ECO 201 Chapter 11 Exam
Questions and Answers 100% Pass
Review the table below. Assume taxes are zero.
National Income = Real GDP (Y)Consumption (C)Savings
(S)$8000$5400$2600$9000$6000$3000$10,000$6600$3400$11,000$7200$3800
In this example, the marginal propensity to consume (MPC) is: - ✔✔MCP= changes in
consumption/change in income
$5,400-$6,00/ $9,000 - $8,000
-,000
= -.6
When the economy is in a recession, the government will want to increase output. If the
multiplier equals 2.5 and the government increases spending by 200, how much will
output increase by? - ✔✔Substituting the above values to calculate output we get,
Output= 2.5 X200= 500
The most important component of consumption spending is - ✔✔current disposable
income
EMILY CHARLENE © 2025, ALL RIGHTS RESERVED 1
, The economy as a whole is in macroeconomic equilibrium if - ✔✔aggregate expenditure
equals GDP
total spending equals GDP
aggregate expenditure equals total production
total spending equals total production
all of the above
How would an increase in interest rates affect investment? - ✔✔real investment
spending declines
The ____________________ in an AD/AS diagram is most relevant to Say's Law. -
✔✔steep portion of the AS curve
When an economy's output increases and the price level decreases, the _________ curve
has shifted to the ____________. - ✔✔AS; right
As the aggregate price level in an economy decreases, - ✔✔imports decrease.
_________________ results when an economy experiences high unemployment and high
inflation at the same time. - ✔✔Stagflation
In an AD/AS model: - ✔✔real GDP is shown on the horizontal axis.
EMILY CHARLENE © 2025, ALL RIGHTS RESERVED 2
Questions and Answers 100% Pass
Review the table below. Assume taxes are zero.
National Income = Real GDP (Y)Consumption (C)Savings
(S)$8000$5400$2600$9000$6000$3000$10,000$6600$3400$11,000$7200$3800
In this example, the marginal propensity to consume (MPC) is: - ✔✔MCP= changes in
consumption/change in income
$5,400-$6,00/ $9,000 - $8,000
-,000
= -.6
When the economy is in a recession, the government will want to increase output. If the
multiplier equals 2.5 and the government increases spending by 200, how much will
output increase by? - ✔✔Substituting the above values to calculate output we get,
Output= 2.5 X200= 500
The most important component of consumption spending is - ✔✔current disposable
income
EMILY CHARLENE © 2025, ALL RIGHTS RESERVED 1
, The economy as a whole is in macroeconomic equilibrium if - ✔✔aggregate expenditure
equals GDP
total spending equals GDP
aggregate expenditure equals total production
total spending equals total production
all of the above
How would an increase in interest rates affect investment? - ✔✔real investment
spending declines
The ____________________ in an AD/AS diagram is most relevant to Say's Law. -
✔✔steep portion of the AS curve
When an economy's output increases and the price level decreases, the _________ curve
has shifted to the ____________. - ✔✔AS; right
As the aggregate price level in an economy decreases, - ✔✔imports decrease.
_________________ results when an economy experiences high unemployment and high
inflation at the same time. - ✔✔Stagflation
In an AD/AS model: - ✔✔real GDP is shown on the horizontal axis.
EMILY CHARLENE © 2025, ALL RIGHTS RESERVED 2
