(1)

If the government sells U.S. Treasury bonds to finance its budget deficit, one would expect:

Group of answer choices

interest rates to rise.

domestic investment to rise.

tax rates to fall.

inflation to rise.

interest rates to fall

(2)

Suppose the equilibrium level of income exceeds the full employment level of income and there is high inflation. Hence, the government decides to implement a fiscal policy that will act to reduce national output and prices. This can be accomplished by:

Group of answer choices

increasing government spending such that aggregate expenditures are increased.

raising taxes and government spending by the same amount such that aggregate supply is decreased and aggregate demand is increased.

decreasing government spending such that aggregate demand is reduced.

lowering average tax rates such that aggregate supply is increased.

increasing transfer payments such that aggregate expenditures decline.

(3)

_____ are elements of fiscal policy that automatically change in value as national income changes.

Group of answer choices

Statistical discrepancies

Exchange rates

Budget deficits

Automatic stabilizers

Supply-side shocks

(4)

A U.S. federal budget deficit that raises real interest rates is most likely to:

Group of answer choices

lead to a depreciation of the dollar in the foreign exchange market.

encourage foreign investment in U.S. securities.

lead to an increase in exports.

lead to an appreciation of other currencies relative to the U.S. dollar.

discourage imports of foreign goods.

(5)

Which of the following would cause a change in imports?

Group of answer choices

A change in foreign income

A change in foreign consumption

A change in domestic tastes for foreign products

A change in foreign tastes for domestic products

A change in domestic investment spending

(6)

As disposable income rises:

Group of answer choices

consumption falls, but not by as much as the disposable income rises.

the average propensity to consume increases.

saving falls as a percentage of disposable income.

the average propensity to consume remains unchanged.

saving rises as a percentage of disposable income.

(7)

The sum of the MPC and the MPS is always:

Group of answer choices

greater than 1.

less than 1.

equal to 1.

equal to zero.

between 0 and 1.

(8)

If a household's disposable income increases from $25,000 to $50,000 and its consumption increases from $15,000 to $25,000, the MPS must be _____.

Group of answer choices

0.4

0.8

0.7

0.2

0.6

(9)

Suppose two successive levels of disposable personal income are $13.8 and $18.8 billion, respectively, and the change in consumption spending between these two levels of disposable personal income is $3.25 billion, then the MPS will be equal to _____.

Group of answer choices

0.40

0.20

0.35

0.60

0.65

(10)

If actual Real GDP is greater than potential Real GDP, then the (actual) unemployment rate is

Group of answer choices

less than the natural unemployment rate.

equal to the natural unemployment rate.

greater than the natural unemployment rate.

less than or greater than the natural unemployment rate, but we cannot determine which one.

(11)

In the country of Marzipana, total consumption in Year 1 was $56,000 million and in Year 2 was $60,000 million. It has been observed that each time disposable income changes in this country by $100, consumption changes by $80. Using this information compute the change in disposable income from Year 1 to Year 2.

Group of answer choices

Disposable income increased by $2,800 million in Year 2.

Disposable income increased by $3,200 million in Year 2.

Disposable income increased by $4,000 million in Year 2.

Disposable income increased by $5,000 million in Year 2.

Disposable income increased by $2,600 million in Year 2.

(12)

Suppose that the consumption function crosses the 45-degree line at a disposable income level of $800. Assume further that saving equals $200 when disposable income is $1,600. This implies that the MPC must equal:

Group of answer choices

0.60

0.70

0.75

0.80

0.90