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Ôn tập cuối kỳ

Kinh tế học đại cương


NT v24-05-14
Ôn tập:
• Cấu trúc thị trường: thị trường cạnh tranh, độc quyền, độc quyền
nhóm, cạnh tranh độc quyền
• Lạm phát, thất nghiệp
• Cách tính GDP, GDP thực, lạm phát theo CPI, deflation,…
• Chính sách kinh tế: tài khóa, tiền tệ…
• Hệ thống tài chính…
1. The demand curve facing a purely competitive 4. Which of the following statements is not
seller is: correct?
a. negatively sloped. a. In a long-run equilibrium, marginal firms make
b. horizontal at the market price. zero economic profit.
c. vertical at the market quantity. b. To maximize profit, firms should produce at a
d. the horizontal summation of all potential buyers’ level of output where price equals average
individual demand curves. variable cost.
c. The amount of gold in the world is limited.
2. A purely competitive firm: Therefore, the gold jewelry market probably has
a. maximizes profits where MR=MC. a long-run supply curve that is upward sloping.
b. makes economic profits when its total revenue is d. Long-run supply curves are typically more elastic
greater than its total cost. than short-run supply curves.
c. has no control over the price of its products.
d. all of the above. 5. The competitive firm's short-run supply curve
is its
3. A profit maximizing competitive firm will shut a. marginal revenue curve, but only the portion
down in the short run if: where marginal revenue exceeds marginal cost.
a. prices do not cover average total costs. b. marginal cost curve.
b. it loses money on each unit of output. c. marginal cost curve, but only the portion above
c. price falls below the minimum of its AVC curve. the minimum of average total cost.
d. fixed costs exceed marginal revenues. d. marginal cost curve, but only the portion above
the minimum of average variable cost.
11. Total revenue (TR) for this profit-maximizing
pure competitor equals area:
a. 0Phq2.
b. 0bgq2.
c. Pbgh.
d. 0aeq1.
12. This profit-maximizing pure competitor’s
total cost fixed TFC equals area:
a. 0Phq2.
b. 0bgq2.
c. 0aeq1.
d. daef.

10. Total Cost (TC) for this profit- 13 This profit maximizng firm’s total variable
maximizing pure competitor equals cost TVC. equals area:
area: a. 0Phq2.
a. 0Phq2. b. 0bgq2.
b. 0bgq2. c. 0bgq2 minus area daef.
c. Pbgh. d. daef
d. 0aeq1.
13. Which of the following are necessary 16. Because monopoly firms do not have
characteristics of a monopoly? to compete with other firms, the
(i) The firm is the sole seller of its product. outcome in a market with a monopoly
(ii) The firm's product does not have close a. maximizes total economic well-being.
substitutes. b. is efficient.
(iii) The firm generates a large economic profit. c. benefits consumers more so than the
(iv) The firm is located in a small geographic producer.
market. d. is often not in the best interest of society.
a. (i) and (iii) only
b. (i) and (ii) only
c. (i), (ii), and (iii) only 17. Suppose a monopolist has a demand
d. (i), (ii), (iii), and (iv) curve that can be expressed as P=90-Q.
Monopolist has constant marginal costs
14. The fundamental source of monopoly and average total costs of $10. The
power is profit-maximizing monopolist will
a. profit. produce an output level of
b. decreasing average total cost. a. 80 units.
c. barriers to entry. b. 40 units.
d. a product without close substitutes. c. 20 units.
d. 10 units.
18. In order to maximize its profit, the firm will
choose to produce
a. 100 units of output, and its profit will be negative.
b. 100 units of output, and its profit will be zero.
c. 133.33 units of output, and its profit will be
negative.
d. 133.33 units of output, and its profit will be zero.

19. When the firm is maximizing its profit,


a. TR = $9,000 and TC =$16,000.
b. TR = $14,000 and TC =$16,000.
c. TR = $16,000 and TC =$16,000.
d. MC exceeds MR by $66.66 on the last unit of
output produced.
20. A profit-maximizing monopolist would
charge the price at
a. $23
b. $20.
c. $15.
d. $12.

21. A profit-maximizing monopolist would


earn total revenues of
a. $81.
b. $144.
c. $225.
d. $240.

