Question 1

What is the likely result from a depreciation of a nation's currency when its economy is operating at its full-employment level of output?

Accepted Answer

A)   net exports fall and contribute to demand-pull inflation
B)   net exports rise and contribute to demand-pull inflation
C)   net exports fall, but equilibrium GDP rises
D)   net exports rise, but equilibrium GDP fallsE) A) and B)
F) A) and C)

Question 2

The equilibrium GDP is the level of domestic output:

Accepted Answer

A)   where consumption equals saving.
B)   where actual investment equals consumption.
C)   which is sustainable.
D)   where full employment exists.E) A) and B)
F) All of the above

Question 3

-Refer to the above diagram, the location of curve B depends on the:

Accepted Answer

A)   level of real GDP.
B)   location of curve A only.
C)   interest rate only.
D)   both interest rate and, the location of curve AE) B) and C)
F) None of the above

Question 4

-Refer to the above diagram which is for a private closed economy. All figures are in billions of dollars. If businesses were willing to invest $30 at each possible level of GDP, the equilibrium level of GDP would be:

Accepted Answer

A)   $462.5.
B)   $435.
C)   $420.
D)   $380.E) A) and B)
F) A) and C)

Question 5

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)   only part of the tax increase will affect the consumption negatively.E) B) and D)
F) C) and D)

Question 6

g cuts the 45-degree line. B)  GDP is $180 billion. C)  GDP is $60 billion. D)  GDP is also zero." class="answers-bank-image d-inline" rel="preload" >
-Refer to the above diagram for a private closed economy. Aggregate saving in this economy will be zero when:

Accepted Answer

A)   C + Ig cuts the 45-degree line.
B)   GDP is $180 billion.
C)   GDP is $60 billion.
D)   GDP is also zero.E) A) and B)
F) None of the above

Question 7

-Refer to the above diagram. Other things equal, an interest rate decrease coupled with a rightward shift in curve A will:

Accepted Answer

A)   shift curve B upward.
B)   shift curve B downward.
C)   has no effect on curve B
D)   reduce GDP.E) B) and D)
F) A) and D)

Question 8

-The economy in the above diagram is incurring:

Accepted Answer

A)   balance in its international trade.
B)   a trade deficit.
C)   a trade surplus.
D)   inflation.E) A) and B)
F) B) and C)

Question 9

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. If the economy's tax schedule was T = 0.2Y rather than T = T0 = 30, the equilibrium GDP would be:

Accepted Answer

A)   $387.3.
B)   $518.5.
C)   $316.
D)   $412.E) None of the above
F) C) and D)

Question 10

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 B)
F) A) and C)

Question 11

The recessionary expenditure gap is the amount by which the equilibrium GDP and the full-employment GDP differ.

Accepted Answer

A) True 
 B)False

Question 12

Other things equal, serious recession in the economies of Canada's trading partners will:

Accepted Answer

A)   have no perceptible impact on the Canadian economy.
B)   cause inflation in the Canadian economy.
C)   depress real output and employment in the Canadian economy.
D)   stimulate real output and employment in the Canadian economy.E) B) and C)
F) A) and C)

Question 13

-Refer to the above diagram for a private closed economy. In this economy, aggregate expenditures:

Accepted Answer

A)   do not change as GDP increases.
B)   increase by $2 for every $5 increase in GDP.
C)   increase by $2 for every $4 increase in GDP.
D)   increase by $2 for every $3 increase in GDP.E) B) and C)
F) All of the above

Question 14

-Refer to the above diagram for a private closed economy. At the $200 level of GDP:

Accepted Answer

A)   consumption is $200 and planned investment is $50 so that aggregate expenditures are $250.
B)   consumption is $200 and planned investment is $100 so that aggregate expenditures are $300.
C)   consumption is $250 and actual investment is $50 so that aggregate expenditures are $300.
D)   aggregate expenditures is equal to the GDP.E) All of the above
F) None of the above

Question 15

-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) B) and C)

Question 16

Refer to the diagram below for a private closed economy. In equilibrium the level of consumption:

Accepted Answer

A)   will be $100.
B)   will be $500.
C)   will be $600.
D)   cannot be determined from the information given.E) None of the above
F) A) and B)

Question 17

The table shows a private, open economy. All figures are in billions of dollars.
 
