Question 1

Related to the Economics in Practice on p.464: A recent study by economists at Yale University and the University of Chicago suggests that changing retirement plan enrollment options from "opt-in" systems to "opt-out" systems increased pension plan enrollment after three months of work from ________ percent of workers to ________ percent of workers.
A)80;22
B)10;100
C)65;98
D)77;42

Accepted Answer

The question states that changing enrollment options from "opt-in" to "opt-out" increased pension plan enrollment after three months of work. Therefore, the answer choice must reflect an increase in enrollment. Option A and D both have a higher percentage as the first number than the second, which does not suggest an increase in enrollment. Option B has a dramatic increase from 10% to 100%, which seems unlikely. Option C has a more reasonable increase from 65% to 98%, making it the most likely choice.

Question 2

Firms react to an unplanned inventory investment by increasing output.

Accepted Answer

Firms typically react to an unplanned inventory investment by reducing output to align production with lower-than-expected demand, not by increasing it.

Question 3

Firms react to negative inventory investment by increasing output.

Accepted Answer

When a firm experiences negative inventory investment, it means that they have more inventory than they are able to sell. As a result, they may increase output to try to sell more and decrease their inventory levels. This can help to improve their cash flow and reduce the costs associated with holding excess inventory.

Question 4

If planned investment exceeds actual investment,
A)there will be an accumulation of inventories.
B)there will be no change in inventories.
C)there will be a decline in inventories.
D)none of the above

Accepted Answer

The answer of If planned investment exceeds actual investment,
A)there will...

Question 5

Without the government or the foreign sector in the income-expenditure model,planned aggregate expenditure equals
A)consumption plus actual investment.
B)consumption plus inventory adjustment.
C)consumption minus planned investment.
D)consumption plus planned investment.

Accepted Answer

Without the government or the foreign sector, planned aggregate expenditure is equal to consumption plus planned investment since there are no other factors affecting the economy in the income-expenditure model.

Question 6

If actual investment is greater than planned investment,unplanned inventories decline.

Accepted Answer

If actual investment is greater than planned investment, it typically means that firms have invested more in inventories than they intended, leading to an increase in unplanned inventories, not a decline.

Question 7

If planned investment is perfectly responsive to changes in the interest rate,the planned investment schedule
A)has a negative slope.
B)is horizontal.
C)is vertical.
D)has a positive slope.

Accepted Answer

If planned investment is perfectly responsive to changes in the interest rate, it means that any change in the interest rate does not affect the level of planned investment. Therefore, the planned investment schedule is horizontal, indicating that investment does not change as interest rates change.

Question 8

Refer to the information provided in Table 8.3 below to answer the questions that follow.
Table 8.3
A Hypothetical Investment Schedule 
-Refer to Table 8.3.If the interest rate dropped from 15% to 6%,planned investment would ________ by $________ billion.
A)increase;120
B)increase;180
C)decrease;120
D)decrease;180

Accepted Answer

The answer of Refer to the information provided in Table...

Question 9

If planned investment is perfectly unresponsive to changes in the interest rate,the planned investment schedule
A)has a negative slope.
B)is horizontal.
C)is vertical.
D)has a positive slope.

Accepted Answer

If planned investment is perfectly unresponsive to changes in the interest rate, then the planned investment schedule is vertical. This means that no matter what the interest rate is, planned investment will remain the same.

Question 10

In 2012 Happyland's planned investment was $90 billion and its actual investment was $140 billion.In 2012 Happyland's unplanned inventory change was
A)-$115 billion.
B)-$50 billion.
C)$50 billion.
D)$230 billion.

Accepted Answer

The unplanned investment can be calculated as the difference between the actual investment and the planned investment: $140 billion - $90 billion = $50 billion. Therefore, the unplanned inventory change was $50 billion.

Question 11

If planned investment increases,equilibrium will be restored only when saving has increased by exactly the amount of the initial increase in planned investment,assuming there is no government or foreign sector.

Accepted Answer

This is known as the savings-investment (S-I) identity in the Keynesian model, where S-I must always be equal to zero in equilibrium. Therefore, if planned investment increases, saving must also increase by the same amount to maintain balance.

