Applied Macroeconomics Exam 3 Practice Questions and Answers

What characterizes equilibrium GDP in a private closed economy?

• C + Ig = GDP

• no unplanned changes in inventories

• S = Ig

• All of these choices are correct.

Economic historians agree that tariffs and devaluations during the 1930s

• were great ideas and significantly increased world trade at that time.

• were huge policy mistakes and even led to a collapse in the international exchange rate system.

• helped many countries to prosper as imports were no longer a significant concern.

• had little effect on world trade in the 1930s.

In a mixed open economy, the equilibrium GDP exists where

• Ca + Ig + Xn intersects the 45-degree line.

• Ca + Ig = Sa + T + X.

• Ca + Ig + Xn + G = GDP.

• Ca + Ig + Xn = Sa + T.

If the full-employment real GDP is $100,

• inflationary expenditure gap is $30.

• inflationary expenditure gap is $10.

• recessionary expenditure gap is $30.

• recessionary expenditure gap is $10.

Refer to the table. If the full-employment real GDP is $40,

• A. inflationary expenditure gap is $30.

• B. inflationary expenditure gap is $10.

• C. recessionary expenditure gap is $30.

• D. recessionary expenditure gap is $10.

Refer to the table. If the full-employment real GDP is $70,

• A. inflationary expenditure gap is $30.

• B. recessionary and inflationary expenditure gaps are both $0.

• C. inflationary expenditure gap is $10.

• D. recessionary expenditure gap is $10.

The table gives data for a private closed economy. All figures are in billions of dollars. The MPC and multiplier are, respectively:

• 0.80 and 5.

• 0.75 and 4.

• 0.75 and 1.33.

• 0.80 and 1.25.

If investment increases by $10 billion and the economy's MPC is 0.8, the aggregate demand curve will shift:

• leftward by $50 billion at each price level.

• rightward by $10 billion at each price level.

• rightward by $50 billion at each price level.

• leftward by $40 billion at each price level.

If consumers expect their future real income to rise, they will:

• tend to spend more of their current incomes now.

• tend to spend less of their current incomes now.

• not change their current spending plans.

• tend to save more money now.

A rightward shift in the aggregate supply curve is best explained by an increase in

• productivity

• tax rates

• input prices

• regulations