Honors Macroeconomics Final
Test Solutions
Course Introduction
Honors Macroeconomics offers an in-depth exploration of broad economic principles and aggregate economic systems, emphasizing analytical rigor and critical thinking. Students will analyze major topics such as national income determination, economic growth, unemployment, inflation, monetary and fiscal policy, and international trade. The course integrates theoretical models with real-world applications, utilizing advanced mathematical and graphical tools to examine policy impacts and economic outcomes. Designed for high-achieving students, Honors Macroeconomics promotes independent research, data analysis, and discussion to develop a nuanced understanding of contemporary macroeconomic issues.
Recommended Textbook
Macroeconomics A Contemporary Introduction 9th Edition by William A. McEachern
Available Study Resources on Quizplus
26 Chapters
3954 Verified Questions
3954 Flashcards
Source URL: https://quizplus.com/study-set/2473 Page 2
Chapter 1: The Art and Science of Economic Analysis
Available Study Resources on Quizplus for this Chatper
147 Verified Questions
147 Flashcards
Source URL: https://quizplus.com/quiz/49101
Sample Questions
Q1) Japan has more vending machines per capita than any other country in the world. One explanation for this phenomenon is that
A)vending machines are very expensive in Japan
B)the customs of the Japanese marketplace encourage businesses to install vending machines
C)vending machines were invented in Japan
D)time is less valuable in Japan than it is elsewhere
E)most products commonly purchased by Japanese consumers are small enough to be sold in vending machines
Answer: B
Q2) In economics, "capital" refers to A)money
B)stocks, bonds, and other financial assets
C)the seat of government
D)machines, buildings, tools, and knowledge
E)net worth (assets minus liabilities)
Answer: D
To view all questions and flashcards with answers, click on the resource link above.
Page 3
Chapter 2: Economic Tools and Economics Systems
Available Study Resources on Quizplus for this Chatper
195 Verified Questions
195 Flashcards
Source URL: https://quizplus.com/quiz/49102
Sample Questions
Q1) The bowed-out shape of the production possibilities frontier indicates increasing opportunity costs.
A)True
B)False
Answer: True
Q2) The "division of labor" refers to
A)discrimination in labor markets
B)separating a job into smaller tasks completed by different people
C)one worker who divides his time among different jobs and duties
D)defining a job according to the appropriate sex
E)the fact that two 20-year-olds are more productive than one 40-year-old
Answer: B
Q3) A production possibilities frontier can shift inward if there is
A)an increase in the unemployment rate
B)mandatory retirement at age 55
C)an improvement in technology
D)a larger work force
E)a larger capital stock
Answer: B
To view all questions and flashcards with answers, click on the resource link above.
Page 4
Chapter 3: Economic Decision Makers
Available Study Resources on Quizplus for this Chatper
200 Verified Questions
200 Flashcards
Source URL: https://quizplus.com/quiz/49103
Sample Questions
Q1) A large number of businesses are organized as sole proprietorships because it is easy for them to acquire large sums of financing.
A)True
B)False
Answer: False
Q2) Which of the following is not a not-for-profit institution?
A)Columbia Broadcasting System (CBS)
B)American Red Cross
C)Salvation Army
D)a public library
E)a typical college or university
Answer: A
Q3) Market activity differs from government activity because
A)markets generally force prices to below-cost levels
B)governments never charge for the services they provide
C)markets do not use voluntary exchange mechanisms
D)markets provide a direct link between benefits and costs
E)governments have strong incentives to keep costs under strict control
Answer: D
To view all questions and flashcards with answers, click on the resource link above.
Page 5
Chapter 4: Demand Supply and Markets
Available Study Resources on Quizplus for this Chatper
232 Verified Questions
232 Flashcards
Source URL: https://quizplus.com/quiz/49104
Sample Questions
Q1) The most important characteristic of the equilibrium price is that it
A)guarantees that producers earn profit
B)clears the market, leaving neither a surplus nor a shortage
C)maximizes the quantity demanded
D)minimizes the quantity demanded
E)guarantees that all buyers who desire the product will get it
Q2) If there is a shortage in the market for automobiles, then
A)producers' inventories will rise
B)the price should begin to rise
C)the demand curve will shift to restore equilibrium in the market
D)the supply curve will shift to restore equilibrium in the market
E)the price is expected to fall
Q3) If the price of the good described in Exhibit 4-1 is $1.60, then an economist would expect the
A)price to decrease to $1.40
B)price to decrease to $1.50
C)quantity supplied to increase to 50 units
D)quantity demanded to increase to 80 units
E)quantity demanded to increase to 90 units
To view all questions and flashcards with answers, click on the resource link above.
