Question 1

In the Keynesian model, a $1 billion increase in autonomous consumption leads to ______ in short-run equilibrium output.

Accepted Answer

A)  a $1billion increase
B)  a greater than $1 billion increase
C)  no change
D)  a $1 billion decreaseE) B) and D)
F) C) and D)

Question 2

If short-run equilibrium output equals 10,000, the income-expenditure multiplier equals 5, the mpc equals 0.8, and potential output (Y*)  equals 9,000, then transfers must be ______ by approximately ______ to eliminate any output gap.

Accepted Answer

A)  decreased; 250
B)  decreased; 200
C)  increased; 250
D)  increased; 200E) A) and C)
F) A) and D)

Question 3

Dave's Mirror Company expects to sell $1,000,000 worth of mirrors and to produce $1,250,000 worth of mirrors in the coming year.The company purchases $300,000 worth of new equipment during the year.Sales for the year turn out to be $900,000.Actual investment by Dave's Mirror Company equals ______ and planned investment equals _______.

Accepted Answer

A)  $250,000; $150,000
B)  $300,000; $200,000
C)  $550,000; $450,000
D)  $650,000; $550,000E) B) and C)
F) C) and D)

Question 4

In the basic Keynesian model, an increase in government purchases:

Accepted Answer

A)  reduces short-run equilibrium output.
B)  increases short-run equilibrium output.
C)  reduces potential output.
D)  increases potential output.E) All of the above
F) B) and C)

Question 5

Planned aggregate expenditure (PAE)  equals:

Accepted Answer

A)  C + Ip + G + NX.
B)  Cp + I + G + NX.
C)  C + I + Gp + NX.
D)  C + I + G + NXp.E) All of the above
F) B) and D)

Question 6

Contractionary policies are government stabilization policies intended to decrease:

Accepted Answer

A)  population.
B)  unemployment.
C)  average labor productivity.
D)  planned spending.E) B) and D)
F) C) and D)

Question 7

In the short run, with predetermined prices, when output is greater than planned aggregate expenditure, firms will:

Accepted Answer

A)  reduce production.
B)  increase production.
C)  increase planned aggregate expenditure.
D)  decrease planned aggregate expenditure.E) All of the above
F) A) and D)

Question 8

Refer to the figure below.  Based on the figure, if the economy is in short-run equilibrium with output equal to 16,000, then there is ______, and ______ could return the economy to potential output (Y*) .

Accepted Answer

A)  an expansionary gap; a decrease in autonomous expenditures of 1,000
B)  an expansionary gap; a decrease in autonomous expenditures of 4,000
C)  a recessionary gap; an increase in autonomous expenditures of 1,000
D)  a recessionary gap; an increase in autonomous expenditures of 4,000E) None of the above
F) All of the above

Question 9

Short-run equilibrium output is the level of output at which actual output:

Accepted Answer

A)  equals potential output.
B)  maximizes firm profits.
C)  equals real GDP per capita.
D)  equals planned aggregate expenditure.E) All of the above
F) C) and D)

Question 10

Induced expenditure is the portion of planned aggregate expenditure that:

Accepted Answer

A)  equals aggregate output.
B)  equals planned spending.
C)  equals autonomous expenditure.
D)  depends on output.E) B) and D)
F) None of the above

Question 11

The bursting of the housing bubble in 2006 caused ______ to cut back on their spending, thereby shifting the PAE line _____.

Accepted Answer

A)  businesses and households; upward
B)  businesses and households; downward
C)  government and businesses; downward
D)  government and businesses; upwardE) A) and B)
F) A) and C)

Question 12

The larger the mpc, the ______ the income-expenditure multiplier and the ______ the effect of a change in autonomous spending on short-run equilibrium output.

Accepted Answer

A)  larger; larger
B)  larger; smaller
C)  smaller; smaller
D)  smaller; largerE) A) and C)
F) A) and D)

Question 13

Two drawbacks in using fiscal policy as a stabilization tool are that fiscal policy can affect ______ as well as aggregate demand and that fiscal policy is _______.

