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Titlemacro ch 11
TagsMacroeconomics Interest Economics Economic Theories Fiscal Multiplier
File Size437.5 KB
Total Pages48
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Question 1 Multiple Choice 0 points Modify Remove

Question
The changes in the economy of Ft. Myers, Florida, between 2003 and 2008 provides an example of:

Answer the risk associated with an agricultural economy.

positive and negative multiplier effects.

how public assistance programs can stimulate the economy.

the benefits of government budget surpluses.

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Question 2 Multiple Choice 0 points Modify Remove

Question
The real estate market in Ft. Myers, Florida, collapsed by 2008 because:

Answer houses were over-priced.

most Floridians prefer to rent apartments rather than buy houses.

hurricanes damaged so much property.

climate change has made much of the retiree population leave Florida.

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Question 3 Multiple Choice 0 points Modify Remove

Question
The marginal propensity to consume is:

Answer increasing if the marginal propensity to save is increasing.

the proportion of total disposable income that the average family consumes.

the change in consumer spending divided by the change in aggregate disposable income.

the change in consumer spending less the change in aggregate disposable income.

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Question 4 Multiple Choice 0 points Modify Remove

Question
The marginal propensity to consume is equal to:

Answer the proportion of consumer spending as a function of aggregate disposable income.

the change in saving divided by the change in aggregate disposable income.

the change in consumer spending divided by the change in aggregate disposable income.

the change in saving divided by the change in consumer spending.

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Question 5 Multiple Choice 0 points Modify Remove

Question
The MPS plus the MPC must equal:

Answer zero.

one.

income.

saving.

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Question 6 Multiple Choice 0 points Modify Remove

Question
If the MPS = .1, then the value of the multiplier equals:

Answer 1.

5.

9.

10.

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Question 7 Multiple Choice 0 points Modify Remove

Question
If the multiplier equals 4, then the marginal propensity to save must be equal to:

Answer 1/4.

1/2.

3/4.

the marginal propensity to consume.

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Question 8 Multiple Choice 0 points Modify Remove

Question
Suppose that the marginal propensity to consume is 0.8, and investment spending increases by $100 billion. The increase in aggregate
demand is:

Answer $100 billion, the amount of investment spending.

$125 billion, composed of $100 billion in investment spending and $25 billion in consumption.

$80 billion, composed of $100 billion in investment spending and a decrease in consumption of $20 billion.

$500 billion, composed of $100 billion in investment spending and $400 billion in consumption.

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Question 9 Multiple Choice 0 points Modify Remove

Question
If the marginal propensity to save is 0.3, the size of the multiplier is:

Answer 3.3.

2.3.

1.3.

0.7.

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Question 10 Multiple Choice 0 points Modify Remove

Question
The marginal propensity to save is:

Answer savings divided by aggregate income.

the fraction of an additional dollar of disposable income that is saved.

1 + MPC.

savings divided by aggregate income or 1 + MPC.

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Question 11 Multiple Choice 0 points Modify Remove

Question
The multiplier is:

Answer 1/[1–MPC].

MPS/MPC.

1/[MPC].

1[1+MPC].

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Question 12 Multiple Choice 0 points Modify Remove

Question
If the MPC is 0.8, then the multiplier is:

Answer 4.

5.

8.

10.

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Question 13 Multiple Choice 0 points Modify Remove

Question
The marginal propensity to consume (MPC) is equal to the change in:

Answer consumer spending divided by the change in disposable income.

consumer spending divided by the change in investment spending.

consumer spending divided by the change in gross domestic product.

disposable income divided by the change in consumer spending.

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Question 14 Multiple Choice 0 points Modify Remove

Question
If disposable income increases by $5 billion and consumer spending increases by $4 billion, the marginal propensity to consume is
equal to:

Answer 20.

0.8.

1.25.

9.

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Question 15 Multiple Choice 0 points Modify Remove

Question
Suppose the marginal propensity to consume is equal to 0.90 and investment spending increases by $50 billion. Assuming no taxes
and no trade, by how much will real GDP change?

Answer $450 billion increase

$90 billion increase

$500 billion increase

$500 billion decrease

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Question 16 Multiple Choice 0 points Modify Remove

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Page 24

Question
Use this scenario to answer questions 155–163.
Scenario: Income-Expenditure Equilibrium
GDP is $8,000, autonomous consumption is $500, and planned investment spending is $200. The marginal propensity to consume is
0.8.
Reference: Ref 11-07

(Scenario: Income-Expenditure Equilibrium) If GDP is $3,000, how much is unplanned inventory investment?

Answer 0

$600

$100

–$100

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Question 162 Multiple Choice 0 points Modify Remove

Question
Use this scenario to answer questions 155–163.
Scenario: Income-Expenditure Equilibrium
GDP is $8,000, autonomous consumption is $500, and planned investment spending is $200. The marginal propensity to consume is
0.8.
Reference: Ref 11-07

(Scenario: Income-Expenditure Equilibrium) Income-expenditure equilibrium is achieved when GDP is:

Answer $8,000.

$7,000.

$3,500.

$700.

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Question 163 Multiple Choice 0 points Modify Remove

Question
Use this scenario to answer questions 155–163.
Scenario: Income-Expenditure Equilibrium
GDP is $8,000, autonomous consumption is $500, and planned investment spending is $200. The marginal propensity to consume is
0.8.
Reference: Ref 11-07

(Scenario: Income-Expenditure Equilibrium) The multiplier is:

Answer 0.8.

0.2.

5.

1.25.

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Question 164 Multiple Choice 0 points Modify Remove

Question
Table: The Economy of Albernia

Reference: Ref 11-08

(Table: The Economy of Albernia) What is the consumption function for Albernia?

