MULTIPLE CHOICE QUESTIONS TESTBANK –
CHAPTER 18
Go to memorandum
Answer the following questions by selecting the appropriate answer from the list below.
Question 1
In the Keynesian model, government expenditure:
A. is undertaken solely to regulate the level of spending.
B. increases with investment because investment increases the size of the tax base.
C. is taken to be autonomous because it is subject to government policy.
D. can be ignored because investment is taken to be the key determinant of income.
E. is determined by the level of tax revenue.
Question 2
In the Keynesian model, tax revenue:
A. does not appear in the aggregate expenditure function because it is always equal to
government expenditure.
B. is taken into account through its effect on consumption.
C. reduces equilibrium income because it reduces autonomous spending.
D. increases aggregate expenditure because government invariably increases its spending
when taxes rise.
E. is taken to be fixed because government expenditure is taken to be fixed.
Question 3
You are given the following information about a model closed economy (without a foreign sector).
The autonomous part of consumption is R100 billion. The marginal propensity to consume is equal
to 0,8. Investment is R460 billion. Government purchases of goods and services are R400 billion. The
tax rate is equal to 0,25. The equilibrium level of consumption is ________, and the equilibrium level
of income is ________.
A. R100 billion; R960 billion
B. R100 billion; R1 600 billion
C. R1 060 billion; R1 600 billion
D. R1 540 billion; R2 400 billion
E. R3 940 billion; R4 800 billion
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Question 4
In the Keynesian model, government expenditure:
A.
B.
C.
D.
E.
is undertaken solely to regulate the level of unemployment.
affects the size of the multiplier because it varies with income.
always increases when taxes increase because government has more to spend.
can be ignored if it equals the level of taxation.
is taken to be independent of income because government decides on the level.
Question 5
Which one of the following statements is correct? Autonomous government spending is:
A. positively related to the level of production and income.
B. negatively related to the level of production and income.
C. not related to the level of production and income.
Question 6
Which one of the following statements with regards to the introduction of government spending is
false?
A. The increase in the equilibrium level of income is equal to the increase in autonomous
spending.
B. The increase in the equilibrium level of income is a multiple of the increase in government
spending.
C. The increase in the equilibrium level of income is equal to the multiplier times the change in
government spending.
D. The introduction of government spending increases the amount of consumption spending
by households.
Question 7
Based on your knowledge of the simple Keynesian model for a closed economy, indicate which one
of the following is an inappropriate policy measure for a country in which unemployment is caused
by low aggregate spending.
A. Creating a more favourable environment for investment spending.
B. Encouraging households to save a larger proportion of their income to stimulate investment
spending.
C. Increased spending by the government on infrastructure.
D. Reducing the rate of taxation.
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Question 8
Which one of the following statements is incorrect? The introduction of government spending into
the simple Keynesian model:
A.
B.
C.
D.
E.
increases the level of aggregate spending.
increases the multiplier.
increases the equilibrium level of income.
leaves the slope of the aggregate spending function unchanged.
creates scope for fiscal policy.
Question 9
Which one of the following statements is incorrect? The introduction of taxation, in the form of a
proportional tax, into the simple Keynesian model:
A.
B.
C.
D.
E.
leaves autonomous spending unchanged.
decreases the multiplier.
decreases the equilibrium level of income.
increases the slope of the aggregate spending function.
creates scope for fiscal policy.
Question 10
Government spending:
A.
B.
C.
D.
E.
increases as income increases.
decreases as income increases.
is autonomous with respect to income.
increases the multiplier.
decreases the multiplier.
Question 11
Taxes:
A.
B.
C.
D.
E.
are an injection into the flow of income and spending.
raise the level of autonomous spending.
leave the multiplier unchanged.
are a withdrawal or leakage from the flow of income and spending.
lower the level of autonomous spending.
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Question 12
If the tax rate is increased:
A.
B.
C.
D.
E.
autonomous spending increases.
disposable income increases
the multiplier decreases.
the equilibrium level of income increases.
government spending increases.
Question 13
Which one of the following will not be affected by a change in the tax rate?
A.
B.
C.
D.
E.
The level of autonomous spending.
The equilibrium level of income.
Disposable income.
The multiplier.
Consumption spending by households.
Question 14
Which one of the following statements is incorrect?
A.
B.
C.
D.
E.
The introduction of a proportional income tax decreases the size of the multiplier.
The higher the tax rate, the smaller the multiplier becomes.
The introduction of a proportional income tax decreases the slope of the consumption
function.
