Exam Review Chapter 3
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MULTIPLE CHOICE. Choo the one alternative that best completes the statement or answers the question.
1)For the U.S. economy, which of the following reprents the largest component of GDP?1)
A)imports
B)government spending
C)exports
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D)investment
E)none of the above
2)When the economy is in equilibrium, we know with certainty that2)
A)private saving equals investment.B)public saving equals investment.
C)G = T.D)none of the above
ESSAY. Write your answer in the space provided or on a parate sheet of paper.
3)Discuss what is meant by the paradox of saving.
4)Explain what the multiplier reprents.
5)Discuss and explain what effect a reduction in the marginal propensity to consume has on the size of the
multiplier.
6)Explain the difference between endogenous and exogenous variables.
MULTIPLE CHOICE. Choo the one alternative that best completes the statement or answers the question.
7)When a clod economy is in equilibrium, we know with certainty that7)
A)G = T and S = I.B)I = S + (G-T).C)I = S.D)I = S + (T-G).
8)An increa in the desire to save by houholds will cau8)
A)an increa in output.
B)no change in investment and no change in output.compactdisc
C)a reduction in output.
D)a reduction in investment.
9)An increa in taxes will cau9)
A)an increa in investment.B)no change in investment.
pensiveC)no change in autonomous spending.D)a reduction in investment.
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10)Bad on our understanding of the model prented in Chapter 3, we know with certainty that an
equal and simultaneous increa in G and T will cau 10)
A)a reduction in output.B)no change in output.
C)an increa in investment.D)an increa in output.
11)Bad on our understanding of the model prented in Chapter 3, we know with certainty that an
equal and simultaneous reduction in G and T will cau 11)
A)no change in output.B)a reduction in output.
C)an increa in investment.D)an increa in output.
12)Bad on our understanding of the model prented in Chapter 3, a reduction in investment will
cau 12)
A)an increa in the multiplier.
B)a reduction in the marginal propensity to save.
C)a reduction in the multiplier.
D)a reduction in output.
E)both B and D
13)Suppo business confidence decreas causing a reduction in investment. Bad on our
understanding of the model prented in Chapter 3, we know with certainty that a reduction in investment will cau 13)
A)a reduction in consumption as the economy adjusts to this decrea in investment.
B)a reduction in the multiplier.
C)a reduction in the marginal propensity to save.
D)an increa in the multiplier.
14)Suppo the marginal propensity to consume equals .8 (i.e., c1= .8). Given this information, which
of the following events will cau the largest increa in output?14)
A)G increas by 200B)I increas by 150
C)T decreas by 200D)both A and B
15)Inventory investment refers to15)thumb
A)nonresidential investment.
B)the difference between production and sales in a given year.
C)the purcha by firms of new machines.
D)fixed investment.
16)Suppo the consumption equation is reprented by the following: C = 250 + .75Y D, then private
savings is 16)
A)-250+0.75Y D.B)-250+0.25Y D.C)-1000+0.25Y D.D)-1000+0.75Y D.
17)If C = 2000 + .9Y D, what decrea in taxes must occur for equilibrium output to increa by 1000?17)
A)111B)100C)500D)1000
18)Which of the following types of government spending is included when calculating GDP?18)
A)spending at the federal level
B)spending at the state level
C)spending at the municipal level
D)all of the above
E)
only A and B
19)Which of the following would NOT be considered part of fixed investment spending (I)?19)
A)Apple computer builds a new factory.
B)Exxon increas its inventories of unsold gasoline.
C)An accountant buys a newly built home for herlf and her family.
D)Toyota buys a new robot for its automobile asmbly line.
