Question 1

Suppose that the slope of the AE curve is 0.67. Then a $100 increase in autonomous spending causes equilibrium expenditure to

Accepted Answer

A)  increase by $300. 
B)  decrease by $200. 
C)  decrease by $300. 
D)  increase by $200. 
A)  increase by $300. 
B)  decrease by $200. 
C)  decrease by $300. 
D)  increase by $200.

Question 2

The four components of aggregate planned expenditure are

Accepted Answer

A)  the real interest rate, consumption expenditure, investment and government expenditures on goods and services. 
B)  the real interest rate, disposable income, wealth, and expected future income. 
C)  consumption expenditure, investment, government expenditures on goods and services, and net exports. 
D)  consumption expenditure, investment, government expenditures on goods and services, and wealth. 
A)  the real interest rate, consumption expenditure, investment and government expenditures on goods and services. 
B)  the real interest rate, disposable income, wealth, and expected future income. 
C)  consumption expenditure, investment, government expenditures on goods and services, and net exports. 
D)  consumption expenditure, investment, government expenditures on goods and services, and wealth.

Question 3

Autonomous consumption

Accepted Answer

A)  increases with income. 
B)  is independent of income and must be equal to zero. 
C)  is independent of income. 
D)  decreases with income. 
A)  increases with income. 
B)  is independent of income and must be equal to zero. 
C)  is independent of income. 
D)  decreases with income.

Question 4

Disposable income is divided into

Accepted Answer

A)  consumption and taxes. 
B)  consumption, saving, and taxes. 
C)  saving and taxes. 
D)  consumption and saving. 
A)  consumption and taxes. 
B)  consumption, saving, and taxes. 
C)  saving and taxes. 
D)  consumption and saving.

Question 5

If the marginal propensity to consume is 0.8, every $10 increase in disposable income increases

Accepted Answer

A)  consumption expenditure by $8.00. 
B)  saving by $0.20. 
C)  consumption expenditure by $0.80. 
D)  consumption expenditure by $18.00. 
A)  consumption expenditure by $8.00. 
B)  saving by $0.20. 
C)  consumption expenditure by $0.80. 
D)  consumption expenditure by $18.00.

Question 6

The sum of planned consumption expenditure, planned investment, planned government expenditures, and planned net exports is .

Accepted Answer

A)  aggregate expenditure 
B)  the expenditure approach to real GDP 
C)  aggregate planned expenditure 
D)  real GDP 
A)  aggregate expenditure 
B)  the expenditure approach to real GDP 
C)  aggregate planned expenditure 
D)  real GDP

Question 7

If the multiplier for a change in autonomous expenditure is 10 and there are no income taxes or imports, then the MPC is

Accepted Answer

A)  1.0. 
B)  0.1. 
C)  0.9. 
D)  9.0. 
A)  1.0. 
B)  0.1. 
C)  0.9. 
D)  9.0.

Question 8

-In the above figure, the multiplier is equal to

Accepted Answer

A)  zero. 
B)  three. 
C)  one. 
D)  two. 
A)  zero. 
B)  three. 
C)  one. 
D)  two.

Question 9

-In the above figure, the shift from AE0 to AE1 might have been caused by

Accepted Answer

A)  an increase in government expenditures. 
B)  an increase in the price level. 
C)  an increase in the real interest rate. 
D)  All of the above answers are correct. 
A)  an increase in government expenditures. 
B)  an increase in the price level. 
C)  an increase in the real interest rate. 
D)  All of the above answers are correct.

Question 10

The marginal propensity to consume is defined as

Accepted Answer

A)  the change in consumption expenditure from a change in disposable income. 
B)  the average, after- tax consumption amount. 
C)  the desired amount of consumption expenditure as a proportion of disposable income. 
D)  what people spend out of total disposable income. 
A)  the change in consumption expenditure from a change in disposable income. 
B)  the average, after- tax consumption amount. 
C)  the desired amount of consumption expenditure as a proportion of disposable income. 
D)  what people spend out of total disposable income.

Question 11

The marginal propensity to consume is

Accepted Answer

A)  the percentage or fraction of income that is consumed. 
B)  the slope of the savings function. 
C)  never greater than 1. 
D)  the percentage change in disposable income. 
A)  the percentage or fraction of income that is consumed. 
B)  the slope of the savings function. 
C)  never greater than 1. 
D)  the percentage change in disposable income.

Question 12

The marginal propensity to consume measures

Accepted Answer

A)  how much consumption expenditure occurs at the equilibrium level of income. 
B)  the fraction of a change in disposable income that is spent on consumption expenditure. 
C)  what percentage of disposable income goes to saving. 
D)  how much of a given level of disposable income is consumed. 
A)  how much consumption expenditure occurs at the equilibrium level of income. 
B)  the fraction of a change in disposable income that is spent on consumption expenditure. 
C)  what percentage of disposable income goes to saving. 
D)  how much of a given level of disposable income is consumed.