22. A profit-maximizing monopolist would


earn profits of
a. $96.
b. $117.
c. $120.
d. $126.
33. For a profit-maximizing monopolistically competitive firm, price exceeds marginal cost in
a. the short run but not in the long run.
b. the long run but not in the short run.
c. both the short run and the long run.
d. neither the short run nor the long run.
34. When a market is monopolistically competitive, the typical firm in the market is likely to
experience a
a. positive profit in the short run and in the long run.
b. positive or negative profit in the short run and a zero profit in the long run.
c. zero profit in the short run and a positive or negative profit in the long run.
d. zero profit in the short run and in the long run.
35. When an industry has many firms, the industry is
a. an oligopoly if the firms sell differentiated products, but it is monopolistically competitive if the
firms sell identical products.
b. an oligopoly if the firms sell differentiated products, but it is perfectly competitive if the firms sell
identical products.
c. monopolistically competitive if the firms sell differentiated products, but it is perfectly competitive
if the firms sell identical products.
d. perfectly competitive if the firms sell differentiated products, but it is monopolistically competitive
if the firms sell identical products.
8
1. Suppose the government passes a law eliminating 3. Over time, people have come to rely more on
holidays and, as a result, the production of goods and market-produced goods and less on goods that
services increases because people work more days per they produce for themselves. For example, busy
year (and thus enjoy less leisure per year). Based on this people with high incomes, rather than cleaning
scenario, which of the following statements is correct? their own houses, hire people to clean their
a. GDP would definitely increase, despite the fact that GDP houses. By itself, this change has
includes leisure. a. caused measured GDP to fall.
b. GDP would definitely increase because GDP excludes leisure. b. not caused any change in measured GDP.
c. GDP could either increase or decrease because GDP includes c. caused measured GDP to rise.
leisure. d. probably changed measured GDP, but in an uncertain
d. GDP could either increase or decrease because GDP excludes direction; the direction of the change depends on the
leisure. difference in the quality of the cleaning that has
resulted.
2. Consider two cars manufactured by Chevrolet in 2007.
During 2007, Chevrolet sells one of the two cars to Sean
for $24,000. Later in the same year, Sean sells the car to 4. If a state made a previously-illegal activity, such
Kati for $19,000. The second automobile, with a market as gambling or prostitution, legal, then, other
value of $30,000, is unsold at the end of 2007 and it things equal, GDP
remains in Chevrolet’s inventory. The transactions just a. necessarily decreases.
described contribute how much to GDP for 2007? b. necessarily increases.
a. $24,000 c. doesn't change because both legal and illegal
b. $43,000 production are included in GDP.
c. $54,000 d. doesn't change because these activities are never
d. $73,000 included in GDP.

