HW 5 - ihw5 Return to Assessment List Part 1 of 1 -...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: ihw5 Return to Assessment List Part 1 of 1 - Question 1 of 55 Investment is a 47.0/ 55.0 Points 0.0/ 1.0 Points A. small part of real GDP, so it accounts for a small share of the fluctuation in real GDP. B. small part of real GDP, yet it accounts for a large share of the fluctuation in real GDP. C. large part of real GDP, so it accounts for a large share of the fluctuation in real GDP. D. large part of real GDP, yet it accounts for a small share of the fluctuation in real GDP. Answer Key: B Feedback: small part of real GDP, yet it accounts for a large share of the fluctuation in real GDP. Question 2 of 55 1.0/ 1.0 Points In the language of macroeconomics, investment refers to A. saving. B. the purchase of new capital. C. the purchase of stocks, bonds, or mutual funds. D. All of the above are correct. Answer Key: B Feedback: the purchase of new capital. Question 3 of 55 1.0/ 1.0 Points The Employment Act of 1946 states that A. the Fed should use monetary policy only to control the rate of inflation. B. the government should promote full employment and production. C. the government should periodically increase the minimum wage and unemployment insurance benefits. D. All of the above are correct. Answer Key: B Feedback: the government should promote full employment and production. Question 4 of 55 1.0/ 1.0 Points The government buys a bridge. The owner of the company that builds the bridge pays her workers. The workers increase their spending. Firms that the workers buy goods from increase their output. This type of effect on spending illustrates A. the multiplier effect. B. the crowding-out effect. C. the marginal propensity to consume effect. D. None of the above is correct. Answer Key: A Feedback: the multiplier effect. Question 5 of 55 1.0/ 1.0 Points Fluctuations in employment and output result from changes in A. aggregate demand only. B. aggregate supply only. C. aggregate demand and aggregate supply. D. neither aggregate demand nor aggregate supply. Answer Key: C Feedback: aggregate demand and aggregate supply. Question 6 of 55 An increase in the MPC 1.0/ 1.0 Points A. increases the multiplier, so that changes in government expenditures have a larger effect on aggregate demand. B. increases the multiplier, so that changes in government expenditures have a smaller effect on aggregate demand. C. decreases the multiplier, so that changes in government expenditures have a larger effect on aggregate demand. D. decreases the multiplier, so that changes in government expenditures have a smaller effect on aggregate demand. Answer Key: A Feedback: increases the multiplier, so that changes in government expenditures have a larger effect on aggregate demand. Question 7 of 55 Which of the following is not investment spending? 1.0/ 1.0 Points A. an increase in business inventories B. the extensive renovation of an old factory building C. the purchase of stock in Potomac Electric Company D. the construction of a new apartment building E. the purchase of a new silo for a farm Answer Key: C Question 8 of 55 1.0/ 1.0 Points Keynes used the term "animal spirits" to refer to A. debates by politicians concerning fiscal policy. B. arbitrary changes in attitudes of household and firms. C. mean spirited economists who believed in the classical dichotomy. D. firms' relentless efforts to maximize profits. Answer Key: B Feedback: arbitrary changes in attitudes of household and firms. Question 9 of 55 1.0/ 1.0 Points If the MPC = 3/5, then the government purchases multiplier is A. 5/3. B. 5/2. C. 5. D. 15. Answer Key: B Feedback: 5/2. Question 10 of 55 Keynesians believe 1.0/ 1.0 Points A. in laissez-faire. B. that equilibrium may exist at less than full employment. C. in the use of fiscal policy to stabilize the economy. D. b and c E. all of the above Answer Key: D Question 11 of 55 0.0/ 1.0 Points Given the following information if government purchases increased to $300, equilibrium real GDP demanded would increase by Real GDP Consumption Planned investment Government purchases $1,800 $1,540 $100 $200 1,900 1,620 100 200 2,000 1,700 100 200 2,100 1,780 100 200 2,200 1,860 100 200 2,300 1,940 100 200 A. $300 B. $500 C. $1,200 D. $1,500 E. $2,500 Answer Key: B Question 12 of 55 1.0/ 1.0 Points If the MPC is 0.75, a decrease in net taxes of $100 billion will increase the equilibrium level of real GDP by A. $75 billion B. $100 billion C. $300 billion D. $400 billion E. $500 