Page 6
Chapter 5: Introduction to Macroeconomics
Available Study Resources on Quizplus for this Chatper
165 Verified Questions
165 Flashcards
Source URL: https://quizplus.com/quiz/49105
Sample Questions
Q1) A rise in the price level
A)moves the economy rightward along the aggregate demand curve
B)moves the economy leftward along the aggregate demand curve
C)shifts the aggregate demand curve to the left
D)shifts the aggregate demand curve to the right
E)is inconsistent with the other-things-constant assumption on which the aggregate demand curve is based
Q2) The global financial panic in September 2008 which led to a sharp fall in business investment spending and consumer spending can be viewed as
A)a sharp decrease in aggregate supply
B)a sharp decrease in aggregate demand
C)a sharp decrease in both aggregate supply and aggregate demand
D)a modest increase in aggregate supply
E)no change in either aggregate supply or aggregate demand
Q3) Since the Great Depression, business fluctuations have become more severe and longer in duration.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
Chapter 6: Tracking the Us Economy
Available Study Resources on Quizplus for this Chatper
213 Verified Questions
213 Flashcards
Source URL: https://quizplus.com/quiz/49107
Sample Questions
Q1) GDP is not a perfect measure of welfare because it
A)treats a dollar spent on guns the same as a dollar spent on education
B)treats a dollar spent on exports the same as a dollar spent on imports
C)double counts the value of leisure time
D)double counts depreciation
E)counts illegal activities in the underground economy
Q2) If real GDP in a particular year is $5,000 trillion and nominal GDP in that same year is $4,000 trillion, then the A)CPI is 125
B)economic activity has decreased 20 percent
C)GDP price index is 125
D)GDP price index is 80
E)economy has grown by 20 percent
Q3) Refer to Exhibit 6-3. Between 2004 and 2005, real GDP for this nation
A)increased by about $5 billion
B)decreased by about $5 billion
C)remained almost constant
D)increased by about $2 billion
E)cannot be determined from the information given
To view all questions and flashcards with answers, click on the resource link above.
Page 8
Chapter 7: Unemployment and Inflation
Available Study Resources on Quizplus for this Chatper
201 Verified Questions
201 Flashcards
Source URL: https://quizplus.com/quiz/49106
Sample Questions
Q1) Which of the following is not a cost of unemployment?
A)Unemployed individuals suffer a loss of income.
B)Unemployed individuals are more likely to have emotional or psychological problems.
C)Unemployed individuals can lose their job skills over time.
D)Unemployment causes production to decrease from what it could be.
E)The opportunity cost of unemployment is a higher inflation rate.
Q2) In which of the following industries are workers least likely to suffer from cyclical unemployment?
A)new home construction
B)automobile manufacturing
C)carpet installation
D)education
E)tourism
Q3) Which type of unemployment is likely to increase the most in a recession?
A)frictional unemployment
B)seasonal unemployment
C)structural unemployment
D)cyclical unemployment
E)employment
To view all questions and flashcards with answers, click on the resource link above.
Page 9
Chapter 8: Productivity and Growth
Available Study Resources on Quizplus for this Chatper
124 Verified Questions
124 Flashcards
Source URL: https://quizplus.com/quiz/49108
Sample Questions
Q1) The reason why small changes in productivity growth rates have large long-term effects on economic growth over the long run is that
A)lower productivity growth makes labor discouraged, compounding the problem
B)lower productivity growth effects on the economy are compounded over the years, leading to large cumulative effects
C)when the productivity growth rate falls, output actually falls
D)lower productivity growth for one resource means lower productivity growth for all resources
E)output usually falls when productivity grows
Q2) In order for a society to have a rising standard of living, output per worker must grow
A)more slowly than the labor force
B)at the same rate as the population
C)faster than the population
D)more slowly than the population
E)at a rate of 3 percent per year and population must grow at a rate of 5 percent per year
To view all questions and flashcards with answers, click on the resource link above.
