Question 1

The formula for the spending multiplier in model with variable net exports trade equals 1/(MPS + MPM).

Accepted Answer

A) True 
 B)False

Question 2

If net exports increase by $400 billion at every level of income,the aggregate expenditure line will

Accepted Answer

A)   shift upward by $400 billion
B)   shift downward by $400 billion
C)   shift upward by more than $400 billion because of the multiplier effect
D)   shift upward by less than $400 billion
E)   shift downward by more than $400 billion because of the multiplier effectF) A) and E)
G) None of the above

Question 3

In a model which includes variable net exports,the spending multiplier equals 1/(MPS + MPM).

Accepted Answer

A) True 
 B)False

Question 4

Exhibit 10-7
 
-In Exhibit 10-7,the marginal propensity to consume is

Accepted Answer

A)   0.3
B)   0.1
C)   0.7
D)   0.4
E)   0.2F) B) and C)
G) None of the above

Question 5

An economy that engages in international trade will have a steeper aggregate expenditure line than one that is the same in all other respects,except for the absence of international trade.

Accepted Answer

A) True 
 B)False  False

Question 6

The larger the marginal propensity to import,the __________ during each round of spending and __________ the resulting spending multiplier.

Accepted Answer

A)   greater the leakage; the smaller
B)   smaller the leakage; the smaller
C)   smaller the leakage; the larger
D)   greater the leakage; the larger
E)   smaller the injection; the largerF) A) and C)
G) B) and C)

Question 7

When variable net exports are added to the aggregate expenditure line,the resulting planned aggregate expenditure line becomes

Accepted Answer

A)   steeper because net exports increase as real domestic income increases
B)   flatter because net exports increase as real domestic income increases
C)   steeper because net exports decrease as real domestic income increases
D)   flatter because net exports decrease as real domestic income increases
E)   flatter because imports decrease as real domestic income increasesF) A) and B)
G) B) and E) D

Question 8

Adding net exports to aggregate expenditure always

Accepted Answer

A)   increases real GDP
B)   shifts the aggregate expenditure line down
C)   increases the slope of the aggregate expenditure line
D)   decreases the slope of the aggregate expenditure line
E)   decreases GDPF) A) and B)
G) A) and E)

Question 9

If the marginal propensity to consume (MPC) equals 0.75 (3/4) and the multiplier equals 2.0,the marginal propensity to import (MPM) must equal

Accepted Answer

A)   0.25
B)   0.50
C)   0.75
D)   1.00
E)   1.25F) B) and C)
G) None of the above

Question 10

A more realistic approach has net exports varying __________ with income.

Accepted Answer

A)   positively
B)   independently
C)   directly
D)   inversely
E)   None of the answers is correctF) B) and D)
G) All of the above

Question 11

If the marginal propensity to import (MPM) equals 0.10 and the multiplier equals 5.0,the marginal propensity to consume must equal

Accepted Answer

A)   0.99
B)   0.95
C)   0.90
D)   0.85
E)   0.50F) B) and C)
G) A) and E)

Question 12

When variable net exports are included in aggregate expenditures,the two leakages from the circular flow are

Accepted Answer

A)   exports and saving
B)   exports and consumption
C)   exports and investment
D)   imports and saving
E)   imports and investmentF) All of the above
G) B) and C)

Question 13

If net exports increase by $450 billion at every level of income,equilibrium real GDP demanded will

Accepted Answer

A)   increase by $450 billion
B)   decrease by $450 billion
C)   increase by more than $450 billion because of the multiplier effect
D)   increase by less than $450 billion
E)   decrease by more than $450 billion because of the multiplier effectF) C) and D)
G) A) and C)

Question 14

The marginal propensity to import is defined as

Accepted Answer

A)   the fraction of each additional dollar of income that is spent on imported products
B)   the fraction of each additional dollar of income that is spent on exports minus imports
C)   the amount spent on imports at each level of income
D)   the change in income divided by the change in imports
E)   the level of imports divided by the level of incomeF) C) and D)
G) D) and E)

