2002PRELIM1rev - PART I: Multiple Choice: 10 points (each...

Info iconThis preview shows pages 1–6. Sign up to view the full content.

View Full Document Right Arrow Icon
PART I: Multiple Choice: 10 points (each question worth ½ point) 1. Assume planned investment falls by $200 billion and the equilibrium level of national income (Y) falls by $500 billion. Given this information, we know that: a. the MPC = 0.9 b. the MPC = 0.8 c. the MPC = 0.75 d. the MPC = 0.5 e. none of the above. (Answer: e because the MPC is 0.6) Planned Aggreg. Expenditure Potential 2 (billions) GDP 45-degree-line F C+I 3,000
Background image of page 1

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

View Full DocumentRight Arrow Icon
2,000 4,000 5,000 Real GDP (billions) In the figure above, at $ 2,000 billion Real GDP, a. spending exceeds total output b. inventories are rising c. spending falls short of output and inventories will rise d none of the above (Answer: a) Planned 3. Aggreg. Expenditure Potential GDP
Background image of page 2
45-degree-line 1 2 3 Real GDP In figure above, if the economy is in a recession, what must happen to reach potential GDP? d. The expenditure level must fall and/or the price level must rise e. The expenditure level must rise and/or the price level must fall f. The expenditure level must rise and/or the price level must rise g. The expenditure level must fall and/or the price level must fall h. None of the above (Answer: b) 4. Whenever there is an increase in autonomous consumption spending, there will be a. an upward shift in the planned aggregate expenditure line causing equilibrium GDP to rise. b. an upward shift in the planned aggregate expenditure line, but no change in equilibrium GDP. c. no change in the planned aggregate expenditure line, but equilibrium GDP will rise. d. an upward shift in the planned aggregate expenditure line causing equilibrium GDP to fall. e. no change in the planned aggregate expenditure line or equilibrium GDP. (Answer: a)
Background image of page 3

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

View Full DocumentRight Arrow Icon
5. Which of the following actions by the Fed will result in a decrease in the money supply? a. Increasing the amount of loans made to commercial banks. b. Buying government securities in the open market. c. Increasing reserve requirements. d. Lowering discount rate. e. Printing more currency. (Answer: c) 6. When money demand is a positive function of income, which of the following statements in TRUE? a. A decrease of autonomous consumption will raise the equilibrium interest rate. b. A decrease of autonomous investment will raise the equilibrium interest rate. c. A decrease of government purchases will raise the equilibrium interest rate. d. A decrease in taxes will raise the equilibrium interest rate. e. None of the above. (Answer: d) 7. Fill in the blanks. An open market sale of securities by the Fed results in a ( ) in reserves and a ( ) in the supply of money by an amount equal to the money multiplier times the change in reserves. (Answer: decrease, decrease) 8. Fill in the blanks.
Background image of page 4
The tendency for increases in government spending to cause a reduction in private investment spending is called the ( ). (Answer: crowding-out effect) 9. A feature of a stock variable and a flow variable is that a. a stock is a quantity that exists at a point in time and a flow is a quantity per unit of time.
Background image of page 5

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

View Full DocumentRight Arrow Icon
Image of page 6
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 09/05/2011 for the course ECON 1120 at Cornell University (Engineering School).

Page1 / 13

2002PRELIM1rev - PART I: Multiple Choice: 10 points (each...

This preview shows document pages 1 - 6. Sign up to view the full document.

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