homework3

homework3 - HOMEWORK 3 Name INTRODUCTION TO MACROECONOMICS...

Info iconThis preview shows pages 1–8. Sign up to view the full content.

View Full Document Right Arrow Icon
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 2
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 4
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 6
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 8
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: HOMEWORK 3 Name INTRODUCTION TO MACROECONOMICS SPRING 2010 DUE ON APRIL 8, 2010 MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Refer to the infomation provided in Table 8.4. below to answer the questions that follow. Table 8.4 Aggregate Output Aggregate Consumption Planned Investment ($ million) ($ million) ($ million) 2,000 111 1,200 a! 1,100 2,500 q», 1,600 CD . 950 3,000 2,000 1,000 3,500 2,400 1,000 4,000 2,800 1,000 '1) Refer to Table 8.4. At an aggregate output level of $2,000 million, planned expenditure equals 1) A), $2,300. B) $2,700. C) 2,400. D) $2,000. ’i y“ , a x...» E c 2 3’0 0 2) Refer to Table 8.4. The MPC in this economy is a A 2) 2 00 A) 0.5. B) 0.7. C) 0.6. (9)08. I, M (A {_ we :f/fjga 1»: W W 2/ W" t, a“ \ 3) Refer to Table 8.4. At an aggregate output level of $3,000 million, the unplanned inventory change 3) V W M J is ‘ b} _ T: Q 0. B) $1,000 million. C) $10 million. D) —$10 million. 4) Refer to Table 8.4. If aggregate output equals there will be a $50 million unplanned 4) decrease in inventories. A) $4,000 million (3) $2,500 million C) $3,500 million D) $2,000 million 5) Refer to Table 8.4. The equilibrium level of aggregate output equals 5) A) $2,000 million. B) $2,500 million. C) $3,500 million. $3,000 million. 6) Refer to Table 8.4. Planned saving equals planned investment at an aggregate output level of 6) .Q 3,000 million. B) $4.000 million. C) $2,500 million D) $3500 minim 7) Refer to Table 8.4. Planned investment equals actual investment at 7) A) all income levels above $2,500 million. B) all income levels. / C)‘allincome levels below $3,500 million @lncome level of $3,000 million. 8) If C = 100 + .6)” and I : 50, then the equilibrium level of income is 8) B) 450. C) 390. \1: [miwnémsa D) 525. 9) If C : 1,500 + .25)” and I = 500, then planned saving equals planned investment at aggregate output level of A) 2,860.89. @2,666.67. C) 2,500.67. D) 3,340.55. Refer to the information provided in Figure 8.9 below to answer the questions that follow. ‘” 1180l — w / AE 4% 7 Lg A ‘ l (I) §§1,000-.———A;~ 1 Q) 7:: ‘ /' l ‘ E E // I is) ' ‘ 5E" 100 i/Q45°% E D 500 1,000 1,200 ll Aggregate output ($ millions) Figure 8.9 10) Refer to Figure 8.9. What is the equation for the aggregate expenditures function (AB)? A) AE:100+ .114 B) £=100+.9r. C) AE=550+ .11”, D) AE: 1,000 + .9Y. 11) Refer to Figure 8.9. At an aggregate output level of $500 million, there is a A) $50 million unplanned increase in inventories. B) $0 change in unplanned inventories. C) $75 million unplanned decrease in inventories. 013) $50 million unplanned decrease in inventories. 12) Refer to Figure 8.9. At aggregate output levels above $1,000 million, there are E) nplanned increases in inventories and output decreases. B) unplanned decreases in inventories and output increases. C) unplanned increases in inventories and output increases. D) unplanned decreases in inventories and output decreases. 13) Firms react to unplanned increases in inventories by A) increasing output. B) increasing consumption. C) increasing planned investment. ' D‘) reducing output. 14) Assume there is no government or foreign sector. If the MP5 is .25, the multiplier is A) 1.33. C) 9. D) 1.11. 9) 10) 11) 12) 13) 14) 15) Assume there is no government or foreign sector. It the multiplier is 5, a $10 billion increase in investment will cause aggregate output to increase by @50 billion. A) $200 billion. B) $5 billion. 16) Midwest State University in Nebraska is trying to convince Nebraska taxpayers that the tax dollars spent at Midwest State University are well spent. One of the university‘s arguments is that for every $1 spent by Midwest State University an additional $5 of expenditures are generated within Nebraska. Midwest State University is arguing that the multiplier for their expenditures is I» A) 0.2. C) 1. D) 4. 