The Simplest Short-run Macro Model
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- Economic Issues and ConceptsEconomic Theories,Data,and GraphsDemand,Supply,and PriceElasticityPrice Controls and Market EfficiencyConsumer BehaviourProducers in the Short RunProducers in the Long RunCompetitive MarketsMonopoly,cartels,and Price DiscriminationImperfect Competition and Strategic BehaviourEconomic Efficiency and Public PolicyHow Factor Markets WorkLabour Markets and Income InequalityInterest Rates and the Capital MarketMarket Failures and Government InterventionThe Economics of Environmental ProtectionTaxation and Public ExpenditureWhat Macroeconomics Is All AboutThe Measurement of National IncomeThe Simplest Short-Run Macro ModelAdding Government and Trade to the Simple Macro ModelOutput and Prices in the Short RunFrom the Short Run to the Long Run: The Adjustment of Factor PricesLong-Run Economic GrowthMoney and BankingMoney,Interest Rates,and Economic ActivityMonetary Policy in CanadaInflation and DisinflationUnemployment Fluctuations and the NairuGovernment Debt and DeficitsThe Gains From International TradeTrade PolicyExchange Rates and the Balance of Payments
Question 1
Free
Multiple Choice
With respect to consumption,investment,government purchases and net exports,the national-income and product accounts measure
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desired expenditures in each of the categories.
both actual and desired expenditures,since actual expenditure must equal desired expenditure in each category.
the flow of saving at any income.
neither actual nor desired expenditures.
actual expenditures in each of the categories.
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Question 2
Free
Multiple Choice
For firms or individual households,desired expenditure is
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always greater than planned expenditure.
always greater than actual expenditure.
not relevant because human wants are unlimited.
what they plan on spending,given the resources at their command.
not a useful concept because it cannot be measured.
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Question 3
Free
Multiple Choice
In the simple macroeconomic model,"autonomous expenditures" are
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dependent on national income.
not dependent on national income.
induced expenditures.
those which are constant.
non-domestic expenditures.
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Question 4
Free
Multiple Choice
Undesired or unplanned inventory accumulation is likely to occur when
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consumption exceeds investment.
investment exceeds consumption.
autonomous expenditure exceeds induced expenditure.
desired aggregate expenditure exceeds actual aggregate expenditure.
actual aggregate expenditure exceeds desired aggregate expenditure.
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Question 5
Free
Multiple Choice
Undesired or unplanned inventory decumulation is likely to occur when
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consumption exceeds investment.
investment exceeds consumption.
autonomous expenditure exceeds induced expenditure.
desired aggregate expenditure exceeds actual aggregate expenditure.
actual aggregate expenditure exceeds desired aggregate expenditure.
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Question 6
Multiple Choice
In each of the four expenditure categories,national income accounts measure ________ expenditures,while the theoretical model of the economy deals with ________ expenditures.
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actual; autonomous
desired; actual
induced; exogenous
endogenous; exogenous
actual; desired
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Question 7
Multiple Choice
Consider the equation: AE = C + I + G + (X - IM).Which of the following statements correctly describes this sum?
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This summation tells us total desired expenditures on domestically produced output.
It is a summation of actual expenditures and is equivalent to GDP.
This summation of planned expenditures is equal to actual nominal GDP.
It is a summation of planned expenditures and is always equal to real GDP.
It is a summation of the desired expenditures of domestic households,firms and government.
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Question 8
Multiple Choice
In macroeconomics,the consumption function
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and the aggregate expenditure function are the same.
describes the relationship between desired consumption expenditure and the factors that determine it,like national income.
refers to the relationship between consumption expenditure and relative prices.
refers to the relationship between an individual's consumption and his/her wealth.
is relatively unimportant in macroeconomics,because consumption is such a small component of aggregate expenditure.
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Question 9
Multiple Choice
Consider the consumption function in our macro model.The key factors that influence desired consumption are assumed to be
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expectations about the future.
wealth.
interest rates.
disposable income.
all of the above
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Question 10
Multiple Choice
The percentage of disposable income that is saved by Canadian households has been changing over time.In 2014,it was estimated to be about ________ percent.
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0
4
15
20
25
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Question 11
Multiple Choice
The consumption function is based on the assumption that as real disposable income rises,aggregate desired consumption
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will fall and desired saving will rise.
will rise and desired saving will fall.
and desired saving will both rise.
remains constant and desired saving will rise.
remains constant and desired saving will fall.
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Question 12
Multiple Choice
In a simple macro model,an increase in households' wealth is generally assumed to
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cause no change in desired consumption because consumption is a function of disposable income only.
cause no change in desired consumption because the increase is always expected.
cause a downward shift in the aggregate consumption function.
cause an upward shift in the aggregate consumption function.
affect only desired saving,not desired consumption.
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Question 13
Multiple Choice
In a simple macro model,a decrease in households' wealth is generally assumed to
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cause no change in consumption because consumption is a function of disposable income only.
cause no change in consumption because the decline is always expected.
cause a downward shift in the consumption function.
cause an upward shift in the consumption function.
affect only saving,not consumption.
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Question 14
Multiple Choice
Consider the consumption function in a simple macro model with no taxes.At the level of national income where APC = 1,the nation's households are
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consuming all of their disposable income.
allocating their income equally between saving and consumption.
saving a portion of their income,but saving is less than consumption.
spending more than their current income.
saving all of their disposable income.
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Question 15
Multiple Choice
FIGURE 21-1
-Refer to Figure 21-1.The APC will be equal to one (1.0)when disposable income is equal to
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0.
Y1.
Y2.
Y3.
desired saving.
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Question 16
Multiple Choice
FIGURE 21-1
-Refer to Figure 21-1.If disposable income is equal to Y3,desired consumption expenditure is equal to the vertical distance
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Y3E.
Y3D.
Y3F.
Y3.
DE.
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Question 17
Multiple Choice
FIGURE 21-1
-Refer to Figure 21-1.The marginal propensity to consume is equal to
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EF/Y2Y3.
EF/DF.
ED/CF.
DF/Y2Y3.
ED/Y2Y3.
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Question 18
Multiple Choice
FIGURE 21-1
-Refer to Figure 21-1.If disposable income is Y3,the level of desired saving is
Choose correct answer/s
DE.
FD.
Y3F.
Y3D.
Y2Y3.
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Question 19
Multiple Choice
FIGURE 21-1
-Refer to Figure 21-1.The marginal propensity to save can be expressed as
Choose correct answer/s
DE/Y1Y3.
DE/Y2Y3.
DF/Y2Y3.
FE/Y1Y3.
FE/Y2Y3.
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Question 20
Multiple Choice
FIGURE 21-1
-Refer to Figure 21-1.Desired consumption expenditures will equal disposable income at an income level of
Choose correct answer/s
zero.
Y1.
Y2.
Y3.
more than Y3.
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