Accepted Answer

A)  consumption; too flexible
B)  potential output; not flexible enough
C)  consumption; offset by automatic stabilizers
D)  potential output; offset by automatic stabilizersE) A) and B)
F) All of the above

Question 14

In the short run with predetermined prices, when output is less than planned aggregate expenditure, firms will:

Accepted Answer

A)  reduce production.
B)  increase production.
C)  increase planned aggregate expenditure.
D)  decrease planned aggregate expenditure.E) A) and C)
F) B) and C)

Question 15

House prices in the U.S.increased dramatically _____, and decreased dramatically ______.

Accepted Answer

A)  from 2001 to 2006; from 2007 to 2009
B)  from 2007 to 2009; from 2001 to 2006
C)  from 2001 to 2009; from 2006 to 2007
D)  from 2006 to 2009; from 2001 to 2006E) C) and D)
F) A) and B)

Question 16

In the basic Keynesian model, a decline in autonomous spending:

Accepted Answer

A)  reduces short-run equilibrium output.
B)  increases short-run equilibrium output.
C)  reduces potential output.
D)  increases potential output.E) A) and B)
F) None of the above

Question 17

When actual investment is less than planned investment:

Accepted Answer

A)  firms sold less output than expected.
B)  firms sold more output than expected.
C)  the quantity of output sold is the amount the firm expected to sell.
D)  the economy produces short-run equilibrium output.E) A) and C)
F) A) and B)

Question 18

The assumption that firms meet the demand for their products at preset prices is the key assumption upon which ______ is built.

Accepted Answer

A)  the basic Keynesian model
B)  Okun's Law
C)  the supply and demand model
D)  quantity equation for moneyE) C) and D)
F) A) and D)

Question 19

In Macroland, autonomous consumption equals 100, the marginal propensity to consume equals 0.75, net taxes are fixed at 40, planned investment is fixed at 50, government purchases are fixed at 150, and net exports are fixed at 20.The slope of the expenditure line is:

Accepted Answer

A)  0.25.
B)  0.75.
C)  290.
D)  320.E) B) and C)
F) A) and D)

Question 20

If firms sell less output than expected, planned investment:

Accepted Answer

A)  is greater than actual investment.
B)  is less than actual investment.
C)  equals actual investment.
D)  equals zero.E) None of the above
F) B) and D)

Exam 11: Spending, Output, and Fiscal Policy

In the Keynesian model, a $1 billion increase in autonomous consumption leads to ______ in short-run equilibrium output.

Correct Answer
verified

When actual investment is less than planned investment:

Correct Answer
verified

Contractionary policies are government stabilization policies intended to decrease:

Correct Answer
verified

Short-run equilibrium output is the level of output at which actual output:

Correct Answer
verified

The bursting of the housing bubble in 2006 caused __ to cut back on their spending, thereby shifting the PAE line _.

Correct Answer
verified

In the basic Keynesian model, a decline in autonomous spending:

Correct Answer
verified

If firms sell less output than expected, planned investment:

Correct Answer
verified

Two drawbacks in using fiscal policy as a stabilization tool are that fiscal policy can affect as well as aggregate demand and that fiscal policy is _.

Correct Answer
verified

Refer to the figure below. Based on the figure, if the economy is in short-run equilibrium with output equal to 16,000, then there is , and could return the economy to potential output (Y*) .

Correct Answer
verified

House prices in the U.S.increased dramatically _, and decreased dramatically __.

Correct Answer
verified

In the short run with predetermined prices, when output is less than planned aggregate expenditure, firms will:

Correct Answer
verified

In the short run, with predetermined prices, when output is greater than planned aggregate expenditure, firms will:

Correct Answer
verified

Planned aggregate expenditure (PAE) equals:

Correct Answer
verified

Induced expenditure is the portion of planned aggregate expenditure that:

Correct Answer
verified

In the basic Keynesian model, an increase in government purchases:

Correct Answer
verified

The larger the mpc, the the income-expenditure multiplier and the the effect of a change in autonomous spending on short-run equilibrium output.

Correct Answer
verified

If short-run equilibrium output equals 10,000, the income-expenditure multiplier equals 5, the mpc equals 0.8, and potential output (Y*) equals 9,000, then transfers must be by approximately to eliminate any output gap.

