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31-21
35.
A private closed economy will expand when
A.
actual GDP is less than potential GDP.
36.
If aggregate expenditures exceed GDP in a private closed economy,
A.
leakages will exceed injections.
37.
For a private closed economy, an unintended decline in inventories suggests that
A.
aggregate expenditures are less than the business sector expected them to be.
31-22
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Di ff i cu l ty :
02 Medium
Learning Objective: 31-04 Discuss the two other ways to characterize the equilibrium level of
real GDP in a private closed economy: saving = investment, and no unplanned changes in
inventories.
Test Bank: I
To pi c:
Other Features of Equilibrium GDP
38.
Refer to the diagram for a private closed economy. The equilibrium GDP is
A. $60 billion.
31-23
39.
Refer to the diagram for a private closed economy. In this economy, investment
A.
decreases as GDP increases.
40.
31-24
Refer to the diagram for a private closed economy. In this economy, aggregate expenditures
A.
do not change as GDP increases.
41.
Refer to the diagram for a private closed economy. Aggregate saving in this economy will be
zero when
A.
C + Ig cuts the 45-degree line.
31-25
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
AACSB: Knowledge Application
Blooms: Understand
Di ff i cu l ty :
02 Medium
Learning Objective: 31-03 Illustrate how economists combine consumption and investment to
depict an aggregate expenditures schedule for a private closed economy and how that schedule
can be used to demonstrate the economys equilibrium level of output where the total quantity of
goods produced equals the total quantity of goods purchased.
Test Bank: I
To pi c:
Equilibrium GDP: C Ig = GDP
Type: Graph
42. (Advanced analysis) The given equations describe consumption and investment (in billions
of dollars) for a private closed economy.
C = 60 + 0.6Y
I = I0 = 30
In this economy, the equilibrium level of income (Y) is
A. 360.
43. (Advanced analysis) The given equations describe consumption and investment (in billions
of dollars) for a private closed economy.
C = 60 + 0.6Y
I = I0 = 30
In equilibrium, the level of consumption spending will be
A. 170.
31-26
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
D. 195.
44. (Advanced analysis) The given equations describe consumption and investment (in billions
of dollars) for a private closed economy.
C = 60 + 0.6Y I = I0 = 30
In equilibrium, the level of saving will be
D. 60.
45.
GDP (Y)
Consumption (C)
Investment (I)
$0
$60
$30
100
120
40
200
180
50
300
240
60
400
300
70
31-27
500
360
80
(Advanced analysis) The tables gives data for a private closed economy. The letters Y, C, S,
and I are used to represent real GDP, consumption, saving, and investment, respectively. The
equation representing the consumption schedule for the economy is
A. C = Y −0.6S.
46.
GDP (Y)
Consumption (C)
Investment (I)
$0
$60
$30
100
120
40
200
180
50
300
240
60
400
300
70
500
360
80
(Advanced analysis) The tables gives data for a private closed economy. The letters Y, C, S,
and I are used to represent real GDP, consumption, saving, and investment, respectively. The
equation representing the investment schedule for the economy is
A. I = 0.3Y.
31-28
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
B. I = 80 −0.3Y.
C. I = 30 + 0.1Y.
D. I = I0 = 30.
47.
GDP (Y)
Consumption (C)
Investment (I)
$0
$60
$30
100
120
40
200
180
50
300
240
60
400
300
70
500
360
80
(Advanced analysis) The tables gives data for a private closed economy. The letters Y, C, S,
and I are used to represent real GDP, consumption, saving, and investment, respectively.
Equilibrium Y (= GDP) is
A. $100.
31-29
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Test Bank: I
To pi c:
Equilibrium GDP: C Ig = GDP
Type: Table
48.
When investment remains the same at each level of GDP in a private closed economy, the
slope of the aggregate expenditures schedule
A.
exceeds the MPC.
49.
Actual investment is $62 billion at an equilibrium output level of $620 billion in a private
closed economy. The average propensity to save at this level of output is
D. 0.84.
31-30
50.
Refer to the diagram for a private closed economy. The MPC and MPS are
A.