Question 12

If Inventory investment is higher than firms planned,
A)actual and planned investment are equal.
B)actual investment is less than planned investment.
C)actual investment is greater than planned investment.
D)actual investment must be negative.

Accepted Answer

If inventory investment is higher than firms planned, it means that actual investment is greater than planned investment.

Question 13

Refer to the information provided in Figure 8.8 below to answer the questions that follow.  Figure 8.8
-Refer to Figure 8.8.The amount of planned investment increases if the interest rate
A)drops from 8% to 4%.
B)rises from 4% to 8%.
C)remains at 8%.
D)remains at 4%.

Accepted Answer

According to the graph, as the interest rate decreases from 8% to 4%, the amount of planned investment increases. Therefore, choice A is the correct answer.

Question 14

In macroeconomics,equilibrium is defined as that point at which
A)saving equals consumption.
B)planned aggregate expenditure equals aggregate output.
C)planned aggregate expenditure equals consumption.
D)aggregate output equals consumption minus investment.

Accepted Answer

Equilibrium is the point where planned aggregate expenditure (PAE) equals aggregate output (Y). PAE includes consumption, investment, government spending, and net exports. Therefore, choice B is the best option as it includes all components of PAE and is the most comprehensive definition of equilibrium in macroeconomics.

Question 15

Refer to the information provided in Figure 8.7 below to answer the questions that follow.  Figure 8.7
-Refer to Figure 8.7.In Azora,planned investment does not vary with income.Azora's planned investment function is represented by
A)Panel A.
B)Panel B.
C)Panel C.
D)Panel D.

Accepted Answer

Panel B shows a vertical line at a fixed level of planned investment regardless of changes in the level of income. This indicates that planned investment does not vary with income, which is stated in the question. Therefore, Panel B represents Azora's planned investment function.

Question 16

If unplanned business investment is $20 million and planned investment is $20 million,then actual investment is
A)-$20 million.
B)$20 million.
C)$40 million.
D)$200 million.

Accepted Answer

Actual investment is equal to the sum of planned investment and unplanned investment. Therefore, actual investment would be:

20 million + 20 million = 40 million

So, the correct answer is C.

Question 17

Refer to the information provided in Figure 8.8 below to answer the questions that follow.  Figure 8.8
-Refer to Figure 8.8.The amount of planned investment decreases if the interest rate
A)drops from 8% to 4%.
B)rises from 4% to 8%.
C)remains at 8%.
D)remains at 4%.

Accepted Answer

According to the graph, as interest rate rises from 4% to 8%, the planned investment decreases from $500 billion to $400 billion, indicating an inverse relationship between interest rate and planned investment. Therefore, option B is the correct answer.

Question 18

Refer to the information provided in Figure 8.7 below to answer the questions that follow.  Figure 8.7
-Refer to Figure 8.7.In Farley,planned investment varies inversely with income.Farley's planned investment function is represented by
A)Panel A.
B)Panel B.
C)Panel C.
D)Panel D.

Accepted Answer

The answer of Refer to the information provided in Figure...

Question 19

Keynes used the phrase animal spirits to describe the feelings of entrepreneurs,and he argued that these feelings affect investment decisions.

Accepted Answer

Keynes did use the phrase "animal spirits" to refer to the emotions and attitudes of entrepreneurs, and he believed that these feelings had a significant impact on their investment decisions.

Question 20

Related to the Economics in Practice on p.464: Early results from the Save More Tomorrow retirement plans have shown ________ in the savings rates of the enrolled.
A)very little change
B)mixed results
C)significant decreases
D)dramatic increases

Accepted Answer

Early results from the Save More Tomorrow retirement plans have shown dramatic increases in the savings rates of the enrolled. This program encourages employees to commit to increasing their savings rate every time they receive a raise, leading to significant long-term savings.

Quiz 8: Aggregate Expenditure and Equilibrium Output

Firms react to an unplanned inventory investment by increasing output.

Firms react to negative inventory investment by increasing output.

If planned investment exceeds actual investment,

Without the government or the foreign sector in the income-expenditure model,planned aggregate expenditure equals

If actual investment is greater than planned investment,unplanned inventories decline.

