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| 1 | |
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 |
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| 2 | |
Answer the next question on the basis of the following data for a private closed economy. The letters Y, C, and I are used to represent GDP, consumption, and investment respectively.
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Refer to the table. At the $400 level of GDP, there will be: |
| | A) | no unplanned change in inventories |
| | B) | an unplanned increase in inventories of $30 |
| | C) | an unplanned decrease in inventories of $30 |
| | D) | an unplanned increase in inventories of $70 |
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| 3 | |
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 |
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| 4 | |
An increase in planned investment spending will: |
| | A) | decrease the interest rate |
| | B) | increase GDP, causing an upward shift of the consumption schedule |
| | C) | decrease the size of the trade deficit |
| | D) | increase equilibrium GDP |
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| 5 | |
All else equal, if domestic consumers 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 |
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| 6 | |
Suppose the economy is suffering a recessionary expenditure gap. A depreciation of the nation's currency will: |
| | A) | increase net exports and reduce the size of the recessionary expenditure gap |
| | B) | decrease net exports, further increasing unemployment |
| | C) | increase net exports, further increasing unemployment |
| | D) | cause cost-push inflation |
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| 7 | |
A given decrease in lump-sum taxes will have a larger impact on real GDP the: |
| | A) | smaller the MPC |
| | B) | smaller the MPS |
| | C) | smaller the size of the recessionary expenditure gap |
| | D) | greater the APC |
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| 8 | |
GDP will rise if: |
| | A) | investment plus saving plus exports exceeds consumption |
| | B) | saving plus imports plus consumption exceeds GDP |
| | C) | investment plus net exports exceeds the government's deficit |
| | D) | investment plus government spending plus exports exceeds saving plus taxes plus imports |
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| 9 | |
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 |
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| 10 | |
If the economy has a $20 billion recessionary expenditure gap and the MPC is 2/3, the equilibrium level of GDP is: |
| | A) | $13 billion below its full-employment potential |
| | B) | $20 billion below its full-employment potential |
| | C) | $40 billion below its full-employment potential |
| | D) | $60 billion below its full-employment potential |
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