quiz 402

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Question 1 (1 point)

In the Income-Expenditure model, if investment expenditure rises autonomously, theslope of the aggregate demand function is unaffected.

100.0% 1. True

0.0% 2. False

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In the three-sector Income-Expenditure model, which includes the Governmentsector, equilibrium requires that leakages equal injections.

100.0% 1. True

0.0% 2. False

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If planned investment is less than saving, in the simple Income-Expenditure model,the equilibrium level of income will fall.

100.0% 1. True

0.0% 2. False

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An increase in disposable income will generate an increase in autonomousconsumption.

0.0% 1. True

100.0% 2. False

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If aggregate expenditure exceeds aggregate supply, then stocks are falling, and actualinvestment is less than planned investment.

100.0% 1. True

0.0% 2. False

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A change in disposable income will shift the consumption function.

0.0% 1. True

100.0% 2. False

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In the Income-Expenditure model, an increase in the marginal propensity to save:

0.0% 1. increases the income multiplier with respect to autonomousconsumption and reduces the slope of the consumption function

0.0% 2. reduces autonomous consumption

100.0% 3. reduces the slope of the aggregate demand curve, and reduces theincome multiplier with respect to autonomous consumption

0.0% 4. none of the above.

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A decrease in the marginal propensity to consume would be caused by

0.0%1. a decrease in the marginal propensity to import

0.0% 2. a decrease in the marginal tax rate

0.0% 3. an increase in the marginal propensity to consume

100.0% 4. an increase in the marginal propensity to save

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If aggregate demand is less than aggregate supply or output, then0.0% 1. planned investment is greater than actual investment.

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0.0% 2. planned investment is greater than saving.

100.0% 3. unplanned investment is positive.

0.0% 4. unplanned investment is greater than saving.

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Which of the following is incorrect if the consumption function is an upward-sloping,straight line?

0.0% 1. The MPC is the same at all levels of disposable income.

0.0% 2. The APC will be different at each level of disposable income.

0.0% 3. The MPS is the same at all levels of disposable income.

100.0% 4. None of the above is incorrect.

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In an income-expenditure model where Y = C + I and C = 50 + 0.8Y and I = 50, inequilibrium, saving will equal 50.

100.0% 1. True

0.0% 2. False

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If consumers would wish to increase their consumption by $60 when their disposableincome rises by $100, their marginal propensity to save (out of disposable income) is0.4.

100.0% 1. True

0.0% 2. False

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In an income-expenditure model where Y = C + I + G and C = 50 + 0.8(Y-T) and taxis given by T= 25+0.25Y and G = 50 and I = 80 then if the marginal propensity toconsume increased from 0.8 to 0.9, then the income multiplier with respect togovernment spending would increase by fifty percent.

0.0% 1. True

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100.0% 2. False

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If an increase in autonomous expenditure by $10 billion increases the equilibriumlevel of income by $18 billion then the income multiplier with respect to autonomousexpenditure is

0.0% 1. 0.8

100.0% 2. 1.8

0.0% 3. 2.8

0.0% 4. 1.5

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In the Income-Expenditure model, where Y = C + I, then if the level of total income isabove the level of aggregate demand by $100 million

0.0% 1. realised investment exceeds planned investment by $100 million.

0.0% 2. the level of saving exceeds planned investment by $100 million.

0.0% 3. There will be an unplanned inventory increase of $100 million.

100.0% 4. all of the above.

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If S = - 2 + 0.5 Y and I = 4 equilibrium income equals:

0.0% 1. 6

100.0% 2. 12

0.0% 3. 140.0% 4. 8

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HARD QUESTION

Given that the marginal propensity to consume out of disposable income is 0.8, themarginal propensity to tax is 0.25, and the marginal propensity to import out of total

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income is 0.1, and that investment and government expenditure are independent ofincome, then a decrease in government expenditure of $100 million will changeequilibrium consumption demand by:

0.0% 1. + $200 million.

0.0% 2. + $120 million.0.0% 3. + $100 million.

100.0% 4. - $120 million.

0.0% 5. - $200 million.