17) Fiscal policy refers to C) $10 billion. A the spending and taxing policies used by the government to influence the economy. B) the government's ability to regulate a firm's behavior in the financial markets. C) the behavior of the nation's central bank, the Federal Reserve, regarding the nation's money supply. D) the techniques used by a business firm to reduce its tax liability. 18) Bill's income is $1,000 and his net taxes are $250. His disposable income is $750. B) 331,250. C) —$250. 19) The difference between what a government spends and what it collects in taxes in a year is @e government budget deficit or surplus. D) the government debt. D) $500. A) net revenue. C) net taxes. 20) in 1998, the city of Canfield collected $500,000 in taxes and spent $450,000. In 1998, the city of Canfield had a A) budget surplus of $50,000. C) budget deficit of $50,000. B) budget surplus of $5,000. D) budget surplus of $450,000. 21) When the government sector is included in the income—expenditures model, planned aggregate expenditure 7 A) stays the same. epends. creases. 22) The aggregate consumption function is C = 100 + .6Yd. If income is $1,000 and net taxes are $200, consumption equals @580. D) decreases. A) 480. B) 600. C) 800. 15) 16) 17) 18) 19) 20) 21) 22) Refer to the information provided in Table 9.2 below to answer the questions thatfollow. Table 9.2 Planned Output Net Consumption Investment Government (Income) Taxes Spending Spending Purchases Y T C I G 500 100 400 150 150 1,000 100 800 150 150 1,500 100 1,200 150 150 2,000 100 1,600 150 1,50 2,500 100 2,000 150 150 23) Refer to Table 9.2. At an output level of $1,500 billion, the level of aggregate expenditure is 23) W billion. A) $1,400 B) $1,300 @1500 D) $1,600 24) Refer to Table 9.2. At an output level of $1,500 billion, there is an unplanned inventory 24) A) increase of $150 billion. B) decrease of $200 billion. C) increase of $300 billion. @hange of $0. 25) Refer to Table 9.2. At an output level of $2,500, the level of aggregate expenditure is 25) billion. CA) 2,300 B) $2,000 C) $2,400 D) $1,500 26) Refer to Table 9.2. At an output level of $2,500, there is an unplanned inventory 26) A) change of $0. B) ncrease of $200 billion. C) decrease of $200 billion. D) decrease of $300 billion. 27) Refer to Table 9.2. 'llie equilibrium level of output is billion. 27) A) $2,000 B) $2,500 C) $1000 fi$1500 28) Refer to Table 9.2. At an output level of $1,500, disposable income 28) A) is $1,400. B) is $1,000. C) is $1,200. D) cannot be determined from this information. The Italian economy can be characterized by Equation 9.1. A) government spending must equal the sum of tax revenue, saving and investment. B) investment plus tax revenue must equal government spending plus saving. @government spending plus investment must equal saving plus tax revenue. D) government spending must equal tax revenue and saving mu st equal investment. EQUATION 9.1: C = 200 + .7Yd G = 500 T 2 200 1 = 200 29) Refer to Equation 9.1. The equilibrium level of output for the Italian economy is 29) s7 . (@szsaaa B) $2,678.9. C) $3,450.5. D) $3,125.8. : 30) Refer to Equation 9.1. At the equilibrium level of output in Italy, consumption equals 30) A) $2,010.2 B) $21004. @3333. D) $1,633.3. 31) Refer to Equation 9.1. At the equilibrium level of output in Italy, saving equals 31) A) $550. B) $450. @500. 1)) $400. 32) For the economy to be in equilibrium, 32) 33) If the government wants to reduce unemployment, government spending should be 33) and/or taxes should be A) increased; increased B) decreased; decreased @reased; decreased D) decreased; increased 34) The leader of Atlantis hires you as an economic consultant. He is concerned that the output level in 34) Atlantis is too low and that this will cause prices to fall. He feels that it is necessary to increase output by $200 billion, He tells you that the MPC in Atlantis is .8. Which of the following would be the best advice to give to the Atlantis president? Decease taxes in Atlantis by $50 billion. B) Increase