Econ: Ch. 11
Economics. Chapter 11.
- 1.
Which of the following statements is entirely correct? The income-expenditure model is useful for understanding:
- A.
Economic fluctuations in the very short-run when prices do not change very much.
- B.
The economy in the long run, when prices are highly volatile.
- C.
Economic fluctuations in the very short-run when prices are highly volatile.
- D.
The economy in the long run, when prices are highly stable.
Correct Answer
A. Economic fluctuations in the very short-run when prices do not change very much. -
- 2.
Refer to the figure below. Which level of output results in depletion of inventories?
- A.
Y*.
- B.
Y1.
- C.
Y2.
- D.
There isn’t sufficient information to answer the question.
Correct Answer
C. Y2. -
- 3.
Consider the consumption function C = Ca + bY. Which part of this function describes the amount of consumption that is dependent on income?
- A.
Ca.
- B.
B.
- C.
BY.
- D.
Ca + bY.
Correct Answer
C. BY. -
- 4.
Refer to the figure below. Which graph best describes the impact of an increase in autonomous consumption?
- A.
The graph on the left.
- B.
The graph on the right.
- C.
Both graphs.
- D.
Neither graph.
Correct Answer
A. The graph on the left. -
- 5.
Which of the following formulas correctly illustrates equilibrium output?
- A.
1 – MPC * (C + I)
- B.
(Ca + I)/(1 – MPC)
- C.
C + I
- D.
Ca + MPC – 1/I
Correct Answer
B. (Ca + I)/(1 – MPC) -
- 6.
When output is determined by demand and the economy is in equilibrium, which of the following is true?
- A.
C = I.
- B.
S = I.
- C.
Y = C
- D.
All of the above.
Correct Answer
B. S = I. -
- 7.
Refer to the figure below. The graph demonstrates the increase in investment from I0 to I1, which is:
- A.
Equal to the corresponding change in output.
- B.
Greater than the corresponding change in output.
- C.
Less than the corresponding change in output.
- D.
Either greater than or less than but not equal to the corresponding change in output.
Correct Answer
C. Less than the corresponding change in output. -
- 8.
Refer to the graph below. Which of the graphs best depicts the impact of an increase in taxes?
- A.
The graph on the left.
- B.
The graph on the right.
- C.
Both graphs.
- D.
Neither graph.
Correct Answer
B. The graph on the right. -
- 9.
Which of the following is correct? The simple income-expenditure model illustrates that:
- A.
An increase in government spending will increase total planned expenditures for goods and services.
- B.
Cutting taxes will increase the after-tax income of consumers and will also lead to an increase in planned expenditures for goods and services.
- C.
Policymakers need to take into account the multipliers for government spending and taxes as they develop their policies.
- D.
All of the above.
Correct Answer
D. All of the above. -
- 10.
Only one statement below is entirely correct. Which one? The result of automatic stabilizers when the economy is in an expansion is to:
- A.
Collect less taxes and pay out less transfer payments, decreasing consumer spending.
- B.
Collect more taxes and pay out less transfer payments, decreasing consumer spending.
- C.
Collect less taxes and pay out more transfer payments, increasing consumer spending.
- D.
Collect more taxes and pays out more transfer payments, decreasing consumer spending.
Correct Answer
B. Collect more taxes and pay out less transfer payments, decreasing consumer spending. -
- 11.
The economy will be more stable when:
- A.
Consumers base their decisions on permanent rather than temporary changes in income.
- B.
Firms and consumers know that the federal government will often be taking actions to stabilize the economy.
- C.
Firms make better forecasts of demand.
- D.
All of the above.
Correct Answer
D. All of the above. -
- 12.
To obtain the MPC for spending on domestic goods, we must:
- A.
Add the marginal propensity to import to the MPC.
- B.
Subtract the marginal propensity to import from the MPC.
- C.
Multiply the marginal propensity to import by the MPC.
- D.
Divide the marginal propensity to import by the MPC.
Correct Answer(s)
B. Subtract the marginal propensity to import from the MPC.
D. Divide the marginal propensity to import by the MPC. -
- 13.
Refer to the figure below. Which graph best depicts the impact of an increase in the marginal propensity to import?
- A.
The graph on the left.
- B.
The graph on the right.
- C.
Both graphs.
- D.
Neither graph.
Correct Answer
B. The graph on the right. -
- 14.
Refer to the figure below. Which of the following is associated with the move from y0 to y1?
- A.
An upward shift of the planned expenditure function.
- B.
A downward shift of the planned expenditure function.
- C.
No change in the planned expenditure function.
- D.
A lower level of consumption and/or investment spending.
Correct Answer
A. An upward shift of the planned expenditure function. -
- 15.
Refer to the graph below. Which move illustrates a rise in government spending in this graph, all other things equal?
- A.
A move from A to B.
- B.
A move from A to C.
- C.
A move from B to A.
- D.
A move from C to A.
Correct Answer
B. A move from A to C. -
- 16.
Refer to the figure below. Which of the following could have caused the simultaneous shift of aggregate planned expenditure and aggregate demand?
- A.
An increase in the aggregate price level.
- B.
An increase in planned expenditures due to increased stock prices.
- C.
An increase in taxes.
- D.
A change in the value of the multiplier.
Correct Answer
B. An increase in planned expenditures due to increased stock prices. -
- 17.
Consumption is 800 + .9Y while investment is 500. The equilibrium level of output is:
- A.
1,170
- B.
8,000
- C.
3,250
- D.
13,000
Correct Answer
D. 13,000 -
- 18.
Equilibrium output is $5200 billion while full employment or potential GDP is $5000 billion. If the MPC is .8 what must the government do to it’s purchases to get the economy to full employment?
- A.
Lower government purchases by $200 billion.
- B.
Raise government purchases by $40 billion.
- C.
Lower government purchases by $40 billion.
- D.
Raise government purchases by $200 billion.
Correct Answer
C. Lower government purchases by $40 billion. -
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Jan 11, 2013Quiz Edited by
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Apr 25, 2010Quiz Created by
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