ECON 2133: TEST 1

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ECON 2133
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The aggregate demand curve shows: A. The history of real GDP over recent past. B. Alternative levels of domestic output that policy maker might choose. C. How the quantity of domestic product demanded changes with changes in the price level. D. The demand fo...
Alternative levels of domestic output that policy maker might choose.
1. Which of the following is not included in the Expenditure approach? A. Consumption and Investment B. Government Expenditure C. Export and Import D. Wages
Wages
1. Which of the following is not included in the Factor Income approach? A. Net Export B. Interest and Rent C. Profit D. Wages
Net Export
1. A graphical representation of how consumption spending varies with changes in disposable income is called A. Aggregate demand curve B. Income-expenditure schedule C. Consumption function D. Philips curve
Consumption Function
if MPC=.07, then a $100 billion change in disposable income will be associated with that change in consumption spending? A. $20 billion B. $30 billion C. $70 billion D. $100 billion
70 Billion (.7 x 100)
1. If a $100 billion increase in disposable income results in a $75 billion increase in consumption spending, then MPC is A. 0.25 B. 0.50 C. 0.75 D. 1.0
.75 (75/100)
1. If consumption spending decline by $45 billion when disposable income declines by $50, what is MPC? A. 0.9 B. 0.1 C. -0.9 D. -0.1
.9 (45/50)
An increase in real interest rates: A. Always leads to a decrease in consumption spending as it provides an increased incentive for greater saving. B. Can be modeled as a movement along consumption function. C. Always lead to an increase in consumption spending as ...
Always leads to a decrease in consumption spending as it provides an increased incentive for greater saving.
Of production, income, and spending, ___ and ____ are always equal while ____ equals the other two only in equilibrium A. Spending and income; production B. Production and spending; income C. Income and production; spending D. Consumption and investment; spending
Spending and income; production
The expenditure schedule is a relationship between: A. The equilibrium level of national income and prices B. Consumption spending and national income. C. Total spending and national income D. Consumption spending and prices.
Total Spending and national income
If investment spending were now higher at all levels of income, the expenditure schedule would A. Shift down. B. Shift up. C. Show no change. D. Uncertain.
Shift Up
In the income-expenditure diagram, the equilibrium level of output is given by the intersection of the expenditure schedule and the A. Consumption function. B. Aggregate demand curve. C. 45 degree line. D. Level of full-employment output.
45 Degree line
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): A. 1.2 B. 1.5 C. 180 D. 150
150 (15/10 x 100)
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? A. 5,0000 USD B. 2, 000 USD C. 5 000 USD D. 4,8000 USD
50000 (15trillion/300million)
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 A. 75 B. 400 C. 400/3 D. 200
400 (1/(1-.75) x 100)
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 A. 800 B. 400 C. 200 D. 100
800 (1/(1-.75) x 200)
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 A. 200 B. 300 C. 400 D. ...
400 (1/(1-.5) x 100 + 1/1(1-.5) x 100)
Which of the following is the largest source of revenue of the US Government? A. Social Insurance Taxes B. Personal Income Taxes C. Corporate Profit Taxes D. Investment Taxes
Personal Income Taxes
Which of the following is the largest source of revenue of the US Government? A. Social Insurance Taxes B. Personal Income Taxes C. Corporate Profit Taxes D. Investment Taxes
Personal Income Taxes
Which of the following is not a part of the aggregate demand? A. Consumption Expenditure B. National Income C. Net Exports D. Investment Expenditure
National Income
When thinking about aggregate demand, economists use the term investment to refer to all expect which one of the following? A. The newly built house that Roberta just bought. B. The stock in General Electric that Ralph bought with his summer earnings. C. The new factor...
The stock in General Electric that Ralph bought with his summer earnings
Which of the following would be an example of a government transfer payment? A. Wage paid to government bureaucrats B. A tax refund for excess withholding C. The purchase of paper clips by a government agency D. Social Security Payments
Social Security Payments
In a circular flow diagram all but which one of the following would be depicted as an injection into the stream of spending? A. The Defense Department purchases a new airplane B. Michelle and Mathew purchase an existing house C. Alice’s spending to rebuild her restaura...