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In an income expenditure model, the income multiplier with respect to governmentexpenditure is 2.0, the income multiplier with respect to exogenous exports is 1.6, andthe income multiplier with respect to exogenous imports is -1.1. Given thatgovernment expenditure increases by $100m and that exogenous imports rise by$60m, the overall change in income is:

0.0% 1. an increase of $266m



0.0% 4. a decrease of $230m


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HARD QUESTION

If an autonomous increase in aggregate expenditure of $2000 generates $1800 ofadditional spending in the next period, $1620 of additional expenditure in thefollowing period, etc., then the value of the multiplier is:

0.0% 1. 0.90

0.0% 2. 1.11

0.0% 3. 5.00

0.0% 4. 9.00

100.0% 5. 10.00

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HARD QUESTION

When an economy is in disequilibrium:

0.0% 1. actual saving must be equal to actual investment.

0.0% 2. actual investment must be equal to planned investment.0.0% 3. actual investment must be equal to planned investment plus unplanned

investment.

0.0% 4. planned saving must be equal to planned investment.

100.0% 5. 1 and 3.

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ATTEMPT 2


In the Income-Expenditure model, the equilibrium level of income will always be lessthan the full-employment level of income.

0.0% 1. True

100.0% 2. False

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In the Income-Expenditure model, which includes the government sector, equilibriumrequires that saving plus taxes equals consumption plus government spending.

0.0% 1. True

100.0% 2. False

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In the Income-Expenditure model, if investment expenditure rises autonomously, theslope of the aggregate demand function is unaffected.

100.0% 1. True

0.0% 2. False

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Comparative statics is concerned with disequilibrium situations and traces each stepof adjustment resulting from a change in one or more exogenous variables in themodel.

0.0% 1. TrueComparative statics is a method of determining the way an

economy is disturbed by an exogenous change or shock. Two staticor equilibrium positions of the economy are being compared. That

is, equilibrium before the shock, and the new equilibrium position

after the shock has worked it's way through the economy.

100.0% 2. False

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While changes in exogenous variables only produce parallel shifts of the aggregatedemand function (Yd), changes in the exogenous coefficients produce rotating shiftsof the Yd function about the vertical axis intercept and may cause an additional

parallel shift as well.

100.0% 1. True

0.0% 2. False

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An unintended increase in inventories of unsold stocks will induce firms to reducetheir output level.

100.0% 1. True

0.0% 2. False

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If, at some level of output, aggregate demand is less than total output,

0.0% 1. output and income will rise.

0.0% 2. output and income remain unchanged, but prices rise.

0.0% 3. output and income will either remain unchanged or fall, depending onthe MPC.

100.0% 4. output and income will fall.

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A decrease in exogenous imports to Australia is represented in the Income-Expenditure model by

0.0% 1. a downward shift in the aggregate demand function

100.0% 2. an upward shift in the aggregate demand function

0.0% 3. a decrease in the slope of the aggregate demand function

0.0% 4. an increase in the slope of the aggregate demand function

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In the Income-Expenditure model where Y = C + I, then if the level of total income is

equal to the equilibrium level,0.0% 1. the level of saving is less than realised investment.

0.0% 2. planned investment exceeds realised investment.

0.0% 3. the level of saving exceeds planned investment.

100.0% 4. none of the above.In the Income-Expenditure model where Y = C + I, then if the level

of total income is equal to the equilibrium level, actual saving

equals actual investment.

Score1 / 1


In an economy consisting of the household and business sectors, equilibrium incomeoccurs where

100.0% 1. leakages equal injections.

0.0% 2. planned leakages exceed planned injections.

0.0% 3. the level of saving is less than realised investment.

0.0% 4. none of the above.

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If the marginal propensity to consume is equal to 0.85 , the average propensity to savemust equal 0.15.

0.0% 1. True

100.0% 2. False

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If the marginal propensity to consume is equal to one, the marginal propensity to savemust also be equal to one.

0.0% 1. True

100.0% 2. False

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In the simple Income-Expenditure model, if S = - 15 + 0.75Y and I = 15, equilibriumincome equals zero.

