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ECON_120_chap_11_test_ans

ECON_120_chap_11_test_ans - c i‘r‘our location...

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Unformatted text preview: c i‘r‘our location: Assessments > View f—‘ill Submissions > View attempt View Attempt 1 of 1 Title: Bonus Quiz (Ch11) Started: November 15. 2009 11:41 PM Submitted: November 16. 2009 12:07 AM Time spent: 00:26:04- Total score: 9l10 = 90% E Total score adjusted by 0.0 E Maximum possible score: 10 Correct. At v2. production is less than expenditures and inventories will fall. 0. There isn’t sufficient information to answer the question. Score: 1f1 Refer to the graph below. Which of the graphs best depicts the impact of an increase in taxes? in (C-if-l-Gh (Gobi-63' WK C iii. The graph on the left. a B. The graph 100% E Correct. An increase in taxes lowers the aggregate expenditure on the function. right. C. Both graphs. D. Neither graph. Score: 1f1 nHCHud-n d-Inn tin-mm Ian-clan. InlL—L:HIF\ RIF-\Hln L-ta-u-d- plan-Jab.- I-L-ta Inna—ind- a5 Hun. :u-anHHI-H :m I-L-ta HH-LwFI:IH-\.l nunmnmpid—n d-a luring-L”! I'KISHSI LU LIN: ||L_a]L,l| I: UUIUW. VVIIILII L_a]lcl|_||| LIISDL LAUIJILLD LIIIS I|I||JCILL LII clll IIIL-I ISCIDI: ||| LIIIS Illcll L_,|II|CII |_|| UIJISI |:D|L5l LU ||I||JU|LE f—‘i. The graph on the left. B B. The graph 100% E Correct. The marginal propensity to import affects the slope of on the the function. right. C. Both graphs. D. Neither graph. Score: 1f1 Consumption is 800 + .QY vvhile investment is 500. The equilibrium level of output is: a. spec c. 3.250 3 D. 13,000 100% E Correct. Equilibrium output is autonomous spending divided bv (1—mpc).r1‘iutonomous C of 000 + autonomous investment of 500 equals 1300. 1-the MPC of .9 equals .1. 13001.1 is 13,000. Score: 131 Equilibrium output is $5200 billion while full emplovment or potential GDP is $5000 billion. If the MPC is .8 what must the government do to it’s purchases to get the economv to full emplovment? fl. _DWBI' government :uurchases 3v $200 billion. B. :{aise government purchases 3v $40 billion. a C. _ower 100% E Correct. The multiplier here is 5. if government purchases fell bv government $40 billion then equilibrium output would fall bv 5 times $40 purchases billion or $200 billion. This would move the economv to full 3v $40 emplovment. :uillion. D. iaise government purchases 3v $200 billion. Score: lfl Which of the following formulas correctlv illustrates equilibrium output? Al—MF‘C’“ (C+I) B B. (Ca + 1).!(1 100% H Correct. Equilibrium output is determined where the C + I line — MPC‘J intersects the 45—deqree line. At that level of output. v*. desired spending equals output. The level of output that'corresponds to equilibrium output is given bv lfll — MF‘C) * (Ca +1). C.C+I D. Ca + MPC — 1H Score: 1fl Refer to the figure below. The graph demonstrates the increase in investment from ID to 11, which is: A. equal to the corresponding changein output. B. greater than the corresponding changein output. 3 C. less than the 100% E Correct. When investment increases from ID to 11, equilibrium corresponding output increases from vU to v1. The change in output is greater change in than the change in investment. output. D. either greater than or less than but not equal to the corresponding changein output. Score: lfl Which of the following is correct? The simple income—expenditure model illustrates that: .An increase in government spending will increase total planned expenditures for goods and services. . Cutting taxes will increase the after-tax income of consumers and will also lead to an increase in planned expenditures for goods and services. C. Policvmakers need to take into account the multipliers for government spending and taxes as thev develop their policies. a D. All of the 100% above. Score: lfl Correct. Our simple income—expenditure model illustrates some important lessons: An increase in government spending will increase total planned expenditures for goods and services. Cutting taxes will increase the after—tax income of consumers and will also lead to an increase in planned expenditures for goods and services. Policymakers need to take into account the multipliers for government spending and taxes as thev develop their policies. Onlv one statement below is entirelv correct. Which one? The result of automatic stabilizers when the economv is in an expansion is to: Response A. collect less taxes and pav out less transfer pavments. decreasing consumer spending. Student Value Correct Answer Feedback B. collect a more taxes and pay out less transfer pavments. decreasing consumer spending. Q] C. collectless 0% taxes and pav out more transfer pavments. increasing consumer spending. D. collect more taxes and pavs out more transfer pavments. decreasing consumer spending. Score: Dfl Incorrect. Automatic stabilizers are taxes and transfer pavments that stabilize GDP without requiring policymakers to take explicit actions. this means that when the economv overheats the government automaticallv takes in more tax revenue and pavs out less in benefits. 1|]. The economv will be more stable when: Student Value Correct Answer Response A. consumers base their decisions on permanent rather than temporarv changes in income. B. firms and consumers know that the federal government will often be taking actions to stabilize the economy. Feedback C. firms make better forecasts of demand. a D. All of the above. Score: ly‘l 100% Correct. In addition to automatic stabilizers, otherfactors that contribute to the stability of the economy include: The fact that many consumers based their spending decisions in part on their permanent income, so they will not be very sensitive to changes in their current income. The knowledge by firms and consumers that the federal government will often be taking actions to stabilize the economy. Changes in inventory management practices. Firms have learned to make better forecasts of demand and have learned how to avoid the inventory cycle that resulted when unexpected shocks caused additional decreases in demand. ...
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