The defense department purchases a new airplane
Starting with the before-tax income of individuals, one calculates disposable income by A. Adding taxes B. Subtracting transfer payments C. Adding taxes to transfer payments D. Subtracting taxes and adding transfer payments
Subtracting taxes and adding transfer payments
A change in which of the following would be associated with a movement in along the consumption function? A. Current disposable income B. Wealth C. The price level D. Expected future income
Current Disposable income
A change in which of the following would be associated with a shift along the consumption function? A. Current disposable income B. Wealth C. The price level D. Expected future income
Wealth
1. What determines the slope the aggregate demand curve? A. Price P B. Autonomous consumption C. Autonomous consumption D. Nominal Wealth
Price P
What determines the slope the aggregate supply curve? A. Price P B. Nominal Wage Rate W C. Price of other factors of production D. State of Technology and Capital Stock
Price P
Open Economy That has Government:
E=C+I+G+X-M
1. For an closed economy with government, which of the following is the multiplier effect for C, I, G: A. 1/(1-b) B. 1/(1-bt) C. 1/(1-b(1-t)) D. 1/(b)
1/(1-b(1-t))
1. For an closed economy with government, which of the following is the multiplier effect for TX: A. - b/(1-b) B. b/(1-b(1-t)) C. - b/(1-b(1-t)) D. - 1/(1-bt)
- b/(1-b(1-t))
1. For an closed economy with government, which of the following is the multiplier effect for t: A. - 1/(1-b) B. b/(1-b(1-t)) C. - b/(1-b(1-t)) D. - 1/(1-bt
- b/(1-b(1-t))
1. For an closed economy with government, which of the following is the multiplier effect for TR : A. - 1/(1-b) B. b/(1-b(1-t)) C. - b/(1-b(1-t)) D. - 1/(1-bt)
b/(1-b(1-t))
1. 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 A. 2500 million C. 4000 million B. 6670 million D. 2000 million
2500 million (1/1-.75(1-.20) = 1/.4 *1000 = 2500)
Let the marginal propensity to consume b=.75 , and marginal income tax rate t=.2 . A decrease in autonomous tax TX of 1000 million will increase the real output by: A. 1875 million B. 4000 million C. 2500 million D. 1000 million
1875 million (.75/1-.75(1-.2)=.75/.40 x 1000)
1. 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. A. 100 B. 250 C. 400 D. 6...
250 (1/1-.75(1-.2)=1/.40 x 100)
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. B. 200 C. 300 D. 400 E. 500...
500 (.5/1-.5 (1-.4) * 700 = .5/7 *700 = 500)
1. 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. A. 5000 B. ...
1000 .5/1-.5 (1-.2) * (600)
1. Positive Aggregate demand shocks are caused by +G, +TR, -TX, -t A. shifts the AD curve to the left B. have no effects on AD curve C. shifts the AD curve to the right D. shifts the AS curve to the right
Shifts the AD curve to the Left
1. Positive Aggregate demand shocks are caused by -G, -TR, +TX, +t: A. shifts the AD curve to the left B. have no effects on AD curve C. shifts the AD curve to the right D. shifts the AS curve to the right
Shifts the AD curve to the Right
When the economy is under “completely slack condition”, the consequence of expansionary fiscal policies are: A. Only Y Increase, P remains unchanged. B. Only P Increase, Y remains unchanged. C. Both P & Y Increase D. P Decline and Y Increase
Only Y increases, P remains unchanged
1. Which of the following is the consequence of positive aggregate demand shocks under the “completely slack condition” of aggregate supply? A. Only Y Increase, P remains unchanged. B. Only P Increase, Y remains unchanged. C. Both P & Y Increase D. P Decline ...
Only Y increases, P remains unchanged
1. When the economy is under “ordinary condition”, the consequence of expansionary fiscal policies are: A. Only Y Increase, P remains unchanged. B. Only P Increase, Y remains unchanged. C. Both P & Y Increase P Decline and Y Increase
Both P&Y increase
1. Which of the following is the consequence of positive aggregate demand shocks under the “ordinary condition” of aggregate supply? A. Only Y Increase, P remains unchanged. B. Only P Increase, Y remains unchanged. C. Both P & Y Increase P Decline and Y Increase
Both P&Y decrease
1. Which of the following is the consequence of negative aggregate demand shocks under the “completely slack condition” of aggregate supply? A. Only Y Decrease, P remains unchanged. B. Only P Decrease, Y remains unchanged. C. Both P & Y Decrease D. P Increase...
