Question : 91) Consider the following news headline: “Canadians develop a greater : 1384388

91) Consider the following news headline: “Canadians develop a greater taste for foreign vacations.” Assuming that aggregate output is demand-determined, what effect will this have, all other things equal, on the AE function and on equilibrium national income?

A) The AE function will shift down parallel to itself and equilibrium national income will fall.

B) The AE function will rotate upward (become steeper) and equilibrium national income will rise.

C) The AE function will rotate downward (become flatter) and national income will fall.

D) The AE function will shift up parallel to itself and equilibrium national income will rise.

E) There will be no change in the AE function or in equilibrium national income.

92) Consider the following news headline: “Government follows through on election promise—cuts income-tax rate by 5 percentage points.” Assuming that aggregate output is demand-determined, what will be the effect of this action, all other things equal, on the AE function and on equilibrium national income?

A) The AE function will shift down parallel to itself and equilibrium national income will fall.

B) The AE function will rotate upward (become steeper) and equilibrium national income will rise.

C) The AE function will rotate downward (become flatter) and national income will fall.

D) The AE function will shift up parallel to itself and equilibrium national income will rise.

E) There will be no change in the AE function or in equilibrium national income.

93) Consider the following news headline: “China signs deal to buy more Canadian wheat.” Assuming that aggregate output is demand-determined, what effect will this have, all other things equal, on the AE function and on equilibrium national income?

A) The AE function will shift down parallel to itself and equilibrium national income will fall.

B) The AE function will rotate upward (become steeper) and equilibrium national income will rise.

C) The AE function will rotate downward (become flatter) and national income will fall.

D) The AE function will shift up parallel to itself and equilibrium national income will rise.

E) There will be no change in the AE function or in equilibrium national income.

94) Consider a simple macro model with demand-determined output. Suppose the level of exports decreases unexpectedly by $6 billion. If the government wants to restore the initial equilibrium level of output it could, all other things equal, ________ by ________.

A) increase its purchases; more than $6 billion

B) increase its net tax revenues; $6 billion

C) increase its net tax revenues; less than $6 billion

D) increase its purchases; $6 billion

E) decrease its purchases; $6 billion

95) Refer to Figure 22-2. What is the value of the multiplier in this economy?

A) 1.33

B) 1.67

C) 2.0

D) 2.5

E) 6.67

96) A decrease in the value of the simple multiplier can be caused by

A) a decrease in the net tax rate.

B) a decrease in the marginal propensity to import.

C) an increase in the marginal propensity to consume.

D) an increase in the marginal propensity to save.

E) an increase in the marginal propensity to spend.

97) An increase in the value of the simple multiplier can be caused by

A) a decrease in the marginal propensity to consume.

B) an increase in the marginal propensity to import.

C) an increase in the net tax rate.

D) an increase in the marginal propensity to save.

E) a decrease in the net tax rate.

98) In a macro model where the marginal propensity to consume out of disposable income is 0.8, the net tax rate is 0.25, and the marginal propensity to import is 0.12, the simple multiplier will be

A) 0.480.

B) 1.471.

C) 1.923.

D) 2.083.

E) 2.110.

99) Consider a simple macro model with a constant price level and demand-determined output. The equations of the model are: C = 60 + 0.43Y, I = 150, G = 260, T = 0, X = 90, IM = 0.06Y. The value of the simple multiplier in this model is

A) 0.37.

B) 1.59.

C) 2.04.

D) 2.32.

E) 2.70.

100) Consider a model in which output is demand-determined. If the marginal propensity to spend out of national income is 0.4, then a $0.6 billion decrease in government purchases will cause equilibrium national income to ________ by approximately ________.

A) decrease; $1.50 billion

B) decrease; $1.00 billion

C) decrease; $0.24 billion

D) increase; $1.00 billion

E) increase; $1.50 billion