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The change in GDP associated with a change in government spending is:
A)equal to the change in government spending
B)smaller than—and opposite in sign to—that associated with an equal change in taxes
C)smaller than—but of same sign as—that associated with an equal change in net exports
D)larger than—and opposite in sign to—that associated with an equal change in taxes
If the MPC is .75 and the economy has a recessionary expenditure gap of $10 billion, then equilibrium GDP is:
A)$10 billion below full-employment GDP
B)$10 billion above full-employment GDP
C)$40 billion below full-employment GDP
D)$40 billion above full-employment GDP
Assume the MPC is 2/3. If government spending decreases by $6 billion, equilibrium GDP will:
A)fall by $2 billion
B)fall by $18 billion
C)fall by $6 billion
D)fall by $4 billion
If inventories are unexpectedly declining at the current level of GDP:
A)GDP exceeds the level of current expenditures
B)GDP is at its equilibrium level
C)current expenditures exceed the level of GDP and GDP will fall
D)GDP is below its equilibrium level
Answer the next question on the basis of the following information for an open economy:
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Refer to the table. The equilibrium level of GDP in this economy is:
Net exports will be positive:
A)at the equilibrium level of GDP
B)whenever GDP is below its equilibrium level
C)whenever GDP exceeds its equilibrium level
D)if exports exceed imports
Assume the level of investment is independent of the level of GDP. If the interest rate rises, the investment schedule will:
A)shift to the right
B)shift to the left
C)shift downward
D)shift upward
When planned injections of investment, government spending, and exports equal leakages of saving, taxes, and imports:
A)aggregate expenditures will equal GDP
B)consumption plus injections will be greater than aggregate expenditures
C)net exports will be zero
D)output will be below its equilibrium level
All else equal, if domestic consumers begin to spend a greater fraction of their consumption expenditures on foreign-produced goods:
A)aggregate expenditures and GDP will both increase
B)aggregate expenditures and GDP will both decrease
C)exports will also rise, offsetting the increase in imports
D)the multiplier will increase
If the MPC is .75, government could eliminate a $60 recessionary expenditure gap by:
A)increasing government spending by $240
B)reducing lump-sum taxes by $80
C)reducing lump-sum taxes by $60
D)balancing its budget

McConnell Economics 18/e OLCOnline Learning Center

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