Since taxes are paid to government, they constitute an injection into the circular flow of
income and spending in the economy.
Government spending does not affect the size of the multiplier.
Question 15
Which one of the following is not required to calculate the equilibrium level of income in a
Keynesian model of a closed economy (that is, an economy without a foreign sector)?
A.
B.
C.
D.
E.
The stock of money in the economy.
Government spending.
The tax rate.
Autonomous consumption.
The marginal propensity to consume.
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Question 16
In a Keynesian model of a closed economy, if total autonomous spending is R1 000 billion, the tax
rate is 0,2 (or 20%) and the marginal propensity to consume is 0,625, then the equilibrium level of
income is:
A.
B.
C.
D.
E.
R3 333 billion.
R1 250 billion.
R2 000 billion.
R1 600 billion.
impossible to calculate.
Question 17
If the government wishes to increase the equilibrium level of income by R100 million, it should:
A.
B.
C.
D.
E.
increase government spending by R100 million.
increase government spending by less than R100 million.
increase government spending by more than R100 million.
increase the tax rate.
decrease government spending by R100 million divided by the multiplier.
Question 18
In a Keynesian model of a closed economy, if autonomous consumption is R100 million, investment
spending is R200 million, government spending is R300 million, the marginal propensity to consume
is 0,8 and the tax rate is 0,25 (or 25%), the equilibrium level of income is:
A.
B.
C.
D.
E.
R4 000 million.
R3 000 million.
R2 000 million.
R1 500 million
R1 200 million.
Question 19
Which one of the following statements is correct?
A.
B.
C.
D.
E.
An increase in government spending increases the size of the multiplier.
A decrease in government spending decreases the size of the multiplier.
An increase in government spending decreases the size of the multiplier.
A decrease in government spending increases the size of the multiplier.
An increase in government spending leaves the multiplier unchanged.
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Question 20
Which one of the following will increase the size of the multiplier?
A.
B.
C.
D.
E.
An increase in government spending.
A decrease in government spending.
An increase in the tax rate.
A decrease in the tax rate.
None of the above.
Question 21
Which of the following statements is/are correct? In the Keynesian model, exports are not
influenced by:
i.
the level of demand in the domestic economy.
ii.
the level of demand in the outside world.
iii.
the exchange rate.
iv.
the level of imports.
A.
F.
G.
H.
I.
i and iv
i
ii, iii and iv
iii and iv
ii and iii
Question 22
In the Keynesian model, exports:
A.
B.
C.
D.
E.
remain unaffected by changes in output.
increase when income increases.
decrease when income decreases.
depend on the interest rate.
depend on government policy.
Question 23
In the Keynesian model, exports are taken to:
A.
B.
C.
D.
E.
be dependent on disposable income.
increase when output increases.
increase when imports increase.
be independent of local conditions.
decrease when imports increase.
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Question 24
Which of the following statements is/are correct? In the Keynesian model, imports:
i.
are always taken as independent of the level of income.
ii.
increase with the level of income.
iii.
decrease with the level of income.
iv.
are determined by government policy.
A.
B.
C.
D.
E.
i and iv
ii and iii
iv only
i only
None of the statements are correct.
Question 25
Which of the following statements is/are correct? In the full Keynesian model, imports:
i.
do not play any part.
ii.
are affected by the level of income.
iii.
are always taken as autonomous.
iv.
vary with the level of exports.
A.
B.
C.
D.
E.
i
ii
i and iii
ii and iv
iv
Question 26
Consider the information below. Use this information to answer Questions (a) to (c)
Consider a Keynesian model where:
full employment output
exports
the marginal propensity to import out of income
autonomous imports
the tax rate
investment
autonomous consumption
the marginal propensity to consume
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=
=
=
=
=
=
=
=
R80 million
R5 million
0,25
R5 million
0,25
R20 million
R15 million
0,6.
Question (a)
The value of the multiplier is:
A.
B.
C.
D.
E.
1,25
1,333
1,538
1,818
2,5
Question (b)
To bring about full employment, government spending should be:
A.
B.
C.
D.
E.
R0 million
R17 million
R29 million
R65 million
made equal to tax revenue
Question (c)
At the full employment level of output, the government budget will be in ________, and the
balance of payments on the current account will be in ________.
A.
B.
C.
D.
E.
deficit; deficit
deficit; surplus
surplus; deficit
surplus; surplus
This is not possible to determine from the information given.
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Question 27
Consider the following diagram, which depicts the Keynesian model of an open economy with
government, and answer Questions (a) and (b).