9
7. In order to include many different goods and
5. In the economy of Wrexington in 2008, services in an aggregate measure, GDP is
consumption was $5000, exports were $100, computed using, primarily,
government purchases were $900, imports were a. market prices.
$200, and investment was $1000. What was b. values of goods and services based on surveys of
Wrexington’s GDP in 2008? consumers.
c. quantities purchased by a typical urban household.
a. $6700
d. profits from producing goods and services.
b. $6800
c. $7000 8. Which of the following transactions adds to
d. $7200 Vietnam GDP for 2021?
6. In the economy of Wrexington in 2008, a. In 2021, Lan sells a car that she bought in 2017 to Tú
consumption was $200, exports were $50, GDP for $15,000.
b. An Vietnamese professor works in Thailand during
was $325, government purchases were $100,
the summer of 2021 and earns the equivalent of
imports were $125, and investment was $100.
What were Wrexington’s net exports in 2008? $10,000 during that time.
c. When Minh and Yến were both single, they lived in
a. -$75 separate apartments and each paid $150 in rent.
b. -$50 Minh and Yến got married in 2021 and they bought a
c. $50 house that, according to reliable estimates, could be
d. $75 rented for $1,000 per month.
d. None of the above transactions adds to GDP for
2021.
10
9. Which of the following is not included in GDP of an economy?
a. purchases of stock and bonds
b. purchases of services such as visits to the doctor
c. purchases of capital goods such as equipment in a factory
d. purchases by foreigners of consumer goods produced in Vietnam
10. Consider two items that might be included in GDP: (1) the estimated rental value of owner-occupied housing
and (2) purchases of newly-constructed homes. How are these two items accounted for when GDP is
calculated?
a. Both item (1) and item (2) are included in the consumption component of GDP.
b. Item (1) is included in the consumption component of GDP, while item (2) is included in the investment component of
GDP.
c. Item (1) is included in the investment component of GDP, while item (2) is included in the consumption component of
GDP.
d. Only item (2) is included in GDP, and it is included in the investment component.
11. For a certain economy in 2005, GDP was $2,000; investment was $400; government purchases were $300;
and net exports were $70. It follows that consumption was
a. $1,370.
b. $1,330.
c. $1,230.
d. 60 percent of GDP.
12. Transfer payments are
a included in GDP because they represent income to individuals.
b. included in GDP because the income will be spent for consumption.
c. not included in GDP because taxes will have to be raised to pay for them.
d. not included in GDP because they are not payments for currently produced goods or services. 11
13. Suppose an economy produces only eggs and ham. In 2019, 100 dozen eggs are sold at $3 per dozen and 50 pounds
of ham sold at $4 per pound. In 2020, the base year, eggs sold at $1.50 per dozen and ham sold at $5 per pound. For
2019,
a. nominal GDP is $400, real GDP is $500, and the GDP deflator is 80.
b. nominal GDP is $400, real GDP is $500, and the GDP deflator is 125.
c. nominal GDP is $500, real GDP is $400, and the GDP deflator is 80.
d. nominal GDP is $500, real GDP is $400, and the GDP deflator is 125.
14. Rosa deposits $100 in a bank account that pays an annual interest rate of 20 percent. A year later, after Rosa has
accumulated $20 in interest, she withdraws her $120. Rosa’s purchasing power
a. did not change if the inflation rate was 20 percent.
b. decreased if the inflation rate was -5 percent.
c. increased if the inflation rate was 22 percent.
d. More than one of the above is correct.
15. Suppose the government eliminates all environmental regulations and, as a result, the production of goods and
services increases, but there is considerably more pollution. Based on this scenario, which of the following
statements is correct?
a. GDP would definitely increase, despite the fact that GDP includes environmental quality.
b. GDP would definitely decrease because GDP includes environmental quality.
c. GDP would definitely increase because GDP excludes environmental quality.
d. GDP could either increase or decrease because GDP excludes environmental quality.
16. Which of the following is a reason why the Consumer Price Index (CPI) is not calculated as a simple average of all
prices?
a. Some goods experience large price changes and the CPI would be too variable if computed by a simple average.
b. Goods differ in their importance in the average consumer’s budget.
c. Some goods never experience price changes and the CPI would not be variable enough if computed as a simple average.
d. It would be difficult to compute a price index using a simple average of all prices. 12
17. In 1931 the price of a movie ticket was $0.25.
19. Arlo is offered a job in Des Moines, where the CPI
The consumer price index was 15.2 in 1931,
is 80, and a job in New York, where the CPI is 125.
and 210 in 2008. Using 2008 prices, the real
Arlo's job offer in Des Moines is for $42,000. How
price of a movie in 1931 was
much does the New York job have to pay in order
a. $13.82. for the two salaries to represent the same
b. $52.50. purchasing power?
c. $1.81.
a. $42,000
d. $3.45.
b. $65,625
c. $68,880
18. Ethel purchased a bag of groceries in 1970 for d. $189,000
$8. She purchased the same bag of groceries 20. The price index in the first year is 150; in the
in 2006 for $25. If the price index was 38.8 in second year it is 160; and in the third year it is
1970 and the price index was 180 in 2006, then 165. Which of the following statements is correct?
what is the price of the 1970 bag of groceries a. The price level was higher in the second year than in
in 2006 dollars? the first year, and it was higher in the third year than in
a. $37.11 the second year.
b. $5.39 b. The inflation rate was positive between the first and
c. $25.00 second years, and it was positive between the second
d. $29.11 and third years.
c. The inflation rate was lower between the second and
third years than it was between the first and second
years.
d. All of the above are correct. 13
1. Mai just graduated from college. In order to devote all her efforts to college, she didn’t hold a job.
She is going to cruise around the country on her motorcycle for a month before she starts looking
for work. Other things the same, the unemployment rate
a. increases and the labor-force participation rate decreases.
b. and the labor-force participation rate both increase.
c. increases and the labor-force participation rate is unaffected.
d. and the labor-force participation rate are both unaffected.

2. Bình loses his job and decides to sit on the beach rather than look for work during the next few
months. Other things the same, the unemployment rate
a. decreases and the labor-force participation rate decreases.
b. increases and the labor-force participation rate is unaffected.
c. is unaffected and the labor-force participation rate decreases.
d. and the labor-force participation rate are both unaffected.

