Question 1

A decrease in a recessionary GDP gap will most likely be associated with a decrease in

Accepted Answer

A)  Structural unemployment.
B)  Cyclical unemployment.
C)  The price level.
D)  Frictional unemployment.

Question 2

0 to AD1 as shown in Figure 10.1.Which of the following statements is true? A) According to Keynesian theory,the economy will quickly adjust back to full employment. B) According to Keynesian theory,additional decreases in aggregate demand will occur. C) In the absence of any additional decreases in investment,the equilibrium will remain at Q1 indefinitely. D) The GDP gap will be eliminated by the multiplier. " class="answers-bank-image d-inline" rel="preload" > 
-Suppose that as a result of expectations of lower sales in the future,a decrease in autonomous business investment causes aggregate demand to shift from AD0 to AD1 as shown in Figure 10.1.Which of the following statements is true?

Accepted Answer

A)  According to Keynesian theory,the economy will quickly adjust back to full employment.
B)  According to Keynesian theory,additional decreases in aggregate demand will occur.
C)  In the absence of any additional decreases in investment,the equilibrium will remain at Q1 indefinitely.
D)  The GDP gap will be eliminated by the multiplier.

Question 3

If there is an inflationary spiral,GDP will fall as inventories rise.

Accepted Answer

A) True 
 B)False

Question 4

How does the multiplier process work when there is an initial decrease in autonomous spending?

Accepted Answer

An initial decrease in autonomous spendi...

Question 5

Keynes believed that abrupt changes in spending behavior

Accepted Answer

A)  Have no effect on the economy.
B)  Help stabilize the economy.
C)  Cause recurring business cycles.
D)  Move the economy to full employment.

Question 6

When unwanted business inventories pile up,which of the following is likely to occur?

Accepted Answer

A)  A lower level of unemployment.
B)  A higher level of output.
C)  A lower price level.
D)  No change in the level of output.

Question 7

One In the News article titled "Deflation: There Are Bargains Everywhere.Here's Why That Could Be a Problem" suggests that deflation

Accepted Answer

A)  Harms economic growth due to lower profits,more layoffs,and less spending that create a self-reinforcing cycle.
B)  Harms the economy because bankruptcies decrease.
C)  Harms sellers only,but not buyers since they get better deals without worries of job losses.
D)  Results in higher interest rates that further slow the economy.

Question 8

If consumers spend 90 cents out of every extra dollar received,the

Accepted Answer

A)  MPS is 0.90.
B)  MPC is 0.90.
C)  Multiplier is 0.90.
D)  Multiplier is 9.

Question 9

An inflationary spiral can emerge when

Accepted Answer

A)  Desired spending at full employment falls short of full-employment output.
B)  Desired saving falls short of desired investment at full employment.
C)  Actual investment exceeds desired investment.
D)  Desired leakages exceed desired injections.

Question 10

Which of the following is considered a leakage?

Accepted Answer

A)  Business investment.
B)  Taxes.
C)  Spending on services.
D)  Exports.

Question 11

Classical economists assume that

Accepted Answer

A)  Spending leakages exceed spending injections.
B)  Interest rate adjustment will cause business investment to equal consumer saving.
C)  The economy might experience persistent macro instability.
D)  No leakages would occur.

Question 12

What are leakages,and how do they affect the economy?

Accepted Answer

A leakage is income not spent directly o...

Question 13

To illustrate the ultimate impact of the multiplier process when investment spending falls,we should

Accepted Answer

A)  Shift the AD curve rightward once.
B)  Shift the AD curve leftward twice,once for the autonomous change and second for the multiplier effect.
C)  Shift the AD curve leftward and then rightward.
D)  Shift the AD curve leftward and then shift the AS curve leftward.

Question 14

F represents full employment output.Which of the following statements is true? A) The economy is experiencing serious inflation problems. B) There is no GDP gap. C) Inventories are accumulating. D) Inventories are falling. " class="answers-bank-image d-inline" rel="preload" > 
-In Figure 10.1,suppose this economy is in equilibrium at point a and QF represents full employment output.Which of the following statements is true?

Accepted Answer

A)  The economy is experiencing serious inflation problems.
B)  There is no GDP gap.
C)  Inventories are accumulating.
D)  Inventories are falling.

Question 15

The formula for the multiplier is

Accepted Answer

A)  1/(1 - MPS) .
B)  1/(1 - MP
C)  .
C)  1 - MPS.
D)  1 - MPC.

Question 16

If desired investment exceeds actual investment,then

Accepted Answer

A)  A recessionary GDP gap will emerge.
B)  Inventories are less than the desired level.
C)  Inventories are accumulating beyond desired levels.
D)  Cyclical unemployment exists.

Question 17

Income not spent directly on domestic output is

Accepted Answer

A)  A leakage.
B)  An injection.
C)  A circular.
D)  Investment.

Question 18

-Suppose lower interest rates suddenly lead to an injection of $325 additional investment spending into the economy and the marginal propensity to consume is 0.80.Complete Table 10.1 by calculating the spending cycles as the increased investment spending works its way through the economy. In Table 10.1,what is the change in the third cycle of spending resulting from the higher initial investment?

Accepted Answer

A)  $50.
B)  $208.
C)  $325.
D)  $585.