Question (a)
Y0 represents:
A.
B.
C.
D.
E.
the equilibrium level of income if the economy were closed.
the full employment level of income.
the equilibrium level of income if exports equal imports.
a level of income less than aggregate expenditure.
the level of income where exports equal imports.
Question (b)
The diagram depicts a situation where at equilibrium (Y1):
A.
B.
C.
D.
E.
domestic demand exceeds output.
exports exceed imports.
domestic demand is less than output.
aggregate expenditure is less than output.
aggregate expenditure exceeds output.
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Question 28
Use the data below and answer Questions (a) to (c).
C = R5 million
c = 6/7
t
= 3/10
m = 0
I
= R10 million
G = R15 million
X = R12 million
Z = R17 million
Question (a)
Which one of the following statements is true?
A.
B.
C.
D.
E.
When income is zero, private consumption spending is zero.
When income is zero, private investment spending is zero.
When income is zero, total spending is R25 million.
When income is zero, total spending is R30 million.
The slope of the aggregate expenditure curve is 6/7.
Question (b)
The value of the multiplier is:
A.
B.
C.
D.
E.
2,5
10
3,3
0,3
not possible to calculate from the available information.
Question (c)
The value of equilibrium income is:
A.
B.
C.
D.
E.
R62,5 million
R75 million
R7,5 million
R9 million
not possible to calculate from the available information.
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Question 29
Assume that the full-employment income level is higher than the equilibrium income level.
According to the Keynesian model, income can be increased if:
A.
B.
C.
D.
E.
the level of spending on imports is increased.
the level of government spending is increased.
the tax rate is increased in an effort to achieve a balanced budget.
exports decrease.
autonomous consumption decreases.
Question 30
The government of an open economy determines that the current equilibrium level of income in the
economy is lower than the full-employment level of income and wishes to close this gap. The
Minister of Economic Affairs hears that you have just studied the Keynesian model of the macroeconomy and approaches you for advice. Which one of the following suggestions would be
inappropriate in this context?
A.
B.
C.
D.
E.
Create a more favourable environment for investment spending.
Spend more on infrastructural projects (for example, the construction of new roads).
Encourage households to save a larger proportion of their annual income.
Reduce the rate of taxation.
Try to reduce imports by encouraging households and firms to purchase locallymanufactured consumer and capital goods.
Question 31
The government referred to in the previous question approaches you for advice about how to
increase the size of the Keynesian multiplier. Which one of the following would be appropriate in
this regard?
A.
B.
C.
D.
Increase the level of government spending.
Reduce the level of government spending.
Raise the tax rate.
Encourage households to spend a larger portion of each additional unit of income they
receive.
E. Encourage households to save a larger portion of each additional unit of income they receive.
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Question 32
Which of the following is a determinant of the size of the multiplier in the full Keynesian model?
A.
B.
C.
D.
E.
The marginal propensity to export.
The level of exports.
The level of aggregate expenditure.
The rate of taxation.
The equilibrium level of income.
Question 33
Use the data below to answer Questions (a) and (b).
Consider a Keynesian model where:
exports
the marginal propensity to import out of income
autonomous imports
the tax rate
government spending
investment
autonomous consumption
the marginal propensity to consume
=
=
=
=
=
=
=
=
Question (a)
The value of the multiplier is:
A.
B.
C.
D.
E.
1,333
1,667
2,5
4
not possible to calculate from the information given.
Question (b)
The equilibrium level of aggregate spending is:
A.
B.
C.
D.
E.
R60 million
R80 million
R100 million
R150 million
R240 million
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R10 million
0,35
R10 million
0,2
R25 million
R20 million
R15 million
0,75
Question 34
Consider the following diagram, which depicts the Keynesian model of an open economy with
government, and answer Questions (a) and (b).
Question (a)
An increase in the marginal propensity to import will:
A.
B.
C.
D.
E.
lower the intercept of the curve labelled A2 without changing its slope.
raise the intercept of the curve labelled A2 without changing its slope.
make the curve labelled A2less steep, leaving its intercept unchanged.
make the curve labelled A2 steeper, leaving its intercept unchanged.
change both the intercept and the slope.
Question (b)
A decrease in the tax rate will:
A.
B.
C.
D.
E.
raise the slope of curve A2 but leave A1 unchanged.
raise the slopes of both curves A2 and A1.
raise the intercept of curve A2 but leave A1 unchanged.
raise the intercepts of both curves A2 and A1.
have no effect on either curve.
