Multiple Choice Self Test for National Income Distribution: Keynesian Model
1. According to the Circular Flow Model of Income and Expenditures, which of the following would be considered "leakages" from the circular flow? A. Exports, Saving, Government Expenditure B. Imports, Saving, Government Expenditure C. Saving, Taxes, Imports D. Saving, Taxes, Exports
2. According to the Circular Flow Model of Income and Expenditures, Saving A. goes to foreign nations and returns as Net Exports. B. goes to financial markets and returns as Investment. C. goes to the government and returns as Taxes. D. goes to the government and returns as Government Expenditure.
3. According to the Circular Flow Model of Income and Expenditures, if Imports increase, in the home or domestic economy, this will A. increase the flow of Net Exports in the domestic economy. B. increase total spending on domestic (home) GDP. C. decrease total spending on foreign GDP. D. decrease total spending on domestic (home) GDP.
4. According to the Consumption Function, A. Consumption and Income are directly related. B. Consumption and Income are inversely related. C. Consumption and Income are NOT related. D. Consumption and Saving are directly related.
5. Which of the following would NOT result in an autonomous change in Investment? A. a change in GDP (Income) B. a change in business taxes C. a change in interest rates D. all of the above WOULD cause an autonomous change in Investment
Figure 1: This figure describes the economy of Nazra in the year 2002. All values are in billions of dollars per year. 6. Refer to Figure 1, above, to answer the following. The Marginal Propensity to Consume, for the year 2002, for Nazra will be A. 1. B. 0.80. C. 0.90. D. 0.10. 7. Refer to Figure 1, above, to answer the following. If GDP in Nazra equals $450 billion, Aggregate Expenditure for the year 2002 will equal A. $450 billion. B. $460 billion. C. $505 billion. D. $550 billion. 8. Refer to Figure 1, above, to answer the following. Equilibrium GDP for the year 2002 will be A. $400 billion per year. B. $450 billion per year. C. $500 billion per year. D. $550 billion per year. 9. Refer to Figure 1, above, to answer the following. If GDP equals $600 billion in 2002, Nazra will be experiencing A. a decrease in unintended inventory investment, which will encourage an increase in annual GDP in 2003. B. an increase in unintended inventory investment, which will encourage a decrease in annual GDP in 2003. C. a increase in unintended inventory investment, which will encourage an increase in annual GDP in 2003. D. a decrease in unintended inventory investment, which will encourage an decrease in annual GDP in 2003. 10. Refer to Figure 1, above, to answer the following. The multiplier for Nazra would be A. 1. B. 5. C. 10. D. 20. 11. Refer to Figure 1, above, to answer the following. Suppose the economy of Nazra was in equilibrium in year 2002. If there was a $20 billion autonomous increase in annual government expenditure in 2003, what would the new equilibrium GDP be in 2003? A. $570 billion B. $600 billion C. $650 billion D. $750 billion Figure 2: This figure describes the economy of Mundane in the year 2002. All values are in billions of dollars per year. Assume that annual Investment equals $150 billion in 2002. 12. Refer to Figure 2, above, to answer the following. If, in 2002, Mundane's annual Investment spending equals $150 billion, Mundane's Equilibrium GDP will be A. $250 billion. B. $450 billion. C. $500 billion. D. $550 billion. 13. Refer to Figure 2, above, to answer the following. In 2002, Mundane's multiplier is A. 1. B. 1.67. C. 2. D. 5. 14. In general, if Canada's exchange rate decreased in the year 2003, this will cause, in year 2003, A. an autonomous increase in Canada's Net Exports, which will cause an increase in Canada's Equilibrium GDP. B. an autonomous increase in Canada's Consumption Expenditure, which will cause an increase in Canada's Equilibrium GDP. C. an autonomous increase in Canada's Investment Expenditure, which will cause an increase in Canada's Equilibrium GDP. D. an autonomous decrease in Canada's Net Exports, which will cause a decrease in Canada's Equilibrium GDP. 15. In general, if the Canadian government increased personal income taxes in the year 2004, this will cause, in the year 2004, A. an autonomous increase in Canada's Net Exports, which will cause an increase in Canada's Equilibrium GDP. B. an autonomous increase in Canada's Consumption Expenditure, which will cause an increase in Canada's Equilibrium GDP. C. an autonomous increase in Canada's Investment Expenditure, which will cause an increase in Canada's Equilibrium GDP. D. an autonomous decrease in Canada's Consumption Expenditure, which will cause a decrease in Canada's Equilibrium GDP.
