Question 1

Which of the following defines the multiplier for a change in autonomous taxes?

Accepted Answer

A)   -s/c
B)   1/s
C)   1/c
D)   -c/sE) None of the above
F) C) and D)

Question 2

In the four-part diagram used to construct the IS curve, a decrease in the interest rate causes

Accepted Answer

A)   an increase in Ap and induced saving but does not shift the IS curve.
B)   an increase in Ap and induced saving and shifts the IS curve to the right.
C)   a decrease in Ap, an increase in induced saving, and shifts the IS curve to the right.
D)   a decrease in Ap and a decrease in induced saving, but does not shift the IS curve.E) A) and B)
F) A) and C)

Question 3

Income on the horizontal axis at which the vertical distance to the 45-degree line is greater than the vertical distance to the Ep line gives rise to a ________ amount of unplanned inventory investment, and thus ________ pressure on output.

Accepted Answer

A)   positive, upward
B)   positive, downward
C)   negative, upward
D)   negative, downwardE) B) and C)
F) A) and D)

Question 4

The inauguration of a new President often increases the degree of optimism in business firms and households, causing Ap to

Accepted Answer

A)   rise and IS to shift leftward.
B)   fall and IS to shift leftward.
C)   fall and IS to increase.
D)   rise and IS to shift rightward.E) A) and B)
F) B) and D)

Question 5

The slope of the planned expenditure line is

Accepted Answer

A)   autonomous consumption.
B)   the marginal propensity to save.
C)   autonomous planned spending.
D)   the marginal propensity to consume.E) B) and D)
F) C) and D)

Question 6

Figure 3-7 
-In figure above, the multiplier for a change in autonomous taxes is

Accepted Answer

A)   5.
B)   4.
C)   2.50.
D)   1.E) None of the above
F) A) and C)

Question 7

The multiplier is defined as the ratio of a change in income to the

Accepted Answer

A)   marginal propensity to save.
B)   marginal propensity to consume.
C)   change in the marginal propensity to consume causing it.
D)   change in the marginal propensity to save causing it.
E)   change in planned autonomous spending causing it.F) C) and D)
G) A) and B)

Question 8

During a recession, automatic stabilization causes the government budget deficit to

Accepted Answer

A)   fall.
B)   increase.
C)   remain stable.
D)   move in the same direction as Y.E) A) and B)
F) C) and D)

Question 9

Which of the following is a possible reason for the improved economic performance since 1985?

Accepted Answer

A)   Demand Shocks have become smaller and less important
B)   Monetary and fiscal policy have become more effective
C)   Change in conditions that make monetary and/or fiscal policy more powerful
D)   All of the aboveE) A) and C)
F) A) and B)

Question 10

Assume that all taxes are lump-sum, net exports = 0, and the marginal propensity to consume is 0.8. Then, if investment and taxes were each to fall by $100 million, the equilibrium level of income would

Accepted Answer

A)   rise by $100 million.
B)   fall by $100 million.
C)   rise by $500 million.
D)   fall by $500 million.E) A) and D)
F) B) and C)

Question 11

Figure 3-7 
-In figure above, the marginal propensity to save is

Accepted Answer

A)   1.
B)   5.
C)   0.5.
D)   0.2.E) A) and D)
F) A) and C)

Question 12

Suppose that in producing a GDP of 3000, goods worth 200 go unsold and are unintentionally added to business inventories. These goods

Accepted Answer

A)   are not counted in total expenditure.
B)   are part of the investment component of expenditure.
C)   are nonetheless part of the consumption component of expenditure.
D)   are classified as net exports and are subtracted from total expenditures.E) All of the above
F) A) and B)

Question 13

The multiplier measures the

Accepted Answer

A)   number of steps it takes to move from one equilibrium to another.
B)   rise in saving resulting from a rise in income.
C)   marginal propensity to invest.
D)   rise in equilibrium GDP resulting from a one dollar rise in planned autonomous expenditures.E) C) and D)
F) A) and C)

Question 14

The saving function is

Accepted Answer

A)   cY.
B)   Y - T.
C)   (1 - c) (Y - T) .
D)   -a + (1 - c) (Y - T) .E) None of the above
F) All of the above

Question 15

At every point on the IS curve, the level of income on the horizontal axis equals

Accepted Answer

A)   planned autonomous spending.
B)   planned autonomous spending times the multiplier.
C)   planned autonomous spending divided by the multiplier.
D)   planned expenditures times the multiplier.E) None of the above
F) A) and B)

Question 16

If the expected earnings of an investment project exceed all expenses except interest payments

Accepted Answer

A)   business firms will not undertake the project.
B)   business firms will undertake the project and raise prices later.
C)   business firms will not undertake the project but will borrow the funds.
D)   consumers will get lower prices.E) A) and D)
F) B) and C)

Question 17

A lower interest rate ________ Ap and thus causes ________ the IS curve.