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MEMORANDUM
Go back to Multiple Choice Questions
Answer the following questions by selecting the appropriate answer from the list below.
Question 1
In the Keynesian model, government expenditure:
A. is undertaken solely to regulate the level of spending.
B. increases with investment because investment increases the size of the tax base.
C. is taken to be autonomous because it is subject to government policy.
D. can be ignored because investment is taken to be the key determinant of income.
E. is determined by the level of tax revenue.
Question 2
In the Keynesian model, tax revenue:
A. does not appear in the aggregate expenditure function because it is always equal to
government expenditure.
B. is taken into account through its effect on consumption.
C. reduces equilibrium income because it reduces autonomous spending.
D. increases aggregate expenditure because government invariably increases its spending
when taxes rise.
E. is taken to be fixed because government expenditure is taken to be fixed.
Question 3
You are given the following information about a model closed economy (without a foreign sector).
The autonomous part of consumption is R100 billion. The marginal propensity to consume is equal
to 0,8. Investment is R460 billion. Government purchases of goods and services are R400 billion. The
tax rate is equal to 0,25. The equilibrium level of consumption is ________, and the equilibrium level
of income is ________.
A. R100 billion; R960 billion
B. R100 billion; R1 600 billion
C. R1 060 billion; R1 600 billion
D. R1 540 billion; R2 400 billion
E. R3 940 billion; R4 800 billion
Question 4
In the Keynesian model, government expenditure:
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A.
B.
C.
D.
E.
is undertaken solely to regulate the level of unemployment.
affects the size of the multiplier because it varies with income.
always increases when taxes increase because government has more to spend.
can be ignored if it equals the level of taxation.
is taken to be independent of income because government decides on the level.
Question 5
Which one of the following statements is correct? Autonomous government spending is:
A. positively related to the level of production and income.
B. negatively related to the level of production and income.
C. not related to the level of production and income.
Question 6
Which one of the following statements with regards to the introduction of government spending is
false?
A. The increase in the equilibrium level of income is equal to the increase in autonomous
spending.
B. The increase in the equilibrium level of income is a multiple of the increase in government
spending.
C. The increase in the equilibrium level of income is equal to the multiplier times the change in
government spending.
D. The introduction of government spending increases the amount of consumption spending
by households.
Question 7
Based on your knowledge of the simple Keynesian model for a closed economy, indicate which one
of the following is an inappropriate policy measure for a country in which unemployment is caused
by low aggregate spending.
A. Creating a more favourable environment for investment spending.
B. Encouraging households to save a larger proportion of their income to stimulate investment
spending.
C. Increased spending by the government on infrastructure.
D. Reducing the rate of taxation.
Question 8
Which one of the following statements is incorrect? The introduction of government spending into
the simple Keynesian model:
A.
B.
C.
increases the level of aggregate spending.
increases the multiplier.
increases the equilibrium level of income.
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D.
E.
leaves the slope of the aggregate spending function unchanged.
creates scope for fiscal policy.
Question 9
Which one of the following statements is incorrect? The introduction of taxation, in the form of a
proportional tax, into the simple Keynesian model:
A.
B.
C.
D.
E.
leaves autonomous spending unchanged.
decreases the multiplier.
decreases the equilibrium level of income.
increases the slope of the aggregate spending function.
creates scope for fiscal policy.
Question 10
Government spending:
A.
B.
C.
D.
E.
increases as income increases.
decreases as income increases.
is autonomous with respect to income.
increases the multiplier.
decreases the multiplier.
Question 11
Taxes:
A.
B.
C.
D.
E.
are an injection into the flow of income and spending.
raise the level of autonomous spending.
leave the multiplier unchanged.
are a withdrawal or leakage from the flow of income and spending.
lower the level of autonomous spending.
Question 12
If the tax rate is increased:
A.
B.
C.
D.
E.
autonomous spending increases.
disposable income increases
the multiplier decreases.
the equilibrium level of income increases.
government spending increases.
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Question 13
Which one of the following will not be affected by a change in the tax rate?
A.
B.
C.
D.
E.
The level of autonomous spending.
The equilibrium level of income.
Disposable income.
The multiplier.
Consumption spending by households.
Question 14
Which one of the following statements is incorrect?
A. The introduction of a proportional income tax decreases the size of the multiplier.
B. The higher the tax rate, the smaller the multiplier becomes.
C. The introduction of a proportional income tax decreases the slope of the consumption
function.
