Question 1

Business cycle turning points are

Accepted Answer

A)  easy to predict. 
B)  brought about by changes in autonomous expenditures that are then subject to the multiplier effect. 
C)  unaffected by, and unrelated to the multiplier. 
D)  None of the above is correct. 
A)  easy to predict. 
B)  brought about by changes in autonomous expenditures that are then subject to the multiplier effect. 
C)  unaffected by, and unrelated to the multiplier. 
D)  None of the above is correct.

Question 2

Which of the following events will make the consumption function steeper?

Accepted Answer

A)  an increase in real GDP 
B)  an increase in disposable income 
C)  an increase in the marginal propensity to consume 
D)  an increase in unplanned inventory investment 
A)  an increase in real GDP 
B)  an increase in disposable income 
C)  an increase in the marginal propensity to consume 
D)  an increase in unplanned inventory investment

Question 3

If prices are fixed, when aggregate planned expenditure exceeds real GDP, then

Accepted Answer

A)  inventories decrease, signaling firms to increase production and increase real GDP. 
B)  profits fall, signaling firms to decrease production and decrease real GDP. 
C)  inventories increase, signaling firms to decrease production and decrease real GDP. 
D)  None of the above answers are correct. 
A)  inventories decrease, signaling firms to increase production and increase real GDP. 
B)  profits fall, signaling firms to decrease production and decrease real GDP. 
C)  inventories increase, signaling firms to decrease production and decrease real GDP. 
D)  None of the above answers are correct.

Question 4

Induced consumption is equal to

Accepted Answer

A)  consumption caused by an increase in disposable income. 
B)  consumption when disposable income is zero. 
C)  dissaving when disposable income is greater than zero. 
D)  saving when consumption equals disposable income. 
A)  consumption caused by an increase in disposable income. 
B)  consumption when disposable income is zero. 
C)  dissaving when disposable income is greater than zero. 
D)  saving when consumption equals disposable income.

Question 5

Actual aggregate expenditures does not always equal real GDP.

Accepted Answer

A) True 
 B)False

Question 6

A movement along the consumption function is the result of changes in

Accepted Answer

A)  the real interest rate. 
B)  expected future income. 
C)  disposable income. 
D)  All of the above answers are correct. 
A)  the real interest rate. 
B)  expected future income. 
C)  disposable income. 
D)  All of the above answers are correct.

Question 7

The marginal propensity to consume is

Accepted Answer

A)  the change in consumption expenditure divided by the change in disposable income. 
B)  the change in consumption expenditure divided by total disposable income. 
C)  total consumption expenditure divided by the change in disposable income. 
D)  the change in consumption expenditure divided by total saving. 
A)  the change in consumption expenditure divided by the change in disposable income. 
B)  the change in consumption expenditure divided by total disposable income. 
C)  total consumption expenditure divided by the change in disposable income. 
D)  the change in consumption expenditure divided by total saving.

Question 8

-In the figure above, the induced consumption when real GDP is $6 trillion is

Accepted Answer

A)  $6 trillion. 
B)  zero. 
C)  $1 trillion. 
D)  $4 trillion. 
A)  $6 trillion. 
B)  zero. 
C)  $1 trillion. 
D)  $4 trillion.

Question 9

In an article regarding Bangladesh's economy, the author suggests that the government ..."[g]ive do tax breaks on investment dollars. Give a tax break to R&D [research and development]. Give a tax b on donations to educational institutions. "
HYPERLINK "http://www.groundreport.com/" www.groundreport.com, March 24, 20
Suppose the multiplier in Bangladesh is 2. As a result of enacting the proposed policies, which of th following describe possible outcomes in the short run?
i. an $20 billion increase in investment will increase aggregate expenditure by $40 billion.
ii. the AE curve will shift upward.
iii. there will be an unplanned increase in inventories.

Accepted Answer

A)  i and ii only 
B)  i and iii only 
C)  ii and iii only 
D)  i, ii and iii 
A)  i and ii only 
B)  i and iii only 
C)  ii and iii only 
D)  i, ii and iii

Question 10

In 2007, investment in France increased by 7 billion euros. Assume the price level was constant, the multiplier was 5 and the economy was at full employment. As a result, equilibrium expenditure

Accepted Answer

A)  increased by 35 billion euros. 
B)  decreased by 35 billion euros. 
C)  increased by 1.4 billion euros 
D)  decreased by .71 billion euros. 
A)  increased by 35 billion euros. 
B)  decreased by 35 billion euros. 
C)  increased by 1.4 billion euros 
D)  decreased by .71 billion euros.

Question 11

Suppose disposable income increases from $5 trillion to $6 trillion. As a result, consumption expenditure increases from $4 trillion to _ _. This result means the MPC equals .

Accepted Answer

A)  $5 trillion; 0.80 
B)  $6 trillion; 1.00 
C)  $4.8 trillion; 0.80 
D)  $4.5 trillion; 4.50 
A)  $5 trillion; 0.80 
B)  $6 trillion; 1.00 
C)  $4.8 trillion; 0.80 
D)  $4.5 trillion; 4.50

Question 12

How does an increase in the price level affect the aggregate expenditure curve and the aggregate demand curve?

Accepted Answer

An increase in the price level

Question 13

-In the above figure, if real GDP equals $14 trillion,

Accepted Answer

A)  actual investment will decrease but planned investment will increase. 
B)  actual and planned investment will both increase. 
C)  unplanned inventories will decrease. 
D)  unplanned inventories will increase. 
A)  actual investment will decrease but planned investment will increase. 
B)  actual and planned investment will both increase. 
C)  unplanned inventories will decrease. 
D)  unplanned inventories will increase.