E)all of the above
20)Which of the following is true for a "clod economy"?20)
A)government spending equals taxes
B)there is no government spending or taxes
C)exports equal imports
D)there are no imports or exports
E)there is no saving
21)Which of the following is an exogenous variable in our model of the goods market in Chapter 3?21)
A)saving (S)
B)disposable income (Y D)
C)consumption (C)
D)government spending (G)
E)none of the above
22)Which of the following is an endogenous variable in our model of the goods market in Chapter 3?22)
A)disposable income (Y D)
B)saving (S)
C)consumption (C)
D)total income (Y)
E)all of the above
23)Disposable income equals23)
A)the sum of consumption and saving.
B)income minus saving.
范围英文C)income minus both saving and taxes.
D)consumption minus taxes.
E)none of the above
制服装24)The marginal propensity to consume reprents24)
A)the level of consumption that occurs if disposable income is zero.
B)the ratio of total consumption to disposable income.
C)the change in output caud by a one-unit change in autonomous demand.
D)the change in consumption caud by a one-unit change in disposable income.
E)total income minus total taxes.
25) 25)Let the consumption function be reprented by the following equation: C = c0+ c1Y D. For this
equation, we assume that c1 is
A)different at different levels of income.
B)larger than c0.
C)equal to one.
D)negative.
E)none of the above
26)Suppo the consumption equation is reprented by the following: C = 250 + .75Y D. The multiplier
in this economy is 26)
A)4.B)5.C).75.D)1.E).25.
27)Suppo the consumption equation is reprented by the following: C = 250 + .75Y D. Given this
information, the marginal propensity to save is 27)
A)1.
B).25.
C)4.
D).7.
E)none of the above
28)Which of the following occurs when disposable income is zero?28)
A)saving must be positive
B)consumption is negative
C)consumption must be zero
D)saving must be zero
E)none of the above
29)Equilibrium in the goods market requires that29)
A)production equals demand.
B)production equals income.
C)government spending equals taxes minus transfers.
actuallyD)consumption equals saving.
E)consumption equals income.
30)An economy is in equilibrium when which of the following conditions is satisfied?30)
A)output equals consumption
B)consumption equals saving
C)total saving equals zero
D)total saving equals investment
E)all of the above
31)Which of the following is included in G?31)
A)interest payments on the government debt
B)medicare
C)government purchas
D)social curity payments
E)all of the above
32)Suppo the consumption equation is reprented by the following: C = 250 + .8Y D. The multiplier
for the above economy equals 32)
A)5.
B)3.
C)4.
D)2.
E)none of the above
33)Suppo the consumption equation is reprented by the following: C = 250 + .75Y D. Now assume
government spending increas by 100 for the above economy. Given the above information, we know that equilibrium output will increa by 33)
A)200.
B)400.
C)1000.
D)800.
E)none of the above
34)Which of the following will NOT increa equilibrium output in the short run?34)
A)decreas in taxes
B)increas in consumer confidence
C)increas in R&D
D)increas in investment demand
E)increas in government spending
35)Which of the following would tend to make the multiplier smaller?35)
A)a reduction in taxes
B)an increa in the marginal propensity to consume
C)an increa in the marginal propensity to save
D)a reduction in government spending
E)none of the above
36)Which of the following reprents total saving for an economy?36)
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A)the sum of private saving and fixed investment
B)the excess of taxes over government spending
C)the sum of private saving and consumption
D)the sum of taxes and government spending
E)none of the above
37)Bad on our understanding of the paradox of saving, we know that a reduction in the desire to
save
will cau 37)
A)a reduction in GDP.
B)no change in equilibrium GDP.
C)a permanent reduction in the level of saving.
D)an increa in the desire to invest.
E)an increa in equilibrium GDP.
38)Bad on our understanding of consumption and saving, we know that the marginal propensity to
consume and the marginal propensity to save must 38)
A)be equal to each other.
B)sum to more than one.
C)sum to exactly one.
D)be equal to the multiplier.
E)sum to less than one.
39)If C = 2000 + .9Y D, what increa in government spending must occur for equilibrium output to
increa by 1000?39)
A)250B)200C)500D)100E)
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1000
