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ECONOMICS 10-8
ECON10-8: THIRD TEST
11/16/00
PROF. WILDE
1. If it was announced that the U.S. GDP at current prices for the year 2000 was $10 trillion and
that the real GDP for the same time period was $9 trillion at 1994 prices, this would mean
that:
a) we were producing more goods and services in 2000 than we did in 1994
b) prices of American goods and services were higher in 1994 than they are in 2000
c) prices of American goods and services were lower in 1994 than they were in 2000
d) we were producing fewer goods and services in 2000 than we did in 1994
e) the U.S. was in a recession in 1994
2. If real GDP rises from one period to the next, we can be sure that:
a) we were increasing our output of goods and services
b) both prices and output were rising
c) we were in a recession
d) output was falling but prices were rising by a greater percentage
e) prices were rising while output changes were indeterminant
3. If it was announced that the U.S. unemployment rate was 5%, this would mean that:
a) 95% of the American population was working
b) 5% of the American population was unemployable
c) 95% of the U.S. labor force had full-time (40 hour/week) jobs
d) 5% of the U.S. labor force had looked for but not found jobs
e) all of the above
4. Point H in Figure I represents a situation in which disposable income is _______ and
consumer spending is _______.
a) positive; positive
b) positive; zero
c) zero; positive
d) positive; negative
e) negative; positive
5. If your marginal propensity to consume was 0.9, this would mean that:
`
a) if you had $10,000 of disposable income you could be expected to buy $9000 worth of
consumer goods and services
b) if your disposable income decreased from $10,000 to $9000, you would buy $900
fewer consumer goods and services
c) if your disposable income increased from $9000 to $10,000, you would buy $1000
more consumer goods and services
d) your marginal propensity to save would be minus 0.9
e) your marginal propensity to save would also be 0.9
6. The marginal propensity to consume in Figure I is:
a) 0.9
b) 0.8
c) 0.7
d) 1.0
0.5
7. A shift from the C2 curve in Figure I to the C1 curve could:
a) be the result of a movement toward equilibrium
b) be caused by a reduced level of confidence in the household sector
c) result in a higher equilibrium level of GDP
d) result in a higher level of disposable income
e) all of the above
8. In Figure I, which of the following would be called autonomous changes in consumption?
a) A to B
b) A to E
c) A to G
d) All of the above
e) Both a and b
9. In the context of Figure I, autonomous changes in consumer spending could be brought about
by:
a) increases in disposable income
b) decreases in interest rates
c) increases in population
d) both a and c
e) both b and c
10. Typically we believe that investment spending is positively affected by the level of GDP
because:
a) firms may want to expand their ability to produce when production is higher
b) households may wish to save more when their incomes are higher
c) government budget surpluses increase with GDP
d) firms are more likely to replace worn-out equipment when output is higher
e) both a and d
11. In macroeconomic analysis, the investment part of C+I+G for the year 2000 includes:
a) the purchase/sale of a 1967 home
b) the purchase/sale of a new computer by a tax preparation company
c) the purchase/sale of a used dump truck
d) the purchase/sale 200 shares of Xerox stock
e) all of the above
12. If investment spending is positively affected by the level of GDP, it will be true that the
I(nvestment) part of the Total Expenditure curve will:
a) make the TE curve steeper and the (Wilde) multiplier larger
b) make the TE curve flatter and the (Wilde) multiplier larger
c) not affect either the TE curve or the (Wilde) multiplier
d) make the TE curve steeper and the (Wilde) multiplier smaller
e) make the TE curve flatter and the (Wilde) multiplier smaller
13. Factors that tend to shift the investment portion of the total expenditure curve include:
a) changes in the GDP
b) changes in interest rates
c) changes in technology
d) all of the above
e) only b and c
14. A(n) ___________ in interest rates tends to _________________ investment spending.
a) increase; increase autonomous
b) decrease; decrease induced
c) increase; have no effect on
d) decrease; increase autonomous
e) increase; decrease induced
15. In Figure II the 45-degree line should properly be labelled the
a) savings curve
b) consumption curve
c) production curve
16.
17.
18.
19.