Question 14

The marginal propensity to consume is the

Accepted Answer

A)  fraction of a change in consumption expenditure that is not saved. 
B)  amount saving increases when consumption expenditure decreases. 
C)  fraction of a change in saving spent on consumption expenditure. 
D)  fraction of a change in disposable income spent on consumption expenditure. 
A)  fraction of a change in consumption expenditure that is not saved. 
B)  amount saving increases when consumption expenditure decreases. 
C)  fraction of a change in saving spent on consumption expenditure. 
D)  fraction of a change in disposable income spent on consumption expenditure.

Question 15

-In the above table, there are no taxes and no imports or exports. Suppose that investment increases from $500 to $750 at each level of real GDP. After the increase, what is the level of planned expenditure when real GDP equals $5,000?

Accepted Answer

A)  $5,250 
B)  $250 
C)  $1,000 
D)  $5,000 
A)  $5,250 
B)  $250 
C)  $1,000 
D)  $5,000

Question 16

In general, a decrease in autonomous expenditure that is NOT caused by a change in the price level results in a

Accepted Answer

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

Question 17

In the Keynesian model of aggregate expenditure, we assume that firms will

Accepted Answer

A)  not change prices. 
B)  lower prices when inventory levels rise. 
C)  change prices only when inventory levels rise. 
D)  raise prices when inventory levels fall. 
A)  not change prices. 
B)  lower prices when inventory levels rise. 
C)  change prices only when inventory levels rise. 
D)  raise prices when inventory levels fall.

Question 18

-In the above figure, line ABC is called

Accepted Answer

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

Question 19

In the third quarter of 2008, investment in the U.S. totalled $1.4 trillion and in 2007, investment was
$1)3 trillion. In addition, third quarter real GDP was $11 trillion. Suppose the MPC in the U.S. is 0.8 Ignoring the effects of imports and taxes, the multiplier is and the change in investment w decrease equilibrium expenditure by .

Accepted Answer

A)  5; $1 trillion. 
B)  2; $200 million. 
C)  2; $1 trillion. 
D)  5; $500 million. 
A)  5; $1 trillion. 
B)  2; $200 million. 
C)  2; $1 trillion. 
D)  5; $500 million.

Question 20

Changes in which of the following will affect the size of the multiplier?
I. marginal propensity to import
II. marginal propensity to consume
III. marginal income tax rate

Accepted Answer

A)  I only 
B)  II only 
C)  I and II only 
D)  I, II, and III 
A)  I only 
B)  II only 
C)  I and II only 
D)  I, II, and III

Business cycle turning points are

Which of the following events will make the consumption function steeper?

If prices are fixed, when aggregate planned expenditure exceeds real GDP, then

Induced consumption is equal to

Actual aggregate expenditures does not always equal real GDP.

A movement along the consumption function is the result of changes in

The marginal propensity to consume is

-In the figure above, the induced consumption when real GDP is $6 trillion is

In 2007, investment in France increased by 7 billion euros. Assume the price level was constant, the multiplier was 5 and the economy was at full employment. As a result, equilibrium expenditure

Suppose disposable income increases from $5 trillion to $6 trillion. As a result, consumption expenditure increases from $4 trillion to _ _. This result means the MPC equals .

How does an increase in the price level affect the aggregate expenditure curve and the aggregate demand curve?

-In the above figure, if real GDP equals $14 trillion,

The marginal propensity to consume is the

-In the above table, there are no taxes and no imports or exports. Suppose that investment increases from $500 to $750 at each level of real GDP. After the increase, what is the level of planned expenditure when real GDP equals $5,000?

In general, a decrease in autonomous expenditure that is NOT caused by a change in the price level results in a

In the Keynesian model of aggregate expenditure, we assume that firms will

-In the above figure, line ABC is called

Changes in which of the following will affect the size of the multiplier? I. marginal propensity to import II. marginal propensity to consume III. marginal income tax rate

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

Business cycle turning points are

Which of the following events will make the consumption function steeper?

If prices are fixed, when aggregate planned expenditure exceeds real GDP, then

Induced consumption is equal to

Actual aggregate expenditures does not always equal real GDP.

A movement along the consumption function is the result of changes in

The marginal propensity to consume is

-In the figure above, the induced consumption when real GDP is $6 trillion is

In 2007, investment in France increased by 7 billion euros. Assume the price level was constant, the multiplier was 5 and the economy was at full employment. As a result, equilibrium expenditure

Suppose disposable income increases from $5 trillion to $6 trillion. As a result, consumption expenditure increases from $4 trillion to _ _. This result means the MPC equals .

How does an increase in the price level affect the aggregate expenditure curve and the aggregate demand curve?

-In the above figure, if real GDP equals $14 trillion,

The marginal propensity to consume is the

-In the above table, there are no taxes and no imports or exports. Suppose that investment increases from $500 to $750 at each level of real GDP. After the increase, what is the level of planned expenditure when real GDP equals $5,000?

In general, a decrease in autonomous expenditure that is NOT caused by a change in the price level results in a

In the Keynesian model of aggregate expenditure, we assume that firms will

-In the above figure, line ABC is called

Changes in which of the following will affect the size of the multiplier? I. marginal propensity to import II. marginal propensity to consume III. marginal income tax rate

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