Unit 3 Practice Exam

Unit 3 Practice Exam - ECO 2013 Unit 3 Practice Exam Use...

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ECO 2013 Unit 3 Practice Exam Use the following to answer question 1: 1. Refer to the above diagrams. The multiplier associated with fiscal policy that increases aggregate demand from AD 1 to AD 2 is less in graph b than in a because: A) inflation occurs in b and not in a . B) the economy is in the vertical range of aggregate supply in a and not in b . C) graph a represents a closed economy while b depicts an open economy. D) graph a represents an open economy while b depicts a closed economy. Use the following to answer question 2: Answer the next question(s) on the basis of the following consumption schedules for three private closed economies. DI signifies disposable income and C represents consumption expenditures. All figures are in billions of dollars. ( 1 ) ( 2 ) ( 3 ) D I C D I C D I C \$ 0 4 0 6 5 0 2 1 0 1 1 8 0 1 2 5 2 0 2 0 2 0 1 8 1 6 0 1 8 5 4 0 3 8 3 0 2 5 2 4 0 2 4 5 6 0 5 6 4 0 3 2 3 2 0 3 0 5 8 0 7 4 5 0 3 9 4 0 0 3 6 5 1 0 0 9 2 2. Refer to the above data. The marginal propensity to consume in economy (1): A) is .5. B) is .3. C) is .8. D) is .7. 3. The average propensity to consume is defined as income divided by consumption. A) True B) False Page 1

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4. A \$1 billion increase in investment will cause a: A) (1/MPS) billion increase in equilibrium GDP. B) (MPS) billion increase in equilibrium GDP. C) (1 - MPC) billion increase in equilibrium GDP. D) (MPC - MPS) billion increase in equilibrium GDP. Use the following to answer question 5: 5. Refer to the above diagram for a private closed economy. The MPC and MPS: A) are .6 and .4 respectively. B) are .7 and .3 respectively. C) are both .5. D) are both .7. 6. A expansionary fiscal policy is shown as a: A) rightward shift in the economy's aggregate demand curve. B) movement along an existing aggregate demand curve. C) leftward shift in the economy's aggregate supply curve. D) leftward shift in the economy's aggregate demand curve. 7. Suppose the economy is operating within the intermediate range of the aggregate supply curve and government increases both expenditures and taxes by \$20 billion. We would expect: A) no change in domestic output or the price level. B) both the domestic output and the price level to rise. C) the domestic output to fall, but the price level to rise. D) the domestic output to rise, but the price level to fall. 8. Which of the following will not tend to shift the consumption schedule upward? A) a currently small stock of durable goods in the possession of consumers B) the expectation of a future decline in the consumer price index C) a currently low level of household debt. D) the expectation of future shortages of essential consumer goods. Page 2
Use the following to answer question 9: 9. Refer to the above diagram. The level of government spending: A) is equal to tax collections at each level of GDP. B) is the same at all levels of GDP.

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This note was uploaded on 02/09/2010 for the course ECON 112 taught by Professor Sam during the Spring '10 term at UCLA.

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Unit 3 Practice Exam - ECO 2013 Unit 3 Practice Exam Use...

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