Macroeconomic Theory econ. 211
Prof. M. El-Sakka
Quiz No.3
1) 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.
Answer: C
2) What type of variables have their movements explained by theory?
A) endogenous
B) exogenous
C) autonomous
D) Both B and C
Answer: A
3) 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.
Answer: A
4) 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.
Answer: D
5) In equilibrium, with exports equal to imports it must be the case that
A) leakages equal injections.
B) saving plus taxes equal government expenditures plus investment.
C) total expenditures equal GDP.
D) All of these.
Answer: D
6) When an economy is in equilibrium
A) planned expenditures exceed production and income.
B) there is no savings nor investment.
C) government tax revenues equal planned government expenditures.
D) production and income equal planned expenditures.
Answer: D
7) If Ep is 3500 and Y is 3000 then
A) planned inventory accumulation is 500.
B) planned inventory depletion is 500.
C) unplanned inventory accumulation is 500.
D) unplanned inventory depletion is 500.
Answer: D
8) In the consumption function, suppose a = 60, c = 0.75, Y = 3000, and T = 800. Consumption
expenditure is
A) 2910.
B) 2245.
C) 1710.
D) 1590.
E) 1510.
Answer: C
9) Suppose a = 50, c = 0.8, and T = 410. How much is saved out of a total income of 1230?
A) 706
B) 606
C) 278
D) 196
E) 114
Answer: E
10) If Ap is total autonomous planned spending, c is the marginal propensity to consume, s is the
marginal propensity to save, and Y is the equilibrium income level, then
A) Ap/Y.
B) Y = Ap/s.
C) sY.
D) cAp.
Answer: B
11) If Y is income, E is actual expenditure, Ep is planned expenditure, and Iu is unintended inventory
investment, then
A) Y = E + Iu.
B) Iu = Y - E.
C) Y = Ep + Iu.
D) none of the above.
Answer: C
12) The IS curve represents
A) investment and saving when the commodity markets are in disequilibrium.
B) equilibrium in the commodity markets for every combination of interest rates and output level.
C) the determination of the level of interest rate.
D) the determination of the level of income and output.
Answer: B
13) The IS curve plots for each level of income the ________ that causes income to equal ________.
A) interest rate, planned expenditures
B) interest rate, planned autonomous spending
C) planned autonomous spending, planned expenditures
D) planned autonomous spending, planned autonomous spending
Answer: A