Question 1

In the very short term, in the Keynesian model, which of the following is fixed and does not change when GDP changes?

Accepted Answer

A)  planned consumption 
B)  planned investment 
C)  planned imports 
D)  All of the above answers are correct 
A)  planned consumption 
B)  planned investment 
C)  planned imports 
D)  All of the above answers are correct

Question 2

The multiplier effect exists because a change in autonomous expenditure

Accepted Answer

A)  will undergo its complete effect in one round. 
B)  prompts further exports. 
C)  leads to changes in income, which generate further spending. 
D)  leaves the economy in the form of imports. 
A)  will undergo its complete effect in one round. 
B)  prompts further exports. 
C)  leads to changes in income, which generate further spending. 
D)  leaves the economy in the form of imports.

Question 3

Which of the following variables is NOT assumed to be completely autonomous in the aggregate expenditure model?

Accepted Answer

A)  imports 
B)  investment 
C)  government expenditures on goods and services 
D)  exports 
A)  imports 
B)  investment 
C)  government expenditures on goods and services 
D)  exports

Question 4

The marginal propensity to consume equals 1 minus the

Accepted Answer

A)  marginal propensity to invest. 
B)  marginal propensity to pay taxes. 
C)  marginal propensity to save. 
D)  marginal propensity to import. 
A)  marginal propensity to invest. 
B)  marginal propensity to pay taxes. 
C)  marginal propensity to save. 
D)  marginal propensity to import.

Question 5

Disposable income is $6 billion and planned saving is $2 billion. What is the value of planned consumption expenditure?

Accepted Answer

A)  $8 billion 
B)  $4 billion 
C)  0.33 
D)  0.67 
A)  $8 billion 
B)  $4 billion 
C)  0.33 
D)  0.67

Question 6

A change in imports caused by rising U.S. incomes is

Accepted Answer

A)  a decrease in autonomous expenditure. 
B)  an increase in autonomous expenditure. 
C)  a change in induced expenditure. 
D)  an increase in induced exports. 
A)  a decrease in autonomous expenditure. 
B)  an increase in autonomous expenditure. 
C)  a change in induced expenditure. 
D)  an increase in induced exports.

Question 7

The relationship between net exports and GDP makes the slope of the aggregate expenditure curve

Accepted Answer

A)  steeper at low levels of GDP and flatter at high levels of GDP. 
B)  steeper than it would be otherwise. 
C)  neither flatter nor steeper than it would be otherwise. 
D)  flatter than it would be otherwise. 
A)  steeper at low levels of GDP and flatter at high levels of GDP. 
B)  steeper than it would be otherwise. 
C)  neither flatter nor steeper than it would be otherwise. 
D)  flatter than it would be otherwise.

Question 8

-In the above table, C is consumption expenditure, I is investment, G is government expenditure, X
Is exports, and M is imports. All entries are in dollars. What is the marginal propensity to consume?

Accepted Answer

A)  0.75 
B)  0.20 
C)  0.25 
D)  0.80 
A)  0.75 
B)  0.20 
C)  0.25 
D)  0.80

Question 9

Which of the following concerning the marginal propensity to consume and the consumption functi true?
I. The larger the marginal propensity to consume, the greater the amount of autonomous consum
II. The larger the marginal propensity to consume, the steeper the consumption function.

Accepted Answer

A)  I is true. 
B)  II is true. 
C)  Both I and II are true. 
D)  Neither I nor II is true. 
A)  I is true. 
B)  II is true. 
C)  Both I and II are true. 
D)  Neither I nor II is true.

Question 10

The MPC is the fraction of

Accepted Answer

A)  total disposable income that is not consumed. 
B)  a change in disposable income that is consumed. 
C)  total disposable income that is consumed. 
D)  a change in disposable income that is saved. 
A)  total disposable income that is not consumed. 
B)  a change in disposable income that is consumed. 
C)  total disposable income that is consumed. 
D)  a change in disposable income that is saved.

Question 11

-The figure above illustrates an economy's consumption function. What is the marginal propensity to save in this economy?

Accepted Answer

A)  1.00 
B)  0.75 
C)  0.33 
D)  0.67 
A)  1.00 
B)  0.75 
C)  0.33 
D)  0.67

Question 12

The larger the slope of the AE curve, the

Accepted Answer

A)  less likely that the multiplier will be affected. 
B)  smaller the value of the multiplier. 
C)  larger the value of the multiplier. 
D)  more likely that the multiplier will be inconsequential. 
A)  less likely that the multiplier will be affected. 
B)  smaller the value of the multiplier. 
C)  larger the value of the multiplier. 
D)  more likely that the multiplier will be inconsequential.

Question 13

The slope of the saving function is equal to

Accepted Answer

A)  the MPS. 
B)  1- MPS. 
C)  the MPC. 
D)  None of the above answers is correct. 
A)  the MPS. 
B)  1- MPS. 
C)  the MPC. 
D)  None of the above answers is correct.

Question 14

According to the Keynesian theory, the typical firm

Accepted Answer

A)  lowers its prices when inventories are decreasing. 
B)  lowers its prices if sales exceed production. 
C)  does not change its prices immediately when aggregate demand fluctuates. 
D)  changes its prices frequently in response to fluctuations in aggregate demand. 
A)  lowers its prices when inventories are decreasing. 
B)  lowers its prices if sales exceed production. 
C)  does not change its prices immediately when aggregate demand fluctuates. 
D)  changes its prices frequently in response to fluctuations in aggregate demand.