Only Y decrease, P remains unchanged
1. Which of the following is the consequence of negative aggregate demand shocks under the “ordinary condition” of aggregate supply? A. Only Y Decrease B. Only P Decrease C. Both P & Y Decrease P Increase and Y Decrease
Both P&Y Decrease
(MC) Expenditure approach measures GDP by the expenditures on final output and services by A. Consumers B. Business Firms C. Governments D. Investors
A, B, C
(MC) Investment Expenditure include: A. New Plant & Equipment Expenditures by firms. B. Purchases of New Housing by consumers. C. Investment of Government in infrastructure. D. Inventory Accumulation (Decumulation) by firms
A, B, C
(MC) Substantial Expansions: “Booms” is signified by the increase in the growth rate of real GDP. Which of the following are expansion periods of US economy: A. 1870 – 1890: Second Industrial Revolution B. 1937-1945: (World War II) C. 1960s and 1983-1987 ...
All of the above
(MC) Which of the following refers to the period referred as the “Great Moderation”? A. 1929 – 1937 B. 1980 – 2000 C. There is a significant decline in the volatility of GDP and that of inflation. D. There is a significant decline in the volatility of stock ret...
B,C
(MC) what assumptions do we make of this model Y=E, E=C+I, C=C+bY, I=I: A. No Government B. Laissez-fair (free market) C. Open Economy D. Closed Economy
A,D
(MC) What are the consequences of an increase in autonomous investment I : A. An upward shift in consumption function B. An upward shift in Expenditure schedule C. An increase in real income D. Aggregate demand ...
B,C,D
(MC) A shift to the left of the aggregate demand curve implies: A. It might be caused by a decrease in autonomous consumption B. It might be caused by a decrease in autonomous investment C. Given price level P, the economy has less real income than before. ...
A,B,C
(MC) MPC refers to: A. Y-axis intercept of the consumption function B. Slope of the consumption function C. Ratio of consumption spending to income. D. Slope of a ray from the origin to a point on the consumption function
B,C
(MC) A marginal propensity to consume implies: A. For every $1 of income, one will spend 50 cents. B. An increase in autonomous consumption of $ 200 will lead to an increase in real income of $ 400. C. An increase in autonomous investment of $ 100 will lead to an incre...
All of the above
(MC) What determines the position the aggregate demand curve? A. Price P B. Autonomous consumption and investment C. Nominal Wealth D. Fiscal policy instruments
B,C,D
(MC) What determines the position the aggregate supply curve? A. Price P B. Nominal Wage Rate W C. Price of other factors of production D. State of Technology and Capital Stock
B,C,D
(MC) Which of the following are assets: A. Money and Stocks B. Bonds and CDs C. Saving Deposits D. Mutual Funds and Money Market Funds E. Current Value of House, Cars, Furniture, Art Work and Vacation Home
All of the Above
(MC) Which of the following are liabilities: A. Mortgage B. College Loan C. Auto Loan D. Credit Card Debt
All of the Above
(MC) Marginal Propensity to consume can be decomposed into: A. Sensitivity of Consumption (C) to Price (P) B. Sensitivity of Consumption (C) to Real Income (Y) C. Sensitivity of Consumption (C) to Real Wealth () Sensitivity of Consumption (C) to Tax (T)
B,C
(MC) Which of the following are expansionary fiscal policies? A. + G B. +TR C. -TX D.-t
All of the Above
(MC) Which of the following are contractionary fiscal policies? A. -G B. -TR C. +TR D.+t
All of the Above
(MC) Which of the following is the consequence of an oil price increase given the aggregate demand unchanged and the economy is under “ordinary condition”? A. Aggregate supply curve shifts to the left. B. Aggregate price P decreases and real output Y decreases. C. Aggr...
A,D
(MC) Which of the following is the consequence of a permanent increase in energy prices given the aggregate demand unchanged and the economy is under “completely slack condition”? A. Aggregate supply curve shifts to the left. B. Aggregate supply curve shifts parallel upward. ...
B,D
(MC) Which of the following is the impact of a transitory wage decrease, given the aggregate demand unchanged and the economy is under “completely slack condition”? A. Aggregate supply curve shifts parallel downward. B. Aggregate supply curve remains unchanged. C. Ag...
B,C
(MC) Which of the following is the impact of a permanent increase in capital stock, given the aggregate demand unchanged and the economy is under “completely slack condition”? A. Aggregate supply curve shifts parallel downward. B. Aggregate supply curve remains unchanged. ...
A,D
(MC) Which of the following are correct statements on expansionary (Increase) fiscal policy? A. It is appropriate to use expansionary fiscal policy in a deep recession, when aggregate supply curve is completely flat. B. It is appropriate to use expansionary fiscal policy i...
A,C
(MC) Which of the following are correct statements on contractionary (Decrease) fiscal policy? A. It is appropriate to use contractionary fiscal policy in a deep recession, when aggregate supply curve is completely flat. B. It is appropriate to use contractionary fiscal pol...
B,D

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