Question 1

-In the above table, suppose investment decreases by $0.1 trillion. The multiplier equals

Accepted Answer

A)  9.0. 
B)  5.0. 
C)  10.0. 
D)  None of the above answers are correct. 
A)  9.0. 
B)  5.0. 
C)  10.0. 
D)  None of the above answers are correct.

Question 2

List and explain factors that influence consumption expenditure.

Accepted Answer

Disposable income is an important factor

Question 3

The change in consumption expenditure divided by the change in disposable income that caused the consumption change is called

Accepted Answer

A)  the marginal propensity to consume. 
B)  autonomous consumption. 
C)  the average propensity to consume. 
D)  the consumption factor. 
A)  the marginal propensity to consume. 
B)  autonomous consumption. 
C)  the average propensity to consume. 
D)  the consumption factor.

Question 4

The multiplier is 5.0 and autonomous expenditure increases by $30 billion. If potential real GDP is unaffected, in the long run, equilibrium real GDP will

Accepted Answer

A)  not change. 
B)  increase by more than $50 billion. 
C)  increase by less than $50 billion. 
D)  increase by $50 billion. 
A)  not change. 
B)  increase by more than $50 billion. 
C)  increase by less than $50 billion. 
D)  increase by $50 billion.

Question 5

What is the consumption function? What factor leads to a movement along the consumption function?

Accepted Answer

The consumption function is the relation

Question 6

A fall in the price level

Accepted Answer

A)  decreases aggregate planned expenditures and shifts the aggregate demand curve leftward. 
B)  shifts the aggregate demand curve rightward and increases equilibrium GDP. 
C)  shifts the aggregate expenditure curve upward and increases the quantity of real GDP demanded. 
D)  shifts both the aggregate expenditures curve and aggregate demand curve upward. 
A)  decreases aggregate planned expenditures and shifts the aggregate demand curve leftward. 
B)  shifts the aggregate demand curve rightward and increases equilibrium GDP. 
C)  shifts the aggregate expenditure curve upward and increases the quantity of real GDP demanded. 
D)  shifts both the aggregate expenditures curve and aggregate demand curve upward.

Question 7

-In the above figure, autonomous expenditure along AE2 equals

Accepted Answer

A)  $4 trillion. 
B)  $2 trillion. 
C)  $8 trillion. 
D)  an amount not given in the above answers. 
A)  $4 trillion. 
B)  $2 trillion. 
C)  $8 trillion. 
D)  an amount not given in the above answers.

Question 8

In general, an increase in autonomous expenditure that is NOT created by a change in the price level results in a

Accepted Answer

A)  leftward shift of the AD curve. 
B)  rightward shift of the AD curve. 
C)  movement upward along the AD curve. 
D)  movement downward along the AD curve. 
A)  leftward shift of the AD curve. 
B)  rightward shift of the AD curve. 
C)  movement upward along the AD curve. 
D)  movement downward along the AD curve.

Question 9

In general, the steeper the aggregate expenditure curve, the

Accepted Answer

A)  smaller the multiplier. 
B)  lower the marginal propensity to consume. 
C)  greater autonomous expenditure. 
D)  larger the multiplier. 
A)  smaller the multiplier. 
B)  lower the marginal propensity to consume. 
C)  greater autonomous expenditure. 
D)  larger the multiplier.

Question 10

When autonomous expenditure changes, the horizontal distance by which the aggregate demand curve shifts

Accepted Answer

A)  is increased by the existence of automatic stabilizers. 
B)  is determined by the inverse of the multiplier. 
C)  depends on the size of the multiplier. 
D)  depends on the size of the wealth effect. 
A)  is increased by the existence of automatic stabilizers. 
B)  is determined by the inverse of the multiplier. 
C)  depends on the size of the multiplier. 
D)  depends on the size of the wealth effect.

Question 11

A fall in the price level shifts the AE curve and equilibrium expenditure.

Accepted Answer

A)  downward; increases 
B)  upward; increases 
C)  downward; decreases 
D)  upward; decreases 
A)  downward; increases 
B)  upward; increases 
C)  downward; decreases 
D)  upward; decreases

Question 12

If the multiplier is 3, a $750,000 increase in autonomous expenditure increases equilibrium expenditure by $2.25 million.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following variables does NOT have a direct effect of changing consumption expenditure?

Accepted Answer

A)  expected future income 
B)  expected future profits 
C)  wealth 
D)  disposable income 
A)  expected future income 
B)  expected future profits 
C)  wealth 
D)  disposable income

Question 14

An increase in shifts the AE curve and an increase in shifts the aggregate demand curve .

Accepted Answer

A)  the price level; upward; autonomous expenditure; leftward 
B)  the price level; downward; autonomous expenditure; rightward 
C)  autonomous expenditure; upward; the price level; rightward 
D)  autonomous expenditure; upward; the price level; leftward 
A)  the price level; upward; autonomous expenditure; leftward 
B)  the price level; downward; autonomous expenditure; rightward 
C)  autonomous expenditure; upward; the price level; rightward 
D)  autonomous expenditure; upward; the price level; leftward

Question 15

Suppose that the slope of the AE curve is 0.80. Then an increase of investment of $10 billion leads to an increase in equilibrium real GDP equal to

Accepted Answer

A)  $10.0 billion. 
B)  $50.0 billion. 
C)  $8.0 billion. 
D)  $12.5 billion. 
A)  $10.0 billion. 
B)  $50.0 billion. 
C)  $8.0 billion. 
D)  $12.5 billion.

