8 Chapter Quiz
1.
During an economic downturn, households respond to a decline in income by
A) reducing consumption.
B) reducing taxes.
C) negotiating higher wages.
D) increasing the quantity of labor supplied.
Correct Answer(s):
A
2.
In the aggregate expenditures model, in equilibrium,
A) aggregate expenditures equal real GDP produced.
B) aggregate expenditures equalinvestment.
C) aggregate expenditures equalsaving.
D) aggregate expenditures equal consumption.
Correct Answer(s):
A
3.
Which of the following events cause the aggregate expenditures curve to "shift" downwards?
A) Firms become optimistic about future profits and increase investment spending.
B) The government reduces property tax rates.
C) The government cuts spending on education.
D) An increase in exports.
Correct Answer(s):
4.
C
The relationship between aggregate expenditures and real GDP is shown by the
A) autonomous expenditures curve.
B) aggregate expenditures curve.
C) aggregate demand curve.
D) consumption function.
Correct Answer(s):
B
5.
Suppose when disposable personal income increases from $10,000 to $15,000, consumption
increases from $9,000 to $13,000. What is the marginal propensity to consume?
A) 0.4
B) 0.6
C) 0.8
D) 0.2
Correct Answer(s):
C
6.
Suppose when disposable personal income increases from $10,000 to $15,000, planned
consumption spending increases from $9,000 to $12,000. What is the marginal propensity to
consume?
A) 0.4
B) 0.6
C) 0.2
D) 0.8
Correct Answer(s):
7.
B
Which of the following statements true?
A) is The economy depicted in the figure experiences an inflationary gap = Y2 -Yp.
B) The economy depicted in the figure experiences an inflationary gap = Y1 -Yp.
C) The economy depicted in the figure experiences an inflationary gap = Y1-Y2.
D) The economy depicted in the figure is in long-run equilibrium but not in short-run equilibrium.
Correct Answer(s):
A
8.
Which of the following statements is true?
A) The economy depicted in the figure experiences a recessionary gap = Yp-Y1.
B) The economy depicted in the figure is in long-run equilibrium but not in short-run equilibrium.
C) The economy depicted in the figure experiences a recessionary gap = Y2-Y1.
D) The economy depicted in the figure experiences a recessionary gap = Yp-Y2.
Correct Answer(s):
D
9.
Which of the following occurs if an economy experiences a recessionary gap?
Actual real GDP is less than potential output.
Actual real GDP is greater than potential output.
Unemployment is less than the natural rate.
Unemployment is greater than the natural rate.
A) I and III
B) II and IV
C) II and III
D) I and IV
Correct Answer(s):
D
10.
At output level YK,
A) the economy is in short-run equilibrium and it operates with an inflationary gap.
B) the economy is in short-run equilibrium and it operates with a recessionary gap.
C) the economy is not in equilibrium because it operates with an output gap.
D) the economy is not in equilibrium because the unemployment rate is below the natural rate of
unemployment.
Correct Answer(s):
B