Question 1

The figure given below represents the macroeconomic equilibrium in the aggregate income and aggregate expenditure framework.Assume that MPI is equal to zero. Figure 10.4 1 and I2: Investment G: Government Spending X: Exports Refer to Figure 10.4.Starting at equilibrium level E3 equilibrium level E1 will be reached if aggregate expenditure: A) decreases by $200. B) increases by $200. C) decreases by $100. D) increases by $100. E) increases by $50." class="answers-bank-image d-inline" rel="preload" > In the figure:
C: Consumption
I1 and I2: Investment
G: Government Spending
X: Exports
Refer to Figure 10.4.Starting at equilibrium level E3 equilibrium level E1 will be reached if aggregate expenditure:

Accepted Answer

A)  decreases by $200.
B)  increases by $200.
C)  decreases by $100.
D)  increases by $100.
E)  increases by $50.F) A) and D)
G) A) and C)

Question 2

The table given below shows the levels of national income (Y) and the corresponding levels of saving (S) , investment (I) , export (X) , and import (M) of an open economy. Table 10.2
 Consider the economy described in Table 10.2.What is the equilibrium level of real GDP?

Accepted Answer

A)  $935
B)  $2, 100
C)  $3, 320
D)  $4, 800
E)  $5, 230F) B) and C)
G) A) and E)

Question 3

If Saving+Tax+Import > Investment+Government spending+Export, then _____ must fall to establish macroeconomic equilibrium.

Accepted Answer

A)  net exports
B)  gross exports
C)  nominal GDP
D)  real GDP
E)  government spendingF) B) and C)
G) A) and C)

Question 4

The table given below reports the value of real GDP and its components consumption (C) , investment (I) , exports, and imports for two consecutive years. Table 10.3
 Refer to Table 10.3.To increase equilibrium real GDP in an open economy to $12, 000 in year 3, all else equal to that in year 2, investment would have to increase by:

Accepted Answer

A)  $258.
B)  $550.
C)  $2, 262.
D)  $1, 100.
E)  $1, 155.F) A) and E)
G) C) and E)

Question 5

Suppose the multiplier effect for Japan is 0.8 for any $1 billion change in U.S.government purchases.Therefore, Japanese real GDP will rise by $8 billion when U.S.government spending rises by $10 billion.

Accepted Answer

A) True 
 B)False

Question 6

In general, autonomous spending increases have a lower multiplier effect on real GDP when the economy is open to international trade.

Accepted Answer

A) True 
 B)False

Question 7

Scenario 10.2 A hypothetical open economy has a marginal propensity to import (MPI) equal to 0.2 and a marginal propensity to consume equal to 0.7.Assume that the economy is initially in equilibrium.
Refer to Scenario 10.2.What is the spending multiplier of this economy?

Accepted Answer

A)  2
B)  1.4
C)  0.7
D)  0.9
E)  Cannot be determined with the information givenF) All of the above
G) A) and D)

Question 8

The table given below reports the value of real GDP and its components consumption (C) , investment (I) , exports, and imports for two consecutive years. Table 10.3
 Refer to Table 10.3.The equilibrium value of imports in year 1 is:

Accepted Answer

A)  $1, 600
B)  $1, 450.
C)  $1, 400.
D)  $1, 300.
E)  $1, 200.F) All of the above
G) A) and B)

Question 9

An increase in U.S.imports from Mexico will cause a decrease in income for Mexican individuals and businesses.

Accepted Answer

A) True 
 B)False

Question 10

What is the value of the spending multiplier when MPC = 0.85 and MPI = 0.3?

Accepted Answer

A)  1.82
B)  0.85
C)  2.22
D)  1.18
E)  2.50F) B) and C)
G) A) and C)

Question 11

In an economy that has no foreign trade, if real GDP declines by $160 million following a decline in investment spending of $40 million, then the marginal propensity to consume must be equal to _____.

Accepted Answer

A)  2
B)  0.33
C)  4
D)  0.75
E)  0.4F) C) and E)
G) A) and D)

Question 12

Given a constant GDP gap, the higher the spending multiplier, the smaller will be the recessionary gap.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is associated with an increase in the average price level?

Accepted Answer

A)  A decrease in the aggregate quantity demanded
B)  An increase in the aggregate quantity demanded
C)  A leftward shift of the aggregate demand curve
D)  A rightward shift of the aggregate demand curve
E)  Aggregate quantity demanded remains unchanged but the aggregate expenditures curve shifts leftward.F) A) and D)
G) A) and E)

Question 14

Suppose equilibrium income decreases by $600 as a result of a change in government spending.If the multiplier is 3, what is the change in government spending?

