ECS 1601

Study Unit 7 Quiz

Multiple Choice Questions (MCQs)

1.

2.

3.

4.

_____ and ____ are leakages out of the production, income and spending circular flow, while
_____ and ____ are injections.
[1]

Taxes; government expenditure; exports; imports

[2]

Exports; government expenditure; taxes; imports

[3]

Taxes; imports; exports; government expenditure

[4]

Exports; imports; taxes; government expenditure

If taxes increase, the multiplier will:

[1]

Decrease

[2]

Increase

[3]

Stays the same

[4]

Cannot be calculated

If marginal propensity to import decrease, the multiplier will:

[1]

Decrease

[2]

Increase

[3]

Stay the same

[4]

Cannot be calculated

If the MPC is 0.75 and the tax rate is 30%, and imports are autonomously determined, then
the slope of the expenditure line is?
[1]

2.1

[2]

1.05

[3]

0.475

[4]

0.525

Long Questions
5.

Explain what autonomous spending and induced spending are And state whether the
following expenditure are autonomous and/or induced.
5.1

Government expenditure (G)

5.2

Proportional taxes (T)

5.3

Exports (X)

5.4

Imports (Z)

Quiz will be discussed on your e-tutor site from Monday 31 March

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ECS 1601
Study Unit 7 Quiz
6.

Use the following information to answer the questions that follow.

Government expenditure =

400

Exports =

250

Autonomous imports=

50

Autonomous consumption=

150

Investment expenditure=

300

Full-employment output=

1 900

Marginal propensity to consume=

0.75

Marginal propensity to import=

0.15

Proportional tax rate=

0.25

6.1

Calculate the equilibrium income level in the above economy.

6.2

Does the government currently have a budget deficit or a budget surplus?

6.3

Draw the expenditure line for the economy above.

6.4

On the same graph, draw a new expenditure line, after government expenditure
increases with 100.

Quiz will be discussed on your e-tutor site from Monday 31 March

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