Chapter 9: Aggregate Expenditure
Available Study Resources on Quizplus for this Chatper
187 Verified Questions
187 Flashcards
Source URL: https://quizplus.com/quiz/49109
Sample Questions
Q1) Which of the following is true of the autonomous investment and saving functions?
A)The autonomous investment function has a positive slope; the saving function is a horizontal line.
B)The autonomous investment function has a negative slope; the saving function has a positive slope.
C)The autonomous investment function is a horizontal line; the saving function has a positive slope.
D)Both the autonomous investment function and the saving function slope upward.
E)Both the autonomous investment function and the saving function slope downward.
Q2) An increase in the price level will
A)increase consumption because goods are more expensive
B)make the consumption function steeper
C)increase consumption because wages will increase
D)decrease consumption because falling interest rates make it cheaper to borrow
E)decrease consumption because the value of net wealth has decreased
Q3) Changes in the price level will not shift the consumption function.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
Chapter 10: Aggregate Expenditure and Aggregate
Demand
Available Study Resources on Quizplus for this Chatper
160 Verified Questions
160 Flashcards
Source URL: https://quizplus.com/quiz/49110
Sample Questions
Q1) Which of the following best describes the multiplier?
A)It shows the magnified change in planned aggregate spending that arises from a change in output.
B)It shows the magnified change in equilibrium output demanded that arises from a change in income.
C)It shows the magnified change in planned aggregate spending that arises from a change in equilibrium output.
D)It shows the magnified change in equilibrium output demanded that arises from a change in planned aggregate spending.
E)It shows the change in planned aggregate spending that arises from a change in real output.
Q2) If people spend 2/3 of any extra income they receive, new autonomous spending of $10 causes equilibrium to increase by
A)$6.67
B)$16.67
C)$15.00
D)$30.00
E)$45.00
To view all questions and flashcards with answers, click on the resource link above. Page 12
Chapter 11: Aggregate Supply
Available Study Resources on Quizplus for this Chatper
213 Verified Questions
213 Flashcards
Source URL: https://quizplus.com/quiz/49111
Sample Questions
Q1) Aggregate supply reflects billions of production decisions made by
A)consumers when they decide which products to purchase
B)households and firms, because they each demand goods and services
C)the largest firms and largest households
D)households, which demand resources, and firms, which supply resources
E)resource suppliers and firms
Q2) The movement shown in Exhibit 11-9 could be caused by
A)government policies to increase demand
B)weather conditions causing worldwide crop failures
C)an attempt by key resource producers to monopolize supply
D)an increase in taxation or a decrease in government spending
E)an increase in labor productivity
Q3) Floods in the Midwest that diminish farm output would shift the aggregate supply curve outward (to the right).
A)True
B)False
Q4) If wages are flexible, the long-run aggregate supply curve is vertical.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 13
Chapter 12: Fiscal Policy
Available Study Resources on Quizplus for this Chatper
242 Verified Questions
242 Flashcards
Source URL: https://quizplus.com/quiz/49112
Sample Questions
Q1) In an economy characterized by the aggregate expenditure line in Exhibit 12-2, if government spending was independent of the level of real GDP what would the government spending multiplier be equal to?
A)0
B)1
C)2
D)3
E)4
Q2) Which of the following is not a weakness of fiscal policy as a tool of economic stabilization?
A)It is ineffective in dealing with stagflation.
B)Its correct implementation depends on an accurate estimate of potential output.
C)It is subject to lags.
D)Households may not respond to changes they perceive as temporary.
E)Households may not respond to changes they perceive as permanent.
Q3) The unemployment problem becomes more severe if prices are sticky downward.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 14
Chapter 13: Federal Budgets and Public Policy
Available Study Resources on Quizplus for this Chatper
158 Verified Questions
158 Flashcards
Source URL: https://quizplus.com/quiz/49113
Sample Questions
Q1) According to the budget philosophy of functional finance,
A)the budget should be balanced annually
B)surpluses should be run during periods of prosperity and deficits should be run during recessions
C)the government should not worry about whether the budget is balanced but worry instead about reaching the potential output level
D)the budget should never be in balance, no matter what
E)the rate of growth in the national debt should equal the rate of growth in the money supply
Q2) According to the functional finance budget philosophy,
A)deficits should never be used to stimulate the economy
B)automatic stabilizers should be eliminated
C)the government budget should be whatever is necessary to have the economy operate at potential GDP
D)each government spending program should be financed on the basis of its function
E)the federal budget should be balanced in the long run
To view all questions and flashcards with answers, click on the resource link above.