20.
d) investment curve
e) government spending curve
The equilibrium level of GDP in Figure II is:
a) $6 trillion
b) $5 trillion
c) $4 trillion
d) $2 trillion
e) none of the above
If the Figure II economy found itself at a GDP of $6 trillion,
a) savings would equal investment
b) the multiplier would be 3
c) inventories of unsold goods would be falling
d) the multiplier would be 6
e) inventories of unsold goods would be rising
If an economy’s multiplier was 5, it would be true that:
a) an autonomous increase in investment of 5 would result in 5 more GDP
b) an induced increase in consumption of 40 would result in 200 more GDP
c) an autonomous decrease in investment of 25 would result in 125 less GDP
d) an induced decrease in investment of 60 would result in 300 less GDP
e) an autonomous increase in investment of 100 would result in 20 more GDP
The slope of the Total Expenditure curve in Figure II is:
a) 2
b) 0.4
c) 0.5
d) 0.6
e) 5
If the slope of an economy’s Total Expenditure curve was 0.75, its multiplier would be:
a) 4
b) 0.25
c) 0.75
d) 7.5
e) 1.333
GDP
0
1000
2000
3000
4000
5000
6000
TABLE A: THE MACROECONOMY
Taxes Transfer Payments
Disp. Income
C
0
50
50
300
120
45
925
1000
240
40
1800
1700
360
35
2675
2400
480
30
3550
3100
600
25
4425
3800
720
20
5300
4500
I
100
200
300
400
500
600
700
G
200
200
200
200
200
200
200
21. In the Table A economy, the equilibrium level of GDP would be:
a) 1000
b) 2000
c) 3000
d) 4000
e) 6000
22. Because the government sector is part of the Table A macroeconomy, we can see that:
a) an increase in government purchases of 200 will result in an increase in GDP of 2000
b) higher GDP can be achieved by reducing transfer payments
c) higher production can be expected to increase income tax revenue
d) disposable income rises when transfer payments fall
e) higher taxes cause higher investment spending
23. When GDP is 5000 in the Table A economy, the government’s budget has:
a) a surplus of 600
b) a surplus of 400
c) a deficit of 200
d) to be balanced if the GDP is in equilibrium
e) a surplus of 375
24. The multiplier in the Table A macroeconomy is:
a) 2
b) 4
c) 5
d) 9
e) 10
25. Table A indicates that if there is an autonomous increase in Investment spending, there will
also be:
a) an induced increase in tax revenue
b) an induced increase in transfer payments
c) an induced increase in government purchases
d) all of the above
e) none of the above
26. The supply-side Economics program of the 1980s attempted to deal with _______ by______.
a) inflation; shifting the AS curve in Figure III down
b) high output; shifting the AD curve in Figure III up
c) unemployment; shifting the AS curve in Figure III up
d) inflation; shifting both the AS and the AD curves up
e) unemployment; shifting the AD curve in Figure III up
27. In the Table A macroeconomy, a legislated tax cut of 100 would result in an autonomous:
a) increase in consumption of 100
b) decrease in consumption of 100
c) increase of consumption of 500
d) increase in consumption of 80
e) decrease in consumption of 80
f)
28. Figure III serves to indicate the macroeconomic level of prices in the economy. The
aggregate demand curve:
a) shows that when pizza prices rise, consumers will buy fewer pizzas and more hotdogs
b) shows that the ability of consumers to use their wealth to finance purchases of goods is
reduced when the prices of those goods increase
c) shows that when consumers buy a lot of products they drive prices down
d) shows that the substitution effect is greater than the income effect
e) shows that businesses make more profits when prices are higher
29. Figure III serves to indicate the macroeconomic level of prices in the economy. The
aggregate supply curve:
a) reflects the increasing marginal cost situation in the economy
b) shows that higher macroeconomic output will result in higher prices
c) indicates that higher prices are likely to be needed to induce greater production
d) all of the above
e) only a and c above
30. Using Figure III, we could predict that greater consumer optimism will result in:
a) a shift in the AD curve and an increase in GDP
b) a shift in the AS curve and a reduction in the Consumer Price Index
c) a shift in both the AD and the AS curves
d) a shift in the AD curve and a reduction in the Consumer Price Index
e) a shift in the AS curve and an increase in GDP
31. Because petroleum is a significant part of energy costs, Figure III indicates that rising oil
prices will cause _______ in the GDP price index and ________ unemployment.
a) a decrease; decreased
b) an increase; increased
c) a decrease; no change in
d) an increase; no change in
e) an increase; decreased