1) The prices for which of the following goods are included in both the GDP deflator and the

consumer price index?

a. goods bought by households.

b. goods bought by firms.

c. good bought by governments.

d. goods bought by foreign households (i.e., exports).

e. all of these.

2) Which of the following occurs when disposable income is zero?

a. saving must be positive.

b. saving must be zero.

c. consumption is negative.

d. consumption must be zero.

e. none of these.

3) Suppose we have the following consumption function in an economy C = 2000 + 0.9YD. How

much government spending has to be increased in order to have an increase in equilibrium

output equal to 1000?

a. 100.

b. 200.

c. 250.

d. 1000.

e. none of these.

f. do not have adequate information.

4) Suppose the following equations represent an economy. What is the multiplier for this

economy?

Z = C + I + G C = 400 + .5YD YD = Y - T T = 400

I = 200 G = 1800

a. 0.5.

b. 1.

c. 1.5.

d. 2.

e. none of these.

Give also a small and brief explanation or graphs if needed for these MCQs.