Question 1

What type of variables have their movements explained by theory?
A)endogenous
B)exogenous
C)autonomous
D)Both B and C

Accepted Answer

Endogenous variables are those whose movements are explained by theory. These variables are dependent on other variables within the system and are influenced by changes in exogenous variables.

Question 2

During recent Global Economic Crises,U.S.household liabilities have
A)increased
B)decreased
C)remained the same
D)quadrupled

Accepted Answer

During the recent global economic crises, US household liabilities have decreased. This can be attributed to factors such as lower interest rates, reduced spending, and increased focus on paying off debts.

Question 3

Suppose that in producing a GDP of 3000,goods worth 200 go unsold and are unintentionally added to business inventories.These goods
A)are not counted in total expenditure.
B)are part of the investment component of expenditure.
C)are nonetheless part of the consumption component of expenditure.
D)are classified as net exports and are subtracted from total expenditures.

Accepted Answer

Unsold goods that are added to inventories are considered as part of the investment component of expenditure. This is because these goods were initially produced for sale and therefore counted as part of the production for the period. When they go unsold, they are added to inventories, which is a form of investment since it represents an increase in the stock of goods that businesses hold. Therefore, the value of these goods will be added to the investment component of GDP, which in this case would be 200.

Question 4

A fixed or rigid price level implies
A)that income is fixed.
B)real GDP is greater than nominal GDP.
C)nominal GDP is less than real GDP.
D)real GDP equals nominal GDP.

Accepted Answer

A fixed or rigid price level means that prices of goods and services remain constant over time, which implies that nominal GDP remains the same. Real GDP, on the other hand, adjusts for changes in prices and is measured in constant dollars. If the price level is fixed, then real GDP would equal nominal GDP, which is the total value of all goods and services produced in an economy.

Question 5

Which of these variables remains exogenous throughout Chapter 3?
A)the interest rate
B)investment
C)price level
D)all of the above

Accepted Answer

In Chapter 3, all the variables listed - the interest rate, investment, and price level - are treated as exogenous, meaning they are considered to be determined outside the model and are not influenced by the other variables within the model's framework.

Question 6

A variable which is independent of the level of income is
A)endogenous.
B)exogenous.
C)autonomous.
D)irrelevant to any theory of income determination.

Accepted Answer

The answer of A variable which is independent of the...

Question 7

Stability of the U.S.economy between 1985 and 2007 referred to as
A)Great Moderation.
B)the Great Depression.
C)Automatic Stabilizer.
D)Fiscal Discretion.

Accepted Answer

The period between 1985 and 2007 in the U.S. is referred to as the Great Moderation due to the relative stability of the economy during this time. The economy experienced a low level of inflation, steady economic growth, and stable employment rates. The term "Great Moderation" was coined by then-Federal Reserve Chairman Ben Bernanke in a speech in 2004.

Question 8

Figure 3-1
 
-Employing Figure 3-1 above,autonomous consumption expenditures are ________,and the marginal propensity to consume is ________.
A)200;0.75
B)500;1
C)200;0.60
D)0;1

Accepted Answer

The autonomous consumption expenditures are shown as the intercept of the consumption function and are equal to $200 billion. The marginal propensity to consume is the slope of the consumption function, which is the change in consumption divided by the change in income. From the graph, we can see that the change in consumption is $300 billion (from $200 billion to $500 billion) and the change in income is $500 billion (from $0 to $500 billion). Therefore, the marginal propensity to consume is 0.6 (i.e. $300 billion/$500 billion).

Question 9

During the 20th century,the highest savings rates in the U.S.were observed during
A)the Great Depression.
B)World War II.
C)the late 1980s and 1990s.
D)none of the above.

Accepted Answer

During World War II, the U.S. implemented policies such as rationing and encouraged citizens to buy war bonds, which led to a high savings rate.

Question 10

In the simple Keynesian model of the determination of income,planned investment is
A)an endogenous parameter.
B)autonomous and thus an exogenous parameter.
C)explained by the model of income determination.
D)None of the above.

Accepted Answer

In the simple Keynesian model of the determination of income, planned investment is considered an autonomous and exogenous parameter. It is not explained or determined by the model itself but rather assumed as outside the model.

Question 11

In the simplest Keynesian model of the determination of income,interest rates are assumed to be
A)exogenous and to gradually change.
B)endogenous and to gradually change.
C)exogenous and to remain constant.
D)endogenous and to remain constant.

Accepted Answer

In the simplest Keynesian model, interest rates are assumed to be exogenous and to remain constant. This means that interest rates are determined outside the model and do not fluctuate over the short run. The focus of the model is on how changes in aggregate expenditures (consumption, investment, government spending, and net exports) affect output and income in the economy.

Question 12

In the simple Keynesian model of the determination of income,the price level is assumed to be
A)exogenous and to gradually change.
B)endogenous and to gradually change.
C)exogenous and to remain constant.
D)endogenous and to remain constant.

Accepted Answer

In the simple Keynesian model, the price level is assumed to be exogenous and to remain constant. This means that changes in output and employment are not influenced by changes in the price level.

