Question 1

Suppose there are both multiplier and crowding out effects but without any accelerator effects.An increase in government expenditures would

Accepted Answer

A)  shift aggregate demand right by a larger amount than the increase in government expenditures.
B)  shift aggregate demand right by the same amount as the increase in government expenditures.
C)  shift aggregate demand right by a smaller amount than the increase in government expenditures.
D)  Any of the above outcomes are possible.E) A) and D)
F) All of the above

Question 2

Which of the following tends to make the size of a shift in aggregate demand resulting from an increase in government purchases smaller than it otherwise would be?

Accepted Answer

A)  the multiplier effect
B)  the crowding-out effect
C)  the accelerator effect
D)  All of the above are correct.E) None of the above
F) B) and C)

Question 3

In 2009 President Obama and Congress increased government spending.Some economists thought this increase would have little effect on output.Which of the following would make the effect of an increase in government expenditures on aggregate demand smaller?

Accepted Answer

A)  the interest rate falls and aggregate supply is relatively flat
B)  the interest rate falls and aggregate supply is relatively steep
C)  the interest rate rises and aggregate supply is relatively flat
D)  the interest rate rises and aggregate supply is relatively steepE) C) and D)
F) B) and C)

Question 4

Assume the MPC is 0.8.Assuming only the multiplier effect matters,a decrease in government purchases of $100 billion will shift the aggregate demand curve to the

Accepted Answer

A)  left by $180 billion.
B)  left by $500 billion.
C)  right by $180 billion.
D)  right by $400 billion.E) A) and D)
F) A) and C)

Question 5

The marginal propensity to consume (MPC) is defined as the fraction of

Accepted Answer

A)  extra income that a household consumes rather than saves.
B)  extra income that a household either consumes or saves.
C)  total income that a household consumes rather than saves.
D)  total income that a household either consumes or saves.E) All of the above
F) C) and D)

Question 6

Figure 34-6.On the left-hand graph,MS represents the supply of money and MD represents the demand for money;on the right-hand graph,AD represents aggregate demand.The usual quantities are measured along the axes of both graphs. 1 to AD2 if there were no crowding out;the AD curve actually shifts from AD1 to AD3 with crowding out.Also,suppose the horizontal distance between the curves AD1 and AD3 is $55 billion.The extent of crowding out,for any particular level of the price level,is A) $75 billion. B) $40 billion. C) $30 billion. D) $20 billion." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 34-6.Suppose the multiplier is 5 and the government increases its purchases by $15 billion.Also,suppose the AD curve would shift from AD1 to AD2 if there were no crowding out;the AD curve actually shifts from AD1 to AD3 with crowding out.Also,suppose the horizontal distance between the curves AD1 and AD3 is $55 billion.The extent of crowding out,for any particular level of the price level,is

Accepted Answer

A)  $75 billion.
B)  $40 billion.
C)  $30 billion.
D)  $20 billion.E) B) and C)
F) A) and B)

Question 7

Assuming no crowding-out,investment-accelerator,or multiplier effects,a $100 billion increase in government expenditures shifts aggregate demand

Accepted Answer

A)  right by more than $100 billion.
B)  right by $100 billion.
C)  left by more than $100 billion.
D)  left by $100 billion.E) A) and D)
F) A) and C)

Question 8

Which of the following is an example of an increase in government purchases?

Accepted Answer

A)  The government builds new roads.
B)  The Federal Reserve purchases government bonds.
C)  The government decreases personal income taxes.
D)  The government increases unemployment insurance benefit payments.E) A) and D)
F) B) and D)

Question 9

If the marginal propensity to consume is 0.75,and there is no investment accelerator or crowding out,a $15 billion increase in government expenditures would shift the aggregate demand curve right by

Accepted Answer

A)  $60 billion,but the effect would be larger if there were an investment accelerator.
B)  $60 billion,but the effect would be smaller if there were an investment accelerator.
C)  $45 billion,but the effect would be larger if there were an investment accelerator.
D)  $45 billion,but the effect would be smaller if there were an investment accelerator.E) A) and B)
F) B) and C)

Question 10

If the MPC = 0.75,then the government purchases multiplier is about

Accepted Answer

A)  1.33.
B)  7.
C)  4.
D)  3.E) All of the above
F) A) and B)

Question 11

A tax increase has

Accepted Answer

A)  a multiplier effect but not a crowding out effect
B)  a crowding out effect but not a multiplier effect
C)  both a crowding out and multiplier effect
D)  neither a multiplier or crowding out effectE) B) and D)
F) A) and B)

Question 12

An increase in government purchases is likely to

Accepted Answer

A)  decrease interest rates.
B)  reduce money demand.
C)  crowd out investment spending by business firms.
D)  All of the above are correct.E) None of the above
F) B) and D)

Question 13

Which of the following events shifts aggregate demand rightward?