Chapter 14: Money and the Financial System
Available Study Resources on Quizplus for this Chatper
209 Verified Questions
209 Flashcards
Source URL: https://quizplus.com/quiz/49114
Sample Questions
Q1) Which of the following statements best characterizes U.S. depository institutions over the last 50 years?
A)The industry has been very turbulent throughout this period.
B)The industry is highly regulated and hence is a very staid, predictable industry.
C)The industry has been highly unprofitable throughout this period.
D)The industry was once highly competitive, but now it is relatively quiet since deregulation began during the 1970s.
E)Once highly regulated, the industry has changed considerably during the past 20 years.
Q2) Insurance that protects individuals from the loss of their bank deposits
A)makes bank officials especially careful about the loans and investments they make B)makes it virtually impossible for a bank to fail
C)is so costly that few banks can afford it
D)makes depositors less concerned about the safety of their money than the interest rate it is earning
E)was introduced as a direct result of the financial problems of the 1970s and 1980s
To view all questions and flashcards with answers, click on the resource link above. Page 16
Chapter 15: Banking and the Money Supply
Available Study Resources on Quizplus for this Chatper
229 Verified Questions
229 Flashcards
Source URL: https://quizplus.com/quiz/49115
Sample Questions
Q1) The world's largest source of bogus American currency is
A)Colombia
B)Ecuador
C)Canada
D)China
E)Czech Republic
Q2) Suppose a bank lends you $1,000 to purchase a car. Which of the following correctly represents the changes in the bank's balance sheet before you spend the money?
A)assets: loans, +$1,000; liabilities and net worth: checking deposits, +$1,000
B)assets: loans, -$1,000, checking deposits, +$1,000; liabilities and net worth: no change
C)assets: loans, +$1,000, checking deposits, -$1,000; liabilities and net worth: no change
D)assets: checking deposits, +$1,000; liabilities and net worth: loans, +$1,000
E)assets: checking deposits, +$1,000; liabilities and net worth: loans, -$1,000
Q3) If the Fed wishes to reduce the money supply, it can sell U.S. government securities to member banks.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
Page 17
Chapter 25: The Algebra of Income and Expenditure
Available Study Resources on Quizplus for this Chatper
17 Verified Questions
17 Flashcards
Source URL: https://quizplus.com/quiz/49099
Sample Questions
Q1) If the net export function is 500 - 0.15Y, then exports are represented by -0.15Y.
A)True
B)False
Q2) If the net export function is 500 - 0.15Y, then an increase in income of $1,000 will decrease net exports by $150.
A)True
B)False
Q3) Investment is the only autonomous spending component in aggregate expenditure.
A)True
B)False
Q4) Equilibrium output can be found by solving for the value of Y in the expression a + b(Y - NT) + I + G + X - M(Y - NT).
A)True
B)False
Q5) If the marginal propensity to import increases, the spending multiplier increases. A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 18
Chapter 16: Monetary Theory and Policy
Available Study Resources on Quizplus for this Chatper
185 Verified Questions
185 Flashcards
Source URL: https://quizplus.com/quiz/49116
Sample Questions
Q1) If the Fed sells government securities to banks, eventually we expect
A)aggregate demand to increase
B)short-run aggregate supply to decrease
C)interest rates to decrease
D)planned investment expenditures to decrease
E)real Gross Domestic Product to increase
Q2) If the money supply increases, the interest rate will __________ and people will want to hold a __________ quantity of money.
