Exam-1-1997-Dr-Ramadan - M p 9 r 1/ I) mum A INNER e /. III...

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Unformatted text preview: M p 9 r 1/ I) mum A INNER e /. III ; ” LIBRARY I , Time: 1 Hour 0? man Economics 212 l - Exam 1 f N . . . f5 ’ ame._ lnstruckna I51. #wvflcufiln _m_e “H_l____‘_rh_m___h__u_ 100% Multiple Choice {50 questlons, 9 pages) \ 1 . The aggregate~demand curve ~ a. is positively sloped. b. shows how much people are prepared to sell at ' different price levels. J shows how much pe _ ween relative prices _ . and the price leVel. ’eJ None of the above. xv » a 2 percent. ' e. zero.' _ industry A are $300 industry A's value added is a. $400. b. $300. @. $200. d. $0. a. none of the above. . 6 The total value added of the economy equals a. total profits. ' b. the sum of Wages, the total value of (x €33 , and profits? 2/9 7. Transfer payments are not included in net national product because ‘ a. they are not necessarily spent upon receipt. b. they are usually double counted. at they are not payments for goods and services. 7/ (E) they should be included under government final expenditures. e. All of the above. 8 . The circular-flow diagram shows that a. the flow of payments to the factors of production exceeds the flow of payments for final goods and services. b. product and factor markets are independent. » the total amount of income generated by the economy equals total purchases of final goods and services. d. consumption equals saving. e. None of the above. 9 . In economy A, government spending is $50 billion, consumption is $100 billion, exports are $30 billion, imports are $30 billion, investment is $10 billion, and taxes are $50 billion. GNP in economy A is a. $270 billion. b. $210 billion. q: $190 billion. (9 $160 billion. e. none of the above. 10 . Which of the following is not a final good or service? a. The flour purchased by the homemaker. £9 The flour purchased by the baker. c. The flour purchased by the grocery store and still on the shelves. d. The increase in flour inventories of the miller. p- All of the above are final goods. 11. The equality of saving and investment means that (él what people want to save always equals what people want to invest. b. the value of stocks and bonds equals the amount \I _ of annual saving. a),//J some mechanism is required to bring desired saving into equality with desired investment. d. national income cannot equal net national product. e. None of the above. 12-. Measured GNP statistics may overstate the differences in living standards between industrialized and poor countries because CE) there is more investment in industrialized countries. HT‘/<jj. there is a higher proportion of nonmarketed goods in poor countries. c. there is more depreciation in the industrialized countries. d. All of the above. e. None of the above. ; ‘3/9 13. The value afloutput will equal the value of income because a. saving equals investment. b. government spending equals taxes. c. the government automatically spends the tax revenues it collects. d. workers receiVe wages when they produce goods. (E) profits insure that the two are equal. 14 . In economy A, C + I + G + X - M equals $500 billion; indirect business taxes equal $50 billion; depreciation equals $25 billion. National income, therefore, equals a. $500 billion. 1:. $450 billion. NW: ((59 loin” Ni; “1’” #50 “’5 . $425 billion. , Su);;5 d. $400 billion. >i ,La’H e. none of the above. . r . 15 . In economy A, c + I + G + X — M equals $500 billion; indirect business taxes equal $50 billion; depreciation equals $25 billion. Net national product, therefore, equals a a. $500 billion. .0le ' 3w, 7’ 6?. $450 billion. ;.q75 5\ o. $425 billion. d. $400 billion. @. none of the ahOVe. 15. One reason some economists prefer net national product (NNP) to gross national product (GNP) is that a. NNP includes depreciation. b. MN? is larger than GNP. 65} NNP does not include depreciation and is a better measure of new goods and services. d. NNP adjusts better_for inflation distortions. e. None of the above.. .. 17 . Expenditures on residential structures are a. intermediate goods and, therefore, not part of GNP. b. are classified as personal consumption expenditures on durable goods. c. a serious omission from the national accounts /. because so much housing is in fact rented. Cg) classified as part of investment expenditures. none of the above. 13 . The reason that national—income accountants are concerned about the underground economy is that (a) we don't want to mistakenly count the value of illegal transactions, which would bias our estimates of GNP. b. air, water, and noise pollution are economic "bads." C. the labor of spouses in the production of unpaid r household serviCes is historically undervalued. 1 /é§{ we would get a false impression of change in economic activity if previously reported activity is no longer reported (to avoid taxes). e. leisure is a private matter and has no place in social accounts. 19 4/9 . If business inventories are $450 billion at the end of 1985 and they were $500 billion at the beginning of a. b. C,. ,20 1985, investment investment inventory investment inventory investment None of the above. inventory inventory was $500 billion for 1985. was $450 billion for 1985. was +$50 billion for 1985. was —$50 billion for 1985. The value of total output equals the value of total income because a. b. Q ? d 21- a. b. c. d. (9 22 a. b a. b. c. d. (9 24. is a? . higher—income families spe 7.. (.9 you cannot buy more than you earn. saving equals investment. the act of producing output automatically creates an equivalent amount of income. society cannot consume what it has not produced. All of the above. Keynesian equilibrium occurs when . desired aggregate expenditure equals income. desired aggregate expenditure equals output. the aggregate—expenditure schedule intersects the 45—degree line. desired saving and desired investment are equal. All of the above. Consumption spending by families shows that, as a general rule, spending equals income. _ nd a larger percentage of their income. higher—income families spend a percentage of their income. lower-income families and higher-income families spend about the same percentage of their incomes. None of the above. smaller The marginal propensity to consume (MPG) is the increase in consumption spending per dollar increase in saving. the decrease in consumption spending per dollar decrease in saving. the change in consumption divided by the change in saving. ' a fraction greater than one. none of the above. Assume that in a hypothetical economy, investment: constant at $30 billion. At an output level of 0, consumption is $10 billion; at an output of $100 billion, consumption is $90 billion; at an output of $200 billion, consumption is $170 billion; at an output of $300 billion, consumption is $250 billion.3 In a. this economy the marginal propensity to save is impossible to determine from the information given. C a of : Hit. v 1 MS 0.3. 