6. Refer to Figure 1, above, to answer the following. The Marginal Propensity to Consume, for the year 2002, for Nazra will be A. 1. B. 0.80. C. 0.90. D. 0.10.
7. Refer to Figure 1, above, to answer the following. If GDP in Nazra equals $450 billion, Aggregate Expenditure for the year 2002 will equal A. $450 billion. B. $460 billion. C. $505 billion. D. $550 billion.
8. Refer to Figure 1, above, to answer the following. Equilibrium GDP for the year 2002 will be A. $400 billion per year. B. $450 billion per year. C. $500 billion per year. D. $550 billion per year.
9. Refer to Figure 1, above, to answer the following. If GDP equals $600 billion in 2002, Nazra will be experiencing A. a decrease in unintended inventory investment, which will encourage an increase in annual GDP in 2003. B. an increase in unintended inventory investment, which will encourage a decrease in annual GDP in 2003. C. a increase in unintended inventory investment, which will encourage an increase in annual GDP in 2003. D. a decrease in unintended inventory investment, which will encourage an decrease in annual GDP in 2003.
10. Refer to Figure 1, above, to answer the following. The multiplier for Nazra would be A. 1. B. 5. C. 10. D. 20.
11. Refer to Figure 1, above, to answer the following. Suppose the economy of Nazra was in equilibrium in year 2002. If there was a $20 billion autonomous increase in annual government expenditure in 2003, what would the new equilibrium GDP be in 2003? A. $570 billion B. $600 billion C. $650 billion D. $750 billion
Figure 2: This figure describes the economy of Mundane in the year 2002. All values are in billions of dollars per year. Assume that annual Investment equals $150 billion in 2002. 12. Refer to Figure 2, above, to answer the following. If, in 2002, Mundane's annual Investment spending equals $150 billion, Mundane's Equilibrium GDP will be A. $250 billion. B. $450 billion. C. $500 billion. D. $550 billion. 13. Refer to Figure 2, above, to answer the following. In 2002, Mundane's multiplier is A. 1. B. 1.67. C. 2. D. 5. 14. In general, if Canada's exchange rate decreased in the year 2003, this will cause, in year 2003, A. an autonomous increase in Canada's Net Exports, which will cause an increase in Canada's Equilibrium GDP. B. an autonomous increase in Canada's Consumption Expenditure, which will cause an increase in Canada's Equilibrium GDP. C. an autonomous increase in Canada's Investment Expenditure, which will cause an increase in Canada's Equilibrium GDP. D. an autonomous decrease in Canada's Net Exports, which will cause a decrease in Canada's Equilibrium GDP. 15. In general, if the Canadian government increased personal income taxes in the year 2004, this will cause, in the year 2004, A. an autonomous increase in Canada's Net Exports, which will cause an increase in Canada's Equilibrium GDP. B. an autonomous increase in Canada's Consumption Expenditure, which will cause an increase in Canada's Equilibrium GDP. C. an autonomous increase in Canada's Investment Expenditure, which will cause an increase in Canada's Equilibrium GDP. D. an autonomous decrease in Canada's Consumption Expenditure, which will cause a decrease in Canada's Equilibrium GDP.
12. Refer to Figure 2, above, to answer the following. If, in 2002, Mundane's annual Investment spending equals $150 billion, Mundane's Equilibrium GDP will be A. $250 billion. B. $450 billion. C. $500 billion. D. $550 billion.
13. Refer to Figure 2, above, to answer the following. In 2002, Mundane's multiplier is A. 1. B. 1.67. C. 2. D. 5.
14. In general, if Canada's exchange rate decreased in the year 2003, this will cause, in year 2003, A. an autonomous increase in Canada's Net Exports, which will cause an increase in Canada's Equilibrium GDP. B. an autonomous increase in Canada's Consumption Expenditure, which will cause an increase in Canada's Equilibrium GDP. C. an autonomous increase in Canada's Investment Expenditure, which will cause an increase in Canada's Equilibrium GDP. D. an autonomous decrease in Canada's Net Exports, which will cause a decrease in Canada's Equilibrium GDP.
15. In general, if the Canadian government increased personal income taxes in the year 2004, this will cause, in the year 2004, A. an autonomous increase in Canada's Net Exports, which will cause an increase in Canada's Equilibrium GDP. B. an autonomous increase in Canada's Consumption Expenditure, which will cause an increase in Canada's Equilibrium GDP. C. an autonomous increase in Canada's Investment Expenditure, which will cause an increase in Canada's Equilibrium GDP. D. an autonomous decrease in Canada's Consumption Expenditure, which will cause a decrease in Canada's Equilibrium GDP.