A)rise; greater
B)rise; smaller
C)not change; greater
D)fall; greater
E)fall; smaller
Q3) If the Fed had to choose between fixing the interest rate and fixing the supply of money, it would
A)always fix the money supply, so that the price level would be stable
B)always fix the money supply, so that spending would be stable
C)always fix the interest rate, so that investment would be stable
D)always fix the interest rate, so that demand for money would be stable
E)find neither alternative would be clearly better than the other
To view all questions and flashcards with answers, click on the resource link above. Page 19
Chapter 17: Macro Policy Debate: Active or Passive
Available Study Resources on Quizplus for this Chatper
190 Verified Questions
190 Flashcards
Source URL: https://quizplus.com/quiz/49117
Sample Questions
Q1) To favor a passive approach to policy is to believe that the private sector is
A)relatively stable and both wages and prices adjust quickly to eliminate excess supply or excess demand for labor
B)basically unstable, although both wages and prices adjust quickly to eliminate excess supply or excess demand for labor
C)relatively stable, although both wages and prices tend to be very sticky downward
D)basically unstable and both wages and prices tend to be very sticky downward
E)so stable that wages and prices rarely change
Q2) According to a recent study of central banks around the world,
A)the more independent the central bank, the lower is that country's unemployment rate
B)the more independent the central bank, the higher is that country's unemployment rate
C)the more independent the central bank, the higher is the inflation rate
D)the more independent the central bank, the lower is that country's inflation rate
E)the higher the inflation rate, the more independent the central bank can be
To view all questions and flashcards with answers, click on the resource link above.
Chapter 26: The Algebra of Demand-Side Equilibrium
Available Study Resources on Quizplus for this Chatper
22 Verified Questions
22 Flashcards
Source URL: https://quizplus.com/quiz/49121
Sample Questions
Q1) If the government raised transfer payments by $100 million while reducing its own purchases of computers by $100 million, we would expect the net effect of these actions to be
A)an increase in aggregate demand, which is a rightward shift of the aggregate demand curve
B)an increase in aggregate demand, which is a leftward shift of the aggregate demand curve
C)a decrease in aggregate demand, which is a rightward shift of the aggregate demand curve
D)a decrease in aggregate demand, which is a leftward shift of the aggregate demand curve
E)to leave the aggregate demand curve unchanged
Q2) With a proportional income tax,
A)the tax multiplier equals (MPC)/(1 - MPC)
B)the tax multiplier equals -MPC/(1 - MPC)
C)the spending multiplier equals (MPC)/(1 - MPC)
D)the spending multiplier equals 1/[1 - MPC(1 - t)]
E)the spending multiplier equals 1/[1 - (MPC)t]
To view all questions and flashcards with answers, click on the resource link above.
21
Chapter 18: International Trade
Available Study Resources on Quizplus for this Chatper
163 Verified Questions
163 Flashcards
Source URL: https://quizplus.com/quiz/49118
Sample Questions
Q1) Which of the following is not a type of trade restriction?
A)low-interest loans to foreign buyers
B)export subsidies for domestic firms
C)domestic content requirements
D)restrictive health and safety standards
E)economies of scale
Q2) U.S. consumers would be better off if they bought only U.S.-produced goods.
A)True
B)False
Q3) A tax on imports equal to a percentage of the cost of those imports is known as
A)a specific tariff
B)an ad valorem tariff
C)a tax on luxury goods only
D)an effective quota
E)an ad valorem quota
Q4) Exports amount to about 11 percent of U.S. GDP.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 22
Chapter 19: International Finance
Available Study Resources on Quizplus for this Chatper
231 Verified Questions
231 Flashcards
Source URL: https://quizplus.com/quiz/49119
Sample Questions
Q1) International reserves are
A)foreign exchange held by governments only
B)foreign exchange held by central banks only
C)foreign exchange held by governments or central banks
D)gold only
E)various internationally acceptable assets
Q2) The Bretton Woods system
A)established a worldwide gold standard
B)established a worldwide system of fixed exchange rates
C)established a worldwide system of flexible exchange rates
D)harmonized tariff systems
E)was restricted to industrialized nations
Q3) If the U.S. dollar appreciates relative to the Brazilian cruzeiro, then
A)the U.S. dollar-cruzeiro exchange rate will increase
B)U.S. goods become less expensive in Brazil
C)Brazilian goods become more expensive in the U.S.
D)Brazilian investors will pay fewer cruzeiros to buy each U.S. dollar
E)the U.S. will import more from Brazil
To view all questions and flashcards with answers, click on the resource link above.
