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1 | |
In the Aggregate Expenditures model, the level of employment in the short run depends on... |
| | A) | The level of inflation |
| | B) | The level of total spending |
| | C) | The level of productivity |
| | D) | The value of potential GDP |
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2 | |
Which of the following is true? |
| | A) | DI=C+S, where DI=disposable income, C=consumption spending, and S=saving |
| | B) | S=DI-C |
| | C) | C=DI-S |
| | D) | All of the above |
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3 | |
For a given level of disposable income, as... |
| | A) | As S  <![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg:: ::/sites/dl/free/0070886695/37629/arrowup.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (2.0K)</a>]]> , C <![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg:: ::/sites/dl/free/0070886695/37629/arrowup.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (2.0K)</a>]]> |
| | B) | As C <![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg:: ::/sites/dl/free/0070886695/37629/arrowup.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (2.0K)</a>]]> , S  <![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg:: ::/sites/dl/free/0070886695/37629/arrowdn.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (2.0K)</a>]]> |
| | C) | As S <![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg:: ::/sites/dl/free/0070886695/37629/arrowup.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (2.0K)</a>]]> , DI <![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg:: ::/sites/dl/free/0070886695/37629/arrowup.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (2.0K)</a>]]> |
| | D) | None of the above |
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4 | |
A given household has the following consumption/savings behaviour at different levels of disposable income (DI) per week:
| DI | C | | 150 | 180 | | 200 | 200 | | 230 | 220 | | 260 | 240 | | 290 | 260 | | 320 | 280 | | 350 | 300 |
What is the value of savings (S) for a household earning disposable income of $260 per week? |
| | A) | $20 |
| | B) | $45 |
| | C) | $30 |
| | D) | $50 |
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5 | |
Using the previous chart, if household disposable income increases from $260 to $290 per week, the marginal propensity to consume (MPC) is... |
| | A) | 0.4 |
| | B) | 0.53 |
| | C) | 0.67 |
| | D) | 0.72 |
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6 | |
Using the previous chart, if a household's disposable income increases from $200 per week to $230 per week, what is its marginal propensity to save (MPS)? |
| | A) | 0.22 |
| | B) | 0.33 |
| | C) | 0.4 |
| | D) | 0.67 |
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7 | |
When C>DI, for a given household... |
| | A) | Savings will be positive |
| | B) | The marginal propensity to save will be high. |
| | C) | Savings will be negative |
| | D) | None of the above |
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8 | |
Which of the following would cause an upward shift of the consumption schedule? |
| | A) | An increase in a household's wealth |
| | B) | Households expect prices to fall in the future |
| | C) | An increase in disposable income |
| | D) | None of the above |
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9 | |
Which of the following would cause a downward shift of the savings schedule? |
| | A) | Expectations of increased income in the future |
| | B) | Expectations of reduced income in the future |
| | C) | A decrease in income taxes. |
| | D) | None of the above |
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10 | |
The text implies that a business will continue to spend on investment as long as... |
| | A) | The real interest rate (i) exceeds the expected rate of return (r) |
| | B) | The expected rate of return (r) exceeds the real interest rate (i) |
| | C) | The expected rate of return (r) just equals the real interest rate (i) |
| | D) | None of the above |
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11 | |
Why is the investment demand curve downward sloping? |
| | A) | As the real interest rate increases, the quantity of investment demanded increases, all else equal |
| | B) | As the real interest rate falls, the quantity of investment demanded increases, all else equal |
| | C) | As the real interest rate falls, the quantity of investment demanded falls, all else equal |
| | D) | None of the above |
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12 | |
A decrease in expected returns for a business will most likely cause... |
| | A) | An upward movement along the investment demand curve |
| | B) | A downward movement along the investment demand curve |
| | C) | A rightward shift of the investment demand curve |
| | D) | A leftward shift of the investment demand curve. |
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13 | |
Assuming a private, closed economy, if GDP>AE (aggregate expenditure) |