D. Since taxes are paid to government, they constitute an injection into the circular flow of
income and spending in the economy.
E. Government spending does not affect the size of the multiplier.
Question 15
Which one of the following is not required to calculate the equilibrium level of income in a
Keynesian model of a closed economy (that is, an economy without a foreign sector)?
A.
B.
C.
D.
E.
The stock of money in the economy.
Government spending.
The tax rate.
Autonomous consumption.
The marginal propensity to consume.
Question 16
In a Keynesian model of a closed economy, if total autonomous spending is R1 000 billion, the tax
rate is 0,2 (or 20%) and the marginal propensity to consume is 0,625, then the equilibrium level of
income is:
A.
B.
C.
D.
E.
R3 333 billion.
R1 250 billion.
R2 000 billion.
R1 600 billion.
impossible to calculate.
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Question 17
If the government wishes to increase the equilibrium level of income by R100 million, it should:
A.
B.
C.
D.
E.
increase government spending by R100 million.
increase government spending by less than R100 million.
increase government spending by more than R100 million.
increase the tax rate.
decrease government spending by R100 million divided by the multiplier.
Question 18
In a Keynesian model of a closed economy, if autonomous consumption is R100 million, investment
spending is R200 million, government spending is R300 million, the marginal propensity to consume
is 0,8 and the tax rate is 0,25 (or 25%), the equilibrium level of income is:
A.
B.
C.
D.
E.
R4 000 million.
R3 000 million.
R2 000 million.
R1 500 million
R1 200 million.
Question 19
Which one of the following statements is correct?
A.
B.
C.
D.
E.
An increase in government spending increases the size of the multiplier.
A decrease in government spending decreases the size of the multiplier.
An increase in government spending decreases the size of the multiplier.
A decrease in government spending increases the size of the multiplier.
An increase in government spending leaves the multiplier unchanged.
Question 20
Which one of the following will increase the size of the multiplier?
A.
B.
C.
D.
E.
An increase in government spending.
A decrease in government spending.
An increase in the tax rate.
A decrease in the tax rate.
None of the above.
Question 21
Which of the following statements is/are correct? In the Keynesian model, exports are not
influenced by:
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i.
ii.
iii.
iv.
the level of demand in the domestic economy.
the level of demand in the outside world.
the exchange rate.
the level of imports.
A. i and ivi
B. ii, iii and iv
C. iii and iv
D. ii and iii
Question 22
In the Keynesian model, exports:
A.
B.
C.
D.
E.
remain unaffected by changes in output.
increase when income increases.
decrease when income decreases.
depend on the interest rate.
depend on government policy.
Question 23
In the Keynesian model, exports are taken to:
A.
B.
C.
D.
E.
be dependent on disposable income.
increase when output increases.
increase when imports increase.
be independent of local conditions.
decrease when imports increase.
Question 24
Which of the following statements is/are correct? In the Keynesian model, imports:
i.
are always taken as independent of the level of income.
ii.
increase with the level of income.
iii.
decrease with the level of income.
iv.
are determined by government policy.
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A.
B.
C.
D.
E.
i and iv
ii and iii
iv only
i only
None of the statements are correct.
Question 25
Which of the following statements is/are correct? In the full Keynesian model, imports:
i.
do not play any part.
ii.
are affected by the level of income.
iii.
are always taken as autonomous.
iv.
vary with the level of exports.
A.
B.
C.
D.
E.
i
ii
i and iii
ii and iv
iv
Question 26
Consider the information below. Use this information to answer Questions (a) to (c)
Consider a Keynesian model where:
full employment output
exports
the marginal propensity to import out of income
autonomous imports
the tax rate
investment
autonomous consumption
the marginal propensity to consume
Question (a)
The value of the multiplier is:
A.
B.
C.
D.
E.
1,25
1,333
1,538
1,818
2,5
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=
=
=
=
=
=
=
=
R80 million
R5 million
0,25
R5 million
0,25
R20 million
R15 million
0,6.
Question (b)
To bring about full employment, government spending should be:
A.
B.
C.
D.
E.
R0 million
R17 million
R29 million
R65 million
made equal to tax revenue
Question (c)
At the full employment level of output, the government budget will be in ________, and the
balance of payments on the current account will be in ________.
A.
B.
C.
D.
E.
deficit; deficit
deficit; surplus
surplus; deficit
surplus; surplus
This is not possible to determine from the information given.
© VAN SCHAIK PUBLISHERS
Question 27
Consider the following diagram, which depicts the Keynesian model of an open economy with
government, and answer Questions (a) and (b).
