31–41
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written consent of McGraw-Hill Education.
AACSB: Knowledge Application
Accessibility:
Keyboard Navigation
Blooms: Understand
Di ff i cu lty :
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
71. At the $180 billion equilibrium level of income, saving is $38 billion in a private closed
economy. Planned investment must be
A.
$138 billion.
72. Planned investment plus unintended increases in inventories equals
D. unintended saving.
73. Saving is always equal to
A.
planned investment less unintended increases in inventories.
74. Actual investment equals saving
D. only at the equilibrium GDP.
75. Unintended changes in inventories
A.
cause the economy to move away from the equilibrium GDP.
31–43
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Blooms: Understand
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
76. Investment and saving are, respectively,
A.
income and wealth.
77. (Advanced analysis) In a private closed economy, (a) the marginal propensity to save is
0.25, (b) consumption equals income at $120 billion, and (c) the level of investment is $40
billion. What is the equilibrium level of income?
D. $198 billion
31–44
78. If the marginal propensity to consume is 0.9 in a private closed economy, a $20 billion
decline in investment spending will decrease
A.
GDP by $20 billion.
79. Suppose that the level of GDP increased by $100 billion in a private closed economy
where the marginal propensity to consume is 0.5. Aggregate expenditures must have increased
by
A.
$100 billion.
80. (Advanced analysis) Assume the consumption schedule for a private closed economy is C
= 40 + 0.75Y, where C is consumption and Y is gross domestic product. The multiplier for this
economy is
A.
3.
31–45
0.2Y, where S is saving and Y is gross domestic product. The multiplier for this economy is
A.
3.
82.
Gross Domestic Product
Consumption
$100
$120
200
180
300
240
400
300
500
360
Expected Rate of Return
Amount of Investment
25%
$0
20
20
15
40
10
60
5
80
31–46
Refer to the tables of information for a private closed economy. If the real interest rate is 20
percent, the equilibrium GDP will be
A. $100.
83.
Gross Domestic Product
Consumption
$100
$120
200
180
300
240
400
300
500
360
Expected Rate of Return
Amount of Investment
25%
$0
20
20
15
40
10
60
5
80
Refer to the tables of information for a private closed economy. If the real interest rate is 10
percent, the equilibrium GDP will be
31–47
A. $100.
84.
Gross Domestic Product
Consumption
$100
$120
200
180
300
240
400
300
500
360
Expected Rate of Return
Amount of Investment
25%
$0
20
20
15
40
10
60
5
80
Refer to the tables of information for a private closed economy. The data suggest that
A. the interest rate and the equilibrium GDP are directly related.
31–48
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: Table
85.
Gross Domestic Product
Consumption
$100
$120
200
180
300
240
400
300
500
360
Expected Rate of Return
Amount of Investment
25%
$0
20
20
15
40
10
60
5
80
Refer to the tables of information for a private closed economy. The multiplier for this
economy is
A. 2.
31–49
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
To pi c:
Changes in Equilibrium GDP and the Multiplier
Type: Table
86.
Gross Domestic Product
Consumption
$100
$100
200
160
300
220
400
280
500
340
600
440
Expected Rate of Return
Amount of Investment
15%
$0
12
40
9
80
6
120
3
160
0
200
Refer to the tables of information for a private closed economy. If the real interest rate is 9
percent, the equilibrium GDP will be
A. $600.
31–50
87.
Gross Domestic Product
Consumption
$100
$100
200
160
300
220
400
280
500
340
600
440
Expected Rate of Return
Amount of Investment
15%
$0
12
40
9
80
6
120
3
160
0
200
Refer to the tables of information for a private closed economy. In this economy, a 3
percentage point decrease in the interest rate will
A.
increase equilibrium GDP by $200.
Type: Table
88.
Gross Domestic Product
Consumption
$100
$100
31–51
200
160
300
220
400
280
500
340
600
440
Expected Rate of Return
Amount of Investment
15%
$0
12
40
9
80
6
120
3
160
0
200
Refer to the tables of information for a private closed economy. The multiplier in this economy
is
A.
4.
89.
Refer to the diagram for a private closed economy. The marginal propensity to consume is
A.
GF/GB.
90.
