The following equations represent the relationships between different variables in a closed economy.

Answer the following questions:

1.The slope of the consumption function is_______ the slope of the total expenditure function *

a.Larger than

b.Smaller than

c.Equal to

d.Different from

2.RGDP at equilibrium is equal to: *

a.$ 88,000

b.$ 22,000

c.$ 80,000

3.If Investment decreases by $1,000; aggregate expenditure will *

a.Increase by $4,000

b.Decrease by $750

c.Increase by $750

d.Decrease by $4,000

4.The value of the marginal propensity to save () : *

a.0.75

b.0.5

c.0.7

d.0.25

5. The total expenditure function for the above closed economy is *

a.TE = 22,000+0.25

b.TE= 15,000 +0.75

c.TE= 12,000+0.25

d.TE= 22,000+0.75

A.The value of the marginal propensity to consume is: *

1.Between -1 and +1

2.Between 1 percent and 10 percent

3.Between 0 and 1

4.Between 1 and 10

B.The multiplier effect means that

1.An increase in investment will increase consumption by more than itself

2.An increase in investment will increase output by more than itself

3.An increase in investment will increase output by as much as itself

4.An increase in investment will increase saving by more than itself

C.Equilibrium GDP is determined by the intersection of the total expenditure function line with

1.The 45-degree line

2.The consumption schedule

3.The II schedule

4.None of the above

D.According to Keynes *

1.Consumption depends on disposable income

2.When disposable income changes, consumption changes by less

3.Consumption and disposable income move in opposite directions

4.Both a and b

E.Macroeconomic equilibrium occurs when *

1.Aggregate income = planned inventories

2.Total expenditure = total production

3.Aggregate income = planned inventories

4.Aggregate expenditure = C+ I + G + net transfers

Given the below table, answer the following 5 questions:

Answer the following questions:

A.If potential GDP is $5,000, the size of the gap is *

1.$2,000

2.$ 200

3.$250

4.$ 1,000

B.At an output level of $6,000, the level of unplanned investment is *

1.$ 400

2.$ 500

3.$ 200

4.$100

C.The multiplier is equal to *

1.0.75

2.4

3.2

4.5

D.Equilibrium output is equal to: *

1.$ 4,000

2.$ 4,750

3.$ 3,250

4.$3,000

E.If potential GDP is $5,000, government expenditures should change by ________to close the gap *

1.$ 100

2.$ 200

3.$500

4.$ 250

A.When the Marginal Propensity to Consume equals to 0.7 it means that *

1.For every one dollar increase in income, consumption will increase by 0.3 cent and saving will increase by 0.7 cent

2.For every one dollar increase in income, consumption will increase by 0.8 cent and saving will increase by 0.2 cent

3.For every one dollar increase in income, consumption will increase by 0.7 cent and saving will increase by 0.3 cent

4.Marginal propensity to save is also 0.7

B.Consumption spending will_______ when disposable income_______ *

1.Increase; decreases

2.Change unpredictably; decreases

3.Decrease; increases

4.Increase; increases

C.The aggregate supply curve in the Keynesian model *

1.Has both a horizontal and a vertical section

2.Is downward sloping

3.Is upward sloping

4.Both b and c

D.If aggregate expenditure is greater than GDP, how will the economy reach macroeconomic equilibrium? *

1.Inventories will rise, and GDP and employment will decline

2.Inventories will rise, and GDP and employment will rise

3.Inventories will decline, and GDP and employment will decline

4.Inventories will decline, and GDP and employment will rise

E.If autonomous consumption is 100 and the marginal propensity to consume is 0.8, the saving function is *

1.100+0.8Yd

2.-100+0.8Yd

3.-100+0.2Yd

4.100+0.2Yd