Chapter 16 Self-test questions

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In the simple model with no government and no trade, which is given by the two equations Y = C + I and C = a + bY; if a=100, b=0.9 and I = 500 what is the value of Y?

600 correct incorrect

60 correct incorrect

6000 correct incorrect

5000 correct incorrect

500 correct incorrect

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In the simple model with no government and no trade, which is given by the two equations Y = C + I and C = a + bY; if the initial values of a=100, b=0.8 and I = 500, how much will GDP, Y, increase if investment, I, now increases from 500 to 600?

By 500 from 3000 to 3500 correct incorrect

By 1000 from 6000 to 7000 correct incorrect

By 100 from 2000 to 2100 correct incorrect

By 500 from 6000 to 6500 correct incorrect

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In the simple model with no government and no trade, which is given by the two equations Y = C + I and C = a + bY, what will be the value of the multiplier if the marginal propensity to consume is 0.6?

1.67 correct incorrect

2.5 correct incorrect

4.25 correct incorrect

6 correct incorrect

5 correct incorrect

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In the short run, macroeconomics is interested in _______.

Positive GDP gap correct incorrect

Negative GDP gap correct incorrect

Narrowing the GDP gap, whether positive or negative correct incorrect

Neutral GDP gap correct incorrect

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In the long run, macroeconomics concerns itself with how quickly the economy _________

Returns to equilibrium from a point of deviation correct incorrect

Increases output gap correct incorrect

Increases actual GDP correct incorrect

None of the above correct incorrect

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The following are all components of actual spending in national accounts except

Private consumption correct incorrect

salaries correct incorrect

investment correct incorrect

Net exports correct incorrect

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Even when income is zero, the consumer will still engage in a type of consumption called _____

Induced consumption correct incorrect

Zero consumption correct incorrect

Autonomous consumption correct incorrect

Stolen consumption correct incorrect

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The economy is in equilibrium when ________

Aggregate desired spending is the same as total output correct incorrect

There is not inflation correct incorrect

The marginal propensity to save is positive correct incorrect

The GDP gap is reducing correct incorrect

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A Keynesian consumption function suggests that ____________

Consumption is planned over the course of the consumer's life correct incorrect

Current consumption is affected only by current disposable income correct incorrect

Consumption is not influenced by income correct incorrect

Consumption is inversely related to income correct incorrect

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The permanent income hypothesis suggests _____________.

Individuals take a long term view with regards to consumption, smoothening out potential shortfalls and rises in income over the course of the period correct incorrect

People never stop receiving wages correct incorrect

Wages are sticky correct incorrect

None of the above correct incorrect