Macroeconomics 9th Edition by William Boyes – Test Bank

Macroeconomics 9th Edition by William Boyes – Test Bank

Chapter 10 Income and Expenditures Equilibrium

MULTIPLE CHOICE

1. In macroeconomics, equilibrium is defined as the point at which:
a. the economy attains the highest level of GDP.
b. there is no unemployment in the economy.
c. people’s plans match the reality.
d. people adjust their behavior to match plans with reality.
e. there is no inflation in the economy.

ANS: C DIF: Easy REF: 1 OBJ: ch. 10, 1
NAT: Analytic | Equilibrium TOP: Equilibrium Income and Expenditures
MSC: Knowledge

2. The equilibrium level of income will rise when:
a. planned consumption spending is less than real GDP.
b. taxes exceed saving.
c. supply exceeds demand.
d. planned inventory investment is negative.
e. aggregate expenditures exceed real GDP.

ANS: E DIF: Easy REF: 1.a OBJ: ch. 10, 2
NAT: Analytic | Equilibrium TOP: Equilibrium Income and Expenditures
MSC: Knowledge

3. If aggregate expenditures are less than real GDP, then:
a. both inventories and real GDP will decline.
b. inventories will decline but real GDP will increase.
c. inventories will increase and real GDP will decline.
d. both inventories and real GDP will increase.
e. inventories will increase but real GDP will remain unchanged.

ANS: C DIF: Easy REF: Ch 10, 1.a OBJ: ch. 10, 2
NAT: Analytic | Equilibrium TOP: Equilibrium Income and Expenditures
MSC: Knowledge

4. At the equilibrium level of income, which of the following is true?
a. Unplanned inventory changes are positive
b. Firms are unable to produce the desired rate of output
c. Autonomous consumption spending is equal to induced consumption spending
d. Aggregate expenditures equal real GDP
e. Unplanned investment spending is positive

ANS: D DIF: Moderate REF: 1.a OBJ: ch. 10, 2
NAT: Analytic | Equilibrium TOP: Equilibrium Income and Expenditures
MSC: Knowledge

NARRBEGIN: Figure 10.1
The figure given below shows the aggregate expenditure curve of an open economy.
Figure 10.1

In the figure:
C1: Consumption
I1: Investment
G1: Government spending
X1: Net Exports
NARREND

5. Consider the economy described in Figure 10.1. Which of the following is true if the real GDP is equal to 0H?
a. Aggregate expenditures are greater than total income.
b. All economic resources are being used efficiently.
c. Households are dissaving an amount equal to DC.
d. Businesses accumulate unwanted inventories.
e. Unplanned investment will decline.

ANS: D DIF: Moderate REF: Ch 10, 1.a OBJ: ch. 10, 2
NAT: Reflective Thinking | Equilibrium TOP: Equilibrium Income and Expenditures
MSC: Application

6. According to Figure 10.1, when real GDP is at G:
a. there is pressure for the economy to expand.
b. there are unplanned reductions in inventory.
c. aggregate expenditures are less than real GDP.
d. the economy has achieved macroeconomic equilibrium.
e. there is pressure for the economy to contract.

ANS: D DIF: Moderate REF: Ch 10, 1.a OBJ: ch. 10, 2
NAT: Reflective Thinking | Equilibrium TOP: Equilibrium Income and Expenditures
MSC: Application

7. According to Figure 10.1, the economy will expand when aggregate expenditures are at:
a. point D.
b. point A.
c. point B.
d. point C.
e. point E.

ANS: A DIF: Moderate REF: Ch 10, 1.a OBJ: ch. 10, 2
NAT: Reflective Thinking | Equilibrium TOP: Equilibrium Income and Expenditures
MSC: Application

NARRBEGIN: Table 10.1
The table given below states the value of the GDP and the different components of aggregate expenditure for two years.
Table 10.1
GDP Export Import
Year 1 — $750 $110 $60 $70 $50
Year 2 $1,150 $930 $90 $75 $125 —

NARREND