billion Answer Key: C Question 13 of 55 1.0/ 1.0 Points If Y = C + I + G + (X - M) (where C = $100, I = $50, G = $50, and X - M = -$10) the equilibrium level of Y equals A. $150 B. $180 C. $190 D. $200 E. $210 Answer Key: C Question 14 of 55 Most economists believe that fiscal policy affects 1.0/ 1.0 Points A. only aggregate demand and not aggregate supply. B. mostly aggregate demand. C. mostly aggregate supply. D. only aggregate supply and not aggregate demand. Answer Key: B Feedback: mostly aggregate demand. Question 15 of 55 0.0/ 1.0 Points A firm's level of investment is tied to the interest rate A. only when the firm has to borrow funds to buy capital B. only when the firm has to borrow funds to buy stocks C. only when the firm already has the funds and could lend them D. because the interest rate represents the opportunity cost of investing in capital E. because investments are always made with borrowed funds Answer Key: D Question 16 of 55 As disposable income increases, 1.0/ 1.0 Points A. consumption and saving both increase B. consumption increases and saving decreases C. consumption and saving both decrease D. consumption decreases but saving increases E. saving increases, but we cannot predict what happens to consumption Answer Key: A Question 17 of 55 1.0/ 1.0 Points Suppose Congress increases income taxes. This is an example of A. expansionary fiscal policy. B. expansionary monetary policy. C. contractionary fiscal policy. D. contractionary monetary policy. Answer Key: C Question 18 of 55 The government purchases multiplier is defined as 1.0/ 1.0 Points A. MPC. B. 1 - MPC. C. 1/MPC. D. 1/(1 - MPC). Answer Key: D Feedback: 1/(1 - MPC). Question 19 of 55 The multiplier effect is the multiplied impact on 1.0/ 1.0 Points A. the money supply of a given increase in government purchases. B. tax revenues of a given increase in government purchases. C. investment of a given increase in interest rates. D. aggregate demand of a given increase in government purchases. Answer Key: D Feedback: aggregate demand of a given increase in government purchases. Question 20 of 55 Out of disposable income, households 1.0/ 1.0 Points A. consume and save B. consume and invest C. save and invest D. consume, save, and pay taxes E. consume, save, pay taxes, and make transfer payments Answer Key: A Question 21 of 55 If taxes 1.0/ 1.0 Points A. increase, consumption increases, aggregate demand shifts right. B. increase, consumption decreases, aggregate demand shifts left. C. decrease, consumption increases, aggregate demand shifts left. D. decrease, consumption decreases, aggregate demand shifts right. Answer Key: B Feedback: increase, consumption decreases, aggregate demand shifts left. Question 22 of 55 1.0/ 1.0 Points The consumption function relates consumption spending to A. the price level B. interest rates C. disposable income D. expectations about the price level E. household wealth Answer Key: C Question 23 of 55 0.0/ 1.0 Points Business cycles A. are explained mostly by fluctuations in consumption. B. no longer are very important due to government policy. C. are fluctuations in real GDP and related variables over time. D. are easily predicted by competent economists. Answer Key: C Feedback: are fluctuations in real GDP and related variables over time. Question 24 of 55 1.0/ 1.0 Points Which of the following is the most volatile component of GDP? A. investment (I) B. consumption (C) C. saving (S) D. government purchases (G) E. net exports (X - M) Answer Key: A Question 25 of 55 1.0/ 1.0 Points Which of the following might be considered the most expansionary set of fiscal policies? A. increase in government purchases, increase in taxes, and decrease in transfer payments B. decrease in government purchases, increase in taxes, and decrease in transfer payments C. increase in government purchases, decrease in taxes, and increase in transfer payments D. increase in government purchases, increase in taxes, and increase in transfer payments E. decrease in government purchases, decrease in taxes, and decrease in transfer payments Answer Key: C Question 26 of 55 1.0/ 1.0 Points The marginal propensity to consume (MPC) is defined as the fraction of A. extra income that a household consumes rather than saves. B. extra income that a household either consumes or saves. C. total income that a household consumes rather than saves. D. total income that a household either consumes or saves. Answer Key: A Feedback: extra income that a household consumes rather than saves. Question 27 