1. Refer to the diagram for a private closed economy. The upward shift of the aggregate expenditures schedule from (C + Ig)1 to (C + Ig)2 reflects:
A. an increase in investment expenditures.
B. a decrease in consumption expenditures.
C. an increase in the MPC.
D. an increase in the APS.
2. Which of the following is a correct statement of the impacts of a lump-sum tax?
A. Disposable income will increase by the amount of the tax and consumption at each level of GDP will decline by the amount of the tax multiplied by the MPC.
B. Disposable income will decline by the amount of the tax and consumption at each level of GDP will decline by the amount of the tax multiplied by the multiplier.
C. Disposable income will decline by the amount of the tax and consumption at each level of GDP will also decline by the amount of the tax.
D. Disposable income will decline by the amount of the tax and consumption at each level of GDP will decline by the amount of the tax multiplied by the MPC.
3. In an aggregate expenditures diagram, a lump-sum tax (T) will:
A. not affect the C + Ig + Xn line.
B. shift the C + Ig + Xn line upward by an amount equal to T.
C. shift the C + Ig + Xn line downward by an amount equal to T.
D. shift the C + Ig + Xn line downward by an amount equal to T ´ MPC.
4. If the MPC in an economy is .9, a $1 billion increase in government spending will ultimately increase consumption by:
A. $1 billion.
B. $0.9 billion.
C. $10 billion.
D. $9 billion.