Multiple Choice
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1.
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If
the unintended change in inventories equals zero, the economy is at its equilibrium level of real GDP
demanded.
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2.
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Consumption plus saving equals disposable income at every level of real GDP
demanded.
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3.
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The
aggregate expenditure function shows total planned spending at each A) | price
level | B) | income level | C) | income level,
holding the price level constant | D) | price level, holding the level of income
constant | E) | interest rate, holding the price level
constant | | |
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4.
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A
decrease in autonomous investment will A) | shift the aggregate expenditure function
upward | B) | shift the aggregate expenditure function
downward | C) | result in an upward movement along the aggregate expenditure
function | D) | result in a downward movement along the aggregate expenditure
function | E) | decrease aggregate expenditures only at low levels of
income | | |
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5.
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On
the aggregate expenditure graph, if autonomous saving decreases by $15
billion, A) | the aggregate
expenditure line shifts upward by $15 billion | B) | planned
investment increases by $15 billion | C) | the aggregate expenditure line shifts downward by $15
billion | D) | planned investment decreases by $15
billion | E) | the equilibrium level of real GDP demanded decreases by $15
billion | | |
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6.
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If
the full employment level of income is $1200 billion and the present level of income is $1000
billion A) | an inflationary
gap exists | B) | autonomous expenditure is too low for a full employment
equilibrium | C) | autonomous expenditure is too high for a full employment
equilibrium | D) | a decrease in autonomous expenditure is
required | E) | government purchases of goods and services should be
reduced | | |
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7.
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Increases in the marginal propensity to consume, other things
constant, A) | increase the
value of the multiplier | B) | decrease the value of the multiplier | C) | never change the
value of the multiplier | D) | shift the aggregate expenditure curve
downward | E) | cause a downward movement along an aggregate expenditure
curve | | |
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8.
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Assume t=m=0. If an increase in planned investment of $70 billion causes equilibrium
output demanded to rise by $280 billion, the value of the marginal propensity to consume
is
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9.
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In
Exhibit 10-3, assume the economy is in equilibrium with real GDP of $5 trillion dollars. If
autonomous expenditure (A) increases by $1 trillion, we would expect the economy's equilibrium real
GDP to A) | increase by $1
trillion | D) | decrease by $1
trillion | B) | increase by more than $1
trillion | E) | remain
unchanged | C) | increase by less than $1 trillion | | | | |
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10.
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As a
result of the events of September 11, 2001, investment by the airlines was projected to decline one
half. What impact would this have on aggregate expenditures and aggregate
demand A) | aggregate
expenditures and aggregate demand would both increase | B) | aggregate demand
would increase but aggregate expenditures would decline | C) | aggregate demand
would decline but aggregate expenditures would increase | D) | both aggregate
demand and expenditures would decline | E) | Nothing because the price level is assumed to be
constant | | |
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11.
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According to the graph in Exhibit 0031, if the price level decreases, the new
equilibrium level of real GDP must be A) | less than $20 | C) | unchanged | E) | greater than $200 | B) | less than
$100 | D) | greater than
$100 | | | | | | |
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12.
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As
price levels in the United States rise relative to price levels in other countries, what would happen
in the U.S.? A) | consumption and
net exports would decline | B) | consumption and net exports would
increase | C) | consumption would increase and net exports would
decrease | D) | consumption would decrease and net exports would
increase | E) | consumption and net exports would remain
constant | | |
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13.
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A
decrease in the price level will A) | shift the aggregate demand curve to the
left | B) | shift the
aggregate demand curve to the right | C) | result in a movement up and to the left along the aggregate
demand curve | D) | result in a movement down and to the right along the aggregate
demand curve | E) | have no effect on the aggregate quantity
demanded | | |
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14.
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A
decline in the U.S. price level, other things constant, would A) | stimulate U.S.
exports, pushing the aggregate demand curve to the right | B) | stimulate U.S.
imports, pushing the aggregate demand curve to the right | C) | stimulate U.S.
exports but discourage imports, causing a rightward movement along a given aggregate demand
curve | D) | discourage U.S. exports but stimulate imports, causing a
rightward movement along a given aggregate demand curve | E) | not affect U.S.
net exports, so aggregate quantity demanded would remain constant | | |
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15.
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The
drop in consumption spending that triggered Japan's worst recession in decades A) | was caused by a
reduction in consumer wealth | B) | was caused by the Japanese government's economic
policies | C) | can be traced to an increase in Japanese
imports | D) | was caused by an increase in the Japanese price
level | E) | was quickly reversed by pro-consumer economic
policies | | |
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