Alen Elshazly | Jotroduction to Wacrocconomics EEE Chapter 3 — MCOQ Questions 1) Disposable income A) increases when net taxes increase. B) increases when income increases. C) decreases when saving increases, D) increases when saving decreases. 2) Assuming no foreign trade in economy, equilibrium is achieved when Zz government purchases equal A) saving minus net taxes minus consumption. B) saving plus net taxes minus investment. C) net taxes plus investment minus saving. D) net taxes minus investment minus saving_ 3) If the government wants to reduce unemployment, government purchases should be . nd/or taxes should be A) increased; increased B) decreased: C) decreased; increased wh increased; decreased 4) The government purchases multiplier is A) the difference between the old equilibrium level of output and the new equilibrium level of output. B) the ratio of the change in government purchases to the change in the equilibrium level of output. p the ratio of the change in the equilibrium level of output to a change in ‘government purchases. 5) The tax multiplier is A) the ratio of the change in taxes to the change in the equilibrium level of output B) the MPC multiplied by the MPS. C) the difference in taxes multiplied by the change in the equilibrium level of output. Ps the ratio of the change in the equilibrium level of output to the change in taxes.Alen Elshazly | Jotroduction to Wacrocconomics (EN 6) Assume an economy is in equilibrium at an output level of $1,500 billion. ion, then at the output level If government spending increases by $200 bi of $1,500 billion, there is Ao Unplanned rise in inventories. B) Unplanned fall in inventories. C) Unplanned inventory change of zero. 7) Assume an economy is in equilibrium at an output level of $600 billion. If government purchases decrease by $75 billion, then at the output level of $600 billion, there is A) Unplanned rise in inventories. B) Unplanned inventory change of zero. -D Unplanned fall in inventories. 8) Ina mixed open economy, if aggregate expenditures exceed GDP: A) I+NX+G=C. B) C+I+NX+GS+M+T. 9) An increase in taxes of a specific amount will have a smaller impact on the equilibrium GDP than will a decline in government spending of the same amount because: A) the MPC is smaller in the private sector than it is in the public sector. B) declines in government spending always tend to stimulate private investment. C) disposable income will fall by some amount smaller than the tax increase. D) some of the tax increase will be paid out of income that would otherwise have been saved. 10) Ignoring international trade, in a mixed economy aggregate expenditures are comprised of: A)C+S+G. B)C+I+G. OC#+S+L = D)CHTHL 11) _ Net exports are: A) that portion of consumption and investment goods sent to other countries, B) exports plus imports. C) exports less imports. D) imports less exports.12) 16) 17) 18) Alen Elshazly | Jotroduction to Wacrocconomies A decrease in lump-sum taxes will A) make the consumption function flatter. B) make the consumption function steeper. C) shift the consumption function downward. D) shift the consumption funetion upward. Imports have the same effect on the current size of GDP as: A) exports. B) investment. C) consumption. D) saving. Exports have the same effect on the current size of GDP as: A) imports. B) investment. C) taxes. D) saving. At the equilibrium GDP for an open economy: A) net exports may be either positive or negative. B) imports will always exceed exports. ©) exports will always exceed imports. D) exports and imports will be equal. Other things equal, if a change in the tastes of American consumers causes them to purchase more foreign goods at each level of U.S. GDP: A) unemployment will decrease domestically. B) U.S. GDP will fall. ©) inflation will occur domestically. D)U.S. real GDP will rise. An upward shift of the aggregate expenditures schedule might be caused by: A) a decrease in exports, with no change in imports. B) a decrease in imports, with no change in exports. ©) an increase in exports, with an equal decrease in investment spending. D)an increase in imports, with no change in exports. In a mixed open economy the equilibrium GDP exists where: A) C+1+NX intersects the 45-degree line. B) C+1+NX+G=GDP. OC)C+I=S+T#NX. D)C+I+NX=S+T.19) 20) 21) 22) 23) 24) Alen Elshazly | Jotroduction to Wacrocconomics EN In a mixed open economy the equilibrium GDP is determined at that point where: A)S+M+T=I+NX+G. B) the 45-degree line and the saving schedule