Macro Economics

1.

As shown in Exhibit 1 autonomous consumption is:

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Group of answer choices

0.

$2 trillion.

$4 trillion.

$6 trillion.

$8 trillion.
2. If the economy is experiencing less than full-equilibrium, the Keynesian school recommends that the government:
Group of answer choices

do nothing to stimulate the economy.

undertake fiscal policy to stimulate aggregate demand.

undertake fiscal policy to stimulate aggregate supply.

balance the budget to stimulate aggregate demand.
3. The school of thought that emphasizes the natural tendency for an economy to move toward equilibrium full employment is known as the:
Group of answer choices

Keynesian school.

supply-side school.

noninterventionist school.

classical school.
4. John Maynard Keynes’s central proposition that a dollar increase in disposable income would increase consumption, but by less than the increase in disposable income implies a marginal propensity to consume (MPC) that is:
Group of answer choices

greater than or equal to one.

equal to one.

less than one but greater than zero.

negative.
5. The marginal propensity to consume (MPC) is the slope of the:
Group of answer choices

GDP curve.

disposable income curve.

consumption function.

autonomous consumption curve.
6. The sum of the marginal propensity to consume (MPC) and the marginal propensity to save (MPS) always equals:
Group of answer choices

1.

0.

the interest rate.

the marginal propensity to invest (MPI).
7. If the marginal propensity to consume = 0.75, then:
Group of answer choices

the marginal propensity to save = 0.75.

the marginal propensity to save = 1.33.

the marginal propensity to save = 0.20.

the marginal propensity to save = 0.25.
8. The investment demand curve shows the amount businesses spend for investment goods at different possible:
Group of answer choices

price levels.

levels of GDP.

rates of interest.

levels of taxation.
9. A rightward shift of the investment demand curve would be caused by a(an):
Group of answer choices

increase in the expected rate of return on investment caused by an increase in business confidence.

decrease in the expected rate of return on investment caused by a decrease in business confidence.

increase in the rate of interest.

decrease in the rate of interest.
10. The consumption function is drawn on a graph with disposable income on the horizontal axis without including investment. Assume investment is autonomous and is added to the consumption function. The effect is:
Group of answer choices

an upward adjustment in the vertical intercept.

no change in the adjustment in the vertical intercept.

an increase in the slope of the consumption schedule.

a decrease in the slope of the planned expenditure schedule.
11.
As shown in Exhibit 2, savings occurs:

Group of answer choices

at 0.

between 0 and $4 trillion.

where disposable income is greater than $4 trillion.

at $2 trillion.
12.
As shown in Exhibit 2, the marginal propensity to consume (MPC) is:

Group of answer choices

0.33.

0.50.

0.67.

0.75.
13.
As shown in Exhibit 2, this economy is in macro equilibrium at:

Group of answer choices

$2 trillion.

$4 trillion.

$6 trillion.

$8 trillion.
14. In the aggregate expenditures-output model, if aggregate expenditures (AE) are less than GDP, then:
Group of answer choices

inventory is depleted.

inventory is unchanged.

employment decreases.

employment increases.
15.
As shown in Exhibit 1, if GDP is $6 trillion, the economy experiences unplanned inventory:

Group of answer choices

depletion of $2 trillion.

depletion of $6 trillion.

accumulation of $2 trillion.

accumulation of $6 trillion.
16. If the marginal propensity to consume (MPC) is 0.80, the value of the spending multiplier is:
Group of answer choices

2.

5.

8.

10.
17. Assume that full-employment real GDP is Y = $1,200 billion, the current equilibrium real GDP is Y = $1,600 billion, and the MPC = 0.8. In order to bring the economy to a full-employment real GDP:
Group of answer choices

a recessionary gap must be bridged by increasing aggregate expenditures by $80 billion.

an inflationary gap must be bridged by cutting aggregate expenditures by $80 billion.

nothing is needed to bring the economy into full employment equilibrium.

a recessionary gap must be bridged by increasing aggregate expenditures by $400 billion.

an inflationary gap must be bridged by cutting aggregate expenditures by $400 billion.

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