ECS 1601

Learning Unit 7 quiz

Multiple-choice questions (MCQs)

1.

and are leakages out of the production, income and spending circular flow while and
are injections.
[1]
[2]
[3]
[4]

2.

If taxes increase, the multiplier .

[1]
[2]
[3]
[4]

3.

will decrease
will increase
will stay the same
cannot be calculated

If marginal propensity to import increases, the equilibrium income level .

[1]
[2]
[3]
[4]

6.

will decrease
will increase
will stay the same
cannot be predicted

If marginal propensity to import decreases, the multiplier .

[1]
[2]
[3]
[4]

5.

will decrease
will increase
will stay the same
cannot be predicted

If taxes decrease, the equilibrium income level .

[1]
[2]
[3]
[4]

4.

Taxes; government expenditure; exports; imports

Exports; government expenditure; taxes; imports
Taxes; imports; exports; government expenditure
Exports; imports; taxes; government expenditure

will decrease
will increase
stay the same
cannot be calculated

If the MPC is 0.75, the tax rate is 30% and imports are autonomously determined, the slope of
the expenditure line is .
[1]

2.1

[2]

1.05

[3]

0.475

[4]

0.525

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Open Rubric

ECS 1601
Learning Unit 7 quiz
7.

Use the following four figures and match a figure to an option below:

Figure A

Figure B
A=Y

A=Y

A1

A1

Figure C

Y
Figure D

A
A=Y

A=Y

A1

A1

7.1

An increase in autonomous imports

7.2

A decrease in exports

7.3

An increase in government expenditure

7.4

A decrease in the average tax rate

7.5

A decrease in the marginal propensity to import

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ECS 1601
Learning Unit 7 quiz

Long questions
8.

(a)

Explain what autonomous spending and induced spending are.

(b)

State whether the following variables are autonomous and/or induced in the
Keynesian model.
(i)
(ii)
(iii)
(iv)

9.

Government expenditure (G)

Proportional taxes (T)
Exports (X)
Imports (Z)

Use the following information to answer the questions that follow.

Government expenditure =

400

Exports =

250

Autonomous imports =

50

Autonomous consumption =

150

Investment expenditure =

300

Full-employment output =

1 900

Marginal propensity to consume =

0.75

Marginal propensity to import =

0.15

Proportional tax rate =

0.25

9.1
9.2
9.3
9.4
9.5

Calculate the equilibrium income level in the above economy.

Does the government currently have a budget deficit or a budget surplus?
Draw the expenditure line for the economy above.
On the same graph, draw a new expenditure line, after government expenditure
increases with 100.
Calculate the amount by which government must increase its spending in order to
achieve full employment.

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ECS 1601
Learning Unit 7 quiz
10.

Figure E shows the situation in Economy ABC. Explain how expansionary fiscal policy will
affect Economy ABC.
A=Y

A1

E1

YB

Y1

Yf

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