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1. When saving is greater than investment in a two-sector model


1. output should increase


2. Output should decrease


3. Output should not change


4. None of the above


2. When output exceeds spending


1. There is unsold output, and the level of output will fall


2. There is unsold output, and the level of output will rise


3. There is unsold output, and the level of spending will rise


4. There is no unsold output since the level of spending will rise




3. In a two-sector model, when consumption is $40 + 0.90 Yd and investment is $60, equilibrium output is


1. $100


2. $400


3. $500


4. $900




4. In a two-sector model, when saving is -$40 + 0.20 Yd and investment is $60, equilibrium output is


1. $100


2. $400


3. $500


4. $1000




5. By definition, the marginal propensity to consume


1. Equals \(\Delta C/\Delta Yd\)


2. Is the behavioral coefficient c in the equation \(C = \overline C + cYd\)


3. Is the slope of the consumption function


4. All of the above




6. A change in autonomous spending is represented by


1. A movement along a (C + I + G) spending line


2. A shif of a (C + I + G) spending line


3. A Change in a behavioral coefficient


4. None of the above




7. Which of the 'following will not result in an increase in output?


1. An increase in autonomous spending


2. A decrease in autonomous taxes


3. An increase in autonomous transfers


4. An increase in lump-sum taxes




8. An increase in lump-sum taxes, ceteris paribus, causes the


1. (c + I + G) spending line to shift upward by \(c\Delta \overline T x\)


2. (c + I + G) spending line to shift downward by \(c\Delta \overline T x\)


3. Leakage line (S + Tx) to shift downward by \(c\Delta \overline T x\)


4. Leakage line (S + Tx) to shift downward by \(\Delta \overline T x\)




9. When there is an increase in lump-sum taxes and government spending, ceteris paribus, then the


1. (S + Tx) leakage line shifts upward and the (I + G) injection line shifts upward


2. (S + Tx) leakage line shifts downward, and the (I + G) injection line shifts downward


3. (S + Tx) leakage lline shifts downward, and the (I + G) injection line shifts upward


4. (S + Tx) leakage line shifts upward, and the (I + G) injection line shifts downward




10. When an increase in government spending is matched by an equal decrease in government transfers, output will


1. Stay the same


2. Increase


3. Decrease


4. None of the above