Question 16

-In the above figure, at point d firms would find themselves with inventories their target level and so would production.

Accepted Answer

A)  decreasing below; decrease 
B)  increasing above; increase 
C)  increasing above; decrease 
D)  decreasing below; increase 
A)  decreasing below; decrease 
B)  increasing above; increase 
C)  increasing above; decrease 
D)  decreasing below; increase

Question 17

The software and related services sector has a multiplier effect on the Indian economy with every one- rupee input spent by the" information technology sector" producing an increase in real GDP by rupees.
HYPERLINK "http://www.ft.com/" www.ft.com, 2/28/20
According to the story, if _ _ in the software and related services sector increases by $15 billio GDP will increase by .

Accepted Answer

A)  consumption; $30 billion. 
B)  consumption; $2 billion. 
C)  investment; $30 billion. 
D)  investment; $2 billion. 
A)  consumption; $30 billion. 
B)  consumption; $2 billion. 
C)  investment; $30 billion. 
D)  investment; $2 billion.

Question 18

In the economy of Jokey Island, autonomous consumption expenditure is $60 million, and the marginal propensity to consume is 0.6. Investment is $110 million, government expenditure is $70 million, and there are no income taxes. Investment and government expenditure are constant-they do not vary with income. The islan does not trade with the rest of the world.
a) Draw the aggregate expenditure curve.
b) What is the island's autonomous aggregate expenditure?
c) What is the size of the multiplier in Jokey Island's economy?
d) What is the island's aggregate planned expenditure and what is happening to inventories when real GDP is million?
e) What is the economy's equilibrium aggregate expenditure?

Accepted Answer

which is r

Question 19

In a diagram with the consumption function, the 45- degree line

Accepted Answer

A)  reflects a decreasing MPC as disposable income rises. 
B)  shows where consumption expenditure equals disposable income. 
C)  contains only a consumption component. 
D)  represents both consumption expenditure and investment. 
A)  reflects a decreasing MPC as disposable income rises. 
B)  shows where consumption expenditure equals disposable income. 
C)  contains only a consumption component. 
D)  represents both consumption expenditure and investment.

Question 20

The sum of the components of aggregate expenditure that are not influenced by real GDP is called

Accepted Answer

A)  the MPC. 
B)  autonomous consumption. 
C)  induced expenditures. 
D)  autonomous expenditures. 
A)  the MPC. 
B)  autonomous consumption. 
C)  induced expenditures. 
D)  autonomous expenditures.

-In the above table, suppose investment decreases by $0.1 trillion. The multiplier equals

List and explain factors that influence consumption expenditure.

The change in consumption expenditure divided by the change in disposable income that caused the consumption change is called

The multiplier is 5.0 and autonomous expenditure increases by $30 billion. If potential real GDP is unaffected, in the long run, equilibrium real GDP will

What is the consumption function? What factor leads to a movement along the consumption function?

A fall in the price level

-In the above figure, autonomous expenditure along AE₂equals

In general, an increase in autonomous expenditure that is NOT created by a change in the price level results in a

In general, the steeper the aggregate expenditure curve, the

When autonomous expenditure changes, the horizontal distance by which the aggregate demand curve shifts

A fall in the price level shifts the AE curve and equilibrium expenditure.

If the multiplier is 3, a $750,000 increase in autonomous expenditure increases equilibrium expenditure by $2.25 million.

Which of the following variables does NOT have a direct effect of changing consumption expenditure?

An increase in shifts the AE curve and an increase in shifts the aggregate demand curve .

Suppose that the slope of the AE curve is 0.80. Then an increase of investment of $10 billion leads to an increase in equilibrium real GDP equal to

-In the above figure, at point d firms would find themselves with inventories their target level and so would production.

In a diagram with the consumption function, the 45- degree line

The sum of the components of aggregate expenditure that are not influenced by real GDP is called

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

-In the above table, suppose investment decreases by $0.1 trillion. The multiplier equals

List and explain factors that influence consumption expenditure.

The change in consumption expenditure divided by the change in disposable income that caused the consumption change is called

The multiplier is 5.0 and autonomous expenditure increases by $30 billion. If potential real GDP is unaffected, in the long run, equilibrium real GDP will

What is the consumption function? What factor leads to a movement along the consumption function?

A fall in the price level

-In the above figure, autonomous expenditure along AE2 equals

In general, an increase in autonomous expenditure that is NOT created by a change in the price level results in a

In general, the steeper the aggregate expenditure curve, the

When autonomous expenditure changes, the horizontal distance by which the aggregate demand curve shifts

A fall in the price level shifts the AE curve and equilibrium expenditure.

If the multiplier is 3, a $750,000 increase in autonomous expenditure increases equilibrium expenditure by $2.25 million.

Which of the following variables does NOT have a direct effect of changing consumption expenditure?

An increase in shifts the AE curve and an increase in shifts the aggregate demand curve .

Suppose that the slope of the AE curve is 0.80. Then an increase of investment of $10 billion leads to an increase in equilibrium real GDP equal to

-In the above figure, at point d firms would find themselves with inventories their target level and so would production.

In a diagram with the consumption function, the 45- degree line

The sum of the components of aggregate expenditure that are not influenced by real GDP is called

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

-In the above figure, autonomous expenditure along AE₂equals