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Multiple Choice Quiz
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1.
If actual GDP equals potential GDP, then:
A)the actual unemployment rate is greater than the natural rate of unemployment.the actual unemployment rate is greater than the natural rate of unemployment.
B)the actual unemployment rate equals the natural rate of unemployment.
C)the actual unemployment rate is less than the natural rate of unemployment.
D)there is a recessionary gap.
E)there is an expansory gap
2.
When actual output is greater than potential output the economy will experience a(n) ______ gap and the actual rate of unemployment will be _____ .
A)recessionary; lower
B)expansionary; higher
C)recessionary; greater
D)expansionary; lower
E)recessionary; greater or lower
3.
A key assumption of the Keynesian model is that:
A)net-exports are zero
B)governments always run a balanced budget
C)in the absence of government intervention the economy will always experience a recessionary gap
D)both frictional and structural unemployment are zero
E)in the short-run firms meet demand at pre-set prices
4.
Dave's Mirror Company expects to sell €2,000,000 worth of mirrors and plans to produce €2,250,000 worth of mirrors in the coming year. The company purchases €500,000 of new equipment during the year. Sales for the year turn out to be €1,900,000. Actual investment by Dave's Mirror Company equals _____ and planned investment equals _______.
A)€850,000; €750,000
B)€750,000; €850,000
C)€850,000; €500,000
D)€500,000; €750,000
E)€500,000; €500,000
5.
In a particular economy planned aggregate expenditure is PAE = 10,000 + 0.8Y. Short-run equilibrium output is ______ and the income-expenditure multiplier is _____:
A)12,500; 1.25
B)20,000; 2
C)50,000; 5
D)60,000; 5
E)30,000; 2
6.
In a particular economy planned aggregate expenditure is PAE = 12,000 + 0.6Y and potential output is Y* = 35,000. The economy is experiencing a(n) _____ equal to _____:
A)budget deficit; 5,000
B)expansionary gap; 3,000
C)expansionary gap; 5,000
D)recessionary gap; 5,000
E)recessionary gap; 3,000
7.
If planned aggregate expenditure is PAE = 15,000 + 0.75Y and potential output is Y* = 60,000 then a 1,000 fall in autonomous expenditure will open a(n) _______ equal to ______:1
A)expansionary gap; 4,000
B)recessionary gap; 4,000
C)recessionary gap; 750
D)expansionary gap; 750
E)recessionary; 1,000
8.
Given the following information what is the short-run equilibrium level of output? Consumption: C = 500 + 0.75(Y – T) T = 100, I = G = NX = 200
A)2,050
B)2,350
C)4,100
D)4,500
E)5,100
9.
If Consumption C = 500 + 0.75(Y – T) and Imports: IM = 0.25Y the income-expenditure multiplier is:
A)4
B)1.3
C)1.5
D)2.5
E)2
10.
Given the following information what is the short-run equilibrium level of output: Consumption: C = 500 + 0.75(Y – T); Imports: IM = 0.25Y T = 100, I = G = 200; Exports: X = 200
A)2,000
B)2,050
C)2,500
D)2,750
E)3,000





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