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Homework answers / question archive / Daytona State College - PB ECO2013 Chapter 8 Question1)Which of the following equations is correct? Question 1 options: a)  AE = C – I + G – (X + M) b)  AE = C + I + G + (X – M) c)  AE = C – I + G + (X + M) d)  AE = C + I – G + (X – M)   Question 2    The 45-degree line in the Keynesian model represents a set of points where _____ equals _____

Daytona State College - PB ECO2013 Chapter 8 Question1)Which of the following equations is correct? Question 1 options: a)  AE = C – I + G – (X + M) b)  AE = C + I + G + (X – M) c)  AE = C – I + G + (X + M) d)  AE = C + I – G + (X – M)   Question 2    The 45-degree line in the Keynesian model represents a set of points where _____ equals _____

Economics

Daytona State College - PB ECO2013

Chapter 8

Question1)Which of the following equations is correct?

Question 1 options:

a) 

AE = C – I + G – (X + M)

b) 

AE = C + I + G + (X – M)

c) 

AE = C – I + G + (X + M)

d) 

AE = C + I – G + (X – M)

 

Question 2 

 

The 45-degree line in the Keynesian model represents a set of points where _____ equals _____.

Question 2 options:

a) 

saving; consumption

b) 

disposable income; saving

c) 

disposable income; consumption

d) 

saving; investment

 

Question 3 

 

A depression economy has considerable slack, so:

Question 3 options:

a) 

there is no excess plant capacity.

b) 

all resources are being used efficiently.

c) 

there is an increase in aggregate price levels.

d) 

unemployment is high.

 

Question 4 

 

Aggregate expenditures are equal to:

Question 4 options:

a) 

the total of consumption plus investment plus government expenditures plus exports minus imports.

b) 

consumption alone in a simplified Keynesian model.

c) 

the total of consumption plus investment plus government expenditures plus imports minus exports.

d) 

the total of consumption plus investment plus government expenditures.

 

Question 5 

 

Consumption spending is:

Question 5 options:

a) 

spending by individuals and households on only nondurable goods, since they are used up quickly.

b) 

spending by individuals and households on both durable and nondurable goods.

c) 

spending on goods and services by heads of households.

d) 

spending by households, businesses, and government on all goods used up within one year.

 

Question 6 

 

_____ is the change in consumption associated with a change in income.

Question 6 options:

a) 

The average propensity to

b) 

The average propensity to consume

c) 

The marginal propensity to

d) 

The marginal propensity to consume

 

Question 7 

 

Saving is equal to:

Question 7 options:

a) 

disposable income minus consumption.

b) 

government taxes minus investment.

c) 

investment minus government taxes.

d) 

consumption minus disposable income.

 

Question 8 

 

As income increases, consumption ______

Question 8 options:

a) 

increases at a slower rate

b) 

decreases faster

c) 

increases faster

d) 

decreases at a slower rate

 

Question 9 

 

MPC + MPS:

Question 9 options:

a) 

is always a negative number.

b) 

equals zero.

c) 

equals 0.75.

d) 

equals 1.

 

Question 10 

 

If the stock market collapses, consumption will:

Question 10 options:

a) 

mildly increase.

b) 

decrease because people feel less wealthy.

c) 

not be affected.

d) 

increase because stocks can now be purchased cheaply.

 

Question 11 

 

Investment spending:

Question 11 options:

a) 

is limited to the stock and bond markets.

b) 

tends to be volatile.

c) 

is not sensitive to interest rates.

d) 

is the largest component of total spending.

 

Question 12 

 

John Maynard Keynes focused on _____ to explain how the economy reaches short-term equilibrium employment, output, and income.

Question 12 options:

a) 

property rights

b) 

the interest rate

c) 

aggregate spending

d) 

investment

 

Question 13 

 

In the simple Keynesian model, equilibrium exists when:

Question 13 options:

a) 

consumption equals investment.

b) 

quantity supplied equals quantity demanded.

c) 

price accepted by demanders equals price offered by suppliers.

d) 

investment spending equals saving.

 

Question 14 

 

When the economy is in equilibrium in the simple Keynesian model:

Question 14 options:

a) 

saving is equal to investment.

b) 

saving is greater than investment.

c) 

investment is greater than saving.

d) 

investment is equal to consumption.

 

Question 15 

 

The formula for the simple spending multiplier is:

Question 15 options:

a) 

MPC + MPS.

b) 

1/(1 – MPC).

c) 

1/MPC.

d) 

1/(MPC + MPS).

 

Question 16 

 

According to Keynes, as income grows:

Question 16 options:

a) 

both consumption spending and saving grow.

b) 

saving falls.

c) 

consumption spending alone grows.

d) 

saving alone grows.

 

Question 17 

 

When taxes are decreased, disposable income _______ and consumption spending ______________ multiplied by the change in disposable income.

Question 17 options:

a) 

rises; rises by the marginal propensity to consume

b) 

rises; falls by the marginal propensity to consume

c) 

falls; falls by the marginal propensity to consume

d) 

falls; rises by the marginal propensity to consume

 

Question 18 

 

The spending reduction necessary to bring an overheated economy back to full employment is called the:

Question 18 options:

a) 

recessionary gap.

b) 

inflationary gap.

c) 

GDP gap.

d) 

gap analysis.

 

Question 19 

 

The GDP gap divided by the multiplier yields the:

Question 19 options:

a) 

full-employment level of income.

b) 

equilibrium level of injections and withdrawals.

c) 

inflationary or recessionary gap.

d) 

optimal level of government spending.

 

Question 20 

 

Between 1929 and 1933, government spending _____ and net exports _____.

Question 20 options:

a) 

stayed the same; stayed the same

b) 

stayed the same; declined

c) 

declined; stayed the same

d) 

declined; declined

 

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