ch.11 macroeconomics quiz

Refer to the diagram for a private closed economy. The equilibrium level of GDP is: $100. $300. $200. $400.

$300.

The table shows a consumption schedule. All figures are in billions of dollars. Refer to the above information. If lump-sum taxes were $20 billion, planned investment $45 billion, net exports zero, and government purchases $20 billion, then equilibrium GDP would be: $760 billion $680 billion $640 billion $720 billion

$720 billion

Refer to the diagram for a private closed economy. The multiplier is: GF/DE. AB/GF. FE/GF. GF/GB.

AB/GF.

When planned investment exceeds saving in a private closed economy: Aggregate expenditures will exceed GDP Consumption plus investment will equal GDP Aggregate expenditures will be less than GDP Aggregate expenditures will equal GDP

Aggregate expenditures will exceed GDP

John Maynard Keynes developed the ideas underlying the aggregate expenditures model: In the 1960s In the 1980s As a critique of classical economics As a reinforcement of Say's Law

As a critique of classical economics

In a private closed economy, there will be an unplanned increase in inventories when: (C + Ig) exceeds aggregate expenditures GDP exceeds aggregate expenditures Aggregate expenditures exceed GDP Aggregate expenditures exceed (C + Ig)

GDP exceeds aggregate expenditures

An economy characterized by high unemployment is likely to be: Having a recessionary expenditure gap Experiencing a high rate of economic growth Experiencing hyperinflation Having an inflationary expenditure gap

Having a recessionary expenditure gap

A personal tax cut of $50 billion will affect income differently than an increase in government spending by $50 billion because: Households may save part of the additional income from the tax cut The increase in government spending is less expansionary than the increase in taxes The increase in government spending will produce a political business cycle Households may consume more than the additional income from the tax cut

Households may save part of the additional income from the tax cut

In the Great Recession of 2007-2009, the aggregate expenditures schedule in the U.S. economy dropped, mostly due to a fall in: Investment expenditures Government spending Consumption spending Net exports

Investment expenditures

(Last Word) In The General Theory of Employment, Interest, and Money: J. B. Say developed "Say's law." Thorstein Veblen poked fun at the leisure class. John Maynard Keynes attacked the classical economist's contention that recession or depression will automatically cure itself. Adam Smith stated his idea of the invisible hand.

John Maynard Keynes attacked the classical economist's contention that recession or depression will automatically cure itself.

One major point that Keynes raised pertains to income and spending. He argued that: Pessimism could cause aggregate spending to fall short of total output Oftentimes, people spend more than their incomes All income is often spent in the same period of time The marginal propensity to spend out of additional income is quite volatile

Pessimism could cause aggregate spending to fall short of total output

From the perspective of classical macroeconomic theory, if aggregate spending was temporarily less than output: Product and resource prices would decrease, so that aggregate spending would rise, expanding output Product price would decrease, but resource prices would increase Product price would increase, but resource prices would decrease Product and resource prices would increase, so that aggregate spending would equal output

Product and resource prices would decrease, so that aggregate spending would rise, expanding output

In which of the following situations for an open mixed economy will the level of GDP contract? When Ca + S + M exceeds Ig + X + T When Ig + X + T exceeds Ca + S + M When Ig + X + G exceeds Sa + M + T When Sa + M + T exceeds Ig + X + G

When Sa + M + T exceeds Ig + X + G

A private closed economy includes: households and businesses, but not government or international trade. households, businesses, and international trade, but not government. households, businesses, and government, but not international trade. households only.

households and businesses, but not government or international trade.

At the equilibrium GDP for a private open economy: net exports may be either positive or negative. exports and imports will be equal. exports will always exceed imports. imports will always exceed exports.

net exports may be either positive or negative.

In an aggregate expenditures diagram, equal increases in government spending and in lump-sum taxes will: shift the aggregate expenditures line upward. leave the aggregate expenditures line unchanged. shift the aggregate expenditures line downward. reduce the equilibrium GDP.

shift the aggregate expenditures line upward.

A recessionary expenditure gap exists if: the aggregate expenditures schedule intersects the 45-degree line at any level of GDP. the aggregate expenditures schedule lies above the 45-degree line at the full-employment GDP. the aggregate expenditures schedule lies below the 45-degree line at the full-employment GDP. planned investment exceeds saving at the full-employment GDP.

the aggregate expenditures schedule lies below the 45-degree line at the full-employment GDP

Which event would most likely decrease an economy's exports? An increase the prosperity of trading partners for this economy A depreciation of the nation's currency relative to foreign currencies An appreciation of the nation's currency relative to foreign currencies A decline in the tariff on products imported from abroad

An appreciation of the nation's currency relative to foreign currencies

in a mixed open economy, if aggregate expenditures exceed GDP: Ca + Ig + Xn + G < domestic output. Ig > S. Ig + X + G = Ca. Ig + X + G > Sa + M + T.

Ig + X + G > Sa + M + T.

Consumption is $141 billion, planned investment is $15 billion, and saving is $15 billion in a private, closed economy. At this level: There will be unplanned increases in inventories There will be unplanned decreases in inventories The economy is in equilibrium Actual investment does not equal planned investment

The economy is in equilibrium