Accepted Answer

A)   raises, movement downward along
B)   lowers, movement upward along
C)   raises, a parallel rightward shift of
D)   lowers, a parallel leftward shift ofE) A) and B)
F) B) and D)

Question 18

In 2000s, low savings rates are attributed to:

Accepted Answer

A)   Rapid economic growth.
B)   Stock market boom.
C)   Declining interest rates and increased refinancing of the mortgages.
D)   Inefficient monetary policy.E) C) and D)
F) A) and B)

Question 19

Assume that all taxes in the economy are autonomous and the values for planned investment, government expenditures, and autonomous taxes are given: p = 100
G = 100 T = 50 he consumption function is: C = 50 + 0.5 YD
-Refer to the information above. What is the level of consumption when the level of income is 850?

Accepted Answer

A)   375
B)   425
C)   450
D)   475E) None of the above
F) A) and D)

Question 20

The one type of expenditure that we assume can differ from what spenders have planned is

Accepted Answer

A)   consumption.
B)   investment.
C)   government expenditure.
D)   net exports.E) A) and B)
F) None of the above

Exam 3: Spending, Income, and Interest Rates

Figure 3-7 -In figure above, the marginal propensity to save is

Correct Answer
verified

The saving function is

Correct Answer
verified

In the four-part diagram used to construct the IS curve, a decrease in the interest rate causes

Correct Answer
verified

The one type of expenditure that we assume can differ from what spenders have planned is

Correct Answer
verified

The inauguration of a new President often increases the degree of optimism in business firms and households, causing Ap to

Correct Answer
verified

Which of the following is a possible reason for the improved economic performance since 1985?

Correct Answer
verified

The multiplier is defined as the ratio of a change in income to the

Correct Answer
verified

During a recession, automatic stabilization causes the government budget deficit to

Correct Answer
verified

Which of the following defines the multiplier for a change in autonomous taxes?

Correct Answer
verified

A lower interest rate Ap and thus causes the IS curve.

Correct Answer
verified

Suppose that in producing a GDP of 3000, goods worth 200 go unsold and are unintentionally added to business inventories. These goods

Correct Answer
verified

Correct Answer
verified

The slope of the planned expenditure line is

Correct Answer
verified

If the expected earnings of an investment project exceed all expenses except interest payments

Correct Answer
verified

In 2000s, low savings rates are attributed to:

Correct Answer
verified

Assume that all taxes are lump-sum, net exports = 0, and the marginal propensity to consume is 0.8. Then, if investment and taxes were each to fall by $100 million, the equilibrium level of income would

Correct Answer
verified

Figure 3-7 -In figure above, the multiplier for a change in autonomous taxes is

Correct Answer
verified

At every point on the IS curve, the level of income on the horizontal axis equals

Correct Answer
verified

The multiplier measures the

Correct Answer
verified

Income on the horizontal axis at which the vertical distance to the 45-degree line is greater than the vertical distance to the Ep line gives rise to a amount of unplanned inventory investment, and thus pressure on output.

Correct Answer
verified

Exam 3: Spending, Income, and Interest Rates

Figure 3-7 -In figure above, the marginal propensity to save is

Correct AnswerverifiedShow Answer

The saving function is

Correct AnswerverifiedShow Answer

In the four-part diagram used to construct the IS curve, a decrease in the interest rate causes

Correct AnswerverifiedShow Answer

The one type of expenditure that we assume can differ from what spenders have planned is

Correct AnswerverifiedShow Answer

The inauguration of a new President often increases the degree of optimism in business firms and households, causing Ap to

Correct AnswerverifiedShow Answer

Which of the following is a possible reason for the improved economic performance since 1985?

Correct AnswerverifiedShow Answer

The multiplier is defined as the ratio of a change in income to the

Correct AnswerverifiedShow Answer

During a recession, automatic stabilization causes the government budget deficit to

Correct AnswerverifiedShow Answer

Which of the following defines the multiplier for a change in autonomous taxes?

Correct AnswerverifiedShow Answer

A lower interest rate ________ Ap and thus causes ________ the IS curve.

Correct AnswerverifiedShow Answer

Suppose that in producing a GDP of 3000, goods worth 200 go unsold and are unintentionally added to business inventories. These goods

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The slope of the planned expenditure line is

Correct AnswerverifiedShow Answer

If the expected earnings of an investment project exceed all expenses except interest payments

Correct AnswerverifiedShow Answer

In 2000s, low savings rates are attributed to:

Correct AnswerverifiedShow Answer

Assume that all taxes are lump-sum, net exports = 0, and the marginal propensity to consume is 0.8. Then, if investment and taxes were each to fall by $100 million, the equilibrium level of income would

Correct AnswerverifiedShow Answer

Figure 3-7 -In figure above, the multiplier for a change in autonomous taxes is

Correct AnswerverifiedShow Answer

At every point on the IS curve, the level of income on the horizontal axis equals

Correct AnswerverifiedShow Answer

The multiplier measures the

Correct AnswerverifiedShow Answer

Income on the horizontal axis at which the vertical distance to the 45-degree line is greater than the vertical distance to the Ep line gives rise to a ________ amount of unplanned inventory investment, and thus ________ pressure on output.

Correct AnswerverifiedShow Answer

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A lower interest rate Ap and thus causes the IS curve.

Correct Answer
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Income on the horizontal axis at which the vertical distance to the 45-degree line is greater than the vertical distance to the Ep line gives rise to a amount of unplanned inventory investment, and thus pressure on output.

Correct Answer
verified