Question 1

If aggregate planned expenditure is less than real GDP, in the short run

Accepted Answer

A)  exports change to restore equilibrium. 
B)  real GDP will decrease. 
C)  the price level will fall. 
D)  aggregate planned expenditure will increase. 
A)  exports change to restore equilibrium. 
B)  real GDP will decrease. 
C)  the price level will fall. 
D)  aggregate planned expenditure will increase.

Question 2

Saving rather than dissaving occurs at any level of disposable income at which

Accepted Answer

A)  the consumption function is above the 45- degree line. 
B)  the consumption function is below the 45- degree line. 
C)  the consumption function intersects the saving/income curve. 
D)  autonomous consumption is positive. 
A)  the consumption function is above the 45- degree line. 
B)  the consumption function is below the 45- degree line. 
C)  the consumption function intersects the saving/income curve. 
D)  autonomous consumption is positive.

Question 3

What is the mathematical formula for the multiplier? Why is there a multiplier?

Accepted Answer

In general, the multiplier equals¹. If, h

Question 4

-In the above table, there are no taxes (so that that real GDP equals disposable income) and no imports or exports. If real GDP decreases from $6,000 to $5,000, the marginal propensity to consume is

Accepted Answer

A)  0.80. 
B)  0.75. 
C)  - 750. 
D)  - 0.75. 
A)  0.80. 
B)  0.75. 
C)  - 750. 
D)  - 0.75.

Question 5

After an increase in autonomous spending, in the long run, changes in the price level

Accepted Answer

A)  will make the AE curve steeper. 
B)  will reduce the effect of the multiplier. 
C)  will not affect the multiplier. 
D)  will make the AE curve flatter. 
A)  will make the AE curve steeper. 
B)  will reduce the effect of the multiplier. 
C)  will not affect the multiplier. 
D)  will make the AE curve flatter.

Question 6

When autonomous expenditure decreases, .

Accepted Answer

A)  the AE curve shifts downward 
B)  there is a movement down along the AE curve 
C)  the AE curve shifts upward 
D)  the AE curve becomes less steep 
A)  the AE curve shifts downward 
B)  there is a movement down along the AE curve 
C)  the AE curve shifts upward 
D)  the AE curve becomes less steep

Question 7

The positive slope of the consumption function indicates that

Accepted Answer

A)  the amount of household wealth is subject to change. 
B)  when prices fall consumers spend more. 
C)  consumers increase their total consumption expenditure when disposable income increases. 
D)  consumers spend less out of each extra dollar of income. 
A)  the amount of household wealth is subject to change. 
B)  when prices fall consumers spend more. 
C)  consumers increase their total consumption expenditure when disposable income increases. 
D)  consumers spend less out of each extra dollar of income.

Question 8

-In the above figure, the multiplier is

Accepted Answer

A)  3.0. 
B)  1.5. 
C)  2.0. 
D)  2.5. 
A)  3.0. 
B)  1.5. 
C)  2.0. 
D)  2.5.

Question 9

Autonomous expenditure is not influenced by

Accepted Answer

A)  real GDP. 
B)  the price level. 
C)  the interest rate. 
D)  any other variable. 
A)  real GDP. 
B)  the price level. 
C)  the interest rate. 
D)  any other variable.

Question 10

-In the above figure, the line AB is called

Accepted Answer

A)  the consumption function. 
B)  the saving function. 
C)  the 45- degree line. 
D)  the expenditure function. 
A)  the consumption function. 
B)  the saving function. 
C)  the 45- degree line. 
D)  the expenditure function.

Question 11

Disposable income is

Accepted Answer

A)  income plus transfer payments minus consumption expenditure. 
B)  income minus taxes plus transfer payments. 
C)  total income divided by the price level. 
D)  income minus saving. 
A)  income plus transfer payments minus consumption expenditure. 
B)  income minus taxes plus transfer payments. 
C)  total income divided by the price level. 
D)  income minus saving.

Question 12

The aggregate expenditure curve shows

Accepted Answer

A)  how planned aggregate expenditure and real GDP are related. 
B)  a negative relationship between the price level and real GDP. 
C)  how consumption changes in response to a change in disposable income. 
D)  Both answers B and C are correct. 
A)  how planned aggregate expenditure and real GDP are related. 
B)  a negative relationship between the price level and real GDP. 
C)  how consumption changes in response to a change in disposable income. 
D)  Both answers B and C are correct.

Question 13

If the consumption function lies below the 45- degree line, then saving at these levels of disposable income will

Accepted Answer

A)  equal zero. 
B)  be positive. 
C)  be negative. 
D)  be some amount that cannot be determined without additional information. 
A)  equal zero. 
B)  be positive. 
C)  be negative. 
D)  be some amount that cannot be determined without additional information.

Question 14

If there are no taxes or imports and MPC = 0.75, the multiplier equals

Accepted Answer

A)  4.0. 
B)  0.25. 
C)  1.33. 
D)  6.0. 
A)  4.0. 
B)  0.25. 
C)  1.33. 
D)  6.0.

