Macro Test 2

Recently, the level of GDP has declined by $60 billion in an economy where the marginal propensity to consume is 0.75. Aggregate expenditures must have fallen by

$15 billion.

In a private closed economy where MPC = 0.8, if consumers reduce their spending by $10 billion and firms cut investments by $5 billion, then equilibrium GDP will decrease by

$75 billion.

Which of the following will not cause the consumption schedule to shift?

a change in consumer incomes

Gross Domestic Product Consumption $100 $100 200 160 300 220 400 280 500 340 600 440 Expected Rate of Return Amount of Investment 15% $0 12 40 9 80 6 120 3 160 0 200 Refer to the tables of information for a private closed economy. The multiplier in this economy is

2.5

(Advanced analysis) Assume the consumption schedule for a private closed economy is C = 40 + 0.75Y, where C is consumption and Y is gross domestic product. The multiplier for this economy is

4

An inflationary expenditure gap is the amount by which

An inflationary expenditure gap is the amount by which

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

a country's net exports to fall.

If the U.S. Congress passes legislation to raise taxes to control demand-pull inflation, then this would be an example of a(n)

contractionary fiscal policy.

In the aggregate expenditures model of the economy, a downward shift in aggregate expenditures can be caused by a

decrease in government spending or an increase in taxes.

Fiscal policy refers to the

deliberate changes in government spending and taxes to stabilize domestic output, employment, and the price level.

A tax reduction of a specific amount will be more expansionary the

larger is the economy's MPC.

One of the potential consequences of the public debt is that it may

lead to additional future taxes that reduce economic incentives.

The actual multiplier effect in the U.S. economy is less than the multiplier effect in the text examples because

in addition to saving, households use some of any increase in income to buy imported goods and to pay additional taxes.

If the multiplier in an economy is 5, a $20 billion increase in net exports will

increase GDP by $100 billion.

A rightward shift of the AD curve in the very steep upper part of the short-run AS curve will

increase the price level by more than real output.

The crowding-out effect of expansionary fiscal policy suggests that

increases in government spending financed through borrowing will increase the interest rate and thereby reduce investment.

In the aggregate expenditures model, the equilibrium GDP is

not necessarily equal to the full-employment GDP.

If personal taxes were decreased and resource productivity increased simultaneously, the equilibrium

output would necessarily rise.

If net exports decline from zero to some negative amount, the aggregate expenditures schedule would

shift downward.

Other things equal, a 10 percent decrease in corporate income taxes will

shift the investment demand curve to the right.