Economics 22nd Edition By Campbell McConnell, Stanley Brue, Sean Masaki Flynn (Test Bank)

Test Bank for Economics
nd
22 Edition By Campbell
McConnell, Stanley Brue,
Sean Masaki Flynn (All
Chapters 100% Original
Verified, A+ Grade)
Correct Answers at the end
of each Chapter.
Part 1: Chapter 31-42
Part 2: Chapter 21-30
Part 3: Chapter 11-20
Part 4: Chapter 1-10
All Chapters Are Arranged Reveres.

,Chapter 31


Student name:__________
TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false.
1) Graphically, the height of the investment schedule depends on the real interest rate, together
with the location of the investment demand curve.
⊚ true
⊚ false

2) In the aggregate expenditures model presented in the textbook, investment is assumed to rise
with increases in real GDP and fall with decreases in real GDP.
⊚ true
⊚ false

3) In the private closed economy, equilibrium GDP occurs where C + Ig = GDP.
⊚ true
⊚ false

4) When C + Ig = GDP in a private closed economy, S = Ig and there are no unplanned changes
in inventories.
⊚ true
⊚ false

5) If C + Ig exceeds GDP in a private closed economy, GDP will decline.
⊚ true
⊚ false

6) If the MPC is 0.8 in a private closed economy, a $30 billion increase in planned investment
will increase equilibrium real GDP by $120 billion.
⊚ true
⊚ false

7) Actual investment consists of planned investment plus unplanned changes in inventories
(plus or minus).
⊚ true
⊚ false

8) A $20 billion decrease in investment in a private closed economy that has an MPS of 0.5 will
reduce saving by $10 billion once the multiplier process has ended.
⊚ true
⊚ false




Version 1 1

,Chapter 31


9) Exports are added to, and imports are subtracted from, aggregate expenditures in moving
from a closed to an open economy.
⊚ true
⊚ false

10) For an open mixed economy, the equilibrium level of GDP is determined where Sa + Ig + X =
T + G.
⊚ true
⊚ false

11) Equal increases in government expenditures and tax collections will leave the equilibrium
GDP unchanged.
⊚ true
⊚ false

12) A $10 billion decrease in taxes will increase the equilibrium GDP by more than would a $10
billion increase in government expenditures.
⊚ true
⊚ false

13) A lump-sum tax causes the after-tax consumption schedule to be flatter than the before-tax
consumption schedule.
⊚ true
⊚ false

14) If government decreases its purchases by $20 billion and the MPC is 0.8, equilibrium GDP
will decrease by $100 billion.
⊚ true
⊚ false

15) If the MPC is 0.9, a $20 billion increase in a lump-sum tax will reduce GDP by $200 billion.
⊚ true
⊚ false

16) A recessionary expenditure gap in a mixed open economy can be measured as the extent to
which aggregate expenditures ( Ca + Ig + Xn + G) fall short of real GDP at the full-
employment level of real GDP.
⊚ true
⊚ false




Version 1 2

, Chapter 31


17) The recessionary expenditure gap is the amount by which the equilibrium GDP and the full-
employment GDP differ.
⊚ true
⊚ false

18) One basic assumption of the aggregate expenditures model is that the price level in the
economy is fixed.
⊚ true
⊚ false

19) The major basic premise of the aggregate expenditures model is that if the total demand for
output increases, then firms will raise their prices.
⊚ true
⊚ false

20) In the aggregate expenditures model of a private closed economy, we analyze a consumption
schedule and an investment schedule, both of which indicate that as income increases then
consumption and investment will increase.
⊚ true
⊚ false

21) If the expected rates of return from investment decrease in an economy, there would most
likely be a downward shift in the investment schedule for that economy.
⊚ true
⊚ false

22) A downward-sloping investment demand curve and a horizontal investment schedule indicate
that investments are inversely related to interest rates but are not affected by the level of
income.
⊚ true
⊚ false

23) In the aggregate expenditures model of the economy, equilibrium is attained when planned
aggregate spending equals total output.
⊚ true
⊚ false




Version 1 3