Macroeconomics Quiz CH 2

What is the critical thing to remember in the circular flow diagram for a two-sector economy?

• The interaction between firms and the government

• The interaction between households and firms

• The interaction between firms and banks

• The interaction between households and the government

What do households provide for firms in the factor market?

• Investment and government spending

• Taxes and imports

• Labor and capital

• Goods and services

What do firms give to the factor market in exchange for labor and capital?

• Investment and government spending

• Wages and rents

• Savings and taxes

• Imports and exports

What is the addition of money to the circular flow of income called?

• Savings

• Taxes

• Imports

• Investment

What is the equation for macroeconomic equilibrium using the Leakage and Injection approach?

• S = I

• AE = C + I

• Y = C + S

• C + S = C + I

If leakage exceeds injection, what will firms do?

• Decrease production

• Stop production

• Maintain production

• Increase production

Suppose there is a closed economy with no government. What happens to the equilibrium level of income if the level of savings rises for households?

• Equilibrium income decreases

• Equilibrium income becomes negative

• Equilibrium income increases

• Equilibrium income remains the same

Suppose there is a closed economy with no government. What happens to the equilibrium level of income if the level of investment rises for firms?

• Equilibrium income increases

• Equilibrium income decreases

• Equilibrium income becomes negative

• Equilibrium income remains the same

Suppose there is a closed economy with no government. What happens to the equilibrium level of income if the level of savings rises for households and the level of investment rises for firms?

• Equilibrium income becomes negative

• Equilibrium income remains the same

• Equilibrium income decreases

• Equilibrium income increases