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Module 9

ECO/EMCC William Ashley
STUDY
PLAY
If MPC = .5, a simultaneous increase in both taxes and government spending of $20 will: Answer
increase GDP by $20.
(Advanced analysis) Answer the question on the basis of the following information for a private closed economy where C is consumption, Y is the gross domestic product, Ig is gross investment, and i is the interest rate: Refer to the above information. The equilibrium level of GDP in this economy is: Answer
$400.
(Advanced analysis) Answer the question on the basis of the following consumption and investment data for a private closed economy. Figures are in billions of dollars.
C = 60 + .6Y
I = I0 = 30

Refer to the above data. In equilibrium the level of saving will be:
30.
If an increase in aggregate expenditures results in no increase in real GDP we can surmise that the: Answer
economy is already operating at full employment.
In a private closed economy _____ investment is equal to saving at all levels of GDP and equilibrium occurs only at that level of GDP where _____ investment is equal to saving. Answer
actual; planned
The effect of imposing a lump-sum tax is to: Answer
reduce the absolute levels of consumption and saving at each level of GDP, but to not change the size of the multiplier.
If the multiplier in an economy is 5, a $20 billion increase in net exports will: Answer
increase GDP by $100 billion.
Refer to the above table. The multiplier is: Answer
3.
Refer to the above diagram for a private closed economy. The equilibrium level of GDP is: Answer
$300.
(Advanced analysis) Answer the question on the basis of the following information for a private closed economy.where S is saving, Ig is gross investment, i is the real interest rate, and Y is GDP.
Refer to the above information. In equilibrium the level of saving will be: Answer
$10.
(Advanced analysis) In a private closed economy (a) the marginal propensity to save is 0.25, (b) consumption equals income at $120 billion, and (c) the level of investment is $40 billion. What is the equilibrium level of income? Answer
$280 billion
(Advanced analysis) Answer the question on the basis of the following information for a private open economy:

Refer to the above information. This nation is incurring: Answer
a trade deficit.
Refer to the above diagram. If the full-employment level of GDP is B and aggregate expenditures are at AE2, the: Answer
economy is in equilibrium, at full employment.
If aggregate expenditures exceed GDP in a private closed economy: Answer
planned investment will exceed saving.
(Advanced analysis) Answer the question on the basis of the following information for a private closed economy, where Ig is gross investment, S is saving, and Y is gross domestic product (GDP).

Refer to the above information. The equilibrium GDP will be: Answer
$400.
The MPC and MPS in the above economy: Answer
are .6 and .4 respectively.
Refer to the above diagram for a private closed economy. The multiplier is: Answer
AB/GF.
(Advanced analysis) Answer the question on the basis of the following information for a private closed economy.

where S is saving, Ig is gross investment, i is the real interest rate, and Y is GDP.

Refer to the above information. In equilibrium the level of consumption will be: Answer
$65.
Refer to the above table. An increase in net exports of $10 would: Answer
increase real GDP by $30.
Refer to the above diagram for a private closed economy. The equilibrium GDP is: Answer
$180 billion.
The U.S. recession of 2007-2009 provides a good example of: Answer
a recessionary expenditure gap.
(Advanced analysis) Answer the question on the basis of the following information for a mixed open economy. The letters Y, Ca, Ig, Xn, G, and T stand for GDP, consumption, gross investment, net exports, government purchases, and net taxes respectively. Figures are in billions of dollars.

Refer to the above information. The multiplier for this economy is: Answer
4.
Answer the question below on the basis of the following information for a private closed economy:

Refer to the above information. If the real interest rate is 10 percent, the equilibrium GDP will be: Answer
$300.
In the United States from 1929 to 1933, real GDP ____________, and the unemployment rate _______________. Answer
declined by 27 percent; rose to 25 percent
(Advanced analysis) Answer the question on the basis of the following information for a private closed economy where C is consumption, Y is the gross domestic product, Ig is gross investment, and i is the interest rate:

Refer to the above information. Given that the interest rate is 10 (percent), the amount that businesses will want to invest will be: Answer
$40.