Correct Answer
verified

Correct Answer
verified

In Macroland, autonomous consumption equals 100, the marginal propensity to consume equals 0.75, net taxes are fixed at 40, planned investment is fixed at 50, government purchases are fixed at 150, and net exports are fixed at 20.The slope of the expenditure line is:

Correct Answer
verified

The assumption that firms meet the demand for their products at preset prices is the key assumption upon which ______ is built.

Correct Answer
verified

Exam 11: Spending, Output, and Fiscal Policy

In the Keynesian model, a $1 billion increase in autonomous consumption leads to ______ in short-run equilibrium output.

Correct AnswerverifiedShow Answer

When actual investment is less than planned investment:

Correct AnswerverifiedShow Answer

Contractionary policies are government stabilization policies intended to decrease:

Correct AnswerverifiedShow Answer

Short-run equilibrium output is the level of output at which actual output:

Correct AnswerverifiedShow Answer

The bursting of the housing bubble in 2006 caused ______ to cut back on their spending, thereby shifting the PAE line _____.

Correct AnswerverifiedShow Answer

In the basic Keynesian model, a decline in autonomous spending:

Correct AnswerverifiedShow Answer

If firms sell less output than expected, planned investment:

Correct AnswerverifiedShow Answer

Two drawbacks in using fiscal policy as a stabilization tool are that fiscal policy can affect ______ as well as aggregate demand and that fiscal policy is _______.

Correct AnswerverifiedShow Answer

Refer to the figure below. Based on the figure, if the economy is in short-run equilibrium with output equal to 16,000, then there is ______, and ______ could return the economy to potential output (Y*) .

Correct AnswerverifiedShow Answer

House prices in the U.S.increased dramatically _____, and decreased dramatically ______.

Correct AnswerverifiedShow Answer

In the short run with predetermined prices, when output is less than planned aggregate expenditure, firms will:

Correct AnswerverifiedShow Answer

In the short run, with predetermined prices, when output is greater than planned aggregate expenditure, firms will:

Correct AnswerverifiedShow Answer

Planned aggregate expenditure (PAE) equals:

Correct AnswerverifiedShow Answer

Induced expenditure is the portion of planned aggregate expenditure that:

Correct AnswerverifiedShow Answer

In the basic Keynesian model, an increase in government purchases:

Correct AnswerverifiedShow Answer

The larger the mpc, the ______ the income-expenditure multiplier and the ______ the effect of a change in autonomous spending on short-run equilibrium output.

Correct AnswerverifiedShow Answer

If short-run equilibrium output equals 10,000, the income-expenditure multiplier equals 5, the mpc equals 0.8, and potential output (Y*) equals 9,000, then transfers must be ______ by approximately ______ to eliminate any output gap.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In Macroland, autonomous consumption equals 100, the marginal propensity to consume equals 0.75, net taxes are fixed at 40, planned investment is fixed at 50, government purchases are fixed at 150, and net exports are fixed at 20.The slope of the expenditure line is:

Correct AnswerverifiedShow Answer

The assumption that firms meet the demand for their products at preset prices is the key assumption upon which ______ is built.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

The bursting of the housing bubble in 2006 caused __ to cut back on their spending, thereby shifting the PAE line _.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Two drawbacks in using fiscal policy as a stabilization tool are that fiscal policy can affect as well as aggregate demand and that fiscal policy is _.

Correct Answer
verified

Refer to the figure below. Based on the figure, if the economy is in short-run equilibrium with output equal to 16,000, then there is , and could return the economy to potential output (Y*) .

Correct Answer
verified

House prices in the U.S.increased dramatically _, and decreased dramatically __.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

The larger the mpc, the the income-expenditure multiplier and the the effect of a change in autonomous spending on short-run equilibrium output.

Correct Answer
verified

If short-run equilibrium output equals 10,000, the income-expenditure multiplier equals 5, the mpc equals 0.8, and potential output (Y*) equals 9,000, then transfers must be by approximately to eliminate any output gap.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified