Set 5 - Chapters 11, 12 & 13 Flashcards
Suppose that the level of GDP increased by $100 billion in a private closed economy where the marginal propensity to consume is 0.5. Aggregate expenditures must have increased by
A) $100 billion.
B) $5 billion.
C) $500 billion.
D) $50 billion.
$50 billion
If the expected rate of return on investment decreases, then most likely the
A) consumption schedule will shift upward.
B) investment schedule will shift downward.
C) investment schedule will shift upward.
D) consumption schedule will shift downward.
investment schedule will shift downward.
Exports have the same effect on the current size of GDP as
A) investment.
B) imports.
C) taxes.
D) saving.
investment
John Maynard Keynes created the aggregate expenditures model based primarily on what historical event?
A) bank panic of 1907
B) spectacular economic growth during World War II
C) Great Depression
D) economic expansion of the 1920s
Great Depression
Other things being equal, a decrease in an economy’s exports will
A) increase domestic aggregate expenditures and the equilibrium level of GDP.
B) increase the amount of imports consumed by the private sector.
C) decrease domestic aggregate expenditures and the equilibrium level of GDP.
D) have no effect on domestic GDP, because imports will offset the change in exports.
decrease domestic aggregate expenditures and the equilibrium level of GDP.
The short-run aggregate supply curve
A) is horizontal.
B) is upward-sloping.
C) becomes flatter at output levels above the full-employment output.
D) becomes steep at output levels above the full-employment output.
is upward-sloping.
In an economy, the government wants to increase aggregate demand by $50 billion at each price level to increase real GDP and reduce unemployment. If the MPS is 0.4, then it could increase government spending by
A) $40.50 billion.
B) $10 billion.
C) $20 billion.
D) $31.25 billion.
$20 billion
Which of the following did not contribute directly to the Great Recession?
A) bursting of the dot-com stock market bubble
B) freezing credit markets
C) pessimism originating from financial market turmoil
D) crisis in the mortgage lending market
bursting of the dot-com stock market bubble
Expansionary fiscal policy is so named because it
A) involves an expansion of the nation’s money supply.
B) is aimed at achieving greater price stability.
C) is designed to expand real GDP.
D) necessarily expands the size of government.
is designed to expand real GDP.
John Maynard Keynes developed the aggregate expenditures model in order to understand the
A) Second World War.
B) oil crises of the 1970s and 1980s.
C) Great Recession of 2007–2009.
D) Great Depression.
Great Depression
The short-run version of aggregate supply assumes that
A) product prices are fixed, while resource prices are flexible.
B) both input and product prices are flexible.
C) both input and product prices are fixed.
D) product prices are flexible, while resource prices are fixed.
product prices are flexible, while resource prices are fixed.