Question 15

If the MPS = 0.25 and the MPM = 0.25,the spending multiplier with net exports equals

Accepted Answer

A)   5
B)   4
C)   3
D)   2
E)   1F) A) and D)
G) A) and C)

Question 16

The spending multiplier with variable net exports is

Accepted Answer

A)   (1 + MP
C)  /MPM
B)   1/(1 - MP
C)  
C)   1/(1 - MPC + MPM) 
D)   1/(1 - MPC - MPM) 
E)   MPC/MPMF) A) and B)
G) B) and C)

Question 17

When net exports are included in the aggregate expenditure function,the spending multiplier

Accepted Answer

A)   increases
B)   decreases
C)   is affected only if exports are greater than imports
D)   is affected only if exports are less than imports
E)   is affected only if exports are equal to importsF) D) and E)
G) B) and C)

Question 18

Imports increase as domestic income increases.

Accepted Answer

A) True 
 B)False

Question 19

If variable net exports increase by the same amount at every level of income,then there is an upward and parallel shift of the net export line.

Accepted Answer

A) True 
 B)False  True

Question 20

If the MPC equals 0.7 and the MPM equals 0.10,then the spending multiplier equals

Accepted Answer

A)   10
B)   9
C)   5
D)   3.3
E)   1.1F) A) and E)
G) C) and D)

Exam 24: Variable Net Exports Revisited

The formula for the spending multiplier in model with variable net exports trade equals 1/(MPS + MPM).

Correct AnswerverifiedShow Answer

If net exports increase by $400 billion at every level of income,the aggregate expenditure line will

Correct AnswerverifiedShow Answer

In a model which includes variable net exports,the spending multiplier equals 1/(MPS + MPM).

Correct AnswerverifiedShow Answer

Exhibit 10-7 -In Exhibit 10-7,the marginal propensity to consume is

Correct AnswerverifiedShow Answer

An economy that engages in international trade will have a steeper aggregate expenditure line than one that is the same in all other respects,except for the absence of international trade.

Correct AnswerverifiedFalse

The larger the marginal propensity to import,the __________ during each round of spending and __________ the resulting spending multiplier.

Correct AnswerverifiedShow Answer

When variable net exports are added to the aggregate expenditure line,the resulting planned aggregate expenditure line becomes

Correct AnswerverifiedD

Adding net exports to aggregate expenditure always

Correct AnswerverifiedShow Answer

If the marginal propensity to consume (MPC) equals 0.75 (3/4) and the multiplier equals 2.0,the marginal propensity to import (MPM) must equal

Correct AnswerverifiedShow Answer

A more realistic approach has net exports varying __________ with income.

Correct AnswerverifiedShow Answer

If the marginal propensity to import (MPM) equals 0.10 and the multiplier equals 5.0,the marginal propensity to consume must equal

Correct AnswerverifiedShow Answer

When variable net exports are included in aggregate expenditures,the two leakages from the circular flow are

Correct AnswerverifiedShow Answer

If net exports increase by $450 billion at every level of income,equilibrium real GDP demanded will

Correct AnswerverifiedShow Answer

The marginal propensity to import is defined as

Correct AnswerverifiedShow Answer

If the MPS = 0.25 and the MPM = 0.25,the spending multiplier with net exports equals

Correct AnswerverifiedShow Answer

The spending multiplier with variable net exports is

Correct AnswerverifiedShow Answer

When net exports are included in the aggregate expenditure function,the spending multiplier

Correct AnswerverifiedShow Answer

Imports increase as domestic income increases.

Correct AnswerverifiedShow Answer

If variable net exports increase by the same amount at every level of income,then there is an upward and parallel shift of the net export line.

Correct AnswerverifiedTrue

If the MPC equals 0.7 and the MPM equals 0.10,then the spending multiplier equals

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
False

The larger the marginal propensity to import,the during each round of spending and the resulting spending multiplier.

Correct Answer
verified

Correct Answer
verified
D

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
True

Correct Answer
verified