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ECON 202 FINAL EXAM Questions with Correct Answers
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ECON 202 FINAL EXAM Questions with Correct Answers
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ECON 202 FINAL EXAM Questions with CorrectAnswers
Firms invest if expected rate of return is less than real interest rate. (T/F)
Correct Answer-False
Phillips curve shows the negative relation between unemployment rate
and inflation rate. (T/F) Correct Answer-True
The economy is initially at long run equilibrium. Aggregate demand
increases and shifts from AD1 to AD2 and in the short-run output is
above full-employment level of output. If the MPC is 0.75, taxes need to
______ by ______ to return the economy to its long-run equilibrium
(shift to the left). Correct Answer-increase by 30 billion
For the scenario described determine the effect on aggregate demand. A
decrease in government purchases will ... Correct Answer-Cause a
decrease in aggregate demand, shifting the aggregate demand curve left
If the marginal propensity to save in the nation of Candy Floss is 0.25,
the tax multiplier is Correct Answer--3.00
The income for the nation of Restabit has decreased by $15 million. Due
to this decrease in income, savings has decreased by $4.5 million. What
is the marginal propensity to consume? Correct Answer-.7
,If the economy is producing $240 billion below the full-employment
level of real GDP and the marginal propensity to save in the economy is
0.25, the economy is experiencing Correct Answer-a recessionary gap of
$60 billion
Consider the aggregate expenditures model. Investment in the Calcland
decreased from $38 billion to $20 billion. Assume the marginal
propensity to save is 0.4. Assuming all else remains unchanged, this
decrease in investment will cause the equilibrium level of real GDP to ...
Correct Answer-decrease by $45 billion
There is dis-savings in the economy when consumption is less than the
disposable income. (T/F) Correct Answer-false
Inflation caused by aggregate demand increasing is called cost-push
inflation. (T/F) Correct Answer-false
Stagflation occurs when inflation and unemployment increase at the
same time. Correct Answer-True
If the marginal propensity to consume in Imaginotopia is 0.6, the
expenditures multiplier is Correct Answer-2.5
Consider the aggregate expenditures model. What is the equilibrium
level of output in Calcland if, its consumption schedule,
C=25,000+0.6(Y-5,000) , gross investment is $15,000, government
, purchases are $8,000, and net exports is $2,000? Correct Answer-
117,500
An increase in aggregate demand shifts aggregate demand from AD1 to
AD2. Without government action, the economy will return to long run
equilibrium because Correct Answer-in the long run, input prices will
increase and aggregate supply will decrease.
Due to this the economy is experiencing a recession. To resolve the
problem of a recession, the government can implement ... Correct
Answer-expansionary fiscal policy by increasing government spending.
Government borrowing crowding out business and consumer borrowing
means that expansionary fiscal policy may not be as effective. (T/F)
Correct Answer-true
The government relaxes environmental regulations that all firms are
required to meet. This change in regulations will Correct Answer-cause
an increase in aggregate supply, shifting the aggregate supply curve
right.
If the marginal propensity to save is 0.1. An initial increase in
expenditures of $20,000 will result in an eventual increase in real GDP
of $200,000. (T/F) Correct Answer-true
A decrease in interest rates will Correct Answer-increase consumption
and investment spending, increasing aggregate demand.
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