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ch-10 SAMPLE QUESTIONS-1

ch-10 SAMPLE QUESTIONS-1 - CHAPTER-10-SAMPLE Student 1...

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CHAPTER-10-SAMPLE QUESTIONS- MACROECONOMICS Student: ___________________________________________________________________________ 1. Expenditures that would exist at a zero level of income are called induced expenditures. True False 2. In the equation AE = \$2,000 + 0.8Y, autonomous expenditures are equal to 80 percent of income. True False 3. If autonomous expenditures equal \$600 and the mpe is 0.80, then equilibrium income in the multiplier model will be \$3,000. True False 4. The multiplier process occurs because changes in expenditures lead to changes in production, which in turn lead to additional changes in expenditure and so on. True False 5. According to the multiplier model, if actual income is \$100 below potential income, then, depending on the multiplier, an increase in government spending of less than \$100 will close the recessionary gap and bring income to potential income. True False 6. The permanent income hypothesis implies that the multiplier is much larger than predicted by the multiplier model. True False

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7. The multiplier model: A. provides numerical estimates of how equilibrium output changes in response to changes in the price level. B. provides numerical estimates of how equilibrium output changes in response to changes in aggregate expenditures. C. is inconsistent with the AS/AD model if the price level is fixed. D. identifies the factors that cause the AS curve to shift over time. 8. The multiplier model assumes that the:
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