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- 1. Multiple ChoiceThe multiplier is:1/MPC1/1+MPC1/MPS1/1-MPS
- 2. Multiple ChoiceAssume MPC is 2/3. If investment spending increases by $2 billion, GDP will increase by$3 billion$2/3 billion$6 billion$2 billion
- 3. Multiple ChoiceIf the MPC is .7 and gross investment spending increase by $3 billion, GDP willincrease by $10 billionincrease by 2.1 billiondecrease by $4.29 billionincrease by $4.29 billion
- 4. Multiple Choice
The proportion of any change in income that is spent rather than saved is
the multiplier
income determinants
marginal propensity to consume
macroeconomic equilibrium
- 5. Multiple Choice
Which of the following does NOT shift the AD curve?
Government Spending
Investment Spending
Long run aggregate supply
Net Exports
- 6. Multiple Choice
Which of the following describes the inflationary gap in the Aggregate Supply and Demand model?
- 7. Multiple Choice
Unemployment is high and GDP is declining. To improve conditions, the government increases spending by $5B. If the MPC is .75, by how much will GDP rise?
$5B
$10B
$15B
$20B
- 8. Multiple Choice
Inflation is high. If the MPS is .25, how much must government cut in spending to decrease AD by $20B?
$1B
$5B
$10B
$20B
- 9. Multiple Choicewhat is the relationship b/w MPC AND MPS?MPC+MPS=0MPC=MPSMPC+MPS=1NONE OF THESE
- 10. Multiple ChoiceHow much is MPS in an economy when MPC is .8?.231.6.8
- 11. Multiple Choice
If there is an initial injection (e.g. a rise in investment) into the economy then the final increase in aggregate demand and real GDP will be greater. This reflects
economic growth
the multiplier effect
keynesian economic policy
accelerator
- 12. Multiple Choice
Matt Damon, a manager at a Taco Bell, received a $5,000 increase in his annual disposable income. Suppose his marginal propensity to consume is 0.90. How much of the $5,000 increase will Damon save?
$1000
$4500
$4700
$300
$500
- 13. Multiple ChoiceIf real output exceeds expenditureinventories will fallinventories will riseinventories will remain unchangedaggregate expenditure will rise
- 14. Multiple Choice
An autonomous increase in aggregate income of $100 leads to additional spending of $80 in the next period and $64 in the following period and so on. From this information the value of the multiplier coefficient is
0.8
1.25
5
6
- 15. Multiple ChoiceIf the West Australian government decided to build a $1 billion football stadium and the marginal propensity to consume (MPC) for the state economy is 0.8, the level of income willremain unchangedincrease by $800 millionincrease by $1 billionincrease by $5 billion
- 16. Multiple Choice
An economy is in macroeconomic equilibrium. If Y = 200, C =100, I =30, G=40 and M =30, what is the value of exports?
60
40
90
50
- 17. Multiple Choice
If Jet's disposable income increases from $500 to $550 and his level of personal consumption expenditures increases from $380 to $420, you may conclude that his marginal propensity to
consume is .8
consume is .4
consume is .25
save is .8
save is .25
- 18. Multiple ChoiceConsumers spending $120 from a wage increase of $200 implies:an MPS of 0.8 and a multiplier of 5an MPS of 0.4 and a multiplier of 2.5an MPS of 0.6 and a multiplier of 2an MPS of 0.4 and a multiplier of 3.5
- 19. Multiple ChoiceIf consumption spending totals $40 million, investment is $30 million, tax revenue totals $15 million, government spending is $10 million, exports are $3 million and imports are $5 million, GDP is...$103 million$80 million$93 million$78 million
- 20. Multiple ChoiceDuring a recession, which of the following is likely to occur?an increase in real wagesan increase in productionand increase in the GDP growth ratean increase in the unemployment rate
- 21. Multiple ChoiceThe federal government decreases spending by $44 billion dollars. This would cause a shift fromAD 1 to AD 2AD 1 to AD 3AD 2 to AD 3
- 22. Multiple ChoiceIn the Keynesian Aggregate Expenditure Model, if the MPC is .75 and Ig increases by $6 billion, GDP will increase by$18 billion$2 Billion$24 Billion$12 Billion
- 23. Multiple ChoiceWhat will happen to PL and Y if a major earthquake destroys manufacturing capabilities on the West coast?Price: Increase
Quantity: DecreasePrice: Decrease
Quantity: IncreasePrice: Increase
Quantity: IncreasePrice: Decrease
Quantity: Decrease - 24. Multiple Choice
When Nancy's disposable income is $100,000, her consumption expenditure is $92,000, and when her disposable income is $110,000, her consumption expenditure is $100,000. Nancy's marginal propensity to consume is
.9
1.25
5
.8
.75
- 25. Multiple ChoiceFiscal Policy refers toincreases in taxes to fight recessionsdecreases in taxes to fight inflationchanges in spending and taxesfederal deficits
- 26. Multiple Choice
When an economy is in equilibrium at potential
gross domestic product, the actual unemployment
rate is
equal to zero
greater than the natural rate
less than the natural rate
equal to the natural rate
- 27. Multiple ChoiceIf the government wants to increase employment, government purchases should be ________ and/or taxes should be ________.increased; decreasedincreased; increaseddecreased; increaseddecreased; decreased
- 28. Multiple ChoiceTaxes are increased by $50 billion and income decreases by $300 billion. The value of the tax multiplier is-3.-5.-6.-15.