-Refer to the above table. The equilibrium real GDP is:

Accepted Answer

A)   $550.
B)   $600.
C)   $650.
D)   $700.E) A) and D)
F) A) and C)

Question 18

The level of aggregate expenditures in the private closed economy is determined by the:

Accepted Answer

A)   expenditures of consumers and businesses.
B)   intersection of the saving schedule and the 45-degree line.
C)   equality of the MPC and MPS.
D)   intersection of the saving and consumption schedules.E) None of the above
F) A) and B)

Question 19

If the MPC is 2/3, the initial impact of an increase of $12 billion in lump-sum taxes will be to cause:

Accepted Answer

A)   a rightward shift in the investment-demand schedule.
B)   an $8 billion downshift in the consumption schedule.
C)   a $4 billion upshift in the consumption schedule.
D)   a $12 billion downshift in the consumption schedule.E) B) and D)
F) All of the above

Question 20

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) C) and D)
F) All of the above

Exam 9: The Aggregate Expenditures Model

-Refer to the above diagram. Other things equal, an interest rate decrease coupled with a rightward shift in curve A will:

Correct Answer
verified

If the MPC is 2/3, the initial impact of an increase of $12 billion in lump-sum taxes will be to cause:

Correct Answer
verified

The recessionary expenditure gap is the amount by which the equilibrium GDP and the full-employment GDP differ.

Correct Answer
verified

-Refer to the above diagram for a private closed economy. Aggregate saving in this economy will be zero when:

Correct Answer
verified

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

Correct Answer
verified

What do investment and government expenditures have in common?

Correct Answer
verified

-Refer to the above diagram for a private closed economy. In this economy, aggregate expenditures:

Correct Answer
verified

What is the likely result from a depreciation of a nation's currency when its economy is operating at its full-employment level of output?

Correct Answer
verified

The table shows a private, open economy. All figures are in billions of dollars. -Refer to the above table. The equilibrium real GDP is:

Correct Answer
verified

-Refer to the above diagram which is for a private closed economy. All figures are in billions of dollars. If businesses were willing to invest $30 at each possible level of GDP, the equilibrium level of GDP would be:

Correct Answer
verified

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

-Refer to the above diagram, the location of curve B depends on the:

Correct Answer
verified

The equilibrium GDP is the level of domestic output:

Correct Answer
verified

Other things equal, serious recession in the economies of Canada's trading partners will:

Correct Answer
verified

The level of aggregate expenditures in the private closed economy is determined by the:

Correct Answer
verified

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

Correct Answer
verified

-Refer to the above diagram for a private closed economy. At the $200 level of GDP:

Correct Answer
verified

Refer to the diagram below for a private closed economy. In equilibrium the level of consumption:

Correct Answer
verified

-The economy in the above diagram is incurring:

Correct Answer
verified

Exam 9: The Aggregate Expenditures Model

-Refer to the above diagram. Other things equal, an interest rate decrease coupled with a rightward shift in curve A will:

Correct AnswerverifiedShow Answer

If the MPC is 2/3, the initial impact of an increase of $12 billion in lump-sum taxes will be to cause:

Correct AnswerverifiedShow Answer

The recessionary expenditure gap is the amount by which the equilibrium GDP and the full-employment GDP differ.

Correct AnswerverifiedShow Answer

-Refer to the above diagram for a private closed economy. Aggregate saving in this economy will be zero when:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

What do investment and government expenditures have in common?

Correct AnswerverifiedShow Answer

-Refer to the above diagram for a private closed economy. In this economy, aggregate expenditures:

Correct AnswerverifiedShow Answer

What is the likely result from a depreciation of a nation's currency when its economy is operating at its full-employment level of output?

Correct AnswerverifiedShow Answer

The table shows a private, open economy. All figures are in billions of dollars. -Refer to the above table. The equilibrium real GDP is:

Correct AnswerverifiedShow Answer

-Refer to the above diagram which is for a private closed economy. All figures are in billions of dollars. If businesses were willing to invest $30 at each possible level of GDP, the equilibrium level of GDP would be:

Correct AnswerverifiedShow Answer

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

-Refer to the above diagram, the location of curve B depends on the:

Correct AnswerverifiedShow Answer

The equilibrium GDP is the level of domestic output:

Correct AnswerverifiedShow Answer

Other things equal, serious recession in the economies of Canada's trading partners will:

Correct AnswerverifiedShow Answer

The level of aggregate expenditures in the private closed economy is determined by the:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

-Refer to the above diagram for a private closed economy. At the $200 level of GDP:

Correct AnswerverifiedShow Answer

Refer to the diagram below for a private closed economy. In equilibrium the level of consumption:

Correct AnswerverifiedShow Answer

-The economy in the above diagram is incurring:

Correct AnswerverifiedShow Answer

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