Answer C = 600 + .3 × YD

C = 600 + 0.75 × YD

C = 400 + 0.6 × YD

C = 400 + 0.75 × YD

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Question 165 Multiple Choice 0 points Modify Remove

Question
Table: The Economy of Albernia

Reference: Ref 11-08

(Table: The Economy of Albernia) What is the income-expenditure equilibrium GDP?

Answer $1,000 billion

$1,500 billion

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$2,000 billion

$2,500 billion

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Question 166 Multiple Choice 0 points Modify Remove

Question
Table: The Economy of Albernia

Reference: Ref 11-08

(Table: The Economy of Albernia) If GDP is $1,500 billion, then the level of unplanned inventories will be equal to:

Answer $400 billion.

–$400 billion.

$600 billion.

–$600 billion.

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Question 167 Multiple Choice 0 points Modify Remove

Question
Table: The Economy of Albernia

Reference: Ref 11-08

(Table: The Economy of Albernia) If real GDP is $3,000 billion, then unplanned investment will be:

Answer zero.

$100 billion.

$200 billion.

$300 billion.

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Question 168 Multiple Choice 0 points Modify Remove

Question
Figure: The Aggregate Consumption Function and Planned Aggregate Spending

Reference: Ref 11-09

(Figure: The Aggregate Consumption Function and Planned Aggregate Spending) If current disposable income increases in this
economy, then the:

Answer AE will shift up.

AE will shift down.

economy will move upward along the AE.

economy will move downward along the AE.

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Question 169 Multiple Choice 0 points Modify Remove

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A country is currently closed with no government sector and aggregate price levels and interest rate levels fixed. Furthermore, the
marginal propensity to consume is constant and the country's consumption function is as follows: C = 200 + 0.75YD, where YD is
disposable income and C is consumption. Furthermore, assume that planned investment equals 75.
Reference: Ref 11-21

(Scenario: A Country's Consumption Function) When real GDP equals 900:

Answer planned investment equals 900.

unplanned inventory investment is negative.

autonomous consumption equals 900.

the economy is in income-expenditure equilibrium.

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Question 283 Multiple Choice 0 points Modify Remove

Question
Use this table to answer questions 281–285.
Scenario: A Country's Consumption Function
A country is currently closed with no government sector and aggregate price levels and interest rate levels fixed. Furthermore, the
marginal propensity to consume is constant and the country's consumption function is as follows: C = 200 + 0.75YD, where YD is
disposable income and C is consumption. Furthermore, assume that planned investment equals 75.
Reference: Ref 11-21

(Scenario: A Country's Consumption Function) What is the income-expenditure equilibrium for this country?

Answer 900

1100

275

200

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Question 284 Multiple Choice 0 points Modify Remove

Question
Use this table to answer questions 281–285.
Scenario: A Country's Consumption Function
A country is currently closed with no government sector and aggregate price levels and interest rate levels fixed. Furthermore, the
marginal propensity to consume is constant and the country's consumption function is as follows: C = 200 + 0.75YD, where YD is
disposable income and C is consumption. Furthermore, assume that planned investment equals 75.
Reference: Ref 11-21

(Scenario: A Country's Consumption Function) Holding everything else constant, what would happen if aggregate wealth decreases by
$100?

Answer The AE curve shifts downward.

The income-expenditure equilibrium real GDP increases by more than $100.

The multiplier effect on real GDP does not occur since there is a drop in aggregate wealth.

Planned investment will increase.

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Question 285 Multiple Choice 0 points Modify Remove

Question
Use this table to answer questions 281–285.
Scenario: A Country's Consumption Function
A country is currently closed with no government sector and aggregate price levels and interest rate levels fixed. Furthermore, the
marginal propensity to consume is constant and the country's consumption function is as follows: C = 200 + 0.75YD, where YD is
disposable income and C is consumption. Furthermore, assume that planned investment equals 75.
Reference: Ref 11-21

(Scenario: A Country's Consumption Function) If real GDP is 1100, then:

Answer unplanned investment equals zero.

planned investment equals zero.

the AE curve shifts up.

the MPC decreases.

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Question 286 Multiple Choice 0 points Modify Remove

Question
If the MPC equals 0.75, then based on the simple model presented in this chapter, one would expect a $100 decrease in investment
spending to lead to:

Answer an increase in spending which will total $100 by the end of all the rounds.

an increase in spending which will total $400 by the end of all the rounds.

a decrease in spending which will total $100 by the end of all the rounds.

a decrease in spending which will total $400 by the end of all the rounds.

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Question 287 Multiple Choice 0 points Modify Remove

Question
Suppose the level of planned aggregate expenditure in an economy is $1000 while the real GDP is $800. According to the simple
model developed in this chapter, where the aggregate price level is assumed to be constant, we can expect:

Answer inventories will stay the same since this is part of planned investment.

inventories will decrease.

inventories will increase.

real GDP will fall further.

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Question 288 Multiple Choice 0 points Modify Remove

Question
If unplanned inventory investment is positive, this most likely means:

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Answer the economy is growing rapidly.

aggregate expenditures on goods and services is less than forecasted.

the economy is doing the same since inventory changes have no impact on the economy.

the stock of inventories is declining.

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Question 289 Multiple Choice 0 points Modify Remove

Question
In the income-expenditure model, inventories are:

Answer fixed and therefore provide little insight into the direction of the economy.

a long-run event which aids forecasters in understanding where long-run real GDP is.

constantly changing and provide insight into the future state of the economy.

often positive suggesting additions to inventory stocks are a long-run goal.

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