0.6 and 0.4, respectively.
51.
Refer to the diagram for a private closed economy. Gross investment
A.
is positively related to the level of GDP.
52.
Refer to the diagram for a private closed economy. At the $200 level of GDP,
D. aggregate expenditures fall short of GDP, with the result that GDP will decline.
31-32
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Type: Graph
53.
Refer to the diagram for a private closed economy. At the $400 level of GDP,
A.
aggregate expenditures exceed GDP, with the result that GDP will rise.
54.
Refer to the diagram for a private closed economy. At the $300 level of GDP,
D. consumption plus saving is $400.
55.
Refer to the diagram for a private closed economy. At the equilibrium level of GDP, the APC
and APS
D. cannot be determined from the information given.
31-34
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
goods produced equals the total quantity of goods purchased.
Test Bank: I
To pi c:
Equilibrium GDP: C Ig = GDP
Type: Graph
56. If unintended increases in business inventories occur, we can expect
D. an offsetting increase in planned investment.
57.
(Advanced analysis) The equations refer to a private closed economy, where Ig is gross
investment, S is saving, and Y is gross domestic product (GDP). The equilibrium GDP will be
A. $160.
58.
(Advanced analysis) The equations refer to a private closed economy, where Ig is gross
investment, S is saving, and Y is gross domestic product (GDP). In equilibrium, consumption
will be
A. $400.
59.
(Advanced analysis) The equations refer to a private closed economy, where Ig is gross
investment, S is saving, and Y is gross domestic product (GDP). In equilibrium, saving will be
A. $40.
31-36
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Test Bank: I
To pi c:
Other Features of Equilibrium GDP
60.
(Advanced analysis) The equations refer to a private closed economy, where S is saving, Ig is
gross investment, i is the real interest rate, and Y is GDP. If the real interest rate is 5 (percent),
investment will be
D. $15 and the equilibrium GDP will be $180.
61.
(Advanced analysis) The equations refer to a private closed economy, where S is saving, Ig is
gross investment, i is the real interest rate, and Y is GDP. In equilibrium, the level of saving
will be
D. $30.
31-37
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Learning Objective: 31-04 Discuss the two other ways to characterize the equilibrium level of
real GDP in a private closed economy: saving = investment, and no unplanned changes in
inventories.
Test Bank: I
To pi c:
Other Features of Equilibrium GDP
62.
(Advanced analysis) The equations refer to a private closed economy, where S is saving, Ig is
gross investment, i is the real interest rate, and Y is GDP. In equilibrium, the level of
consumption will be
A. $80.
63.
In a private closed economy, investment is equal to saving at all levels of GDP and
equilibrium occurs only at that level of GDP where investment is equal to saving.
A.
planned; actual
31-38
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written consent of McGraw-Hill Education.
inventories.
Test Bank: I
To pi c:
Other Features of Equilibrium GDP
64.
(Advanced analysis) If S = -60 + 0.25Y and Ig = 60, where S is saving, Ig is gross
investment, and Y is gross domestic product (GDP), then the equilibrium level of GDP is
A. $200.
65.
In the aggregate expenditures model, technological progress will shift the investment
schedule
A.
downward and increase aggregate expenditures.
66.
At equilibrium real GDP in a private closed economy,
A.
the MPC must equal the APC.
31-39
67.
(Advanced analysis) The equations are for a private closed economy, where C is consumption,
Y is the gross domestic product, Ig is gross investment, and i is the interest rate. Given that the
interest rate is 10 (percent), the amount that businesses will want to invest will be
A. $58.
68.
(Advanced analysis) The equations are for a private closed economy, where C is consumption,
Y is the gross domestic product, Ig is gross investment, and i is the interest rate. The
equilibrium level of GDP in this economy is
31-40
A. $240.
69. What will be the effect of an excess of planned investment over saving in a private closed
economy with unemployed resources?
A.
a decline in the rate of interest
70. Which of the following statements is correct for a private closed economy?
D. Saving equals actual investment only at the equilibrium level of GDP.
