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| 1 | |
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—and of the 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. |
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| 2 | |
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. |
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| 3 | |
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. |
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| 4 | |
If inventories are declining unexpectedly 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. |
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| 5 | |
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: |
| | A) | $150. |
| | B) | $200. |
| | C) | $250. |
| | D) | $300. |
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| 6 | |
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. |
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| 7 | |
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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| 8 | |
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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| 9 | |
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. |
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| 10 | |
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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