In the closed economy of Zipland, autonomous consumption expenditure is $5 billion and the marginal propensity to consume is 0.6. Investment is $10 billion and government purchases of goods and services are $15 billion. The marginal tax rate is zero, and the price level is fixed. The government increases its purchases of goods and services to $20 billion, equilibrium expenditure ______________ and the government purchases multiplier is _____________.

increases by $5.0 billion; 1.0
increases by $12.5 billion; 2.5
increases by $2.0 billion; 0.4
increases by $15.0 billion; 3.0

In the closed economy of Zipland, the marginal propensity to consume is 0.6, the marginal tax rate is zero, and the price level is fixed. The government increases lump-sum taxes by $5 billion, equilibrium expenditure ____________ and the lump-sum tax multiplier is ________________.

decreases by $7.5 billion; -1.5
decreases by $5.0 billion; -1.0
increases by $12.5 billion; 2.5
increases by $7.5 billion; 1.5

In the closed economy of Zapland, the marginal propensity to consume is 0.75, the marginal tax rate is zero, and the price level is fixed. The government increases its purchases of goods and services by $5 billion and at the same time increases lump-sum taxes by $5 billion to pay for the new goods and services. Equilibrium expenditure ____________.

increases by $5 billion
does not change
increases by $12.5 billion
decreases by $5 billion

In the closed economy of Dreamland, the price level is fixed and the government purchases multiplier is 5. If the marginal tax rate is zero, the marginal propensity to consume in Dreamland is ___________ and the lump-sum tax multiplier is _______________.

4/5; -4
5/6; 5
1/5; -4/5
4/5; 4

In the closed economy of Big Foot, when the price level is fixed the government purchases multiplier is 3. The slope of the AE curve in Big Foot is ___________ and a $15 million increase in government purchases will increase aggregate demand by _______________.

2/3; $45 million
1/3; $5 million
1/3; less than $5 million
2/3; $10 million

The figure shows tax revenues and government expenditures in the economy of Meadowlake. Potential GDP is $10 million. If real GDP is $10 million, then the government has a ______________.

balanced budget
cyclical surplus
structural surplus
cyclical deficit

In the closed economy of Little Toe, the magnitude of the lump-sum tax multiplier when the price level is fixed is 2. A $5 million increase in lump-sum taxes will ___________ aggregate demand by ______________.

decrease; $10.0 million
decrease; $2.5 million
increase; less than $2.5 million
increase; $10.0 million

The figure shows tax revenues and government expenditures in the economy of Meadowlake. Potential GDP is $10 million, and real GDP is $15 million. Now the government cuts the marginal tax rate. It creates a ______________.

structural deficit
cyclical surplus
cyclical deficit
structural surplus

The figure illustrates the aggregate demand and short-run aggregate supply in Lotus Land. Potential GDP is $50 million, and the economy is currently at point c. Now the government increases its purchases of goods and services. In the short run, the economy will _______. The price level will _______, and the change in real GDP will be _______ the increase in aggregate demand.

move to point d; rise; less than
remain at point c; remain constant; the same as
move to point b; rise; less than
move to point a; rise; greater than

The figure illustrates the aggregate demand and short-run aggregate supply in Lotus Land. Potential GDP is $50 million, and the economy is currently at point b. Now the government decreases lump-sum taxes. In the long run, the economy will _______. The price level will _______, and the change in real GDP will be _______ the initial change in equilibrium expenditure.

remain at point d; remain constant; equal to
move to point a; rise; the same as
move to point c; fall; less than
move to point a; rise; less than

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