of 55 Fiscal policy refers to 1.0/ 1.0 Points A. efforts to balance a government's budget. B. changes in the money supply to achieve particular economic goals. C. changes in government expenditures and taxation to achieve particular economic goals. D. the change in private expenditures that occurs as a consequence of changes in government spending. Answer Key: C Question 28 of 55 1.0/ 1.0 Points If households view a tax cut as being temporary, the tax cut A. has no affect on aggregate demand. B. has more of an affect on aggregate demand than if households view it as permanent. C. has the same affect as when households view the cut as permanent. D. has less of an affect on aggregate demand than if households view it as permanent. Answer Key: D Feedback: has less of an affect on aggregate demand than if households view it as permanent. Question 29 of 55 1.0/ 1.0 Points Which of the following is included in the aggregate demand for goods and services? A. consumption demand B. investment demand C. net exports D. All of the above are correct. Answer Key: D Feedback: All of the above are correct. Question 30 of 55 1.0/ 1.0 Points A short period of falling incomes and rising unemployment is called a A. depression. B. recession. C. expansion. D. business cycle. Answer Key: B Feedback: recession. Question 31 of 55 Consumption 1.0/ 1.0 Points A. makes up about two-thirds of GDP in a typical year B. exceeds GDP in years when net exports are negative C. is much more volatile than investment, especially during recession years D. is much more volatile than investment, especially during expansion years E. has declined as a fraction of GDP over time Answer Key: A Question 32 of 55 1.0/ 1.0 Points When we speak of expansionary fiscal policy, policymakers __________ government spending, or __________ taxes, or both. A. decrease; decrease B. increase; increase C. increase; decrease D. decrease; increase Answer Key: C Question 33 of 55 During recession years, 0.0/ 1.0 Points A. investment declines while consumption increases B. investment increases while consumption declines C. investment is constant while consumption declines D. investment declines much faster than GDP declines E. consumption declines much faster than GDP declines Answer Key: D Question 34 of 55 1.0/ 1.0 Points When opening a restaurant you may need to buy ovens, freezers, tables, and cash registers. Economists call these expenditures A. capital investment. B. investment in human capital. C. business consumption expenditures. D. None of the above are correct. Answer Key: A Feedback: capital investment. Question 35 of 55 0.0/ 1.0 Points If the MPC < 1 and a household's disposable income increases by $2,000, the household's consumption will A. increase by less than $2,000 B. increase by $2,000 C. decrease if the family was wealthy before the income change D. remain the same unless the change in income significantly affects the household's wealth E. remain the same Answer Key: A Question 36 of 55 The simple tax multiplier is 1.0/ 1.0 Points A. 1/MPC B. 1 C. 1/(1 - MPC) D. MPC/(1 - MPC) E. -MPC/(1 - MPC) Answer Key: E Question 37 of 55 Fluctuations in consumption 1.0/ 1.0 Points A. are noticeably smaller during recessions than during expansions B. are roughly similar to fluctuations in investment C. are roughly similar to fluctuations in GDP D. are closely followed by economic forecasters because those fluctuations often signal that a recession will occur E. account for most of the variability in GDP Answer Key: C Question 38 of 55 1.0/ 1.0 Points An increase in government spending initially and primarily shifts A. aggregate demand right. B. aggregate demand left. C. aggregate supply right. D. neither aggregate demand nor aggregate supply. Answer Key: A Feedback: aggregate demand right. Question 39 of 55 1.0/ 1.0 Points As the MPC gets close to 1, the value of the multiplier approaches A. 0. B. 1. C. infinity. D. None of the above is correct. Answer Key: C Feedback: infinity. Question 40 of 55 1.0/ 1.0 Points Assuming multiplier but no crowding-out or investment-accelerator effects, a $100 billion increase in government expenditures shifts aggregate A. demand right by more than $100 billion. B. demand right by less than $100 billion. C. supply left by more than $100 billion. D. supply left by less than $100 billion. Answer Key: A Feedback: demand right by more than $100 billion. Question 41 of 55 If C = $3,000 + 0.9Y and income is $20,000, 1.0/ 1.0 Points A. consumption is $20,000 B. consumption is $18,000 C. saving