0. 2? L» 0 none of the above. 5 5/9 25 . Qavinq occurs at any level of income at which a. the consumption/income curve is above the 45- qp l - degree line. L {5: the consumption/income curve intersects the 9 ° saving/ income curve . 10 7 .4,69 the consumption/income curve is below the 45- G] '1 degree line. *‘ d. the economy is in disequilibrium. g, c e None of the above. ho L 4 Hg , 26 . Saving and investment are a. done by the same people. b. seldom the same, except by accident. c. done for the same reasons because saving and investment are equal. d. direct transfers from one group to another. @9 none of the above. 27 .. Points on the consumption/income curve that lie below the 45-degree line indicate _ §?. levels of income at which there is saving. . that consumers are spending too little. c. that consumers are spending too much. d. levels of income at which there is dissaving. e. None of the above. sity to consume is 23 .. The marginal propen g to personal a. the ratio of consumption spendin disposable income. b. the increase in disposable income divided by the increase in consumption spending. c. the increase in consumption spending divided by average disposable income. G? the increase in consumption spending divided by the increase in disposable income. e. none of the above. 29 The consumption fmfittioifl in the Keynesian mdfiel shows that C) real consumption rises when real income rises. b. real consumption rises by less than the increaSe in real disposable income. c. the marginal propensity to consume out of 0‘ disposable income is between 0 and l. d disposable the marginal propensity to save out of disposable income is between 0 and 1. @Z All of the above. 30 . If income goes up, the Total :5 curve a. shifts up. n" 15. doesn't move. {\ c. shifts down. . gets steeper. e. gets flatter. 6/9 31 . The accumulation of unwanted inventories V111 eventually result in an increase in desired investment. will signal that current production rates are too high. means desired investment is greater than actual saVings. defines a Keynesian equilibrium. All of the above. 32 . When government spending and taxes are added to the Keynesian model, a. the model breaks down. b. the consumption/income curve shifts up when taxes are introduced. . the equilibrium condition becomes 5 + G I + T. 6? the equilibrium condition becomes S + T I + G. . All of the above. 33 . One reason for the aggregate-demand curve to be downward—sloping is that 69 a.lower price level stimulates consumption for a given money supply. b. a lower price level discourages consumption for a given money supply. c. a higher level of income encourages more consumption. d. investment equals saving. e None of the above. 34. . If there is a higher price level, a. the aggregate—demand (AD) curve shifts up. the AD curve shifts down. ,a the aggregate-expenditure (AB) curve shifts down. . the AE curve shifts up. e. the AB curve remains unchanged. 35 . Assume that investment is constant at $10 billion and that government spending is constant at $40 billion. At a national-income level of $100 billion, consumption is $150 billion; at $200 billion, consumption is $200 billion: at $300 billion, consumption is $250 billion; at $400 billion, consumption is $300 billion. If investment increases from $10 billion to $20 billionithe increase in equilibrium output is ‘3 In a. $50 billion. ;”L' l b. $200 billion. c. $150 billion. d. $100 billion. 6) none of the above. 3-1 36 .. If the marginal propensity to consume out of . disposable income is 0.75, a $100 billion increase in taxes will shift the'dfibla\ E; . [9 curve y $50 billion. >K?) cfi down by $100 billion. (6/ down by. $75 billion. None of the above. Ll*L-"7J?§) 7/9 _zilf taxes are increased by $100,billion, the lex I . w Ti. 7 o:?:~«a. curve should PIS a. shift up by more than $100 billion. b. shift up by less than $100 billion. shift down by less than $100 billion. d. shift down by more than $100 billion e. do none of the above. . 33 . Suppose government spending rises by $100 billion. If taxes are constant and the margins” '“onensity to consume is 0.75; then according to the Keynesian model, equilibrium output a. rises by $75 billion. . rises by $100 billion. c rises by $200 billion. (a? rises by $400 billion. a. None of the above. 39 . If government spending is increased b billion and taxes are raised by the same a gynesian model predicts that ’ output will increase by the amount of the ‘a government—spending increase. f) (S? output will not change. c. output will decline by the amount of the tax increase. d. the consumption function will not shift. e. None of the above. I, ‘ 40 . Suppose taxes fall by $100 billion. In the Simple Ke nesian model, if government spending is constant and tb marginal propensity to consume is 0.8, the i-ILL‘I equilibrium output rises by a, $100 billion. . é) $80 billion. \\ c. $240 billion. ‘ d. $320 billion. $400 billion. 4; . The relationship between the multiplier and the marginal propensity to save is 6%? inverse. . ositive. _ . c. Ehat the marginal propensity to consume is always equal to the multiplier. d. nonexistent. C- e.-None of the above. ’I* fipk 42. Assume that investment is $10 billion, government spending is $20 billion, taxes are $15 billion, and consumption equals $5 billion plus 0.8 times the I difference between national income and taxes; that is, - 5 + 0.8(Y - T). Equilibrium output will equal .$115 billion. ‘ g Amfiulnf ] $70 billion. Lt? $120 billion. $50 billion. none of the above. ...
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This note was uploaded on 02/28/2010 for the course ECON 212 taught by Professor Sandraalsaghir during the Spring '10 term at American University of Beirut.

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Exam-1-1997-Dr-Ramadan - M p 9 r 1/ I) mum A INNER e /. III...

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