Question 1

Describe the role of business inventory change in determining the equilibrium level of GDP and changes in the level of GDP.

Accepted Answer

Inventories work as buffers in the econo...

Question 2

A recessionary gap exists when potential GDP

Accepted Answer

A)   falls short of equilibrium GDP.
B)   exceeds equilibrium GDP.
C)   equals equilibrium GDP.
D)   All of the above are correct.E) B) and C)
F) A) and C)

Question 3

Investment increases by $200 million and the value of MPC is 0.75.What would be the total increase in spending?

Accepted Answer

A)   $200 million
B)   $266 million
C)   $750 million
D)   $800 millionE) A) and B)
F) B) and C)

Question 4

The U.S.economy in 2009 was characterized by an excess level of output.This corresponds to a recessionary gap.

Accepted Answer

A) True 
 B)False

Question 5

From the demand side,the equilibrium level of GDP is one at which

Accepted Answer

A)   everyone who wants a job has one and firms are not looking for extra workers.
B)   the only unemployment is frictional.
C)   aggregate demand equals production.
D)   the only unemployment is cyclical.E) B) and D)
F) B) and C)

Question 6

The expenditure schedule will shift upward when

Accepted Answer

A)   net exports decrease.
B)   net exports increase.
C)   total imports increase.
D)   total exports decrease.E) A) and C)
F) A) and B)

Question 7

If total spending is less than the value of total output,firms

Accepted Answer

A)   may decide to cut prices.
B)   may increase production levels.
C)   will tend to raise prices.
D)   will notice inventories falling.E) All of the above
F) B) and D)

Question 8

Identify the "oversimplified multiplier formula."

Accepted Answer

A)   Multiplier = 1 divided by (1 − change in GDP) 
B)   Multiplier = 1 divided by (1 − marginal propensity to consume) 
C)   Multiplier = 1 divided by (1 − marginal propensity to save) 
D)   Multiplier = 1 divided by (1 − rate of inflation) E) A) and B)
F) C) and D)

Question 9

If the economy is in equilibrium,it must be

Accepted Answer

A)   on the 45° line.
B)   on the 60° line.
C)   below the 45° line.
D)   below the 60° line.E) A) and D)
F) B) and C)

Question 10

In a capitalist market economy,the decision to save is made by the same people who make the major investment decisions.

Accepted Answer

A) True 
 B)False

Question 11

In the circular flow diagram saving

Accepted Answer

A)   is a leakage and investment is an injection.
B)   and investment are both injections.
C)   is an injection and investment is a leakage.
D)   and investment are both leakages.E) B) and C)
F) A) and B)

Question 12

To avoid a coordination failure,the intentions of savers and investors must be both

Accepted Answer

A)   increasing.
B)   at their planned levels.
C)   more than full employment GDP.
D)   at levels set by the government.E) A) and B)
F) B) and D)

Question 13

Why does the aggregate demand curve slope downward?

Accepted Answer

The effect of higher prices on consumer ...

Question 14

To eliminate a recessionary gap,the expenditure schedule should be

Accepted Answer

A)   shifted downward.
B)   shifted upward.
C)   made steeper.
D)   made flatter.E) C) and D)
F) B) and D)

Question 15

If total spending is greater than current output,GDP will rise.

Accepted Answer

A) True 
 B)False

Question 16

If the expenditure schedule lies above the level of potential GDP,then there is a(n)

Accepted Answer

A)   recessionary gap.
B)   precautionary gap.
C)   deflationary gap.
D)   inflationary gap.E) A) and C)
F) All of the above

Question 17

One of the primary functions of markets could be labeled

Accepted Answer

A)   stimulation.
B)   coordination.
C)   planification.
D)   decentralization.E) B) and D)
F) A) and B)

Question 18

Figure 9-1
 
-Using the standard 45-degree line diagram,how does an increase in autonomous consumption effect the expenditure schedule?

Accepted Answer

A)   It shifts the expenditure schedule downward.
B)   It shifts the expenditure schedule upward.
C)   It increases the slope of the expenditure schedule.
D)   It decreases the slope of the expenditure schedule.E) B) and C)
F) C) and D)

Question 19

The total expenditure schedule in Macroland begins with these initial levels (in billions of dollars): Income = 1,000; Consumption = 900; Investment = 200; Government = 300; Net Exports = −100.If the MPC = 0.75 and income increases in increments of 200,find the equilibrium level of income.If full employment requires an income level of 2,000,what (if anything)should the government do? Indicate both the direction of the spending change and the size of the spending change.

