ECON301 T/F Exam 2025 Questions
and Answers
The largest component of GDP is consumption. - --CORRECT ANSWER--True.
Government spending, including transfers, was equal to 18.1% of GDP in 2014. - -
-CORRECT ANSWER--False, government spending excluding transfers was equal
to 18.1% of GDP in 2014.
The propensity to consume has to be positive, but other-wise it can take on any
positive value. - --CORRECT ANSWER--False, the propensity to consume does
have to be positive but also must be less than 1 in order for our model to work.
One factor in the 2009 recession was a drop in the value of the parameter c0. - --
CORRECT ANSWER--True, A drop in c0 ( which is what people consume if
there disposable income in the current year is equal to zero.) means a drop in
disposable income, decreasing consumption.
Fiscal policy describes the choice of government spending and taxes and is treated
as exogenous in our goods
market model. - --CORRECT ANSWER--True, government spending and taxes
are exogenous, taken as given.
....COPYRIGHT ©️ 2025 ALL RIGHTS RESERVED...TRUSTED & VERIFIED 1
, The equilibrium condition for the goods market states that consumption equals
output. - --CORRECT ANSWER--False, aggregate demand = aggregate output.
An increase of one unit in government spending leads to an increase of one unit in
equilibrium output. - --CORRECT ANSWER--False the increase in equilibrium
output is 1 x multiplier not just one unit.
An increase in the propensity to consume leads to a decrease in output. - --
CORRECT ANSWER--False, a increase in propensity to consume leads to an
increase in output since they have a positive relationship.
Income and financial wealth are both examples of stock variables. - --CORRECT
ANSWER--False, income is a flow variable (something expressed in units of time
Income/saving) and financial wealth is a stock variable ( the value of wealth at a
given moment in time)
The term investment, as used by economists, refers to the purchase of bonds and
shares of stock. - --CORRECT ANSWER--False, investment refers to the
purchase of new capital goods. Purchase of bonds and stock are referred to as
financial investments
The demand for money does not depend on the interest rate because only bonds
earn interest. - --CORRECT ANSWER--False, interest rate influences whether
bonds are bought and money supply. A lower interest rate increases money supply
and vice versa.
....COPYRIGHT ©️ 2025 ALL RIGHTS RESERVED...TRUSTED & VERIFIED 2
and Answers
The largest component of GDP is consumption. - --CORRECT ANSWER--True.
Government spending, including transfers, was equal to 18.1% of GDP in 2014. - -
-CORRECT ANSWER--False, government spending excluding transfers was equal
to 18.1% of GDP in 2014.
The propensity to consume has to be positive, but other-wise it can take on any
positive value. - --CORRECT ANSWER--False, the propensity to consume does
have to be positive but also must be less than 1 in order for our model to work.
One factor in the 2009 recession was a drop in the value of the parameter c0. - --
CORRECT ANSWER--True, A drop in c0 ( which is what people consume if
there disposable income in the current year is equal to zero.) means a drop in
disposable income, decreasing consumption.
Fiscal policy describes the choice of government spending and taxes and is treated
as exogenous in our goods
market model. - --CORRECT ANSWER--True, government spending and taxes
are exogenous, taken as given.
....COPYRIGHT ©️ 2025 ALL RIGHTS RESERVED...TRUSTED & VERIFIED 1
, The equilibrium condition for the goods market states that consumption equals
output. - --CORRECT ANSWER--False, aggregate demand = aggregate output.
An increase of one unit in government spending leads to an increase of one unit in
equilibrium output. - --CORRECT ANSWER--False the increase in equilibrium
output is 1 x multiplier not just one unit.
An increase in the propensity to consume leads to a decrease in output. - --
CORRECT ANSWER--False, a increase in propensity to consume leads to an
increase in output since they have a positive relationship.
Income and financial wealth are both examples of stock variables. - --CORRECT
ANSWER--False, income is a flow variable (something expressed in units of time
Income/saving) and financial wealth is a stock variable ( the value of wealth at a
given moment in time)
The term investment, as used by economists, refers to the purchase of bonds and
shares of stock. - --CORRECT ANSWER--False, investment refers to the
purchase of new capital goods. Purchase of bonds and stock are referred to as
financial investments
The demand for money does not depend on the interest rate because only bonds
earn interest. - --CORRECT ANSWER--False, interest rate influences whether
bonds are bought and money supply. A lower interest rate increases money supply
and vice versa.
....COPYRIGHT ©️ 2025 ALL RIGHTS RESERVED...TRUSTED & VERIFIED 2