Accepted Answer

A)  an increase in government expenditures or a decrease in the price level
B)  a decrease in government expenditures or an increase in the price level
C)  an increase in government expenditures,but not a change in the price level
D)  a decrease in the price level,but not an increase in government expendituresE) A) and D)
F) B) and C)

Question 14

As real GDP falls,

Accepted Answer

A)  money demand rises,so the interest rate rises.
B)  money demand rises,so the interest rate falls
C)  money demand falls,so the interest rate rises.
D)  money demand falls,so the interest rate falls.E) All of the above
F) A) and D)

Question 15

The process of the investment accelerator involves

Accepted Answer

A)  positive feedback from aggregate demand to investment.
B)  negative feedback from aggregate demand to investment.
C)  positive feedback from aggregate supply to investment.
D)  negative feedback from aggregate supply to investment.E) B) and C)
F) A) and D)

Question 16

An aide to a U.S.Congressman computes the effect on aggregate demand of a $20 billion tax cut.The actual increase in aggregate demand is less than the aide expected.Which of the following errors in the aide's computation would be consistent with an overestimation of the impact on aggregate demand?

Accepted Answer

A)  The actual MPC was larger than the MPC the aide used to compute the multiplier.
B)  The aide thought the tax cut would be permanent,but the actual tax cut was temporary.
C)  The increase in income shifted money demand less than the aide had anticipated.
D)  The increase in income resulted in investment rising more than the aide had anticipated.E) B) and C)
F) A) and B)

Question 17

Scenario 34-1.Take the following information as given for a small,imaginary economy:
• When income is $10,000,consumption spending is $6,500.
• When income is $11,000,consumption spending is $7,250.
-Refer to Scenario 34-1.The marginal propensity to consume for this economy is

Accepted Answer

A)  0.650.
B)  0.750.
C)  0.650 or 0.664,depending on whether income is $10,000 or $11,000.
D)  0.800.E) A) and B)
F) A) and C)

Question 18

If the multiplier is 5.25,then the MPC is

Accepted Answer

A)  0.19.
B)  0.68.
C)  0.81.
D)  0.84.E) C) and D)
F) A) and D)

Question 19

If the multiplier is 6 and if there is no crowding-out effect,then a $60 billion increase in government expenditures causes aggregate demand to

Accepted Answer

A)  increase by $250 billion.
B)  increase by $333 billion.
C)  increase by $360 billion.
D)  None of the above are correct.E) A) and B)
F) None of the above

Question 20

Figure 34-8 1 to AD2. B) shift aggregate demand from AD1 to AD3. C) cause movement from point A to point B along AD1. D) have no effect on aggregate demand." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 34-8.An increase in taxes will

Accepted Answer

A)  shift aggregate demand from AD1 to AD2.
B)  shift aggregate demand from AD1 to AD3.
C)  cause movement from point A to point B along AD1.
D)  have no effect on aggregate demand.E) A) and B)
F) A) and C)

Exam 21: The Influences of Monetary and Fiscal Policy on Aggregate Demand: How Fiscal Policy Influences Aggregate Demand

If the MPC = 0.75,then the government purchases multiplier is about

Correct Answer
verified

Correct Answer
verified

If the multiplier is 6 and if there is no crowding-out effect,then a $60 billion increase in government expenditures causes aggregate demand to

Correct Answer
verified

Figure 34-8 -Refer to Figure 34-8.An increase in taxes will

Correct Answer
verified

An increase in government purchases is likely to

Correct Answer
verified

If the marginal propensity to consume is 0.75,and there is no investment accelerator or crowding out,a $15 billion increase in government expenditures would shift the aggregate demand curve right by

Correct Answer
verified

In 2009 President Obama and Congress increased government spending.Some economists thought this increase would have little effect on output.Which of the following would make the effect of an increase in government expenditures on aggregate demand smaller?