3. Tuan has just finished high school and started looking for his first job, but has not yet found one.
Other things the same, the unemployment rate
a. increases and the labor-force participation rate is unaffected.
b. and the labor-force participation rate both increase.
c. is unaffected and the labor-force participation rate increases.
d. and the labor-force participation rate are both unaffected.
4. In 2016, the Swedish adult non-institutionalized population was about 7.3 million, the labor force was
5.2 million, and the number of people employed was 4.8 million. According to these numbers, the
Swedish labor-force participation rate and unemployment rate were about
a. 71.2% and 5.5%
b. 65.8% and 7.7%
c. 65.8% and 5.5%
d. 71.2% and 7.7%
5. In 2016 the US Bureau of Labor Statistics reported that there were 71.9 million people over age 25
who had at least a bachelor’s degree. Of these 52.1 million were employed and 1.3 million were
unemployed. What were the labor-force participation rate and the unemployment rate for this group?
a. 72.5% and 1.8%
b. 72.5% and 2.4%
c. 74.3% and 2.4%
d. 74.3% and 1.8%
6. Suppose that the adult population is 6 million, the number of employed is 3.8 million, and the labor-
force participation rate is 70%. What is the unemployment rate?
a. 6.7%
b. 9.5%
c. 10.5%
d. 28%
7. Cyclical unemployment 10. Consumers decide to buy more
a. has a different explanation than does the natural rate of computers and fewer typewriters. As a
unemployment. result, computer companies expand
b. refers to the year-to-year fluctuation in unemployment around an production while typewriter companies
economy’s natural rate of unemployment. lay-off workers. This is an example of
c. is closely associated with short-run ups and downs of economic a. frictional unemployment created by
activity. efficiency wages.
d. All of the above are correct. b. frictional unemployment created by sectoral
8. More generous unemployment insurance would shifts.
a. raise structural unemployment. c. structural unemployment created by
b. raise frictional unemployment. efficiency wages.
c. lower structural unemployment. d. structural unemployment created by
d. lower frictional unemployment. sectoral shifts.
9. John is a stockbroker. He has had several job offers, but he 11. Unemployment that exists because there
has turned them down because he thinks he can find a firm is a shortage of jobs is
that better matches his tastes and skills. Curtis has looked a. frictional unemployment, which contributes
for work as an accountant for some time. While the demand to the natural rate of unemployment.
for accountants doesn’t appear to be falling, there seems to b. frictional unemployment, which does not
be more people applying than jobs available. contribute to the natural rate of
a. John and Curtis are both frictionally unemployed. unemployment.
b. John and Curtis are both structurally unemployed. c. structural unemployment, which contributes
c. John is frictionally unemployed, and Curtis is structurally to the natural rate of unemployment.
unemployed. d. structural unemployment, which does not
d. John is structurally unemployed, and Curtis is frictionally contribute to the natural rate of
unemployed. unemployment.
12. If the natural rate of unemployment is 5.2 percent and the actual rate of unemployment is 5.7 percent, then
by definition there is
a. cyclical unemployment amounting to 0.5 percent of the labor force.
b. frictional unemployment amounting to 0.5 percent of the labor force.
c. structural unemployment amounting to 0.5 percent of the labor force.
d. search unemployment amounting to 0.5 percent of the labor force.
13. Suppose that some people are counted as unemployed when, to maintain unemployment compensation,
they search for work only at places where they are unlikely to be hired. If these individuals were counted
as out of the labor force instead of as unemployed, then
a. both the unemployment rate and labor-force participation rate would be higher.
b. both the unemployment rate and labor-force participation rate would be lower.
c. the unemployment rate would be lower and the labor-force participation rate would be higher.
d. the unemployment rate would be higher and the participation rate would be lower.
14. Unemployment that results because the number of jobs available in some labor markets may be
insufficient to give a job to everyone who wants one is called
a. the natural rate of unemployment.
b. cyclical unemployment.
c. structural unemployment.
d. frictional unemployment.
15. Unemployment that results because it takes time for workers to search for the jobs that best suit their
tastes and skills is called
a. the natural rate of unemployment.
b. cyclical unemployment.
c. frictional unemployment.
d. structural unemployment.
1. Hyperinflation can be explained by
a. the market for loanable funds.
b. the velocity theory of money.
c. the quantity theory of money.
d. the market for federal funds.
2. When the price level rises, the number of dollars
needed to buy a representative basket of goods 4. If the money supply is MS2 and the value of money is
a. increases, and so the value of money rises. 2, then there is an excess
b. increases, and so the value of money falls. a. demand for money that is represented by the distance
c. decreases, and so the value of money rises. between points A and C.
d. decreases, and so the value of money falls b. demand for money that is represented by the distance
3. The value of money rises as the price level between points A and B.
c. supply of money that is represented by the distance
a. rises, because the number of dollars needed to buy a
between points A and C.
representative basket of goods rises. d. supply of money that is represented by the distance
b. rises, because the number of dollars needed to buy a between points A and B.
representative basket of goods falls.
5. When the money supply curve shifts from MS1 to
c. falls, because the number of dollars needed to buy a MS2,
representative basket of goods rises.
a. the demand for goods and services decreases.
d. falls, because the number of dollars needed to buy a b. the economy's ability to produce goods and services
representative basket of goods falls. increases.
c. the equilibrium price level decreases.
d. None of the above is correct.
10. You put money in an account and earn a real 13. Suppose someone in Paradise bought a
interest rate of 4 percent. Inflation is 2 percent, parcel of land for $20,000 in 2000 when the
and your marginal tax rate is 20 percent. What price index equaled 100. In 2020, the person
is your after-tax real rate of interest? sold the land for $100,000, and the price
a. 1.2 percent index equaled 600. If the person must pay 20
b. 2.8 percent percent of any capital gain in taxes, then the
c. 4.8 percent after-tax real capital gain (in 2020 dollars) on
