Question 1 (1 point) E-II The multiplier principle illustrates that 0 an increase in investment spending will be multiplied into a larger increase in GDP. 0 an increase in GDP will be multiplied into a larger amount of investment spending. 0 an increase in GDP will be multiplied into a larger increase in consumer spending. 0 investment spending is always a multiple of consumer spending. Question 2 (1 point) au A higher price level leads to: 0 lower real wealth 0 lower real income 0 a lower consumption function 0 All of the above. 0 All of the above except b. Question 3 (1 point) E-II Government stabilization policy 0 cannot inuence investment spending. 0 can stimulate aggregate demand and thereby induce businesses to invest, but the amount is not totally predictable. O can stimulate aggregate demand, but investment spending will not be affected. 0 can stimulate aggregate demand, but only in the long run. Question 4 (1 point) 5-3 When aggregate demand exceeds current production 0 both output and the price level are in equilibrium. O output is not in equilibrium, but the price level is. O prices are not in equilibrium, but output is. O neither output nor the price level is in equilibrium. Question 5 (1 point) E-I Figure 10-1 Q... CO I I I I I K I .I I I Price Level 5,000 0.000 1,500 Real GDP [billions of dollars per year] If the price level in Figure 10-1 were 100, O rms would have to lower their prices. O inventories would be accumulating. O shortages of goods would exist. O aggregate quantity demanded would exceed aggregate quantity supplied. 0 both c and (1 would occur. Question 6 (1 point) () Listen Figure 9-1 Potential 6.000 GDP 450 C+J+(X-IM) 5,000 F 4,000 Real Expenditure (billions of dollars per year) 3,000 2,000 2,000 3,000 4,000 5,000 6,000 7,000 Real GDP (billions of dollars per year) In Figure 9-1, O the 45-degree line represents all points where spending equals output. to the left of equilibrium GDP, inventories will fall. Oto the right of equilibrium GDP, inventories will rise. O All of the above are correct. Previous Page Next PageQuestion 7 (1 point) E- The amount by which equilibrium real GDP exceeds full-employment GDP is known as O stagflation. O employment. O a recessionary gap. O an inationary gap. Question 8 (1 point) E- Using the standard 45-degree line diagram, how does an increase in investment spending effect the expenditure schedule? Q It shifts the expenditure schedule downward. Q It shifts the expenditure schedule upward. Q It increases the slope of the expenditure schedule. Q It decreases the slope of the expenditure schedule. Question 9 (1 point) E- The slope of the aggregate supply curve is O perfectly vertical. 0 perfectly horizontal. O upward. O downward. Question 10 (1 point) E-I The aggregate supply curve shows the relationship between and , holding all other factors constant. O price level; quantity of real GDP supplied O price level; supply of nominal GDP O nominal GDP; price level of real GDP O price level; amount of nominal GDP supplied Question 11 (1 point} E-I A recessionary gap exists when potential GDP O falls short of equilibrium GDP. O exceeds equilibrium GDP. O equals equilibrium GDP. O All of the above are correct. Question 12 (1 point} an The recessionary gap is the O amount of unemployment compensation required during a recession. O budget decit encountered during a recession. O amount of government spending needed to end a recession. O distance between the equilibrium level of output and the full employment level of output. Question 13 (1 point) () Listen One of the objectives of supply-side policies is to focus attention on the trade-off between inflation and unemployment. sharpen the trade-off between inflation and unemployment. eliminate the trade-off between inflation and unemployment. Oconvince the public of the trade-off between inflation and unemployment. Question 14 (1 point) Listen Figure 10-1 120 Price Level 110 100 S D 5,000 6,000 7,500 Real GDP (billions of dollars per year) If the price level in Figure 10-1 were 110, inventories would be accumulating. firms would have to lower their prices. O aggregate quantity demanded would equal aggregate quantity supplied. O shortages of goods would exist. Question 15 (1 point) Listen The general shape of the aggregate supply curve is O downward sloping. O upward sloping. vertical. Ohorizontal.Question 16 (1 point) () Listen Recessionary gaps are most likely to be accompanied by O inflation. O inventory reductions. O unemployment. O expanding output. Question 17 (1 point) Listen Figure 10-1 S 120 Price Level 110 100 S 5,000 6,000 7,500 Real GDP (billions of dollars per year) If the price level in Figure 10-1 were 120, there would be excess goods on the market. O firms would have to raise their prices. O inventories would be disappearing. O aggregate quantity demanded would exceed aggregate quantity supplied. Question 18 (1 point) Listen How does a tax cut affect the expenditure schedule? It causes movement to the left along the schedule. O It causes the schedule to shift upward. O It causes movement to the right along the schedule. O It causes the schedule to shift downward. Previous Page Next PageQuestion 19 (1 point) Listen Figure 9-1 Potential 6,000 GDP 45 C+/+(X-IM) 5,00 F 4.000 Real Expenditure (billions of dollars per year) 3,000 2,000 2,000 3,000 4,000 5,000 6,000 7,000 Real GDP (billions of dollars per year) In Figure 9-1, the economy is Oexperiencing an inflationary gap, shown by the horizontal distance EB. O at full employment without inflation. experiencing a recessionary gap, shown by the horizontal distance EB. Oexperiencing a recessionary gap, shown by the distance between EF. Question 20 (1 point) () Listen Using the standard 45-degree line diagram, how does a decrease in investment spending effect the expenditure schedule? It increases the slope of the expenditure schedule. It decreases the slope of the expenditure schedule. It shifts the expenditure schedule downward. O It shifts the expenditure schedule upward. Question 21 (1 point) ) Listen If total spending is less than the value of total output, firms O may decide to cut prices. O may increase production levels. will tend to raise prices. O will notice inventories falling.If the price level rises, what will happen to the level of real GDP supplied? O It will usually decrease. OIt will usually increase. Nothing. It will decrease at first and then increase. Question 23 (1 point) Listen Using the standard 45-degree line diagram, how does a decrease in net exports effect the expenditure schedule? It increases the slope of the expenditure schedule. It decreases the slope of the expenditure schedule. It shifts the expenditure schedule upward. It shifts the expenditure schedule downward. Question 24 (1 point) Listen Table 9-1 Output Consumption Investment Net Exports 1000 800 500 00 1500 1200 500 100 2000 1600 500 100 2500 2000 500 100 3000 2400 500 100 3500 2800 500 100 4000 3200 500 100 In Table 9-1, inventories are being depleted as long as output is below 2,000. 2,500. 3,000. 3,500.Question 25 (1 point) Listen If the economy automatically tends toward full employment, then government stabilization policy O must be constantly in force. O will be necessary only in recessions. will be necessary only in inflationary periods. O will not be necessary. Previous Page Next Page Page 9 of 9