ECON 2133 1st Edition Exam 1 Study Guide I Single Choice Question 1 Which of the following items are included in US GDP Cars produced by a Japanese automobile company in Detroit 2 Which of the following items are included in US GNP but not in US GDP McKinsey Company provides consulting service in China 3 The aggregate demand curve shows How the quantity of domestic product demanded changes with changes in the price level 4 Which of the following is not included in the Expenditure approach Wages 5 Which of the following is not included in the Factor Income approach Net Export 6 A graphical representation of how consumption spending varies with changes in disposable income is called Consumption function 7 If MPC 0 7 then a 100 billion change in disposable income will be associated with that change in consumption spending 70 billion 8 If a 100 billion increase in disposable income results in a 75 billion increase in consumption spending then MPC is 0 75 9 If consumption spending decline by 45 billion when disposable income declines by 50 what is MPC 0 9 10 An increase in real interest rates Always leads to a decrease in consumption spending as it provides an increased incentive for greater saving 11 Of production income and spending and are always equal while equals the other two only in equilibrium Spending and income production 12 The expenditure schedule is a relationship between Total spending and national income 13 If investment spending were now higher at all levels of income the expenditure schedule would Shift up 14 In the income expenditure diagram the equilibrium level of output is given by the intersection of the expenditure schedule and the 45 degree line 15 If the 2013 GDP of US is 15trillion USD and 2000 GDP of US is 10 trillion USD what is the 2013 implicit price deflator for GDP IPD 150 16 If the 2013 GDP of US is 15trillion USD and total population is 300 million what is the real income per capita of US in 2013 5 0000 USD 17 If an closed economy without government has a marginal propensity to consume of 0 75 an increase in the autonomous consumption of 100 would cause the real income to increase by 400 18 If an closed economy without government has a marginal propensity to consume of 0 75 an increase in the autonomous investment of 200 would cause the real income to increase by 800 19 If an closed economy without government has a marginal propensity to consume of 0 5 an increase in the autonomous consumption of 100 and an increase in the autonomous investment of 100 together would cause the real income to increase by 400 20 Which of the following is the largest source of revenue of the US Government Personal Income Taxes 21 Which of the following is not a part of the aggregate demand National Income 22 When thinking about aggregate demand economists use the term investment to refer to all expect which one of the following The stock in General Electric that Ralph bought with his summer earnings 23 Which of the following would be an example of a government transfer payment Social Security Payments 24 In a circular flow diagram all but which one of the following would be depicted as an injection into the stream of spending The Defense Department purchases a new airplane 25 Starting with the before tax income of individuals one calculates disposable income by Subtracting taxes and adding transfer payments 26 A change in which of the following would be associated with a movement in along the consumption function Current disposable income 27 A change in which of the following would be associated with a shift along the consumption function Wealth 28 What determines the slope the aggregate demand curve Price P 29 What determines the slope the aggregate supply curve Price P 30 Which of the follows is an open economy that has government Y E E C I G X M tY TX TX I I C C b Y TX TR 31 For an closed economy with government which of the following is the multiplier effect for C I G 1 1 b 1 t 32 For an closed economy with government which of the following is the multiplier effect for TX b 1 b 1 t 33 For an closed economy with government which of the following is the multiplier effect for t b 1 b 1 t 34 For an closed economy with government which of the following is the multiplier effect for TR b 1 b 1 t 35 Let the marginal propensity to consume b 0 75 and marginal income tax rate t 0 2 An increase in government expenditure G of 1000 million will increase the real output by 2500 million 36 Let the marginal propensity to consume b 0 75 and marginal income tax of 1000 million will rate t 0 2 A decrease in autonomous tax TX increase the real output by 1875 Million 37 If a closed economy with government has a marginal propensity to consume of 0 75 and a marginal income tax rate of 0 2 an increase in the military spending of 100 billion would cause the real output to increase by billion 250 38 If a closed economy with government has a marginal propensity to consume of 0 5 and a marginal income tax rate of 0 4 an increase in the unemployment insurance of 700 billion would cause the real output to increase by billion 500 39 If a closed economy with government has a marginal propensity to consume of 0 5 and a marginal income tax rate of 0 2 a tax cut of 600 billion an increase in health care expenditure of 600 billion would cause the real output to increase by billion 1500 TX t 40 Positive Aggregate demand shocks are caused by G TR Shifts the AD curve to the right TR TX t 41 Negative Aggregate demand shocks are caused by G shifts the AD curve to the right 42 When the economy is under completely slack condition the consequence of expansionary fiscal policies are Only Y Increase P remains unchanged 43 When the economy is under ordinary condition the consequence of expansionary fiscal policies are Both P Y Increase 44 Which of the following is the consequence of positive aggregate demand shocks under the completely slack condition of aggregate supply Only Y Increase P remains unchanged 45 Which of the following is the consequence of positive aggregate demand shocks under the ordinary condition of aggregate supply Both P Y Increase 46 Which of the following is the consequence of negative aggregate demand shocks under the completely slack condition of aggregate supply Only Y Decrease P remains unchanged 47 Which of the following is the consequence of negative aggregate demand shocks under the ordinary condition of aggregate supply P Increase and Y Decrease 48 Expenditure approach measures GDP