- 29. Multiple ChoiceIf the MPS is 0.4, the government spending multiplier is0.6.2.5.4.5.
- 30. Multiple ChoiceWith an MPS of 0.2, an increase in government spending of $240 m will result in the equilibrium level of income rising by$1200m$480m$960m$2400m
- 31. Multiple Choice
Which of the following would be most effective in combating a recession where T represents Taxes and G represents Government Spending?
T decreases by $25 billion and G decreases by $25 billion
T decreases by $25 billion and G increases by $25 billion
T decreases by $25 billion and G does not change
T increases by $25 billion and G decreases by $25 billion
T increases by $25 billion and G increases by $25 billion
- 32. Multiple ChoiceWhen income is $200 consumption is $140, and when income is $250 consumption is $180. The marginal propensity to save is0.800.750.250.20
- 33. Multiple ChoiceThe value of the multiplier will increase ifautonomous investment increases.induced investment increases.the MPC decreases.the MPS decreases.
- 34. Multiple ChoiceLionsville is an open economy with a complex multiplier of 2.5. The current level of GDP is $250m below the full employment level of GDP. For the government to close this gap, it needs to increase its spending by$250 million.$100 million.$10 million.$625 million.
- 35. Multiple Choice
The quantity of Chinese exports is determined by
Chinese aggregate expenditure.
political factors.
aggregate incomes in the rest of the world.
Chinese GDP.
Chinese consumption expenditure.
- 36. Multiple ChoicePeople in Oobi Doobi spend 80% of any change in income. If taxation decreased by $20 million and government spending decreased by $16 million, other things being equal, the equilibrium level of income willdecrease.increase.decrease initially, then increase.not change.
- 37. Multiple ChoiceWhat would be the effect of an increase in imports?Increase ADDecrease ADIncrease SRASDecrease SRAS
- 38. Multiple ChoiceWhich of the following would shift AS in the short run but not in the long run?Increase in capital stockIncrease in wagesDecrease in capital stockImprovements in technology
- 39. Multiple Choice
In 2016, disposable income equaled $10 billion. If the MPC is 0.6, how much income was spent by consumers?
$10 billion
$4 billion
$6 billion
$8 billion
- 40. Multiple Choice
In 2016, disposable income equaled $10 billion. If the MPC is 0.6, how much income was saved by consumers?
$10 billion
$4 billion
$6 billion
$8 billion
- 41. Multiple Choice
The slope of the consumption function is
equal to the MPC and is equal to 1.
equal to the MPC and is less than 1.
not equal to the MPC and is less than 1.
equal to the MPC and is greater than 1.
not equal to the MPC and is equal to 1.
- 42. Multiple Choice
In an economy with no income taxes or imports, if the expenditure multiplier is 4, what does the MPC equal?
.4
.9
.5
.75
.8
- 43. Multiple Choice
The expenditure multiplier is 10 and, as a result of a change in expenditure, equilibrium expenditure and real GDP change by $100 billion. What was the initial change in expenditure?
$10 billion
$5 billion
$20 billion
$50 billion
$100 billion
- 44. Multiple Choice
An economy has no imports or income taxes. The MPC is .75 and real GDP is $120 billion. Businesses increase investment by $4 billion. The new level of real GDP is
$132 billion.
$124 billion.
$140 billion.
$136 billion.
$128 billion.
- 45. Multiple Choice
The MPC is 0.80 and there are no income taxes or imports. If government expenditures on goods and services increases by $5.0 billion, after the multiplier effect works out, aggregate expenditures increases by
$2 billion.
$20 billion.
$10 billion.
$2.8 billion.
$1.8 billion.
- 46. Multiple Choice
The formula, 1/1-slope of the AE curve, is the
marginal propensity to export.
total amount of autonomous expenditure.
marginal propensity to consume.
marginal tax rate.
expenditure multiplier.
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