government purchases increase by $50 billion,GDP will:

Accepted Answer

A)   increase by $50 billion.
B)   decrease by $50 billion.
C)   increase by $10 billion.
D)   decrease by $10 billion.E) B) and C)
F) None of the above

Question 11

In a recessionary expenditure gap,the equilibrium level of real GDP is:

Accepted Answer

A)   less than planned investment.
B)   equal to full-employment GDP.
C)   greater than full-employment GDP.
D)   less than full-employment GDP.E) All of the above
F) B) and C)

Question 12

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

Accepted Answer

A)   4
B)   5
C)   1.5.
D)   3E) B) and D)
F) None of the above

Question 13

-Refer to the above information.In this economy a 3 percentage point decrease in the interest rate will:

Accepted Answer

A)   increase equilibrium GDP by $200.
B)   increase equilibrium GDP by $100.
C)   increase equilibrium GDP by $50.
D)   decrease equilibrium GDP by $50.E) C) and D)
F) A) and B)

Question 14

In reality,if a nation devalues its currency,then the final result will be that:

Accepted Answer

A)   net exports and GDP will increase.
B)   net exports and GDP will decrease.
C)   there will be is no long term effect on net exports and GDP.
D)   there will be a decrease in imports and an increase in GDP.E) All of the above
F) C) and D)

Question 15

In the aggregate expenditures model,an increase in government spending will:

Accepted Answer

A)   decrease real GDP.
B)   increase output and employment.
C)   shift the aggregate expenditures schedule downward.
D)   do all of the above.E) All of the above
F) A) and D)

Question 16

-Refer to the above diagram.The equilibrium condition for a private open economy is S + M = Ig + X.

Accepted Answer

A) True 
 B)False

Question 17

In a private closed economy,where aggregate expenditures exceed domestic output:

Accepted Answer

A)   domestic output will decline to the break-even level.
B)   business inventories will rise.
C)   saving exceeds planned investment.
D)   planned investment exceeds saving.E) All of the above
F) A) and D)

Question 18

What do investment and government expenditures have in common?

Accepted Answer

A)   Both represent injections to the circular flow.
B)   Both represent leakages from the circular flow.
C)   Neither is subject to the multiplier effect.
D)   Both represent a decline in indebtedness.E) A) and D)
F) A) and C)

Question 19

In a private closed economy (a) the marginal propensity to save is 0.25, (b) consumption equals income when consumption is $120 billion,and (c) the level of investment is $40 billion.What is the equilibrium level of income?

Accepted Answer

A)   $280 billion
B)   $320 billion
C)   $262 billion
D)   $198 billionE) A) and C)
F) All of the above

Question 20

What will be the effect of an excess of planned investment over saving in a private closed economy with unemployed resources?

Accepted Answer

A)   a decline in the rate of interest
B)   an unplanned accumulation of inventories by businesses
C)   a rise in the real GDP
D)   the federal budget will automatically move toward a deficitE) None of the above
F) A) and B)

Exam 11: The Aggregate Expenditures Model

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

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If the marginal propensity to save in a closed economy is 0.25 and a lump-sum tax is imposed,the slope of the economy's aggregate expenditures schedule will be:

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In which of the following situations for a private closed economy will the level of GDP expand?

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In reality,if a nation imposes tariffs,then the final result will be that net exports and GDP will decrease.

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-Refer to the above diagram.The impact of the public sector on the equilibrium GDP:

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When the public sector is added to the aggregate expenditures model:

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What will be the effect of an excess of planned investment over saving in a private closed economy with unemployed resources?

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In a private closed economy,where aggregate expenditures exceed domestic output:

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What do investment and government expenditures have in common?

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-Refer to the above information.In this economy a 3 percentage point decrease in the interest rate will:

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In reality,if a nation devalues its currency,then the final result will be that:

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-Refer to the above diagram.If (C + Ig) are the private expenditures in the closed economy and Xn2 are the net exports in the open economy:

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

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If the marginal propensity to consume is .80 and both taxes and government purchases increase by $50 billion,GDP will:

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In the aggregate expenditures model,an increase in government spending will:

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A "recessionary expenditure gap" is:

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-Refer to the above diagram.The equilibrium condition for a private open economy is S + M = Ig + X.

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In a recessionary expenditure gap,the equilibrium level of real GDP is:

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In a private closed economy (a) the marginal propensity to save is 0.25, (b) consumption equals income when consumption is $120 billion,and (c) the level of investment is $40 billion.What is the equilibrium level of income?

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Actual investment is $62 billion at an equilibrium output level of $620 billion in a private closed economy.The average propensity to save at this level of output:

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-Refer to the above diagram.If (C + I_g) are the private expenditures in the closed economy and X_n2 are the net exports in the open economy:

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-Refer to the above diagram.The equilibrium condition for a private open economy is S + M = I_g + X.

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