Correct Answer
verified

Assume the MPC is 0.8.Assuming only the multiplier effect matters,a decrease in government purchases of $100 billion will shift the aggregate demand curve to the

Correct Answer
verified

The marginal propensity to consume (MPC) is defined as the fraction of

Correct Answer
verified

If the multiplier is 5.25,then the MPC is

Correct Answer
verified

As real GDP falls,

Correct Answer
verified

Assuming no crowding-out,investment-accelerator,or multiplier effects,a $100 billion increase in government expenditures shifts aggregate demand

Correct Answer
verified

Which of the following is an example of an increase in government purchases?

Correct Answer
verified

Which of the following tends to make the size of a shift in aggregate demand resulting from an increase in government purchases smaller than it otherwise would be?

Correct Answer
verified

Which of the following events shifts aggregate demand rightward?

Correct Answer
verified

A tax increase has

Correct Answer
verified

Suppose there are both multiplier and crowding out effects but without any accelerator effects.An increase in government expenditures would

Correct Answer
verified

The process of the investment accelerator involves

Correct Answer
verified

Scenario 34-1.Take the following information as given for a small,imaginary economy: • When income is $10,000,consumption spending is $6,500. • When income is $11,000,consumption spending is $7,250. -Refer to Scenario 34-1.The marginal propensity to consume for this economy is

Correct Answer
verified

An aide to a U.S.Congressman computes the effect on aggregate demand of a $20 billion tax cut.The actual increase in aggregate demand is less than the aide expected.Which of the following errors in the aide's computation would be consistent with an overestimation of the impact on aggregate demand?

Correct Answer
verified

Exam 21: The Influences of Monetary and Fiscal Policy on Aggregate Demand: How Fiscal Policy Influences Aggregate Demand

If the MPC = 0.75,then the government purchases multiplier is about

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the multiplier is 6 and if there is no crowding-out effect,then a $60 billion increase in government expenditures causes aggregate demand to

Correct AnswerverifiedShow Answer

Figure 34-8 -Refer to Figure 34-8.An increase in taxes will

Correct AnswerverifiedShow Answer

An increase in government purchases is likely to

Correct AnswerverifiedShow Answer

If the marginal propensity to consume is 0.75,and there is no investment accelerator or crowding out,a $15 billion increase in government expenditures would shift the aggregate demand curve right by

Correct AnswerverifiedShow Answer

In 2009 President Obama and Congress increased government spending.Some economists thought this increase would have little effect on output.Which of the following would make the effect of an increase in government expenditures on aggregate demand smaller?

Correct AnswerverifiedShow Answer

Assume the MPC is 0.8.Assuming only the multiplier effect matters,a decrease in government purchases of $100 billion will shift the aggregate demand curve to the

Correct AnswerverifiedShow Answer

The marginal propensity to consume (MPC) is defined as the fraction of

Correct AnswerverifiedShow Answer

If the multiplier is 5.25,then the MPC is

Correct AnswerverifiedShow Answer

As real GDP falls,

Correct AnswerverifiedShow Answer

Assuming no crowding-out,investment-accelerator,or multiplier effects,a $100 billion increase in government expenditures shifts aggregate demand

Correct AnswerverifiedShow Answer

Which of the following is an example of an increase in government purchases?

Correct AnswerverifiedShow Answer

Which of the following tends to make the size of a shift in aggregate demand resulting from an increase in government purchases smaller than it otherwise would be?

Correct AnswerverifiedShow Answer

Which of the following events shifts aggregate demand rightward?

Correct AnswerverifiedShow Answer

A tax increase has

Correct AnswerverifiedShow Answer

Suppose there are both multiplier and crowding out effects but without any accelerator effects.An increase in government expenditures would

Correct AnswerverifiedShow Answer

The process of the investment accelerator involves

Correct AnswerverifiedShow Answer

Scenario 34-1.Take the following information as given for a small,imaginary economy: • When income is $10,000,consumption spending is $6,500. • When income is $11,000,consumption spending is $7,250. -Refer to Scenario 34-1.The marginal propensity to consume for this economy is

Correct AnswerverifiedShow Answer

An aide to a U.S.Congressman computes the effect on aggregate demand of a $20 billion tax cut.The actual increase in aggregate demand is less than the aide expected.Which of the following errors in the aide's computation would be consistent with an overestimation of the impact on aggregate demand?

Correct AnswerverifiedShow Answer

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