Question 13

The relationship between consumption expenditure and disposable income is called the

Accepted Answer

A)  consumption function. 
B)  household aggregate demand function. 
C)  investment function. 
D)  savings function. 
A)  consumption function. 
B)  household aggregate demand function. 
C)  investment function. 
D)  savings function.

Question 14

-Based upon the above table, if disposable income is $400 billion, saving equals

Accepted Answer

A)  $0 billion. 
B)  - $50 billion. 
C)  $50 billion. 
D)  $100 billion. 
A)  $0 billion. 
B)  - $50 billion. 
C)  $50 billion. 
D)  $100 billion.

Question 15

The marginal propensity to consume

Accepted Answer

A)  exceeds 1. 
B)  is between 0 and 1. 
C)  equals 1. 
D)  is negative if dissaving is present. 
A)  exceeds 1. 
B)  is between 0 and 1. 
C)  equals 1. 
D)  is negative if dissaving is present.

Question 16

-In the above figure, if real GDP is below $300 billion, inventories will be

Accepted Answer

A)  below target levels, so firms increase production. 
B)  above target levels, so firms increase production. 
C)  above target levels, so firms decrease production. 
D)  below target levels, so firms decrease production. 
A)  below target levels, so firms increase production. 
B)  above target levels, so firms increase production. 
C)  above target levels, so firms decrease production. 
D)  below target levels, so firms decrease production.

Question 17

Income taxes reduce the size of the multiplier.

Accepted Answer

A) True 
 B)False

Question 18

-In the above table, savings are positive when disposable income is greater than

Accepted Answer

A)  $500. 
B)  $300. 
C)  $100. 
D)  zero. 
A)  $500. 
B)  $300. 
C)  $100. 
D)  zero.

Question 19

The size of the multiplier

Accepted Answer

A)  increases in the long run. 
B)  decreases in the long run. 
C)  is unaffected by the amount of time that elapses. 
D)  is constant in the long run. 
A)  increases in the long run. 
B)  decreases in the long run. 
C)  is unaffected by the amount of time that elapses. 
D)  is constant in the long run.

Question 20

-In the above table, C is consumption expenditure, I is investment, G is government expenditure, and NX is net exports. All entries are in dollars. The equilibrium level of real GDP is

Accepted Answer

A)  $2,500. 
B)  $2,400. 
C)  $2,200. 
D)  $2,300. 
A)  $2,500. 
B)  $2,400. 
C)  $2,200. 
D)  $2,300.

Suppose that the slope of the AE curve is 0.67. Then a $100 increase in autonomous spending causes equilibrium expenditure to

The four components of aggregate planned expenditure are

Autonomous consumption

Disposable income is divided into

If the marginal propensity to consume is 0.8, every $10 increase in disposable income increases

The sum of planned consumption expenditure, planned investment, planned government expenditures, and planned net exports is .

If the multiplier for a change in autonomous expenditure is 10 and there are no income taxes or imports, then the MPC is

-In the above figure, the multiplier is equal to

-In the above figure, the shift from AE₀to AE₁might have been caused by

The marginal propensity to consume is defined as

The marginal propensity to consume is

The marginal propensity to consume measures

The relationship between consumption expenditure and disposable income is called the

-Based upon the above table, if disposable income is $400 billion, saving equals

The marginal propensity to consume

-In the above figure, if real GDP is below $300 billion, inventories will be

Income taxes reduce the size of the multiplier.

-In the above table, savings are positive when disposable income is greater than

The size of the multiplier

-In the above table, C is consumption expenditure, I is investment, G is government expenditure, and NX is net exports. All entries are in dollars. The equilibrium level of real GDP is

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

Suppose that the slope of the AE curve is 0.67. Then a $100 increase in autonomous spending causes equilibrium expenditure to

The four components of aggregate planned expenditure are

Autonomous consumption

Disposable income is divided into

If the marginal propensity to consume is 0.8, every $10 increase in disposable income increases

The sum of planned consumption expenditure, planned investment, planned government expenditures, and planned net exports is .

If the multiplier for a change in autonomous expenditure is 10 and there are no income taxes or imports, then the MPC is

-In the above figure, the multiplier is equal to

-In the above figure, the shift from AE0 to AE1 might have been caused by

The marginal propensity to consume is defined as

The marginal propensity to consume is

The marginal propensity to consume measures

The relationship between consumption expenditure and disposable income is called the

-Based upon the above table, if disposable income is $400 billion, saving equals

The marginal propensity to consume

-In the above figure, if real GDP is below $300 billion, inventories will be

Income taxes reduce the size of the multiplier.

-In the above table, savings are positive when disposable income is greater than

The size of the multiplier

-In the above table, C is consumption expenditure, I is investment, G is government expenditure, and NX is net exports. All entries are in dollars. The equilibrium level of real GDP is

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, the shift from AE₀to AE₁might have been caused by