ECON 2133 1st EditionExam # 1 StudyGuideI. Single Choice Question1. 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?Wages5. Which of the following is not included in the Factor Income approach?Net Export6. A graphical representation of how consumption spending varies with changes in disposable income is calledConsumption function7. IfMPC=0.7, then a $ 100 billion change in disposable income will be associated with that change in consumption spending?$70 billion8. If a $100 billion increase in disposable income results in a $75 billion increase in consumption spending, then MPC is0.759. If consumption spending decline by $45 billion when disposable income declines by $50, what is MPC?0.910. An increase in real interest ratesAlways 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 equilibriumSpending and income; production12. The expenditure schedule is a relationship between Total spending and national income13. 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 the45 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):15016. 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 USD17. If an closed economy without government has a marginal propensity to consumeof 0.75, an increase in the autonomous consumption of $ 100 would cause the real income to increase by40018. If an closed economy without government has a marginal propensity to consumeof 0.75, an increase in the autonomous investment of $200 would cause the real income to increase by 80019. If an closed economy without government has a marginal propensity to consumeof 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 40020. Which of the following is the largest source of revenue of the US Government?Personal Income Taxes21. Which of the following is not a part of the aggregate demand?National Income22. 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 Payments24. In a circular flow diagram all but which one of the following would be depicted asan injection into the stream of spending?The Defense Department purchases a new airplane25. Starting with the before-tax income of individuals, one calculates disposable income by Subtracting taxes and adding transfer payments26. A change in which of the following would be associated with a movement in along the consumption function?Current disposable income27. A change in which of the following would be associated with a shift along the consumption function?Wealth28. What determines the slope the aggregate demand curve?Price P29. What determines the slope the aggregate supply curve?Price P30. Which of the follows is an open economy that has government:Y =EE=C +I +´G+ X−MC=´C+b(Y −TX +´TR)TX=´TX +tYI =´I31. 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 rate t=0.2. A decrease in autonomous tax ´TX of 1000 million will 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. 25038. 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. 50039. 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 inhealth care expenditure of $ 600 billion would cause the real output to increase by ___ billion.150040. Positive Aggregate demand shocks are caused by ↑´G ↑´TR↓´TX ↓ tShifts the AD curve to the right41. Negative Aggregate demand shocks are caused by ´↓G ↓´TR↑´TX ↑ tshifts the AD curve to the right42. 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 Increase44. 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 Increase46. Which of the following is the consequence of negative aggregate demand shocks under the “completely slack condition” of