If the MPC is 0.80, and if the goal is to increase real GDP by 200 million, then by how much would government spending have to change to generate this increase in real GDP?
a. 240 million.
b. 200 million.
c. 180 million.
d. 40 million.
QUESTION 2Whom does the Bureau of Labor Statistics include in the discouraged workers group?
a. All those between 16 and 65 who are neither disabled nor in an institution and are also neither employed nor seeking employment.
b. Civilian labor force members who have chosen early retirement because they dislike their work or think the pay is too low.
c. Members of the noninstitutional population who say they want to be employed but aren't searching for a job.
d. Members of the civilian labor force who are looking for a job but cannot find one.
e. Anyone in the population who is not working.
QUESTION 3If the marginal propensity to consume (MPC) is 0.80, and if policy makers wish to increase real GDP 200 billion, then by how much would they have to change taxes?
a. 240 million.
b. 200 million.
c. 180 million.
d. 50 million.
QUESTION 4An increase in the supply of money will lead to ____ in equilibrium real GDP and ____ in equilibrium price level.
a. an increase; an increase
b. an increase; a decrease
c. a decreases; an increase
d. a decrease; a decrease
QUESTION 5Exclusion of which of the following tends to understate the true level of unemployment in the economy?
a. Children.
b. Retired persons.
c. Students.
d. People who do not want to work.
e. Discouraged workers.
QUESTION 6If an economy were experiencing a high rate of unemployment as the result of insufficient aggregate demand, a Keynesian economist would favor:
a. a reduction in taxes coupled with a reduction in government expenditures of equal size.
b. an increase in government expenditures coupled with an increase in taxes of equal size.
c. a reduction in taxes, without any offsetting reduction in government expenditures.
d. maintenance of a balanced budget.
QUESTION 7While the classicists believed that both velocity and output are stable, Keynesians believe:
a. velocity is stable and output is variable.
b. velocity and output are both variable.
c. output is stable and velocity is variable
d. the same as the classical economists that both output and velocity are stable
e. at low levels of income both velocity and output are stable, but at high levels of income velocity becomes variable.
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