0.0% 1. True100.0% 2. False

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If planned consumption is C = 40 + 0.75Y and planned investment is I = 60, then theequilibrium level of income will be

100.0% 1. 4000.0% 2. 240

0.0% 3. 100

0.0% 4. 75

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The MacDonald family has an annual disposable income of $20 000. If the familyspends $17 000 on consumption goods and services, then its

0.0% 1. marginal propensity to consume is 0.7

0.0% 2. marginal propensity to save is 0.15

100.0% 3. average propensity to consume is 0.85

0.0% 4. average propensity to save is 0.3

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If C = 10 + 1/2 Y and I = 5 + 1/4 Y the in equilibrium:

0.0% 1. income equals 50

100.0% 2. consumption equals 40

0.0% 3. autonomous (planned) investment equals 10

0.0% 4. all of the above

0.0% 5. none of the aboveIf C = 10 + 1/2 Y and I = 5 + 1/4 Y, and assuming that Y = C + I,

then Y = 10 + 1/2 Y + 5 + 1/4 Y. After re-arranging, 1/4Y = 15, so Y

= 60. This means that C = 40, I = 20 and S = 20.

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HARD QUESTION

Assume the following three sector goods market model:

Yd = C + I + GC = 100 + 0.8 YdispG = 20T = 15

whereYd = aggregate demandI = planned investment

Ydisp = disposable incomeG = government expenditureC = planned consumptionT = taxation.

If aggregate investment is 80, including unplanned disinvestment in inventories of 10,then the equilibrium level of aggregate income is:

0.0% 1. 626.67

0.0% 2. 593.33

0.0% 3. 650100.0% 4. 660

We are told that Yd = C + I + G, G = 20, C = 100 + 0.8 Ydisp, T =

15. Actual or realized investment (Ia) = planned investment (I) plus

unplanned investment (Iu). If aggregate (actual) investment is 80,

including unplanned disinvestment in inventories of 10, then I

(planned investment) must equal 90. So, substituting into the Yd we

equation we get: Y = 100 + 0.8(Y-T) + 90 + 20 which, after

substituing T = 15, becomes Y = 100 + 0.7Y - 12 + 90 + 20. If we re-

arrange we get: 0.3Y = 198, so Y = 660.

0.0% 5. 616.67

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HARD QUESTION

In the income-expenditure model, a decrease in the marginal propensity to import willproduce, ceteris paribus,

0.0% 1. a downward parallel shift of the aggregate demand line and a decreasein output

0.0% 2. a upward parallel shift of the aggregate demand line and an increase inoutput

100.0% 3. an anti-clockwise rotation of the aggregate demand line and an increasein output

0.0% 4. a clockwise rotation of the aggregate demand line and an increase in

output.

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HARD QUESTION

If an autonomous increase in aggregate expenditure of $100 million causesconsumption demand to increase by $60 million, taxes to increase by $25 million, andimports to increase by $10 million in the next period, and investment, governmentexpenditure and exports are independent of income, then the value of the incomemultiplier with respect to government expenditure in a goods market model is:

0.0% 1. 1.6

0.0% 2. 1.81 (approximately)

100.0% 3. 2.0In the first period, an increase in autonomous expenditure of $100

leads to an increase in income (Y) of $100. From the taxation

equation, T = To + tY, we have dT = t*dY. That is, 25 = t*100,

hence t = 0.25. From the consumption equation, C = Co + bYdisp,we have dC = b*dYdisp. Since Ydisp = Y - T, dYdisp = dY - dT.

That is, dYdisp = 100 - 25 = 75. Hence, from the consumption

equation, 60 = b*75 or b = 0.8. From the imports equation, M = Mo

+ mY, we have dM = m*dY. That is, 10 = m * 100 or m = 0.1. The

income multiplier with respect to government expenditure, dY/dGo

= 1/(1-d). Since d = b - bt - m, d = 0.8 - 0.8*0.25 - 0.1, which equals

0.5. Thus, this multipler equals 1/(1-0.5) or 2.0.

0.0% 4. 4.0

0.0% 5. 10.0

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In an income expenditure model, the income multiplier with respect to governmentexpenditure is 2.0, the income multiplier with respect to exogenous exports is 1.6, andthe income multiplier with respect to exogenous imports is -1.1. Given that

government expenditure increases by $100m and that exogenous imports rise by$60m, the overall change in income is:



100.0% 3. an increase of $134mIf government expenditure rises by $100m and the multiplier

dY/dGo = 2.0, then income rises by $200m. If exogenous imports

rise by $60m and the multiplier dY/dMo = -1.1, then income falls

by $66m. Hence, the overall change in Y is 200 - 66 = $134m.

0.0% 4. a decrease of $230m


Score1 / 1

Total score 18 / 20 = 90.0%

quiz 402

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