Question 15

If the marginal propensity to import increases, then the

Accepted Answer

A)  multiplier will decrease in value. 
B)  multiplier will not change in value. 
C)  effect on the multiplier will depend on what happens to exports. 
D)  multiplier will increase in value. 
A)  multiplier will decrease in value. 
B)  multiplier will not change in value. 
C)  effect on the multiplier will depend on what happens to exports. 
D)  multiplier will increase in value.

Question 16

If the multiplier is 6 and exports decrease by $30, what impact will that have on aggregate expenditure?

Accepted Answer

A)  increase by $180 
B)  increase by $30 
C)  decrease by $30 
D)  decrease by $180 
A)  increase by $180 
B)  increase by $30 
C)  decrease by $30 
D)  decrease by $180

Question 17

Which of the following shifts the aggregate demand curve rightward?

Accepted Answer

A)  an increase in the price level 
B)  an increase in the income tax rate 
C)  a decrease in investment 
D)  an increase in government expenditures 
A)  an increase in the price level 
B)  an increase in the income tax rate 
C)  a decrease in investment 
D)  an increase in government expenditures

Question 18

-In the above figure, at the equilibrium, induced expenditure is

Accepted Answer

A)  $300 billion. 
B)  $100 billion. 
C)  $200 billion. 
D)  some amount not given in the above answers. 
A)  $300 billion. 
B)  $100 billion. 
C)  $200 billion. 
D)  some amount not given in the above answers.

Question 19

An economy saves 20 percent of any increase in income and there are no income taxes or imports. Then, an increase in investment of $2 billion can produce a short run increase in real GDP of as much as

Accepted Answer

A)  $2 billion. 
B)  $1.6 billion. 
C)  $10 billion. 
D)  $0.4 billion. 
A)  $2 billion. 
B)  $1.6 billion. 
C)  $10 billion. 
D)  $0.4 billion.

Question 20

As disposable income increases, there is a _ the saving function.

Accepted Answer

A)  rightward shift of 
B)  change in the slope of 
C)  leftward shift of the 
D)  movement along 
A)  rightward shift of 
B)  change in the slope of 
C)  leftward shift of the 
D)  movement along

In the very short term, in the Keynesian model, which of the following is fixed and does not change when GDP changes?

The multiplier effect exists because a change in autonomous expenditure

Which of the following variables is NOT assumed to be completely autonomous in the aggregate expenditure model?

The marginal propensity to consume equals 1 minus the

Disposable income is $6 billion and planned saving is $2 billion. What is the value of planned consumption expenditure?

A change in imports caused by rising U.S. incomes is

The relationship between net exports and GDP makes the slope of the aggregate expenditure curve

-In the above table, C is consumption expenditure, I is investment, G is government expenditure, X Is exports, and M is imports. All entries are in dollars. What is the marginal propensity to consume?

Which of the following concerning the marginal propensity to consume and the consumption functi true? I. The larger the marginal propensity to consume, the greater the amount of autonomous consum II. The larger the marginal propensity to consume, the steeper the consumption function.

The MPC is the fraction of

-The figure above illustrates an economy's consumption function. What is the marginal propensity to save in this economy?

The larger the slope of the AE curve, the

The slope of the saving function is equal to

According to the Keynesian theory, the typical firm

If the marginal propensity to import increases, then the

If the multiplier is 6 and exports decrease by $30, what impact will that have on aggregate expenditure?

Which of the following shifts the aggregate demand curve rightward?

-In the above figure, at the equilibrium, induced expenditure is

An economy saves 20 percent of any increase in income and there are no income taxes or imports. Then, an increase in investment of $2 billion can produce a short run increase in real GDP of as much as

As disposable income increases, there is a _ the saving function.

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 very short term, in the Keynesian model, which of the following is fixed and does not change when GDP changes?

The multiplier effect exists because a change in autonomous expenditure

Which of the following variables is NOT assumed to be completely autonomous in the aggregate expenditure model?

The marginal propensity to consume equals 1 minus the

Disposable income is $6 billion and planned saving is $2 billion. What is the value of planned consumption expenditure?

A change in imports caused by rising U.S. incomes is

The relationship between net exports and GDP makes the slope of the aggregate expenditure curve

-In the above table, C is consumption expenditure, I is investment, G is government expenditure, X Is exports, and M is imports. All entries are in dollars. What is the marginal propensity to consume?

Which of the following concerning the marginal propensity to consume and the consumption functi true? I. The larger the marginal propensity to consume, the greater the amount of autonomous consum II. The larger the marginal propensity to consume, the steeper the consumption function.

The MPC is the fraction of

-The figure above illustrates an economy's consumption function. What is the marginal propensity to save in this economy?

The larger the slope of the AE curve, the

The slope of the saving function is equal to

According to the Keynesian theory, the typical firm

If the marginal propensity to import increases, then the

If the multiplier is 6 and exports decrease by $30, what impact will that have on aggregate expenditure?

Which of the following shifts the aggregate demand curve rightward?

-In the above figure, at the equilibrium, induced expenditure is

An economy saves 20 percent of any increase in income and there are no income taxes or imports. Then, an increase in investment of $2 billion can produce a short run increase in real GDP of as much as

As disposable income increases, there is a _ the saving function.

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