Refer to the diagram for a private closed economy. The upward shift of the aggregate
expenditures schedule from (C + Ig)1 to (C + Ig)2 reflects
D. an increase in the APS.
31–53
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Learning Objective: 31-05 Analyze how changes in equilibrium real GDP can occur in the
aggregate expenditures model and describe how those changes relate to the multiplier.
Test Bank: I
To pi c:
Changes in Equilibrium GDP and the Multiplier
Type: Graph
91.
Refer to the diagram for a private closed economy. The multiplier is
A.
GF/DE.
92. Imports have the same effect on the current size of GDP as
A.
exports.
31–54
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: 31-06 Explain how economists integrate the international sector exports
and imports into the aggregate expenditures model.
Test Bank: I
To pi c:
Adding International Trade
93. Exports have the same effect on the current size of GDP as
A.
imports.
94. At the equilibrium GDP for a private open economy,
D. exports and imports will be equal.
95. Other things equal, if a change in the tastes of American consumers causes them to
purchase more foreign goods at each level of U.S. GDP, then
D. U.S. real GDP will rise.
96.
Domestic
Output
(GDP=DI)
Aggregate
Expenditures, Closed
Economy
Exports
Imports
Net
Exports
Aggregate
Expenditures, Open
Economy
$200
$230
$30
$20
$——–
$——–
250
270
30
20
——–
——–
300
310
30
20
——–
——–
350
350
30
20
——–
——–
400
390
30
20
——–
——–
450
430
30
20
——–
——–
500
470
30
20
——–
——–
Complete the accompanying table and answer the question on the basis of the resulting data.
All figures are in billions of dollars. If the economy was closed to international trade, the
equilibrium GDP and the multiplier would be
A. $300 and 5.
97.
Domestic
Output
(GDP=DI)
Aggregate
Expenditures, Closed
Economy
Exports
Imports
Net
Exports
Aggregate
Expenditures, Open
Economy
$200
$230
$30
$20
$——–
$——–
250
270
30
20
——–
——–
300
310
30
20
——–
——–
350
350
30
20
——–
——–
400
390
30
20
——–
——–
450
430
30
20
——–
——–
500
470
30
20
——–
——–
Complete the accompanying table and answer the question on the basis of the resulting data.
All figures are in billions of dollars. For the open economy, the equilibrium GDP and the
multiplier are
A. $300 and 2.5.
98. If net exports decline from zero to some negative amount, the aggregate expenditures
schedule would
A.
shift upward.
31–57
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Accessibility:
Keyboard Navigation
Blooms: Understand
Di ff i cu l ty :
02 Medium
Learning Objective: 31-06 Explain how economists integrate the international sector exports
and imports into the aggregate expenditures model.
Test Bank: I
To pi c:
Adding International Trade
99. If net exports are positive,
A.
the equilibrium GDP must be greater than the full-employment GDP.
100. An upward shift of the aggregate expenditures schedule might be caused by
A.
a decrease in exports, with no change in imports.
101. Other things equal, an increase in an economy‘s exports will
A.
lower the marginal propensity to import.
31–58
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written consent of McGraw-Hill Education.
B.
have no effect on domestic GDP because imports will change by an offsetting amount.
C.
decrease its domestic aggregate expenditures and therefore decrease its equilibrium GDP.
D. increase its domestic aggregate expenditures and therefore increase its equilibrium GDP.
102. If the dollar appreciates relative to foreign currencies, we would expect
A.
the multiplier to decrease.
103. If a nation imposes tariffs and quotas on foreign products, the immediate effect will be to
A.
reduce the rate of domestic inflation.
31–59
104. If the multiplier in an economy is 5, a $20 billion increase in net exports will
D. increase GDP by $20 billion.
105.
(Advanced analysis) The equations give information for a private open economy. The letters Y,
C, Ig, X, and M stand for GDP, consumption, gross investment, exports, and imports,
respectively. Figures are in billions of dollars. The equilibrium GDP (=Y) in the economy is
A. $200.
106.
(Advanced analysis) The equations give information for a private open economy. The letters Y,
C, Ig, X, and M stand for GDP, consumption, gross investment, exports, and imports,
respectively. Figures are in billions of dollars. In equilibrium, saving is
A. $20.
107.
(Advanced analysis) The equations give information for a private open economy. The letters Y,
C, Ig, X, and M stand for GDP, consumption, gross investment, exports, and imports,
respectively. Figures are in billions of dollars. This nation is experiencing
A.
a trade surplus.