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| 1 | |
Potential output is the economy's output when ________________. |
| | A) | inputs are underemployed |
| | B) | inputs are over employed |
| | C) | inputs are fully employed |
| | D) | inputs are in preparation |
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| 2 | |
Autonomous consumption increases with income. |
| | A) | True |
| | B) | False |
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| 3 | |
The goods market is in equilibrium when output ___________planned spending or aggregate demand. |
| | A) | is greater than |
| | B) | is equal to |
| | C) | is less than |
| | D) | none of the above |
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| 4 | |
Goods market equilibrium means that: |
| | A) | planned output is greater than potential output. |
| | B) | planned output is less than potential output. |
| | C) | planned output equals potential output. |
| | D) | planned output equals or is less than potential output. |
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| 5 | |
When aggregate demand exceeds actual output there is either ______________________ or _____________ . |
| | A) | unplanned disinvestment, unplanned saving |
| | B) | unplanned disinvestment, planned saving |
| | C) | planned disinvestment, unplanned saving |
| | D) | planned disinvestment, planned saving |
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| 6 | |
A rise in planned investment increases equilibrium output by the same. amount |
| | A) | True |
| | B) | False |
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| 7 | |
If planned savings are greater than planned investment aggregate demand will: |
| | A) | not change. |
| | B) | fall. |
| | C) | rise. |
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| 8 | |
Other things remaining equal if people spend ____ of their income this will cause GNP to ____. |
| | A) | more, grow |
| | B) | more, decline |
| | C) | more, remain unchanged |
| | D) | more, grow
more, decline
more, remain unchanged
less, grow |
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| 9 | |
We would expect a Keynesian economist to believe that governments should ___________ and _______________. |
| | A) | not intervene, allow the economy to regulate itself |
| | B) | intervene, keep output close to potential outputv |
| | C) | balance their budget, practice strict monetarism |
| | D) | promote supply-side policies, impose trade barriers |
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| 10 | |
In a macroeconomic model without foreign trade or a government, aggregate demand is the sum of: |
| | A) | personal saving and private investment. |
| | B) | personal saving and personal consumption. |
| | C) | personal consumption and private investment. |
| | D) | none of the above. |
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| 11 | |
The sum of the MPS and MPC is 1. |
| | A) | True |
| | B) | False |
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| 12 | |
A linear consumption function with a positive slope less than one means that if income increases, consumption will ______. |
| | A) | fall |
| | B) | not change |
| | C) | increase |
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| 13 | |
Short-run equilibrium output means that aggregate demand _________ actual output. |
| | A) | is less than |
| | B) | equals |
| | C) | is greater than |
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| 14 | |
If desired spending in the economy exceeds income we would expect _________. |
| | A) | households to save more |
| | B) | firms to produce less |
| | C) | firms to produce more |
| | D) | the MPC to change |
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| 15 | |
In equilibrium savings exceed investment |
| | A) | True |
| | B) | False |
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| 16 | |
When investment is assumed to be autonomous the slope of the AD schedule is determined by the ___________. |
| | A) | marginal propensity to invest |
| | B) | level of disposable income |
| | C) | marginal propensity to consume |
| | D) | average propensity to consume |
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| 17 | |
The multiplier tells us how much ____________ changes after a shift in ________________. |
| | A) | consumption, income |
| | B) | investment, output |
| | C) | savings, investment |
| | D) | output, aggregate demand |
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| 18 | |
The multiplier is calculated as: |
| | A) | 1/(1 – MPC) |
| | B) | 1/MPS |
| | C) | 1/MPC |
| | D) | a or b |
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| 19 | |
If the MPC is 0.5, the multiplier is _______. |
| | A) | 2 |
| | B) | ½ |
| | C) | 0.2 |
| | D) | 20 |
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| 20 | |
If as a result of households’ wish to save more, there is a change in equilibrium income and no change in equilibrium saving, this is an example of ___________. |
| | A) | market imperfection |
| | B) | the law of diminishing returns |
| | C) | the paradox of thrift |
| | D) | market failure |
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