Chapter 20: Economic Development
Available Study Resources on Quizplus for this Chatper
110 Verified Questions
110 Flashcards
Source URL: https://quizplus.com/quiz/49120
Sample Questions
Q1) The yardstick most often used to compare living standards across nations is
A)average production cost per unit
B)sales revenue per month
C)utility per capita
D)output per capita
E)imports per year
Q2) Which of the following does the country of Fuggedaboutit not have to be concerned about?
A)choosing a system of resource ownership
B)allocating resources
C)earning a profit for its owners
D)providing individual incentives
E)answering the three economic questions
Q3) Which of the following groups has the lowest malnutrition rate among children less than 5 years of age?
A)middle-income economies
B)low-income economies
C)high-income economies
D)sub-Saharan African economies
E)all the world's economies
To view all questions and flashcards with answers, click on the resource link above. Page 24
Chapter 21: National Income Accounts
Available Study Resources on Quizplus for this Chatper
34 Verified Questions
34 Flashcards
Source URL: https://quizplus.com/quiz/49097
Sample Questions
Q1) Disposable income is personal income after taxes.
A)True
B)False
Q2) In Exhibit 6-5, National Income equals
A)$420 billion
B)$390 billion
C)$365 billion
D)$385 billion
E)$375 billion
Q3) Which of the following does not help account for the difference between GDP and National Income (NI)?
A)depreciation
B)net indirect business taxes
C)personal income taxes
D)earnings of American owned resources located abroad
E)earnings of foreign owned resources located in the U.S.
Q4) Personal income equals national income minus personal taxes.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 25
Chapter 22:Understanding Graphs
Available Study Resources on Quizplus for this Chatper
65 Verified Questions
65 Flashcards
Source URL: https://quizplus.com/quiz/49098
Sample
Questions
Q1) Refer to Exhibit 1-13. The reason that Line (a) would shift to the position of Line (b) is
A)a change in quantity
B)a change in price
C)a change in an assumption about the relationship between the two variables observed
D)a change from a positive relation to a negative relation
E)a change from a negative relation to a positive relation
Q2) The slope of the straight line in Exhibit 1-5 is
A)greater at point a than at point b
B)the same at points a and b
C)zero because the line is straight
D)negative because an inverse relation is shown
E)positive because the line lies to the right of the y-axis
Q3) In Exhibit 1-2, at x = 10, the
A)value of y is larger on curve A than on curve B
B)value of y is smaller on curve A than on curve B
C)value of y is the same on curve A as on curve B
D)slope of line A is negative
E)slope of line B is positive
To view all questions and flashcards with answers, click on the resource link above.
Page 26
Chapter 23:Variable Net Exports
Available Study Resources on Quizplus for this Chatper
27 Verified Questions
27 Flashcards
Source URL: https://quizplus.com/quiz/49096
Sample Questions
Q1) An increase in the value of the U.S. dollar relative to other currencies will increase U.S. imports.
A)True
B)False
Q2) If imports are plotted on the vertical axis and disposable income on the horizontal axis, the import line
A)slopes downward, but we can tell nothing about its steepness
B)slopes downward with a slope less than -1
C)is a horizontal line
D)slopes upward with a slope less than 1
E)slopes upward, but we can say nothing about its steepness
Q3) If one British pound originally exchanges for one U.S. dollar and then is revalued to exchange for two U.S. dollars, what should happen to U.S. net exports?
A)Since the pound costs more, net exports will increase.
B)Since the dollar costs more, net exports will increase.
C)Since the dollar costs less, net exports will decrease.
D)Since the dollar costs more, net exports will decrease.
E)Since the dollar costs less, net exports will increase.
To view all questions and flashcards with answers, click on the resource link above.
Chapter 24: Variable Net Exports Revisited
Available Study Resources on Quizplus for this Chatper
35 Verified Questions
35 Flashcards
Source URL: https://quizplus.com/quiz/49100
Sample Questions
Q1) If net exports increase by $450 billion at every level of income, equilibrium real GDP demanded will
A)increase by $450 billion
B)decrease by $450 billion
C)increase by more than $450 billion because of the multiplier effect
D)increase by less than $450 billion
E)decrease by more than $450 billion because of the multiplier effect
Q2) If the MPC equals 0.7 and the MPM equals 0.10, then the spending multiplier equals A)10
B)9
C)5
D)3.3
E)1.1
Q3) In a model which includes variable net exports, the spending multiplier equals 1/(MPS + MPM).
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
28