Pick the correct answer. Give an explanation for each answer.

1.A private closed economy includes:

A.households, businesses, and government, but not international trade.

B.households, businesses, and international trade, but not government.

C.households and businesses, but not government or international trade.

D.households only.

2.The equilibrium level of GDP in a private closed economy is where:

A.MPC = APC.

B.unemployment is about 3 percent of the labor force.

C.consumption equals saving.

D.aggregate expenditures equal GDP.

3.The equilibrium level of GDP is associated with:

A.an excess of planned investment over saving.

B.no unintended changes in inventories.

C.an unintended decrease in business inventories.

D.an unintended increase in business inventories.

4.Suppose that the level of GDP increased by $100 billion in a private closed economy where the marginal propensity to consume is 0.5. Aggregate expenditures must have increased by:

A.$100 billion.

B.$50 billion.

C.$500 billion.

D.$5 billion.

5.If a $10 billion decrease in lump-sum taxes increases equilibrium GDP by $40 billion then:

A.the multiplier is 4.

B.the MPC for this economy is .8.

C.the MPC for this economy is .6.

D.the multiplier is 3.

6.An increase in the investment demand curve will:

A.Shift the investment schedule downward

B.Shift the investment schedule upward

C.Decrease the quantity of investment

D.Decrease the real rate of interest

7.Saving and investment are, respectively:

A.An injection and a leakage

B.A leakage and an injection

C.Wealth and income

D.Income and wealth

8.If GDP exceeds aggregate expenditures:

A.Saving will exceed planned investment

B.Planned investment will exceed saving

C.Planned investment will exceed actual investment

D.Injections will exceed leakages

9.Over time, an increase in the real output and incomes of Canada's trading partners will:

A.Increase Canadian U.S. exports and Canadianimports

B.Decrease Canadian exports and Canadian imports

C.Increase Canadian exports and decrease Canadian imports

D.Decrease Canadianexports and increase Canadian imports

10.The amount by which an aggregate expenditures schedule must shift downward to eliminate demand-pull inflation and still achieve the full-employment GDP is a(n):

A.Inflationary expenditure gap

B.Recessionary expenditure gap

C.Depreciation rate

D.Price-level change