If planned investment is perfectly responsive to changes in the interest rate,the planned investment schedule

Refer to the information provided in Table 8.3 below to answer the questions that follow. Table 8.3 A Hypothetical Investment Schedule -Refer to Table 8.3.If the interest rate dropped from 15% to 6%,planned investment would by $ billion.

If planned investment is perfectly unresponsive to changes in the interest rate,the planned investment schedule

In 2012 Happyland's planned investment was $90 billion and its actual investment was $140 billion.In 2012 Happyland's unplanned inventory change was

If planned investment increases,equilibrium will be restored only when saving has increased by exactly the amount of the initial increase in planned investment,assuming there is no government or foreign sector.

If Inventory investment is higher than firms planned,

Refer to the information provided in Figure 8.8 below to answer the questions that follow. Figure 8.8 -Refer to Figure 8.8.The amount of planned investment increases if the interest rate

In macroeconomics,equilibrium is defined as that point at which

Refer to the information provided in Figure 8.7 below to answer the questions that follow. Figure 8.7 -Refer to Figure 8.7.In Azora,planned investment does not vary with income.Azora's planned investment function is represented by

If unplanned business investment is $20 million and planned investment is $20 million,then actual investment is

Refer to the information provided in Figure 8.8 below to answer the questions that follow. Figure 8.8 -Refer to Figure 8.8.The amount of planned investment decreases if the interest rate

Refer to the information provided in Figure 8.7 below to answer the questions that follow. Figure 8.7 -Refer to Figure 8.7.In Farley,planned investment varies inversely with income.Farley's planned investment function is represented by

Keynes used the phrase animal spirits to describe the feelings of entrepreneurs,and he argued that these feelings affect investment decisions.

Related to the Economics in Practice on p.464: Early results from the Save More Tomorrow retirement plans have shown ________ in the savings rates of the enrolled.

Quiz 8: Aggregate Expenditure and Equilibrium Output

Firms react to an unplanned inventory investment by increasing output.

Firms react to negative inventory investment by increasing output.

If planned investment exceeds actual investment,

Without the government or the foreign sector in the income-expenditure model,planned aggregate expenditure equals

If actual investment is greater than planned investment,unplanned inventories decline.

If planned investment is perfectly responsive to changes in the interest rate,the planned investment schedule

Refer to the information provided in Table 8.3 below to answer the questions that follow. Table 8.3 A Hypothetical Investment Schedule -Refer to Table 8.3.If the interest rate dropped from 15% to 6%,planned investment would ________ by $________ billion.

If planned investment is perfectly unresponsive to changes in the interest rate,the planned investment schedule

In 2012 Happyland's planned investment was $90 billion and its actual investment was $140 billion.In 2012 Happyland's unplanned inventory change was

If planned investment increases,equilibrium will be restored only when saving has increased by exactly the amount of the initial increase in planned investment,assuming there is no government or foreign sector.

If Inventory investment is higher than firms planned,

Refer to the information provided in Figure 8.8 below to answer the questions that follow. Figure 8.8 -Refer to Figure 8.8.The amount of planned investment increases if the interest rate

In macroeconomics,equilibrium is defined as that point at which

Refer to the information provided in Figure 8.7 below to answer the questions that follow. Figure 8.7 -Refer to Figure 8.7.In Azora,planned investment does not vary with income.Azora's planned investment function is represented by

If unplanned business investment is $20 million and planned investment is $20 million,then actual investment is

Refer to the information provided in Figure 8.8 below to answer the questions that follow. Figure 8.8 -Refer to Figure 8.8.The amount of planned investment decreases if the interest rate

Refer to the information provided in Figure 8.7 below to answer the questions that follow. Figure 8.7 -Refer to Figure 8.7.In Farley,planned investment varies inversely with income.Farley's planned investment function is represented by

Keynes used the phrase animal spirits to describe the feelings of entrepreneurs,and he argued that these feelings affect investment decisions.

Related to the Economics in Practice on p.464: Early results from the Save More Tomorrow retirement plans have shown ________ in the savings rates of the enrolled.

Refer to the information provided in Table 8.3 below to answer the questions that follow. Table 8.3 A Hypothetical Investment Schedule -Refer to Table 8.3.If the interest rate dropped from 15% to 6%,planned investment would by $ billion.