1. John Maynard Keynes said business investment is determined mainly by
a. the state of business confidence
b. expectations about the future
c. psychological perceptions about the economy
d. all of the above
2. Assume that the Canada experiences higher inflation that the U.S. If other economic factors remain constant, one could predict that
a. net exports in Canada will increase
b. net exports in U.S will increase
c. net export will remain unchanged in Canada but will increase in the U.S
d. net export will remain unchanged in the U.S but will decrease in the Canada
e. net exports will be unchanged in both U.S and Canada
3. Government Stabilization policy
a. cannot influence investment spending
b. can stimulate aggregate demand and thereby induce business to invest, although the precise amount may be hard to predict
c. can stimulate aggregate demand, but investment spending will not be affected unless interest rtes fall
d. can stimulate aggregate demand in the long run, but short-run changes in aggregate demand are impossible to achieve with government stabilization policy
4. If C = 100+.75Y, I = 500 and (X-IM) = -200 then the equilibrium level of real GDP is
a. 400
b. 800
c. 1600
d.3200
5. If businesses spend an additional $400 billion on investment projects and the national income increases by $1,000 billion, what is the value of the multiplier?
a. 4
b. 3 1/3
c. 2 ½
d. 2
e. 1 ½
6. which of the following could initiate an upward shift in the consumption function?
a. increase in the natural income
b. decrease in the price level
c. increase in the income tax rate
d. stock market crash
7. If GDP rises in a strong economy, what will happen to net exports?
a. they will fall
b. they will increase
c. they will not change
d. it is not possible to predict
8. If the nation experiences a technological breakthrough in the production process, then
a. business cost will rise, profits will fall, and production will decrease.
b. business cost will fall, but profits also will fall; production will remain at the pro-breakthrough level
c. business cost will decline, improving profitability, and production will increase
d. firms will make higher profits but will not increase production unless the nation’s labor supply and capital stock also increase.
9. traditionally, government has used_________to influence_____________.
a. taxing and spending, the demand side of the economy
b. spending, the supply side of the economy
c. supply management, the supply side of the economy
d. micromanagement, the demand side of the economy
10. when taxes are increased, disposable, income, and hence consumption
a. increase
b. decrease
c. stays the same
d. may change in some unpredictable fashion
11. An active stabilization policy designed to limit the size of government would
a. raise G to eliminate a recessionary gap and lower taxes to eliminate an inflationary gap
b. raise G to eliminate a recessionary gap and raise taxes to eliminate an inflationary gap
c. reduce taxes to eliminate a recessionary gap and reduce G to eliminate an inflationary gap
d. reduce taxes to eliminate a recessionary gap and raise G to eliminate an inflationary gap
12. If the government sought to remove an inflationary gap, which of the following would be an appropriate policy?
a. decrease transfer payments
b. increase transfer payments
c. decrease taxes
d. increase government spending
e. increase transfer payments and decrease taxes
11. D.
put in the answers please
1. b
Wieners
1.C
2.C
3.C
4.B
5.D
6.B
7.A
8.C
9.A
10.B
11.C
12.B
1. The answer is d. all of the above. To arrive at this answer, we need to understand John Maynard Keynes' view on business investment. Keynes argued that business investment is influenced by a combination of factors, including the overall state of business confidence, expectations about the future, and psychological perceptions about the economy. Therefore, all of these factors are considered to determine business investment.
2. The answer is b. net exports in the U.S will increase. This prediction is based on the assumption that Canada experiences higher inflation than the U.S. When a country experiences higher inflation, its goods and services become more expensive relative to other countries. As a result, its exports become less competitive, leading to a decrease in net exports. On the other hand, the U.S, with lower inflation, will have relatively cheaper goods and services, making its exports more competitive and increasing net exports.
3. The answer is b. can stimulate aggregate demand and thereby induce business to invest, although the precise amount may be hard to predict. Government stabilization policy refers to actions taken by the government to manage fluctuations in the economy and stabilize aggregate demand. By implementing policies such as fiscal stimulus or monetary easing, the government can stimulate aggregate demand, which in turn may encourage businesses to invest. However, the exact impact on investment spending is hard to predict as it depends on various factors.
4. To find the equilibrium level of real GDP in this scenario, we need to equate aggregate demand (AD) with aggregate supply (AS). The given aggregate demand equation is C + I + (X-IM), and in equilibrium, when GDP is at its potential level, AD equals AS. Given that C = 100 + 0.75Y, I = 500, and (X-IM) = -200, we can substitute these values into the aggregate demand equation. By simplifying, we get AD = (100 + 0.75Y) + 500 - 200. Equating AD with AS, we get 100 + 0.75Y + 500 - 200 = Y. Simplifying further, we find 400 + 0.75Y = Y. Rearranging the equation and isolating Y, we get 0.25Y = 400. Solving for Y, we divide both sides by 0.25, yielding Y = 1600. Therefore, the equilibrium level of real GDP is c. 1600.
5. The value of the multiplier can be determined by calculating the ratio of the change in national income to the initial change in investment. In this case, if businesses spend an additional $400 billion on investment projects and the national income increases by $1,000 billion, we can use the formula multiplier = ΔY / ΔI, where ΔY is the change in national income and ΔI is the change in investment. Therefore, the multiplier = 1000 / 400, which equals 2.5. So, the value of the multiplier is c. 2 ½.
6. An upward shift in the consumption function can be initiated by factors that increase people's willingness and ability to consume. Among the given options, an increase in income would be the most likely factor to initiate an upward shift in the consumption function. When income increases, people tend to have more disposable income, leading to higher consumption levels.
7. If GDP rises in a strong economy, net exports (X-IM) are likely to decrease. This is because as GDP rises, domestic consumption and demand for imports also tend to increase. At the same time, foreign demand for exports may not increase proportionally. As a result, imports may increase more than exports, leading to a decrease in net exports.
8. The correct answer is c. Business cost will decline, improving profitability, and production will increase. A technological breakthrough in the production process typically leads to increased efficiency and lower costs for businesses. With improved profitability and reduced production costs, firms are likely to increase production.
9. The answer is a. taxing and spending, the demand side of the economy. Traditionally, the government has utilized taxing and spending policies to influence the demand side of the economy. By adjusting tax rates and implementing spending programs, the government can directly impact consumer and business spending, thereby influencing aggregate demand.
10. When taxes are increased, disposable income decreases, and hence consumption decreases. Taxes reduce the amount of income available for individuals to spend or save. Therefore, an increase in taxes leads to a decrease in disposable income, which in turn reduces consumer spending and consumption.
11. The answer is a. raise G to eliminate a recessionary gap and lower taxes to eliminate an inflationary gap. An active stabilization policy aims to address fluctuations in the economy by closing recessionary or inflationary gaps. When there is a recessionary gap (insufficient aggregate demand), the government can increase government spending (G) to stimulate demand and close the gap. Conversely, when there is an inflationary gap (excessive aggregate demand), the government can lower taxes to reduce disposable income and decrease demand, thereby closing the gap.
12. The answer is c. decrease taxes. To remove an inflationary gap (excessive aggregate demand), the government can implement contractionary fiscal policy measures. One such measure is to decrease taxes, which reduces disposable income and decreases consumer spending. This helps to decrease aggregate demand and bring it back in line with potential output, thereby removing the inflationary gap.