1.
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Consider the Keynesian cross model. If output exceeds the equilibrium level of output, then
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| firms experience a decrease in inventories and respond by reducing production. |
| firms experience an increase in inventories and respond by reducing production. |
| firms experience an increase in inventories and respond by increasing production. |
| firms experience a decrease in inventories and respond by increasing production. |
| firms experience no change in inventories. |
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2.
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When the level of national output is zero, total consumption is
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| less than autonomous consumption. |
| greater than autonomous consumption. |
| equal to autonomous consumption. |
| equal to output. |
| None of the above are true. |
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3.
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If the marginal propensity to consume (MPC) increases, then
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| the consumption function shifts up. |
| the consumption function shifts down. |
| the slope of the consumption function decreases. |
| the slope of the consumption function increases. |
| the consumption function does not change. |
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4.
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If C = 200 + 0.75 and I = 50, then the equilibrium level of output is _________ (assume no government or foreign sectors).
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| 1,000 |
| 200 |
| 267 |
| 750 |
| 500 |
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5.
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The ratio of changes in output to changes in spending is known as
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| the marginal propensity to consume. |
| the marginal propensity to import. |
| the marginal propensity to save. |
| the multiplier. |
| the consumption function. |
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6.
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Which of the following is an example of a contractionary fiscal policy?
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| increased defense spending |
| increased taxes |
| decreased taxes |
| increased spending on highways |
| a decrease in the money supply |
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7.
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If (proportional) income taxes increase, then
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| the C+I+G (demand) line shifts up. |
| the C+I+G (demand) line shifts down. |
| the slope of the C+I+G (demand) line decreases. |
| the slope of the C+I+G (demand) line increases. |
| the C+I+G (demand) line does not change. |
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8.
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Which of the following is an example of an automatic stabilizer?
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| an increase in defense spending during an expansion |
| a decrease in social security benefits during a recession |
| an increase in welfare benefits during an expansion |
| a decrease in unemployment benefits paid out during an expansion |
| an increase in taxes during a recession |
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9.
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Consider the following Keynesian model: C=50+0.8Y, T=10, G=20, I=50, X=10, and M=0.1Y. What is the approximate equilibrium level of output?
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| 400 |
| 350 |
| 450 |
| 500 |
| 1220 |
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10.
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If the consumption function is C=50+0.8Y, then a $100 increase in net taxes will result in a __________ in output.
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| $100 increase |
| $500 decrease |
| $500 increase |
| $400 increase |
| $400 decrease |
