Deck 24: Variable Net Exports Revisited

Question 1

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

Answer 1

5

Question 2

If net exports increase by $400 billion at every level of income,the aggregate expenditure line will

A) shift upward by $400 billion
B) shift downward by $400 billion
C) shift upward by more than $400 billion because of the multiplier effect
D) shift upward by less than $400 billion
E) shift downward by more than $400 billion because of the multiplier effect

Answer 2

shift upward by $400 billion

Question 3

When variable net exports are included in aggregate expenditures,the two leakages from the circular flow are

A) exports and saving
B) exports and consumption
C) exports and investment
D) imports and saving
E) imports and investment

Answer 3

imports and saving

Question 4

The formula for the spending multiplier when variable net exports are included in aggregate expenditures is

A) 1/(MPS + MPM)
B) 1/MPS
C) MPS * MPM
D) 1/(MPC* MPM)
E) 1/(1 - MPC - MPM)

Question 5

Exports are an injection into the circular flow.

Question 6

The marginal propensity to import is defined as

A) the fraction of each additional dollar of income that is spent on imported products
B) the fraction of each additional dollar of income that is spent on exports minus imports
C) the amount spent on imports at each level of income
D) the change in income divided by the change in imports
E) the level of imports divided by the level of income

Question 7

The larger the marginal propensity to import,the __________ during each round of spending and __________ the resulting spending multiplier.

A) greater the leakage; the smaller
B) smaller the leakage; the smaller
C) smaller the leakage; the larger
D) greater the leakage; the larger
E) smaller the injection; the larger

Question 8

If net exports increase by $350 billion at every level of income,the net export line will

A) shift upward by $350 billion
B) shift downward by $350 billion
C) shift upward by more than $350 billion because of the multiplier effect
D) shift upward by less than $350 billion
E) shift downward by more than $350 billion because of the multiplier effect

Question 9

If the MPC = 0.9 and the MPM = 0.1,then the spending multiplier with variable net exports equals 8.

Question 10

Exhibit 10-7

In Exhibit 10-7,the spending multiplier equals

A) 1.43
B) 2.50
C) 3.33
D) 5
E) 10

Question 11

In a model which includes variable net exports,the spending multiplier equals 1/(MPS + MPM).

Question 12

Adding net exports to aggregate expenditure always

A) increases real GDP
B) shifts the aggregate expenditure line down
C) increases the slope of the aggregate expenditure line
D) decreases the slope of the aggregate expenditure line
E) decreases GDP

Question 13

What is the impact of net exports on the aggregate expenditure line?

A) They cause the line to shift upward in a parallel fashion.
B) They cause the line to shift downward in a parallel fashion.
C) They make the line steeper.
D) They make the line flatter.
E) They make the slope of the line equal 1.

Question 14

When variable net exports are added to the aggregate expenditure line,the resulting planned aggregate expenditure line becomes

A) steeper because net exports increase as real domestic income increases
B) flatter because net exports increase as real domestic income increases
C) steeper because net exports decrease as real domestic income increases
D) flatter because net exports decrease as real domestic income increases
E) flatter because imports decrease as real domestic income increases

Question 15

If variable net exports increase by the same amount at every level of income,then there is an upward and parallel shift of the net export line.

Question 16

Imports are a leakage from the circular flow.

Question 17

Since imports are positively related to domestic income,a trade deficit will grow as domestic income expands.

Question 18

Adding variable net exports to aggregate expenditure always increases the slope of the aggregate expenditure line.

Question 19

An economy that engages in international trade will have a steeper aggregate expenditure line than one that is the same in all other respects,except for the absence of international trade.

Question 20

The formula for the spending multiplier in model with variable net exports trade equals 1/(MPS + MPM).

Question 21

Which of the following is true concerning the impact of net exports in the model with AE = C + I + NX + G?

A) Net exports are a leakage from the economy if imports exceed exports.
B) Net exports are always positive.
C) Net exports are negative because exports are assumed to be autonomous.
D) Net exports must be negative if planned investment is positive.
E) Net exports are an injection into the economy if imports equal exports.

Question 22

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

Question 23

When net exports are included in the aggregate expenditure function,the spending multiplier

A) increases
B) decreases
C) is affected only if exports are greater than imports
D) is affected only if exports are less than imports
E) is affected only if exports are equal to imports

Question 24

The concept of variable net exports is that as domestic income (Y)increases,

A) exports will increase
B) exports will decrease
C) imports will decrease
D) imports will increase
E) imports and exports will remain constant

Question 25

A more realistic approach has net exports varying __________ with income.

A) positively
B) independently
C) directly
D) inversely
E) None of the answers is correct

Question 26

If the marginal propensity to import (MPM)equals 0.10 and the multiplier equals 5.0,the marginal propensity to consume must equal

A) 0.99
B) 0.95
C) 0.90
D) 0.85
E) 0.50

Question 27

The spending multiplier with variable net exports is

A) (1 + MPC)/MPM
B) 1/(1 - MPC)
C) 1/(1 - MPC + MPM)
D) 1/(1 - MPC - MPM)
E) MPC/MPM

Question 28

Exhibit 10-8
Refer to Exhibit 10-8.Which dotted-line segment represents an increase in autonomous spending?

A) a
B) b
C) c
D) d
E) e

Question 29

If the marginal propensity to consume (MPC)equals 0.75 (3/4)and the multiplier equals 2.0,the marginal propensity to import (MPM)must equal

A) 0.25
B) 0.50
C) 0.75
D) 1.00
E) 1.25

Question 30

If the MPS = 0.25 and the MPM = 0.25,the spending multiplier with net exports equals

A) 5
B) 4
C) 3
D) 2
E) 1

Question 31

Imports increase as domestic income increases.

Question 32

Exhibit 10-7

In Exhibit 10-7,the marginal propensity to consume is

A) 0.3
B) 0.1
C) 0.7
D) 0.4
E) 0.2

Question 33

The marginal propensity to import

A) is negative
B) is positive
C) is likely to be larger than the MPC
D) depends on the value of domestic income
E) depends on the value of exports