Question 15

The multiplier is greater than 1 because

Accepted Answer

A)  corporate spending exceeds corporate income. 
B)  one person's spending becomes another's income. 
C)  most households are unable to save. 
D)  household spending exceeds income. 
A)  corporate spending exceeds corporate income. 
B)  one person's spending becomes another's income. 
C)  most households are unable to save. 
D)  household spending exceeds income.

Question 16

-In the above figure, autonomous consumption equals

Accepted Answer

A)  0. 
B)  $6 trillion. 
C)  $2 trillion. 
D)  - $2 trillion. 
A)  0. 
B)  $6 trillion. 
C)  $2 trillion. 
D)  - $2 trillion.

Question 17

If investment decreases, the AE curve shifts

Accepted Answer

A)  downward and the AD curve shifts leftward. 
B)  downward and there is a movement along the AD curve. 
C)  upward and there is a movement along the AD curve. 
D)  upward and the AD curve shifts rightward. 
A)  downward and the AD curve shifts leftward. 
B)  downward and there is a movement along the AD curve. 
C)  upward and there is a movement along the AD curve. 
D)  upward and the AD curve shifts rightward.

Question 18

When the economy is at full employment and investment increases, in the long run the price level will and, if potential GDP does not change, in the long run real GDP will .

Accepted Answer

A)  decrease; not change 
B)  decrease; decrease 
C)  increase; not change 
D)  increase; increase 
A)  decrease; not change 
B)  decrease; decrease 
C)  increase; not change 
D)  increase; increase

Question 19

When disposable income increases from $6 trillion to $6.5 trillion, consumption expenditure increase from $5.5 trillion to $5.9 trillion. The MPC equals

Accepted Answer

A)  0.8. 
B)  0.76. 
C)  0.75. 
D)  0.2. 
A)  0.8. 
B)  0.76. 
C)  0.75. 
D)  0.2.

Question 20

In the very short term, planned investment, planned government expenditure, planned exports, planned consumption, and planned imports are all fixed and do not change when GDP changes.

Accepted Answer

A) True 
 B)False

If aggregate planned expenditure is less than real GDP, in the short run

Saving rather than dissaving occurs at any level of disposable income at which

What is the mathematical formula for the multiplier? Why is there a multiplier?

-In the above table, there are no taxes (so that that real GDP equals disposable income) and no imports or exports. If real GDP decreases from $6,000 to $5,000, the marginal propensity to consume is

After an increase in autonomous spending, in the long run, changes in the price level

When autonomous expenditure decreases, .

The positive slope of the consumption function indicates that

-In the above figure, the multiplier is

Autonomous expenditure is not influenced by

-In the above figure, the line AB is called

Disposable income is

The aggregate expenditure curve shows

If the consumption function lies below the 45- degree line, then saving at these levels of disposable income will

If there are no taxes or imports and MPC = 0.75, the multiplier equals

The multiplier is greater than 1 because

-In the above figure, autonomous consumption equals

If investment decreases, the AE curve shifts

When the economy is at full employment and investment increases, in the long run the price level will and, if potential GDP does not change, in the long run real GDP will .

When disposable income increases from $6 trillion to $6.5 trillion, consumption expenditure increase from $5.5 trillion to $5.9 trillion. The MPC equals

In the very short term, planned investment, planned government expenditure, planned exports, planned consumption, and planned imports are all fixed and do not change when GDP changes.

What Is Economics

The Economic Problem

Demand and Supply

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

U.S. Inflation, Unemployment, and Business Cycle

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

Exam 11: Expenditure Multipliers: They Keynesian Model

If aggregate planned expenditure is less than real GDP, in the short run

Saving rather than dissaving occurs at any level of disposable income at which

What is the mathematical formula for the multiplier? Why is there a multiplier?

-In the above table, there are no taxes (so that that real GDP equals disposable income) and no imports or exports. If real GDP decreases from $6,000 to $5,000, the marginal propensity to consume is

After an increase in autonomous spending, in the long run, changes in the price level

When autonomous expenditure decreases, .

The positive slope of the consumption function indicates that

-In the above figure, the multiplier is

Autonomous expenditure is not influenced by

-In the above figure, the line AB is called

Disposable income is

The aggregate expenditure curve shows

If the consumption function lies below the 45- degree line, then saving at these levels of disposable income will

If there are no taxes or imports and MPC = 0.75, the multiplier equals

The multiplier is greater than 1 because

-In the above figure, autonomous consumption equals

If investment decreases, the AE curve shifts

When the economy is at full employment and investment increases, in the long run the price level will and, if potential GDP does not change, in the long run real GDP will .

When disposable income increases from $6 trillion to $6.5 trillion, consumption expenditure increase from $5.5 trillion to $5.9 trillion. The MPC equals

In the very short term, planned investment, planned government expenditure, planned exports, planned consumption, and planned imports are all fixed and do not change when GDP changes.

What Is Economics

The Economic Problem

Demand and Supply

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

U.S. Inflation, Unemployment, and Business Cycle

Fiscal Policy

Monetary Policy

International Trade Policy

Filters