Accepted Answer

Initially,total expenditures equal 1,300...

Question 20

When income rises,total expenditures remain constant.

Accepted Answer

A) True 
 B)False

Exam 9: Demand-Side Equilibrium: Unemployment or Inflation?

If the expenditure schedule lies above the level of potential GDP,then there is a(n)

Correct Answer
verified

In a capitalist market economy,the decision to save is made by the same people who make the major investment decisions.

Correct Answer
verified

Why does the aggregate demand curve slope downward?

Correct Answer
verified
The effect of higher prices on consumer ...
View Answer

If total spending is less than the value of total output,firms

Correct Answer
verified

To eliminate a recessionary gap,the expenditure schedule should be

Correct Answer
verified

Correct Answer
verified
Initially,total expenditures equal 1,300...
View Answer

Figure 9-1 -Using the standard 45-degree line diagram,how does an increase in autonomous consumption effect the expenditure schedule?

Correct Answer
verified

Describe the role of business inventory change in determining the equilibrium level of GDP and changes in the level of GDP.

Correct Answer
verified
Inventories work as buffers in the econo...
View Answer

From the demand side,the equilibrium level of GDP is one at which

Correct Answer
verified

If the economy is in equilibrium,it must be

Correct Answer
verified

The U.S.economy in 2009 was characterized by an excess level of output.This corresponds to a recessionary gap.

Correct Answer
verified

In the circular flow diagram saving

Correct Answer
verified

To avoid a coordination failure,the intentions of savers and investors must be both

Correct Answer
verified

A recessionary gap exists when potential GDP

Correct Answer
verified

One of the primary functions of markets could be labeled

Correct Answer
verified

The expenditure schedule will shift upward when

Correct Answer
verified

If total spending is greater than current output,GDP will rise.

Correct Answer
verified

When income rises,total expenditures remain constant.

Correct Answer
verified

Identify the "oversimplified multiplier formula."

Correct Answer
verified

Investment increases by $200 million and the value of MPC is 0.75.What would be the total increase in spending?

Correct Answer
verified

Exam 9: Demand-Side Equilibrium: Unemployment or Inflation?

If the expenditure schedule lies above the level of potential GDP,then there is a(n)

Correct AnswerverifiedShow Answer

In a capitalist market economy,the decision to save is made by the same people who make the major investment decisions.

Correct AnswerverifiedShow Answer

Why does the aggregate demand curve slope downward?

Correct AnswerverifiedThe effect of higher prices on consumer ...View AnswerShow Answer

If total spending is less than the value of total output,firms

Correct AnswerverifiedShow Answer

To eliminate a recessionary gap,the expenditure schedule should be

Correct AnswerverifiedShow Answer

Correct AnswerverifiedInitially,total expenditures equal 1,300...View AnswerShow Answer

Figure 9-1 -Using the standard 45-degree line diagram,how does an increase in autonomous consumption effect the expenditure schedule?

Correct AnswerverifiedShow Answer

Describe the role of business inventory change in determining the equilibrium level of GDP and changes in the level of GDP.

Correct AnswerverifiedInventories work as buffers in the econo...View AnswerShow Answer

From the demand side,the equilibrium level of GDP is one at which

Correct AnswerverifiedShow Answer

If the economy is in equilibrium,it must be

Correct AnswerverifiedShow Answer

The U.S.economy in 2009 was characterized by an excess level of output.This corresponds to a recessionary gap.

Correct AnswerverifiedShow Answer

In the circular flow diagram saving

Correct AnswerverifiedShow Answer

To avoid a coordination failure,the intentions of savers and investors must be both

Correct AnswerverifiedShow Answer

A recessionary gap exists when potential GDP

Correct AnswerverifiedShow Answer

One of the primary functions of markets could be labeled

Correct AnswerverifiedShow Answer

The expenditure schedule will shift upward when

Correct AnswerverifiedShow Answer

If total spending is greater than current output,GDP will rise.

Correct AnswerverifiedShow Answer

When income rises,total expenditures remain constant.

Correct AnswerverifiedShow Answer

Identify the "oversimplified multiplier formula."

Correct AnswerverifiedShow Answer

Investment increases by $200 million and the value of MPC is 0.75.What would be the total increase in spending?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
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Correct Answer
verified
The effect of higher prices on consumer ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Initially,total expenditures equal 1,300...
View Answer

Correct Answer
verified

Correct Answer
verified
Inventories work as buffers in the econo...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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