Macroeconomics Answers

The consumer price index (CPI) can be used to measure inflation. There are potential problems with this process though that can result in inflation being overstated or understated. Place each statement according to whether it would cause inflation to be overstated, understated, or would give an accurate representation of inflation.

which one of the following statement is correct regarding the Keynesian model with the government sector and the foreign sector
(1) government expenditure is autonomous
(2) exports and imports are a function of the interest rate
(3) an increase in government expenditure will decrease the equilibrium level of income
(4) a decrease in net exports will increase the equilibrium level of income

which one of the following statement is correct
(1) a decrease in net exports will decrease the equilibrium level of income
(2) an increase in the tax rate will increase the size of the multiplier
(3) a change in the tax rate has no impact on the size of the multiplier
(4) an increase in net exports will decrease the equilibrium level of income

to get the equilibrium level of income in the simple Keynesian model
(1) we multiply the autonomous aggregate spending by the multiplier
(2) we add all the autonomous aggregate spending component and subtract the multiplier
(3) we divide the multiplier by aggregate demand
(4) we multiply the interest rate by the multiplier

which one of the following statement regarding consumption spending is correct
(1) total consumption consist of induced consumption and autonomous consumption
(2) induced consumption is independent of the rate of income
(3) autonomous consumption is a function of income
(4) both autonomous and induced consumption are a function of income

which one of the following statement regarding the assumption of the Keynesian model
(1) the simple Keynesian model can be used to study inflation
(2) the simple Keynesian model can be used to explain the working of the labour market
(3) the simple Keynesian model can be used to study monetary policy
(4) in the simple Keynesian model prices, wages, money supply and the interest rate are given meaning that value is determined outside the model

which one of the following statement regarding say's law is correct
(1) overproduction is not possible
(2) demand determines supply
(3) aggregate spending determines production
(4) consumption is equal to savings

in the simple Keynesian model
(1) production is always equal to aggregate expenditure
(2) aggregate expenditure is less than production
(3) aggregate demand determines production
(4) aggregate supply determines production

the 45-degree line in the simple Keynesian model
(1) indicates that along the line aggregate demand is greater than aggregate supply
(2) is the line of disequilibrium
(3) show all the possible equilibrium points
(4) shows excess supply and excess demand

investment spending is a function of
(1) the interest rate
(2) government spending
(3) exports
(4)imports