Test 3 (Chapters 10-13): Macroeconomics
Refer to the graph for a private closed economy. At the equilibrium level of GDP, saving will be
$100 billion
The table shows a private closed economy. All figures are in billions of dollars. If the real rate of interest is 2 percent, then the equilibrium level of GDP will be
$1200 billion
The multiplier can be calculated as
1/(1-MPC)
The table gives information about the relationship between input quantities and real domestic output in a hypothetical economy. The level of productivity in the economy is
2
Which would tend to reduce the crowding-out effect that occurs when the Federal government increases its borrowing to finance a deficit?
The economy is operating at less than full employment
Refer to the data for a fictional economy. The changes in the budget conditions between 1998 and 1999 best reflect
a recession
If the dollar appreciates in value relative to foreign currencies
aggregate demand decreases because net exports decrease
One of the potential consequences of the public debt is that it may
lead to additional future taxes that reduce economic incentives
A change in the amount saved due to a change in income is represented by a
movement along the saving schedule
When changes in taxes and government spending occur in the economy without explicit action by Congress, such policy is called ______ fiscal policy
nondiscretionary
Assume that if there were no crowding out, an increase in government spending would increase GDP by $100 billion. On the other hand, if there had been full crowding out, then GDP would have
not increased
The aggregate demand curve or schedule shows the relationship between the total demand for output and the
price level
The crowding-out effect from government borrowing to finance the public debt is reduced when
public investment complements private investment
Refer to the table. All figures are in billions of dollars. If gross investment is $12 billion, the equilibrium level of GDP will be
$280 billion
Refer to the accompanying consumption schedule. If disposable income were $34,000, then the average propensity to save would be about
0.12
The relationship between the MPS and the MPC is such that
1-MPC=MPS
Refer to the diagram, in which Qf is the full-employment output. An expansionary fiscal policy would be most appropriate if the economy's present aggregate demand curve were at
AD0
Refer to the diagram, in which C1 is the before-tax consumption schedule. Other things being equal, the economy would enjoy the greatest built-in stability with consumption schedule
C4
Which of the following statements is correct?
There is tendecy for the public debt to grow during recessions
A sharp rise in the real value of stock prices, which is independent of a change in the price level, would best be an example of
a change in the real value of consumer wealth
An increase in aggregate demand is most likely to be caused by which of the following?
a decrease in the tax rates on household income
Assume the economy is at full employment and that investment spending declines dramatically. If the goal is to restore full employment, government fiscal policy should be directed toward
an excess of government expenditures over tax receipts
Which of the following factors would decrease investment demand?
an increase in the cost of acquiring capital goods
Which of the following would shift the consumption schedule downward?
an increase in the probability of a recession
Refer to the graph. When output increases from Q1 and the price level decreases from P1, this change will
be caused by a shift in the aggregate supply curve from AS1 and AS3
The slope of the immediate-short-run aggregate supply curve is based on the assumption that
both input and output prices are fixed
State and local governments are limited in their ability to respond to recessions because of
constitutional and other requirement to balance their budgets
A constitutional amendment is passed that requires the government to have an annually balanced budget in the sense that changes in spending should be matched by equivalent changes in taxes. Should the government desire to increase GDP by $25 billion and meet the provisions of the law, it
could increase spending by $25 billion and increase taxes by $25 billion
A decline in disposable income
decrease consumption by moving downward along a specific consumption schedule
The American Recovery and Reinvestment Act of 2009 is a clear example of
discretionary fiscal policy that made the cyclically adjusted budget become more negative
The saving schedule shows the relationship of saving of households to the level of
disposable income
The cyclically adjusted budget deficit in an economy is zero. If this economy goes into recession, then the actual government budget will be
in deficit
Other things equal, a reduction in personal and business taxes can be expected to
increase both aggregate demand and aggregate supply
Assume the marginal propensity to consume is 0.8. If consumer spending increases by $20 billion, then real GDP will
increase by $100 billion
Refer to the data for a fictional economy. The changes in the budget conditions between 1998 and 1999 best reflect
increases by $20 billion
Assume a machine that has a useful life of only one year costs $2,000. Assume, also, that net of such operating costs as power, taxes, and so forth, the additional revenue from the output of this machine is expected to be $2,300. If the firm finds it can borrow funds at an interest rate of 10 percent, the firm should
purchase the machine because the expected rate of return exceeds the interest rate
An increase in net exports will shift the AD curve to the
right by a multiple of the change in net exports
The so-called wealth effect will result in households
spending more and saving less
Deflation refers to a situation where
the price level falls; it could be caused by a shift of AD to the left
The slope of the consumption schedule between two points on the schedule is
the ratio of the change in consumption to the change in disposable income between those two points
