Quiz2B - LahoreSchoolofEconomics...

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Lahore School of Economics Introduction to Macroeconomics BBA/B. Sc. I Quiz 2B – Total Points: 80 – Suggested Solutions Instructions: Answer all the questions within the spaces provided below every question. Cell  phones should be turned off and cannot be used as calculators. Stationary, etc cannot be  shared. If anybody is seen cheating or talking during the session, their quiz will be cancelled  without any warning or notification.  Multiple Choice Questions (MCQs) In the above table,  is consumption expenditure,  is investment,  is government expenditure,  and  NX  is net exports. All entries are in dollars. The equilibrium level of real GDP is A) $2,400 B) $2,300 C) $2,500 D) $2,200 Which of the following is correct? A. Government expenditures and taxes both increase GDP. B. Government expenditures and taxes both decrease GDP. C. Government expenditures increase, but taxes decrease, GDP. D. Government expenditures decrease, but taxes increase, GDP. If an increase in business inventories occurs: A. we can expect aggregate production to be unaffected. B. we can expect businesses to increase the level of production. C. we can expect businesses to lower the level of production. D. aggregate expenditures must exceed the domestic output. Answer the next question(s) on the basis of the following information for a private closed  economy, where  Ig  is gross investment,  is saving, and  is gross domestic product (GDP) Lahore School of Economics Page 1
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= 80 Refer to the above information. In equilibrium consumption will be: A. $400. B. $280. C. $320. D. $360. If the MPS is .25 and the economy has a recessionary expenditure gap of $5 billion, then  equilibrium GDP is: A. $5 billion below the full-employment GDP B. $5 billion above the full-employment GDP C. $20 billion below the full-employment GDP D. $20 billion above the full-employment GDP The following schedule contains data for a private closed economy. All figures are in billions.  Use these data in answering the next question(s). Refer to the above data. If a lump-sum tax of $20 is imposed, the consumption schedule will  become:  Answer C Suppose that the level of GDP increased by $100 billion in a private closed economy where the  marginal propensity to consume is 0.5. Aggregate expenditures must have increased by: A. $100 billion. B. $50 billion.
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This note was uploaded on 03/23/2012 for the course ECON 202 taught by Professor Cowell during the Spring '11 term at LSE.

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Quiz2B - LahoreSchoolofEconomics...

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