government spending in Atlantis by $100 billion. C) Reduce government spending in Atlantis by $100 billion. D) Increase government spending in Atlantis by $200 billion. Refer to the information provided in Table 9.4 below to answer the questions that follow. Table 9.4 All Figures in Billions of Dollars Consumption Planned Output Net Spending Investment Government (Income) Taxes (C = 100 + .9Yd) Savings Purchases Spending 2,400 100 2,170 150 150 200 2,800 100 2,530 170 150 200 3,000 100 2,710 190 150 200 3,200 100 2,890 210 150 200 3,400 100 3,070 230 150 200 3,600 100 3,250 250 150 200 3,800 100 3,300 270 150 200 35) Refer to Table 9.4. The equilibrium level of income is A) $800 billion. (@05500 billion. 36) Refer to Table 9.4. The MP5 A) is .8. B) is .2 @s .1. D) cannot be determined from the available information. C) $2,000 billion. D) $1,600 billion. 37) Refer to Table 9.4. The value of the government spending multiplier A) is .9. ) is 5. s 10. D) Cannot be determined from the available information 38) Refer to Table 9.4. The economy is at the equilibrium level of output. If government spending increases to $500 billion, the new equilibrium level of output is A) $6,040 billion. B) $2,100 billion. @6,600 billion. 39) Refer to Table 9.4. The economy is at the equilibrium level of output. If government spending decreases by $50 billion, the new equilibrium level of output is "a A) $1,450 billion. B) $1,350 billion. @3,100 billion. 40) Refer to Table 9.4. If taxes are reduced from $100 billion to $50 billion, the new equilibrium level of output is $4,050 billion. D) $1,640 billion. D) $1,550 billion. A) $1,800 billion. B) $1,600 billion. C) $2,100 billion. 35) 36) 37) 38) 39) 40) 41) Refer to Table 9.4. If taxes are reduced from $100 billion to $50 billion and government spending is reduced from $200 billion to $150 billion, the new equilibrium level of income A) is $1,600 billion. @5 $3,550 billion. C) is $1,400 billion. D) cannot be determined from this information. 42) If the MP5 is .2, the government spending multiplier is ,4 “a”? A) 9. B) 4. C) 1.11. D) 5.) 43) If the MPC is .5, the tax multiplier is A) —2.5. B) —1.666. —1. D) —2 The economy of Bananaland can be characterized by Equation 9.3. EQUATION 9.3: C = 2,000 + .SYd T = 200 G = 400 I = 500 44) Refer to Equation 9.3. The equilibrium level of income in Bananaland is @600. B) 4,600. C) 5,800. D) 4,800. 45) Refer to Equation 9.3. If government spending in Bananaland increases by $100, equilibrium output increases by @$200. A) $800. B) $100. C) $400. 46) A decrease in lump—sum taxes will A) shift the consumption function downward. B) make the consumption function flatter. C) make the consumption function steeper. D)" 'hift the consumption function upward. 47) If thetax multiplier is —6 and taxes are reduced by $100 billion, output @ylzcmases by $600 billion. B) increases by $100 billion. C) falls by $100 billion. D) falls by $600 billion. 41) 42) 43) 44) 45) 46) 47) 48) If the government spending multiplier is 10, then the tax multiplier 48) A)__is —S. C) is ~4. D) cannot be determined because the MP5 is not given. 49) if government spending is increased by $500, taxes are reduced by $500, and the MP8 is .5, 49) equilibrium output will change by B) $0. C) w$500. D) an amount that cannot be determined from this information. 50) You are hired by the Council of Economic Advisers (CEA) as an economic consultant. The 50) Chairperson of the CEA tells you that she believes the current unemployment rate is too high. The unemployment rate can be reduced if aggregate output increases. She wants to know what policy to pursue to increase aggregate output by $300 billion. 'lhe best estimate she has for the MPC is .8. Which of the following policies should you recommend? A) Increase government spending by $150 billion. B Cut taxes by $60 billion. increase government spending by $60 billion. D) Cut taxes by $60 billion and to increase government spending by $60 billion. ...
View Full Document

Page1 / 8

homework3 - HOMEWORK 3 Name INTRODUCTION TO MACROECONOMICS...

This preview shows document pages 1 - 8. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online