Overview
Chapter 11
The short-run macro model
Multiple Choice
1. In the short run,
a. spending determines income, but not the other way around
b. income determines spending, but not the other way around
c. spending determines the interest rate, but not the other way around
d. spending determines income, and income determines spending
e. spending determines the productivity, and productivity determines spending.
ANS: D PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic STA: DISC: Aggregate demand and aggregate supply
TOP: Consumption Spending KEY: Bloom’s: Comprehension
2. In the short run,
a. spending depends on income and income depends on spending
b. spending depends on income, but income does not depend on spending
c. income depends on spending, but spending does not depend on income
d. spending and income are independent of one another
e. spending is the only determinant of how much income an economy will produce
ANS: A PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic STA: DISC: Aggregate demand and aggregate supply
TOP: Consumption Spending KEY: Bloom’s: Comprehension
3. The short-run macro model
a. relies on the market-clearing assumption
b. is used primarily for long-run analysis
c. is used primarily for short-run analysis
d. focuses on the supply of and demand for resources
e. focuses on fluctuations in the financial markets to explain fluctuations in real GDP
ANS: C PTS: 1 DIF: Difficulty: Easy
NAT: BUSPROG: Analytic STA: DISC: Aggregate demand and aggregate supply
TOP: Consumption Spending KEY: Bloom’s: Comprehension
4. The short-run macro model is used most often to determine changes in
a. nominal output
b. net output
c. gross output
d. financial output
e. real output.
ANS: E PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic STA: DISC: Aggregate demand and aggregate supply
TOP: Consumption Spending KEY: Bloom’s: Comprehension
5. The focus of the short-run macro model is on the role of
a. spending in explaining economic fluctuations
b. labor in explaining economic fluctuations
c. financial markets in explaining economic fluctuations
d. output in explaining economic fluctuations
e. resources in explaining economic fluctuations.
ANS: A PTS: 1 DIF: Difficulty: Easy
NAT: BUSPROG: Analytic STA: DISC: Aggregate demand and aggregate supply
TOP: Consumption Spending KEY: Bloom’s: Comprehension
6. The largest component of aggregate expenditure is
a. consumption spending
b. investment spending
c. government purchases
d. net exports
e. a virtual tie between consumption spending and government purchases
ANS: A PTS: 1 DIF: Difficulty: Easy
NAT: BUSPROG: Analytic STA: DISC: Aggregate demand and aggregate supply
TOP: Consumption Spending KEY: Bloom’s: Knowledge
7. Disposable income is best defined as
a. income adjusted for inflation
b. nominal income
c. the income remaining after bills have been paid
d. income after taxes have been paid and transfers received
e. income paid in dollars that are worthless
ANS: D PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic STA: DISC: Aggregate demand and aggregate supply
TOP: Consumption Spending KEY: Bloom’s: Knowledge
8. Roughly what fraction of total spending is consumption spending?
a. One-half
b. One-eighth
c. Two-fifths
d. One-quarter
e. Two-thirds
ANS: E PTS: 1 DIF: Difficulty: Easy
NAT: BUSPROG: Analytic STA: DISC: Aggregate demand and aggregate supply
TOP: Consumption Spending KEY: Bloom’s: Knowledge
9. Which of the following describes the relationship among income, disposable income, taxes, and transfer payments?
a. Taxes plus transfers equal income plus disposable income
b. Disposable income equals income divided by the sum of taxes and transfers
c. Disposable income equals income minus taxes plus transfers
d. Disposable income equals income plus taxes plus transfers
e. Taxes plus transfers equal disposable income minus income
ANS: C PTS: 1 DIF: Difficulty: Easy
NAT: BUSPROG: Analytic STA: DISC: Aggregate demand and aggregate supply
TOP: Consumption Spending KEY: Bloom’s: Comprehension
10. The largest component of aggregate expenditure is
a. consumption spending
b. government purchases
c. net exports
d. capital expenditures
e. investment spending
ANS: A PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic STA: DISC: Aggregate demand and aggregate supply
TOP: Consumption Spending KEY: Bloom’s: Knowledge
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