Question 13

Which of the following is a possible reason for the improved economic performance between 1985 and 2007?
A)Demand Shocks have become smaller and less important.
B)Monetary and fiscal policy have become more effective.
C)Change in conditions that make monetary and/or fiscal policy more powerful.
D)All of the above

Accepted Answer

All three options could have contributed to the improved economic performance between 1985 and 2007. Smaller and less important demand shocks may have led to more stable economic conditions, while better monetary and fiscal policy could have helped boost growth and stability. Additionally, changes in conditions that make these policies more effective could have further contributed to the positive economic outcomes during this period.

Question 14

In the 2000s,low savings rates are attributed to
A)rapid economic growth.
B)stock market boom.
C)declining interest rates and increased refinancing of the mortgages.
D)inefficient monetary policy.

Accepted Answer

Declining interest rates and increased refinancing of mortgages in the 2000s led to lower savings rates. As people were able to obtain cheaper loans or lower mortgage payments through refinancing, they had less incentive to save. The stock market boom and rapid economic growth in the early 2000s may have also contributed to a sense of optimism and reduced the perceived need to save for the future. However, inefficient monetary policy does not seem to be a significant factor in explaining the low savings rates during this period.

Question 15

In the simplest Keynesian model of the determination of income,interest rates are assumed
A)to be exogenous and to influence desired spending.
B)to be endogenous and not to influence desired spending.
C)to be endogenous and to influence desired spending.
D)to be exogenous and not to influence spending.

Accepted Answer

In the simplest Keynesian model, interest rates are assumed to be exogenous factors that can influence desired spending. This means that changes in interest rates can lead to changes in the levels of investment and consumption, which in turn affect the overall level of income in the economy. This approach is consistent with the view that monetary policy can be used to manage aggregate demand and stabilize the economy.

Question 16

The multiplier measures the
A)number of steps it takes to move from one equilibrium to another.
B)rise in saving resulting from a rise in income.
C)marginal propensity to invest.
D)rise in equilibrium GDP resulting from a one dollar rise in planned autonomous expenditures.

Accepted Answer

The multiplier measures the rise in equilibrium GDP resulting from a one dollar rise in planned autonomous expenditures.

Question 17

During the worst of the Great Depression,in 1932 and 1933,disposable income was so low that it actually ________ aggregate consumption,so that aggregate saving became ________.
A)rose above,positive
B)rose above,negative
C)fell below,positive
D)fell below,negative

Accepted Answer

During the worst of the Great Depression, disposable income was so low that it fell below aggregate consumption, so that aggregate saving became negative.

Question 18

If total planned spending (E(p))exceeds GDP,we expect that
A)inventories will be falling.
B)inventories will be rising.
C)GDP will be falling.
D)government expenditures must be rising.

Accepted Answer

When total planned spending exceeds GDP, it means that consumers and businesses are spending more than the economy is producing, leading to a decrease in inventories as goods are being purchased faster than they are being produced.

Question 19

As used in this text,"autonomous" variables are
A)spontaneous variables that are completely unpredictable.
B)completely independent of income,although they can be explained by movements in other variables.
C)determined only by income levels.
D)the same as endogenous variables.

Accepted Answer

Autonomous variables are variables that are not influenced by other variables in the system, but can still influence other variables. Therefore, they are independent, but can be explained by movements in other variables. Income is often used as an example of an autonomous variable.

Question 20

From 1950 till 2009 the four-quarter growth rate of real GDP has been as high as ________ percent and as low as ________ percent.
A)8.1;-2.8
B)12.6;-3.9
C)3.2;2.5
D)5;-10

Accepted Answer

The four-quarter growth rate of real GDP has experienced significant fluctuations over the years, reaching as high as 12.6 percent and as low as -3.9 percent. This reflects periods of strong economic expansion as well as recessions.

Quiz 3: Income and Interest Rates: the Keynesian Cross Model and the Is Curve

What type of variables have their movements explained by theory?

During recent Global Economic Crises,U.S.household liabilities have

Suppose that in producing a GDP of 3000,goods worth 200 go unsold and are unintentionally added to business inventories.These goods

A fixed or rigid price level implies

Which of these variables remains exogenous throughout Chapter 3?

A variable which is independent of the level of income is

Stability of the U.S.economy between 1985 and 2007 referred to as

Figure 3-1 -Employing Figure 3-1 above,autonomous consumption expenditures are ,and the marginal propensity to consume is .

During the 20th century,the highest savings rates in the U.S.were observed during

In the simple Keynesian model of the determination of income,planned investment is

In the simplest Keynesian model of the determination of income,interest rates are assumed to be

In the simple Keynesian model of the determination of income,the price level is assumed to be

Which of the following is a possible reason for the improved economic performance between 1985 and 2007?

In the 2000s,low savings rates are attributed to

In the simplest Keynesian model of the determination of income,interest rates are assumed

The multiplier measures the

During the worst of the Great Depression,in 1932 and 1933,disposable income was so low that it actually aggregate consumption,so that aggregate saving became .

If total planned spending (E(p) ) exceeds GDP,we expect that

As used in this text,"autonomous" variables are

From 1950 till 2009 the four-quarter growth rate of real GDP has been as high as percent and as low as percent.