Question 1

Investment spending is influenced by:

Accepted Answer

A)   the profit expectations of businesses.
B)   the rate of interest on borrowed funds.
C)   business expectations as to the overall level of economic activity.
D)   all of the above.E) A) and D)
F) All of the above

Question 2

Total spending on newly produced goods and services:

Accepted Answer

A)   is the main force determining the economy's levels of output, employment, and income.
B)   will have a dampening effect on the economy when it falls, and an expansionary effect when it increases.
C)   is made up of the combined spending of all households, businesses, government units and foreign buyers in the economy.
D)   all of the above.E) C) and D)
F) None of the above

Question 3

If non-income-determined spending increases by $40 billion, and 25 percent of additional income is not spent, the level of economic activity will grow by $160 billion.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is a leakage from the spending stream?

Accepted Answer

A)   Business saving and taxes.
B)   Business spending from retained earnings.
C)   Business investment in replacement parts financed by the sale of stock.
D)   All of the above.E) C) and D)
F) B) and D)

Question 5

The sector that purchases the most goods and services in the U.S. economy is the ________________ sector.

Accepted Answer

household ...

Question 6

Typically, when real GDP goes up over a period of, say, one year, the rate of:

Accepted Answer

A)   inflation tends to fall.
B)   employment tends to fall.
C)   unemployment tends to fall.
D)   employment tends to remain unchanged.E) None of the above
F) All of the above

Question 7

Monetary policy is designed to affect the level of economic activity by:

Accepted Answer

A)   controlling imports and exports.
B)   controlling government taxes and expenditures.
C)   influencing the leakages and injections that flow through the economy's financial institutions.
D)   government monitoring of economic conditions to advise businesses how to produce.E) B) and C)
F) B) and D)

Question 8

The economy will contract when:

Accepted Answer

A)   the multiplier is zero.
B)   the multiplier is a positive number.
C)   total leakages from the spending stream are less than total injections.
D)   total leakages from the spending stream are greater than total injections.E) B) and C)
F) A) and D)

Question 9

Investment spending fluctuates from year to year due to changes in:

Accepted Answer

A)   interest rates.
B)   profit expectations.
C)   expectations of future economic activity.
D)   all of the aboveE) None of the above
F) C) and D)

Question 10

Which of the following arguments was NOT cited in Up for Debate: Is Saving a Healthy Habit?

Accepted Answer

A)   The stress of everyday life can be lessened by a cushion of savings.
B)   Increases in saving by households could kick off a downward spiral in the economy.
C)   If people increased their savings levels by 50%, it would lead to economic expansion and a healthier economy.
D)   Saving can lead to additional income as interest and dividends are earned on the saving.E) C) and D)
F) All of the above

Question 11

Money received by a household from the government for which there is no work directly performed in return is:

Accepted Answer

A)   a surtax.
B)   a payment-in-kind.
C)   a transfer payment.
D)   an income tax refund.E) A) and B)
F) A) and C)

Question 12

The multiplier effect is equal to the change in non-income-determined spending divided by the percentage of additional income that is not spent.

Accepted Answer

A) True 
 B)False

Question 13

Application 5.3, "Ripples through the Economy,"illustrates in part how:

Accepted Answer

A)   the multiplier effect causes unemployment in one industry to spread to other industries.
B)   something like a large convention or sporting event in a city tends not to have a multiplier effect because it lasts just a few days.
C)   unemployment in the steel and automobile industries made it easier for steel and auto workers to find higher paying jobs in other industries.
D)   the snowball effect of the multiplier does not apply to the automobile industry.E) A) and B)
F) None of the above

Question 14

A decrease in interest rates would:

Accepted Answer

A)   have no effect on investment decisions.
B)   make investment projects less attractive.
C)   make more investment projects attractive.
D)   make investment spending as stable as personal consumption expenditures.E) A) and B)
F) C) and D)

Question 15

Personal consumption expenditures would likely increase if there were an increase in:

Accepted Answer

A)   taxes.
B)   savings.
C)   transfer payments.
D)   all of the above.E) A) and B)
F) A) and C)

Question 16

The multiplier effect would NOT be initiated by an increase in:

Accepted Answer

A)   business investment spending.
B)   foreign purchases of U.S. exports.
C)   household income-determined spending.
D)   government purchase of goods and services.E) All of the above
F) B) and C)

Question 17

The most important determinant of an economy's levels of total output, employment, and income is:

Accepted Answer

A)   total spending.
B)   the level of prices.
C)   the balance of trade.
D)   congressional policies for domestic programs.E) B) and C)
F) A) and B)

Question 18

Assuming all other leakages and injections are equal, an economy will contract if total saving is greater than total investment.

Accepted Answer

A) True 
 B)False

Question 19

To stimulate an economy in a recession, the appropriate fiscal policy response would be to:

Accepted Answer

A)   increase taxes.
B)   increase transfer payments.
C)   decrease government purchases.
D)   all of the above.E) C) and D)
F) A) and B)

Question 20

The sector of the economy which is the major cause of changes in the level of economic activity is the:

Accepted Answer

A)   foreign sector.
B)   business sector.
C)   household sector.
D)   government sector.E) A) and B)
F) A) and C)

Exam 5: Foundations of the Macroeconomy

The most important determinant of an economy's levels of total output, employment, and income is:

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The multiplier effect would NOT be initiated by an increase in:

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The sector of the economy which is the major cause of changes in the level of economic activity is the:

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Monetary policy is designed to affect the level of economic activity by:

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Money received by a household from the government for which there is no work directly performed in return is:

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The economy will contract when:

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A decrease in interest rates would:

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Investment spending fluctuates from year to year due to changes in:

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The sector that purchases the most goods and services in the U.S. economy is the ________________ sector.

Correct Answerverifiedhousehold ...View AnswerShow Answer

Which of the following arguments was NOT cited in Up for Debate: Is Saving a Healthy Habit?

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Which of the following is a leakage from the spending stream?

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Assuming all other leakages and injections are equal, an economy will contract if total saving is greater than total investment.

Correct AnswerverifiedShow Answer

To stimulate an economy in a recession, the appropriate fiscal policy response would be to:

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The multiplier effect is equal to the change in non-income-determined spending divided by the percentage of additional income that is not spent.

Correct AnswerverifiedShow Answer

Personal consumption expenditures would likely increase if there were an increase in:

Correct AnswerverifiedShow Answer

Investment spending is influenced by:

Correct AnswerverifiedShow Answer

Application 5.3, "Ripples through the Economy,"illustrates in part how:

Correct AnswerverifiedShow Answer

Total spending on newly produced goods and services:

Correct AnswerverifiedShow Answer

If non-income-determined spending increases by $40 billion, and 25 percent of additional income is not spent, the level of economic activity will grow by $160 billion.

Correct AnswerverifiedShow Answer

Typically, when real GDP goes up over a period of, say, one year, the rate of:

Correct AnswerverifiedShow Answer

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household ...
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