Question 19

The disposable income consumers receive is equal to about what percentage of total income?

Accepted Answer

A)  30 percent.
B)  50 percent.
C)  70 percent.
D)  95 percent.

Question 20

How can an event such as the terrorist attacks of September 2001 affect consumer and business confidence and the economy?

Accepted Answer

Any situation that makes people feel vul...

Exam 10: Self-Adjustment or Instability

Income not spent directly on domestic output is

Correct Answer
verified

How does the multiplier process work when there is an initial decrease in autonomous spending?

Correct Answer
verified
An initial decrease in autonomous spendi...
View Answer

How can an event such as the terrorist attacks of September 2001 affect consumer and business confidence and the economy?

Correct Answer
verified
Any situation that makes people feel vul...
View Answer

An inflationary spiral can emerge when

Correct Answer
verified

To illustrate the ultimate impact of the multiplier process when investment spending falls,we should

Correct Answer
verified

-In Figure 10.1,suppose this economy is in equilibrium at point a and Q_F represents full employment output.Which of the following statements is true?

Correct Answer
verified

Keynes believed that abrupt changes in spending behavior

Correct Answer
verified

If there is an inflationary spiral,GDP will fall as inventories rise.

Correct Answer
verified

If desired investment exceeds actual investment,then

Correct Answer
verified

When unwanted business inventories pile up,which of the following is likely to occur?

Correct Answer
verified

The formula for the multiplier is

Correct Answer
verified

A decrease in a recessionary GDP gap will most likely be associated with a decrease in

Correct Answer
verified

-Suppose that as a result of expectations of lower sales in the future,a decrease in autonomous business investment causes aggregate demand to shift from AD₀ to AD₁ as shown in Figure 10.1.Which of the following statements is true?

Correct Answer
verified

If consumers spend 90 cents out of every extra dollar received,the

Correct Answer
verified

Which of the following is considered a leakage?

Correct Answer
verified

The disposable income consumers receive is equal to about what percentage of total income?

Correct Answer
verified

One In the News article titled "Deflation: There Are Bargains Everywhere.Here's Why That Could Be a Problem" suggests that deflation

Correct Answer
verified

What are leakages,and how do they affect the economy?

Correct Answer
verified
A leakage is income not spent directly o...
View Answer

Classical economists assume that

Correct Answer
verified

Correct Answer
verified

Exam 10: Self-Adjustment or Instability

Income not spent directly on domestic output is

Correct AnswerverifiedShow Answer

How does the multiplier process work when there is an initial decrease in autonomous spending?

Correct AnswerverifiedAn initial decrease in autonomous spendi...View AnswerShow Answer

How can an event such as the terrorist attacks of September 2001 affect consumer and business confidence and the economy?

Correct AnswerverifiedAny situation that makes people feel vul...View AnswerShow Answer

An inflationary spiral can emerge when

Correct AnswerverifiedShow Answer

To illustrate the ultimate impact of the multiplier process when investment spending falls,we should

Correct AnswerverifiedShow Answer

-In Figure 10.1,suppose this economy is in equilibrium at point a and QF represents full employment output.Which of the following statements is true?

Correct AnswerverifiedShow Answer

Keynes believed that abrupt changes in spending behavior

Correct AnswerverifiedShow Answer

If there is an inflationary spiral,GDP will fall as inventories rise.

Correct AnswerverifiedShow Answer

If desired investment exceeds actual investment,then

Correct AnswerverifiedShow Answer

When unwanted business inventories pile up,which of the following is likely to occur?

Correct AnswerverifiedShow Answer

The formula for the multiplier is

Correct AnswerverifiedShow Answer

A decrease in a recessionary GDP gap will most likely be associated with a decrease in

Correct AnswerverifiedShow Answer

-Suppose that as a result of expectations of lower sales in the future,a decrease in autonomous business investment causes aggregate demand to shift from AD0 to AD1 as shown in Figure 10.1.Which of the following statements is true?

Correct AnswerverifiedShow Answer

If consumers spend 90 cents out of every extra dollar received,the

Correct AnswerverifiedShow Answer

Which of the following is considered a leakage?

Correct AnswerverifiedShow Answer

The disposable income consumers receive is equal to about what percentage of total income?

Correct AnswerverifiedShow Answer

One In the News article titled "Deflation: There Are Bargains Everywhere.Here's Why That Could Be a Problem" suggests that deflation

Correct AnswerverifiedShow Answer

What are leakages,and how do they affect the economy?

Correct AnswerverifiedA leakage is income not spent directly o...View AnswerShow Answer

Classical economists assume that

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
An initial decrease in autonomous spendi...
View Answer

Correct Answer
verified
Any situation that makes people feel vul...
View Answer

Correct Answer
verified

Correct Answer
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-In Figure 10.1,suppose this economy is in equilibrium at point a and Q_F represents full employment output.Which of the following statements is true?

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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-Suppose that as a result of expectations of lower sales in the future,a decrease in autonomous business investment causes aggregate demand to shift from AD₀ to AD₁ as shown in Figure 10.1.Which of the following statements is true?

Correct Answer
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Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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A leakage is income not spent directly o...
View Answer

Correct Answer
verified

Correct Answer
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