d. None of the above is correct. the land was
11. You put money in an account and earn a real a. $64,000.
interest rate of 6 percent, inflation is 2 percent, b. –$36,000.
and your marginal tax rate is 20 percent. What c. –$16,667
is your after-tax real rate of interest? d. –$3,333
a. 4.8 percent 14. Suppose someone in Paradise bought a
b. 3.2 percent parcel of land for $10,000 in 2000 when the
c. 2.8 percent price index equaled 100. In 2020, the person
d. None of the above is correct. sold the land for $100,000, and the price
12. Given a nominal interest rate of 5 percent, in index equaled 500. If the person must pay 20
which case below would you earn the highest percent of any capital gain in taxes, then the
after-tax real rate of interest? after-tax real capital gain (in 2020 dollars) on
a. Inflation is 4 percent; the tax rate is 20 percent. the land was
b. Inflation is 3 percent; the tax rate is 40 percent. a. $72,000.
c. Inflation is 2 percent; the tax rate is 60 percent. b. $62,000.
d. The after-tax real interest rate is the same for all of c. $32,000.
the above. d. $6,400.
1. The primary economic function of the 3. If you were to start a business delivering
financial system is to documents, you might need to purchase
a. keep interest rates low. cell phones, bicycles, desks, and chairs.
b. provide expert advice to savers and investors. a. These purchases are called capital
c. match one person’s consumption expenditures investment. If you raise the funds from
with another person’s capital expenditures. others to purchase them you are a saver.
d. match one person’s saving with another b. These purchases are called capital
person’s investment. investment. If you raise the funds from
2. Most entrepreneurs do not have enough others to purchase them you are a borrower.
money of their own to start their c. These purchases are called consumption. If
businesses. When they acquire the you raise the funds from others to purchase
necessary funds from someone else, them you are a saver.
a. their consumption expenditures are being d. These purchases are called consumption. If
financed by someone else’s saving. you raise the funds from others to purchase
b. their consumption expenditures are being them you are a borrower.
financed by someone else’s investment.
c. their investments are being financed by
someone else’s saving.
d. their saving is being financed by someone
else’s investment.
20
4. Compared to bondholders, stockholders
a. face higher risk and have the potential for higher returns.
b. face higher risk but receive a fixed payment.
c. face lower risk and have the potential for higher returns.
d. face lower risk but receive a fixed payment.
5. The economy’s two most important financial markets are
a. the investment market and the saving market.
b. the bond market and the stock market.
c. banks and the stock market.
d. financial markets and financial institutions.
6. Two of the economy’s most important financial intermediaries are
a. suppliers of funds and demanders of funds.
b. banks and the bond market.
c. the stock market and the bond market.
d. banks and mutual funds.
7. When economists refer to investment, they mean the purchasing of stocks and
bonds and other types of saving
a. True
b. False
21
13. Economists use the term “money” to refer to
a. all wealth.
b. all assets, including real assets and financial assets.
c. all financial assets, but not real assets.
d. those types of wealth that are regularly accepted by sellers in exchange for
goods and services.
14. Which of the following best illustrates the medium of exchange
function of money?
a. You keep some money hidden in your shoe.
b. You keep track of the value of your assets in terms of currency.
c. You pay for your oil change using currency.
d. None of the above is correct.
15 Most financial assets other than money function as
a. a medium of exchange, a unit of account, and a store of value.
b. a medium of exchange and a store of value, but not a unit of account.
c. a store of value and a unit of account, but not a medium of exchange.
d. a store of value, but not a unit of account nor a medium of exchange
16. Which list ranks assets from most to least liquid?
a. currency, demand deposits, stock
b. currency, saving account, demand deposits
c. Gold, demand deposits, currency
d. demand deposits, house, currency
17. Which of the following is not included in M1?
a. a $5 bill in your wallet
b. $100 in your checking account
c. $500 in your savings account
d. All of the above are included in M1.
18. John and Jane decide to go on a vacation. As a result, they withdraw
$2,500 from their savings account to purchase $2,500 worth of
traveler’s checks. As a result of these changes,
a. M1 increases by $2,500 and M2 decreases by $2,500.
b. M1 increases by $2,500 and M2 stays the same.
c. M1 and M2 stay the same.
d. M1 decreases by $2,500 and M2 increases by $2,500.
19. If the reserve ratio increased from 10 percent to 20 percent, the money multiplier
would
a. rise from 10 to 20.
b. rise from 5 to 10.
c. fall from 10 to 5.
d. not change.
20. Regulations on the
a. maximum amount of reserves that banks can hold against deposits are called reserve
requirements.
b. minimum amount of reserves that banks must hold against deposits are called reserve
requirements.
c. extent to which banks can buy and sell bonds are called open-market requirements.
d. extent to which banks can make new loans are called open-market requirements.
21. A bank’s reserve ratio is 6.5 percent and the bank has $1,950 in reserve. Its
deposits amount to
a. $62.25.
b. $126.75.
c. $22,500
d. $30,000
22. A bank has a 10 percent reserve requirement, $4,000 in deposits, and has
loaned out all it can given the reserve requirement.
a. It has $40 in reserves and $3,960 in loans.
b. It has $400 in reserves and $3,600 in loans.
c. It has $444 in reserves and $3,556 in loans.
d. None of the above is correct.
23. A bank which must hold 100 percent reserves opens in an economy that
had no banks and a currency of $100. If customers deposit $50 into the
bank, what is the value of the money supply?
a. $00
b. $50
c. $100
d. $150
24. If a bank has a reserve ratio of 8 percent, then
a. government regulation requires the bank to use at least 8 percent of its deposits to
make loans.
b. the bank keeps 8 percent of its deposits as reserves and loans out the rest.
c. the bank’s ratio of loans to deposits is 8 percent.
d. the bank keeps 8 percent of its assets as reserves and loans out the rest.
1. If taxes
a. increase, consumption increases, and aggregate demand shifts to the right.
b. increase, consumption decreases, and aggregate demand shifts to the left.
c. decrease, consumption increases, and aggregate demand shifts to the left.
d. decrease, consumption decreases, and aggregate demand shifts to the right.

