CHAPTER 9 MACRO TEST

Refer to the above table. If an additional lump-sum tax of $20 were imposed, we would expect: a. equilibrium GDP to fall by $30. b. equilibrium GDP to fall by $20. c. equilibrium GDP to fall by $50. d. equilibrium GDP to rise by $24.

A

If net exports decline from zero to some negative amount, the aggregate expenditures schedule would: a. shift upward. b. shift downward. c. not move (net exports do not affect aggregate expenditures). d. become steeper.

B

If the economy is in equilibrium at $400 billion of GDP and the full-employment GDP is $500 billion: a. real and nominal GDP will both increase. b. GDP will remain at $400 billion unless aggregate expenditures change. c. real GDP will increase, but nominal GDP will decrease. d. the price level will increase.

B

Refer to the above diagram that applies to a private closed economy. The slope of the consumption schedule in this figure reveals that the: a. MPS rises as income rises. b. MPC is constant. c. APC is constant. d. APC increases as income increases.

B

If the dollar appreciates relative to foreign currencies, we would expect: a. the multiplier to decrease. b. a country's exports and imports to both fall. c. a country's net exports to rise. d. a country's net exports to fall.

D

In an aggregate expenditures diagram, a lump-sum tax (T ) will: a. not affect the C + Ig + Xn line. b. shift the C + Ig + Xn line upward by an amount equal to T. c. shift the C + Ig + Xn line downward by an amount equal to T. d. shift the C + Ig + Xn line downward by an amount equal to T × MPC.

D

In the aggregate expenditures model, equilibrium GDP in a private closed economy is indicated by: a. the equality of saving and planned investment. b. the intersection of aggregate expenditures and the 45-degree line. c. the absence of unplanned changes in inventories. d. all of these.

D

Other things equal, an increase in an economy's exports will: a. lower the marginal propensity to import. b. have no effect on domestic GDP because imports will change by an offsetting amount. c. decrease its domestic aggregate expenditures and therefore decrease its equilibrium GDP. d. increase its domestic aggregate expenditures and therefore increase its equilibrium GDP.

D

The equation representing the consumption schedule for the above economy is: a. C = Y - .6S. b. Y = C + S. c. C = 60 + .4Y. d. C = 60 + .6Y.

D

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

A

Planned investment plus unintended increases in inventories equals: a. actual investment. b. consumption of fixed capital. c. consumption minus saving. d. unintended saving.

A

Refer to the above diagram. The value of the multiplier for this economy is: a. BC/hg. b. BC/AB. c. ed/di. d. df/BC.

A

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

B

Which of the following statements is incorrect? a. Given the economy's MPS, a $15 billion reduction in government spending will reduce the equilibrium GDP by more than would a $15 billion increase in taxes. b. Other things unchanged, a tax reduction of $10 billion will increase the equilibrium GDP by $25 billion when the MPS is 0.4. c. If the MPC is 0.8 and GDP has declined by $40 billion, this was caused by a decline in aggregate expenditures of $8 billion. d. A government surplus is anti-inflationary; a government deficit is expansionary.

B

(Advanced analysis) Assume the saving schedule for a private closed economy is S = Picture 20 + 0.2Y, where S is saving and Y is gross domestic product. The multiplier for this economy is: a. 3. b. 4. c. 5. d. 10.

C

If net exports are positive: a. the equilibrium GDP must be greater than the full-employment GDP. b. imports must exceed exports. c. aggregate expenditures are greater at each level of GDP than when net exports are zero or negative. d. some other component of aggregate expenditures must be negative

C

The multiplier associated with a change in government purchases is: a. always equal to 1. b. smaller than that associated with an equal change in taxes. c. the same as that associated with a change in investment. d. less than that associated with a change in investment.

C

Which of the following would reduce GDP by the greatest amount? a. a $20 billion increase in taxes b. $20 billion increases in both government spending and taxes c. $20 billion decreases in both government spending and taxes d. a $20 billion decrease in government spending

D

A $10 billion decrease in taxes will increase the equilibrium GDP by more than would a $10 billion increase in government expenditures. TRUE/FALSE

FALSE