is $0 D. saving is -$1,000 E. income will increase to $200,000 Answer Key: D Question 42 of 55 1.0/ 1.0 Points The most important determinant of a household's consumption spending is A. its disposable income B. its total wealth C. the number of persons in the household D. its net wealth E. the ratio of wage to nonwage income the household earns Answer Key: A Question 43 of 55 Keynes argued that 0.0/ 1.0 Points A. irrational waves of pessimism would cause a decrease in aggregate demand and increase unemployment. B. irrational waves of optimism would cause a reduction in aggregate demand and decrease unemployment. C. changes in business and consumer expectations generally stabilize the economy. D. All of the above are correct. Answer Key: A Feedback: irrational waves of pessimism would cause a decrease in aggregate demand and increase unemployment. Question 44 of 55 Tax cuts 1.0/ 1.0 Points A. and increases in government expenditures shift aggregate demand right. B. and increases in government expenditures shift aggregate demand left. C. shift aggregate demand right while increases in government expenditures shift aggregate demand left. D. shift aggregate demand left while increases in government expenditures shift aggregate demand right. Answer Key: A Feedback: and increases in government expenditures shift aggregate demand right. Question 45 of 55 1.0/ 1.0 Points Which of the following actions might we logically expect to result from rising stock prices? A. Jim increases his consumption spending. B. Firms sell fewer shares of new stock. C. Firms spend less on investment. D. None of the above is correct. Answer Key: A Feedback: Jim increases his consumption spending. Question 46 of 55 1.0/ 1.0 Points In which of the following ways does government affect the consumption component of planned aggregate expenditures? A. through net taxes, which change disposable income B. by purchasing goods and services, which increase consumption C. by using subsidies to encourage firms to invest D. by using net taxes to encourage firms to invest E. by producing public goods Answer Key: A Question 47 of 55 1.0/ 1.0 Points If every time disposable income increases by $5 billion, consumption increases by $4 billion and saving increases by $1 billion, the MPC and MPS are, respectively, A. 1/4, 1/2 B. 1/2, 1/2 C. 1, 0 D. 4/5, 1/5 E. the answer is indeterminate from the information given Answer Key: D Question 48 of 55 1.0/ 1.0 Points Which of the following policies would someone who wants the government to follow an active stabilization policy recommend when the economy is experiencing unemployment above the natural rate? A. decrease the money supply B. increase government expenditures C. increase taxes D. All of the above are correct. Answer Key: B Feedback: increase government expenditures Question 49 of 55 Fiscal policy is implemented primarily by 1.0/ 1.0 Points A. local governments alone. B. the defense department. C. state governments alone. D. the federal government. E. state and local governments. Answer Key: D Question 50 of 55 1.0/ 1.0 Points The AD curve shifts to the left with a __________ in government purchases (G) or a __________ in taxes. A. rise; rise B. rise; fall C. fall; rise D. fall; fall Answer Key: C Question 51 of 55 1.0/ 1.0 Points Given the following data, the level of saving at a disposable income of $1,200 is Disposable income Consumption $1,000 1,100 1,200 1,300 1,400 $ 800 880 960 1,040 1,120 A. $80 B. $240 C. $950 D. $1,200 E. $1,300 Answer Key: B Question 52 of 55 If the MPC is 0, the multiplier is 1.0/ 1.0 Points A. 0. B. 1. C. infinite. D. None of the above is correct. Answer Key: B Feedback: 1. Question 53 of 55 1.0/ 1.0 Points If C = 10 + 0.8Y, a $100 increase in Y would increase consumption by A. $10 B. $20 C. $50 D. $80 E. $100 Answer Key: D Question 54 of 55 1.0/ 1.0 Points Fiscal policy refers to the idea that aggregate demand is changed by changes in A. the money supply. B. government spending and taxes. C. trade policy. D. All of the above are correct. Answer Key: B Feedback: government spending and taxes. Question 55 of 55 The marginal propensity to consume 0.0/ 1.0 Points A. is the proportion of disposable income consumed B. is the reciprocal of the ratio of disposable income to saving C. is the change in consumption relative to a change in disposable income D. minus the marginal propensity to save must equal 1 E. is greater than 1 at all levels of income Answer Key: C ...
View Full Document

Ask a homework question - tutors are online