2. The multiplier effect


a. and the crowding-out effect both amplify the effects of an increase in government expenditures.
b. and the crowding-out effect both diminish the effects of an increase in government expenditures.
c. diminishes the effects of an increase in government expenditures, while the crowding-out effect amplifies
the effects.
d. amplifies the effects of an increase in government expenditures, while the crowding-out effect diminishes
the effects.

3. An increase in the MPC


a. increases the multiplier, so that changes in government expenditures have a larger effect on aggregate
demand.
b. increases the multiplier, so that changes in government expenditures have a smaller effect on aggregate
demand.
c. decreases the multiplier, so that changes in government expenditures have a larger effect on aggregate
demand.
d. decreases the multiplier, so that changes in government expenditures have a smaller effect on aggregate
demand. 26
4. If the marginal propensity to consume is 2/3, and there is no investment accelerator or crowding out, a
$20 billion increase in government expenditures would shift the aggregate demand curve to the right
by
a. $30 billion, but the effect would be larger if there was an investment accelerator.
b. $30 billion, but the effect would be smaller if there was an investment accelerator.
c. $60 billion, but the effect would be larger if there was an investment accelerator.
d. $60 billion, but the effect would be smaller if there was an investment accelerator.

5. According to the crowding-out effect, an increase in government spending


a. increases the interest rate and so increases investment spending.
b. increases the interest rate and so decreases investment spending.
c. decreases the interest rate and so increases investment spending.
d. decreases the interest rate and so decreases investment spending.

27

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