ECON 162 Binghamton University Macroeconomic Questions

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a.wages, prices, rents and interest rates are flexible so that markets always clear.b.there is no money illusion.c.wages may be sticky so that involuntary unemployment may exist in labor markets.d.supply creates its own demand.e.none of the above1 points QUESTION 2Compared to the Keynesian model, the classical model a.is a demand-side model.b.is a supply-side model.c.believes that government intervention is necessary in times of recession.d.was dominant after the Great Depressione.believes that nominal variables are relevant in economic decision making.1 points QUESTION 3In the Keynesian model, an increase in income will lead to an increase in consumption spending. True False1 points QUESTION 4In the classical model, output adjusts to spending. True False1 points QUESTION 5Suppose that the MPC is equal to 0.8 and autonomous consumption spending is 400. Then the consumption function is given bya.C = 400 – 0.8Ydb.C = -400 + 0.2Ydc.C = 320 x Ydd.C = 400 + 0.8Yde.C = 400 + 0.2Yd

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QUESTION 1
1. In the fixed-price Keynesian model
a. wages, prices, rents and interest rates are flexible so that markets always clear.
b. there is no money illusion.
c. wages may be sticky so that involuntary unemployment may exist in labor markets.
d. supply creates its own demand.
e. none of the above
QUESTION 2
1. Compared to the Keynesian model, the classical model
a. is a demand-side model.
b. is a supply-side model.
c. believes that government intervention is necessary in times of recession.
d. was dominant after the Great Depression
e. believes that nominal variables are relevant in economic decision making.
QUESTION 3
1. In the Keynesian model, an increase in income will lead to an increase in consumption spending.
True
False
QUESTION 4
1. In the classical model, output adjusts to spending.
True
False
QUESTION 5
1. Suppose that the MPC is equal to 0.8 and autonomous consumption spending is 400. Then the
consumption function is given by
a. C = 400 – 0.8Yd
b. C = -400 + 0.2Yd
c. C = 320 x Yd
d. C = 400 + 0.8Yd
e. C = 400 + 0.2Yd
QUESTION 6
1. Suppose that the MPC is equal to 0.8 and autonomous consumption spending is 400. At what
level of income is saving = 0?
a. 400
b. 500
c. 2000
d. 320
e. 1200
QUESTION 7
1. The saving function
a. . is an upward-sloping straight line with a vertical intercept of -C0 and a slope of (1 – b).
b. shows that in some ranges of income saving may be negative.
c. is given by the equation S = -C0 + (1 – b)Yd
d. can be derived from the consumption function.
e. all of the above
QUESTION 8
1. Assume the following Keynesian model for the economy of Boogerland:
AE = C + I + G + (X – M)
C = 200 + .75Y
I = 400
G = 200
(X – M) = 200
T=0
What is the equilibrium level of real GDP?
a. Y* = 4000
b. Y* = 1000
c. Y* = 3200
d. Y* = 750
e. Y* = 2400
QUESTION 9
9. The following table shows the levels of various aggregate economic variables for the economy of
Trumpland:
Y
C
S
I
G
0
20
-120
40
40
20
100
100
100
-100
40
40
20
100
200
180
-80
40
40
20
100
300
260
-60
40
40
20
100
400
340
-40
40
40
20
100
500
420
-20
40
40
20
100
600
500
0
40
40
20
100
700
580
20
40
40
20
100
800
660
40
40
40
20
100
900
740
60
40
40
20
100
1000
820
80
40
40
20
100
In Trumpland, what is the MPC?
(X – M)
T
a. MPC = 0.2
b. MPC = 0.8
c. MPC = 1
d. MPC = 0.9
e. MPC = 0.75
QUESTION 10
1. Referring to the question above, what is the equilibrium level of real GDP in Trumpland?
a. Y* = 400
b. Y* = 500
c. Y* = 600
d. Y* = 700
e. Y* = 800

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