Chapter 1+2+3 revision

Assume that the marginal propensity to consume is 0.90. As a result of an increase in the tax rates, the government collects an additional $20 million. What will be the impact on gross domestic product (GDP) ?

• GDP will increase by a maximum of $200 million.

• GDP will increase by a maximum of $180 million.

• GDP will decrease by a maximum of $200 million

• GDP will decrease by a maximum of $180 million

• GDP will decrease by a maximum of $20 million.

Which of the following is true according to the circular flow model?

• Firms are suppliers in both the product and factor markets.

• Firms are demanders in the product markets and suppliers in the factor markets.

• Households are demanders in both the product and factor markets

• Households are demanders in the product markets and suppliers in the factor markets.

• The government is a demander in the product market only.

Which of the following is most likely included in gross domestic product?

• Matt gives his secondhand bicycle to his brother.

• Sal paints his own bicycle.

• Ali buys a new bicycle.

• Mike buys a share of stock in a bicycle firm.

• Daniel bikes to school every day.

Assume that Atlantic National Bank has demand deposits of $100,000 and no excess reserves, and that the reserve requirement is 10 percent. A customer withdraws $5,000 from the bank. To meet the reserve requirement, the bank must increase its reserves by

• $500

• $1,000

• $2,000

• $4,000

• $4,500

Which of the following is a possible limitation of fiscal policy?

• It affects only interest-sensitive spending.

•  Its outcome could be delayed because of implementation lags.

• It is more effective during inflationary periods than during recessionary periods.

• It is less effective in reducing the natural rate of unemployment than monetary policy.

• It does not affect discouraged workers.

A major advantage of automatic stabilizers in fiscal policy is that they

• reduce the public debt

• increase the possibility of a balanced budget

• stabilize the unemployment rate

• go into effect without passage of new legislation

• automatically reduce the inflation rate

In an economy, the price index in 2006 was 100 and the real gross domestic product (GDP) was $1,000. In 2010, the price index was 110 and the nominal GDP was $2,200. Based on that information, which of the following can be inferred about the economy’s nominal GDP in 2006 and real GDP in 2010

• Nominal GDP in 2006 equals $2,000 ; Real GDP in 2010 equals $1,000

• Nominal GDP in 2006 equals $1,000 ; Real GDP in 2010 equals $2,000

• Nominal GDP in 2006 equals $1,100 ; Real GDP in 2010 equals $2,420

• Nominal GDP in 2006 equals $1,000 ; Real GDP in 2010 equals $2,420

• Nominal GDP

  in 2006=$1,100; Real GDP in 2010=$2,200

Suppose that the economy is in the midst of a recession and government policy makers want to increase aggregate demand by $600 billion.If the economy’s marginal propensity to consume is 0.75 and there is no crowding out, the government should do which of the following?

• Increase spending by $2,400 billion

• Increase spending by $600 billion

• Increase spending by $150 billion

• Decrease taxes by $150 billion

• Decrease taxes by $600 billion.

Suppose that personal income is $3,500 billion, personal taxes are $1,000 billion, and depreciation is $500 billion. Disposable income is equal to which of the following?

• $1,500 billion

• $2,000 billion

• $2,500 billion

• $3,000 billion

• There is not enough information to answer the question.

The table shows a country 's macroeconomic data in 2021. The country's gross domestic product is

• $220 billion

• $282 billion

• $304 billion

• $309 billion

• $347 billion