| | A) | Inventories will decrease, and employment and income will tend to increase |
| | B) | Inventories will increase, and employment and income will tend to increase |
| | C) | Inventories will decrease and employment and income will tend to decrease. |
| | D) | Inventories will increase and employment and income will tend to decrease |
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14 | |
Suppose the Canadian economy is in a position such that its actual Real GDP<equilibrium Real GDP. In this position, |
| | A) | AE>GDP, inventories build up, and firms will lay off workers as the economy experiences a recession (HINT: Draw the diagram) |
| | B) | GDP>AE, inventories are reduced, and firms will lay off workers as the economy experiences a recession |
| | C) | AE>GDP, inventories are reduced, and firms will hire more workers as the economy begins to expand. |
| | D) | AE=GDP and the economy will remain at full employment |
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15 | |
Equilibrium GDP occurs when... |
| | A) | Real GDP=Aggregate Expenditure |
| | B) | Consumption=Savings |
| | C) | Nominal Income=Real Income |
| | D) | All of the above |
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16 | |
Savings are an example of... |
| | A) | Injections because they represent an addition to the spending stream and help increase Real GDP |
| | B) | Leakages because they represent an addition to the spending stream, and reduce Real GDP |
| | C) | Injections because they represent a withdrawal of potential spending from the economy and this reduces Real GDP |
| | D) | Leakages because they represent a withdrawal of potential spending from the economy and this reduces Real GDP |
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17 | |
An upward shift of the Aggregate Expenditures schedule (C+Ig) will... |
| | A) | Increase aggregate expenditures, but decrease equilibrium Real GDP |
| | B) | Decrease aggregate expenditures, but increase equilibrium Real GDP |
| | C) | Increase both aggregate expenditures and equilibrium Real GDP |
| | D) | Decrease both aggregate expenditures and equilibrium Real GDP |
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18 | |
Suppose that, in a given economy, each household has an MPC=0.8. If gross business investment increases by $10 million, what is the total change in Real GDP? |
| | A) | $10 million |
| | B) | $25 million |
| | C) | $40 million |
| | D) | $50 million |
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19 | |
An increase in country A's Real GDP from $200 billion to $250 billion results in its imports rising from $10 billion to $20 billion. What is this country's marginal propensity to import? |
| | A) | 0.1 |
| | B) | 0.2 |
| | C) | 0.3 |
| | D) | 0.5 |
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20 | |
An open economy has MPC=0.6 and MPM=0.2. The open economy multiplier is... |
| | A) | 1.25 |
| | B) | 1.67 |
| | C) | 1.84 |
| | D) | 2.5 |
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21 | |
An increase in the value of the Canadian dollar relative to other countries will... |
| | A) | Reduce net exports (Xn), shift the aggregate expenditure schedule upward, and increase Real GDP |
| | B) | Increase net exports, shift the aggregate expenditure schedule upward, and increase Real GDP |
| | C) | Reduce net exports, shift the aggregate expenditure schedule downward, and reduce Real GDP |
| | D) | Increase net exports, shift the aggregate expenditure schedule downward, and increase Real GDP |
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22 | |
The balanced budget multiplier is equal to... |
| | A) | 0.25 |
| | B) | 0.5 |
| | C) | 1 |
| | D) | 2 |
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23 | |
Suppose that economy X has a full employment level of $700 billion. Further, its aggregate expenditure schedule (AE=C+Ig+G+Xn) cuts the 45° line at Real GDP of $630 billion. The economy is in a(n)... |
| | A) | Inflationary gap of $70 billion |
| | B) | Recessionary gap of $30 billion |
| | C) | Situation in which equilibrium Real GDP equals full employment GDP |
| | D) | Recessionary gap of $70 billion |
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24 | |
Which of the following statements is true regarding the AE model? |
| | A) | It assumes that the price level remains constant during the analysis |
| | B) | It is capable of explaining cost-push inflation |
| | C) | It can use the concept of inflationary gap to measure the rate of inflation in the economy |
| | D) | None of the above |
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25 | |
In an inflationary gap... |
| | A) | The economy's unemployment rate is greater than the natural unemployment rate |
| | B) | The economy's unemployment rate is less than the natural unemployment rate. |
| | C) | The economy's unemployment rate is equal to the natural unemployment rate |
| | D) | There is no frictional unemployment present in the economy |
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2002 McGraw-Hill Higher Education