Accepted Answer

A)  Government sending will decrease by $1, 800
B)  Government sending will decrease by $600
C)  Government sending will decrease by $200
D)  Government sending will increase by $400
E)  Government sending will increase by $1, 200F) C) and E)
G) A) and E)

Exam 15: Income and Expenditures Equilibrium

Correct Answer
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Scenario 10.2 A hypothetical open economy has a marginal propensity to import (MPI) equal to 0.2 and a marginal propensity to consume equal to 0.7.Assume that the economy is initially in equilibrium. Refer to Scenario 10.2.What is the spending multiplier of this economy?

Correct Answer
verified

Correct Answer
verified

The table given below shows the levels of national income (Y) and the corresponding levels of saving (S) , investment (I) , export (X) , and import (M) of an open economy. Table 10.2 Consider the economy described in Table 10.2.What is the equilibrium level of real GDP?

Correct Answer
verified

In an economy that has no foreign trade, if real GDP declines by $160 million following a decline in investment spending of $40 million, then the marginal propensity to consume must be equal to _____.

Correct Answer
verified

An increase in U.S.imports from Mexico will cause a decrease in income for Mexican individuals and businesses.

Correct Answer
verified

Suppose the multiplier effect for Japan is 0.8 for any $1 billion change in U.S.government purchases.Therefore, Japanese real GDP will rise by $8 billion when U.S.government spending rises by $10 billion.

Correct Answer
verified

What is the value of the spending multiplier when MPC = 0.85 and MPI = 0.3?

Correct Answer
verified

In general, autonomous spending increases have a lower multiplier effect on real GDP when the economy is open to international trade.

Correct Answer
verified

The table given below reports the value of real GDP and its components consumption (C) , investment (I) , exports, and imports for two consecutive years. Table 10.3 Refer to Table 10.3.The equilibrium value of imports in year 1 is:

Correct Answer
verified

If Saving+Tax+Import > Investment+Government spending+Export, then _____ must fall to establish macroeconomic equilibrium.

Correct Answer
verified

Which of the following is associated with an increase in the average price level?

Correct Answer
verified

Given a constant GDP gap, the higher the spending multiplier, the smaller will be the recessionary gap.

Correct Answer
verified

Suppose equilibrium income decreases by $600 as a result of a change in government spending.If the multiplier is 3, what is the change in government spending?

Correct Answer
verified

Exam 15: Income and Expenditures Equilibrium

Correct AnswerverifiedShow Answer

Scenario 10.2 A hypothetical open economy has a marginal propensity to import (MPI) equal to 0.2 and a marginal propensity to consume equal to 0.7.Assume that the economy is initially in equilibrium. Refer to Scenario 10.2.What is the spending multiplier of this economy?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The table given below shows the levels of national income (Y) and the corresponding levels of saving (S) , investment (I) , export (X) , and import (M) of an open economy. Table 10.2 Consider the economy described in Table 10.2.What is the equilibrium level of real GDP?

Correct AnswerverifiedShow Answer

In an economy that has no foreign trade, if real GDP declines by $160 million following a decline in investment spending of $40 million, then the marginal propensity to consume must be equal to _____.

Correct AnswerverifiedShow Answer

An increase in U.S.imports from Mexico will cause a decrease in income for Mexican individuals and businesses.

Correct AnswerverifiedShow Answer

Suppose the multiplier effect for Japan is 0.8 for any $1 billion change in U.S.government purchases.Therefore, Japanese real GDP will rise by $8 billion when U.S.government spending rises by $10 billion.

Correct AnswerverifiedShow Answer

What is the value of the spending multiplier when MPC = 0.85 and MPI = 0.3?

Correct AnswerverifiedShow Answer

In general, autonomous spending increases have a lower multiplier effect on real GDP when the economy is open to international trade.

Correct AnswerverifiedShow Answer

The table given below reports the value of real GDP and its components consumption (C) , investment (I) , exports, and imports for two consecutive years. Table 10.3 Refer to Table 10.3.The equilibrium value of imports in year 1 is:

Correct AnswerverifiedShow Answer

If Saving+Tax+Import > Investment+Government spending+Export, then _____ must fall to establish macroeconomic equilibrium.

Correct AnswerverifiedShow Answer

Which of the following is associated with an increase in the average price level?

Correct AnswerverifiedShow Answer

Given a constant GDP gap, the higher the spending multiplier, the smaller will be the recessionary gap.

Correct AnswerverifiedShow Answer

Suppose equilibrium income decreases by $600 as a result of a change in government spending.If the multiplier is 3, what is the change in government spending?

Correct AnswerverifiedShow Answer

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