intersect. C)S+NX+G=I+T. D)S+1+NX=G+T. Suppose that a mixed open economy is producing at its equilibrium income and that net exports are zero. If at the equilibrium income the public sector's budget shows a surplus: A)C+1+NX+G must exceed GDP. B) a recessionary gap must exist. C) planned investment must exceed saving. D) saving must exceed planned investment. In moving from a private closed to a mixed closed economy in the aggregate expenditures model, taxes: A) must be added to gross investment. B) must be added to saving. C) must be added to consumption and gross investment. D) have no impact upon the equilibrium GDP. If the central bank decreases the money supply, it is conducting A) monetary policy. B) supply-side policy. ©) fiscal policy D) incomes policy. If the government increases government spending, it is using ‘A) monetary policy. B) supply-side policy. C) fiscal policy. D) incomes policy Government policies regarding taxes and expenditures are called A) fiscal policy B) income policies. C) supply-side policy. _D) monetary policy. The government implements fiscal policy when it changes A) spending and/or interest rate B) money supply and/or taxes. C) taxes and/or spending. D) taxes and/or interest rate.26) 27) 28) 29) 30) 31) 32) Alon Elshazly | Jotroduction to Wacrocconomics EN The government wants to encourage consumer spending by cutting is an example of income taxes. Thi: A) an incomes policy. B)a fiscal policy. C) a supply-side policy. D) a monetary policy. The central bank affecting the supply of money is known as A) fiscal policy. B) monetary policy: C) growth policy. D) supply side policy. Policies designed to affect the quantity of money are A) fiscal policies. B) supply side or growth policies. C) government spending policies. _ D) monetary policies Fiscal policies are government policies regarding and A) taxes; expenditures B) income; saving C) money supply: money demand _D) revenues; earnings Other things equal, an increase in an economy's exports will: A) lower the marginal propensity to import. B) have no effect on domestic GDP because imports will change by an offsetting amount. C) decrease its domestic aggregate expenditures and therefore decrease its equilibrium GDP. D) increase its domestic aggregate expenditures and therefore increase its equilibrium GDP. Assuming no foreign trade in economy, equilibrium is achieved when government purchases equal A) saving minus net taxes minus consumption. B) saving plus net taxes minus investment. C) net taxes plus investment minus saving. D) net taxes minus investment minus saving. When the government changes taxes and spending, it is implementing A) supply-side policy. B) fiscal policy. C) incomes policy. D) monetary policy.33) 34) 35) 36) 37) 38) 39) 40) Alen Elshazly | Jotroduction to Wacrocconomies The government wants to discourage consumer spending through raising income taxes. This i A) an incomes policy. B) a monetary policy. C) a supply-side policy. D)a fiscal policy. an example of During recessions, government spending usually A) decreases because unemployment payments decrease B) increases because unemployment payments increase. C) decrease because unemployment payments increase. D) increases because unemployment payments decrease. If Congress decreases government spending, it is using A) fiscal policy. B) supply-side policy. C) monetary policy. D) incomes policy. When the government sector is included in the income-expenditure model, the equation for aggregate income is A)Y=C+S-T B)Y=C+L C)Y=C+1+G. D)Y=C+S+1. The difference between what a government spends and what it collects in taxes ina year is A) net revenue. B) net taxes. C) the government budget deficit or surplus. D) the government debt. Assuming there is no foreign trade in the economy, the econom equilibrium when A)S+T=G+C B)I+G=S+T C)IT=S+G. D)G+T=S+1 As the size of the MPC increases, the value of the balanced-budget multiplier A) increases. B) decreases. ©) remains constant. D) could either increase or decrease. The government spending multiplier is A) 1/( + MPC). B) I/MPS. ©) VAPC. D) 1/(1 + MPS).Alen Elshazly | Jotroduction to Wacrocconomics The formula for the tax multiplier is A)-(MPS/MPC). B)MPS/MPC. C)-(MPC/MPS)._D) -1/MPS Balanced-budget multiplier is A)O. B) is greater than 0 but less than 1 C) is greater than | D) 1. Answers B 6 B 11 Cc 16 B 21 B 26 B 31 B 36 C 41 € B 7 A i2 D 17 B 22 A 27 B 32 B 37 C 42 D D 8 D 13 D 18 B 23 C 28 D 33 D 38 B D 9 D 14 B 19 A 24 A 29 A 34 B 39 C D 10 B 15 A 20 C 25 C 30 D 35 A 40 B