Question (a)
Y0 represents:
A.
B.
C.
D.
E.
the equilibrium level of income if the economy were closed.
the full employment level of income.
the equilibrium level of income if exports equal imports.
a level of income less than aggregate expenditure.
the level of income where exports equal imports.
Question (b)
The diagram depicts a situation where at equilibrium (Y1):
A.
B.
C.
D.
E.
domestic demand exceeds output.
exports exceed imports.
domestic demand is less than output.
aggregate expenditure is less than output.
aggregate expenditure exceeds output.
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Question 28
Use the data below and answer Questions (a) to (c).
C = R5 million
c = 6/7
t
= 3/10
m = 0
I
= R10 million
G = R15 million
X = R12 million
Z = R17 million
Question (a)
Which one of the following statements is true?
A.
B.
C.
D.
E.
When income is zero, private consumption spending is zero.
When income is zero, private investment spending is zero.
When income is zero, total spending is R25 million.
When income is zero, total spending is R30 million.
The slope of the aggregate expenditure curve is 6/7.
Question (b)
The value of the multiplier is:
A.
B.
C.
D.
E.
2,5
10
3,3
0,3
not possible to calculate from the available information.
Question (c)
The value of equilibrium income is:
A.
B.
C.
D.
E.
R62,5 million
R75 million
R7,5 million
R9 million
not possible to calculate from the available information.
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Question 29
Assume that the full-employment income level is higher than the equilibrium income level.
According to the Keynesian model, income can be increased if:
A.
B.
C.
D.
E.
the level of spending on imports is increased.
the level of government spending is increased.
the tax rate is increased in an effort to achieve a balanced budget.
exports decrease.
autonomous consumption decreases.
Question 30
The government of an open economy determines that the current equilibrium level of income in the
economy is lower than the full-employment level of income and wishes to close this gap. The
Minister of Economic Affairs hears that you have just studied the Keynesian model of the macroeconomy and approaches you for advice. Which one of the following suggestions would be
inappropriate in this context?
A.
B.
C.
D.
E.
Create a more favourable environment for investment spending.
Spend more on infrastructural projects (for example, the construction of new roads).
Encourage households to save a larger proportion of their annual income.
Reduce the rate of taxation.
Try to reduce imports by encouraging households and firms to purchase locallymanufactured consumer and capital goods.
Question 31
The government referred to in the previous question approaches you for advice about how to
increase the size of the Keynesian multiplier. Which one of the following would be appropriate in
this regard?
A.
B.
C.
D.
Increase the level of government spending.
Reduce the level of government spending.
Raise the tax rate.
Encourage households to spend a larger portion of each additional unit of income they
receive.
E. Encourage households to save a larger portion of each additional unit of income they receive.
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Question 32
Which of the following is a determinant of the size of the multiplier in the full Keynesian model?
A.
B.
C.
D.
E.
The marginal propensity to export.
The level of exports.
The level of aggregate expenditure.
The rate of taxation.
The equilibrium level of income.
Question 33
Use the data below to answer Questions (a) and (b).
Consider a Keynesian model where:
exports
the marginal propensity to import out of income
autonomous imports
the tax rate
government spending
investment
autonomous consumption
the marginal propensity to consume
Question (a)
The value of the multiplier is:
A.
B.
C.
D.
E.
1,333
1,667
2,5
4
not possible to calculate from the information given.
Question (b)
The equilibrium level of aggregate spending is:
A.
B.
C.
D.
E.
R60 million
R80 million
R100 million
R150 million
R240 million
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=
=
=
=
=
=
=
=
R10 million
0,35
R10 million
0,2
R25 million
R20 million
R15 million
0,75
Question 34
Consider the following diagram, which depicts the Keynesian model of an open economy with
government, and answer Questions (a) and (b).
Question (a)
An increase in the marginal propensity to import will:
A.
B.
C.
D.
E.
lower the intercept of the curve labelled A2 without changing its slope.
raise the intercept of the curve labelled A2 without changing its slope.
make the curve labelled A2less steep, leaving its intercept unchanged.
make the curve labelled A2 steeper, leaving its intercept unchanged.
change both the intercept and the slope.
Question (b)
A decrease in the tax rate will:
A.
B.
C.
D.
E.
raise the slope of curve A2 but leave A1 unchanged.
raise the slopes of both curves A2 and A1.
raise the intercept of curve A2 but leave A1 unchanged.
raise the intercepts of both curves A2 and A1.
have no effect on either curve.
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