ECO 201 Chapter 11 Exam Questions and Answers Already Passed
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: - Answers 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? - Answers
Substituting the above values to calculate output we get,
Output= 2.5 X200= 500
The most important component of consumption spending is - Answers current disposable income
The economy as a whole is in macroeconomic equilibrium if - Answers 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? - Answers real investment spending declines
The ____________________ in an AD/AS diagram is most relevant to Say's Law. - Answers steep portion
of the AS curve
When an economy's output increases and the price level decreases, the _________ curve has shifted to
the ____________. - Answers AS; right
As the aggregate price level in an economy decreases, - Answers imports decrease.
_________________ results when an economy experiences high unemployment and high inflation at
the same time. - Answers Stagflation
In an AD/AS model: - Answers real GDP is shown on the horizontal axis.
, The graph above refers to a significant increase in individual income taxes, taking them to their highest
level in 50 years. Which of the following is likely to result? - Answers the economy will experience lower
economic growth
The graph above refers to a significant increase in individual income taxes, taking them to their highest
level in 50 years. Which of the following is likely to result? - Answers unemployment is likely to rise
The graph above refers to a significant increase in oil prices. Which of the following is likely to result? -
Answers a rise in inflation from 2.0% to 3.0%
The term "full employment GDP" is synonymous with which of the following? - Answers potential GDP
Whether the economy is in a recession is illustrated in the AD/AS model by how close the
_____________________ is to the potential GDP line. - Answers equilibrium
The _____________ holds that a rise in price level will make domestic goods relatively more expensive,
____________ exports and _______________ imports. - Answers foreign price effect; discouraging;
encouraging
The following table shows the aggregate supply and demand data for a country.
Price Level
Aggregate Demand
Aggregate Supply
200
10,000
4,000
300
9,000
6,000
400
8,000
8,000
500
7,000
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: - Answers 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? - Answers
Substituting the above values to calculate output we get,
Output= 2.5 X200= 500
The most important component of consumption spending is - Answers current disposable income
The economy as a whole is in macroeconomic equilibrium if - Answers 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? - Answers real investment spending declines
The ____________________ in an AD/AS diagram is most relevant to Say's Law. - Answers steep portion
of the AS curve
When an economy's output increases and the price level decreases, the _________ curve has shifted to
the ____________. - Answers AS; right
As the aggregate price level in an economy decreases, - Answers imports decrease.
_________________ results when an economy experiences high unemployment and high inflation at
the same time. - Answers Stagflation
In an AD/AS model: - Answers real GDP is shown on the horizontal axis.
, The graph above refers to a significant increase in individual income taxes, taking them to their highest
level in 50 years. Which of the following is likely to result? - Answers the economy will experience lower
economic growth
The graph above refers to a significant increase in individual income taxes, taking them to their highest
level in 50 years. Which of the following is likely to result? - Answers unemployment is likely to rise
The graph above refers to a significant increase in oil prices. Which of the following is likely to result? -
Answers a rise in inflation from 2.0% to 3.0%
The term "full employment GDP" is synonymous with which of the following? - Answers potential GDP
Whether the economy is in a recession is illustrated in the AD/AS model by how close the
_____________________ is to the potential GDP line. - Answers equilibrium
The _____________ holds that a rise in price level will make domestic goods relatively more expensive,
____________ exports and _______________ imports. - Answers foreign price effect; discouraging;
encouraging
The following table shows the aggregate supply and demand data for a country.
Price Level
Aggregate Demand
Aggregate Supply
200
10,000
4,000
300
9,000
6,000
400
8,000
8,000
500
7,000
