Question 1

In the figure above, if income taxes increase,

Accepted Answer

A)  there is a movement leftward along the unchanged AE curve. 
B)  the AE curve becomes steeper. 
C)  the AE curve becomes flatter. 
D)  there is a movement rightward along the unchanged AE curve. 
A)  there is a movement leftward along the unchanged AE curve. 
B)  the AE curve becomes steeper. 
C)  the AE curve becomes flatter. 
D)  there is a movement rightward along the unchanged AE curve.

Question 2

When disposable income equals $800 billion, planned consumption expenditure equals $600 billion, and when disposable income equals $1,000 billion, planned consumption expenditure equals $760 billion. What is the marginal propensity to save?

Accepted Answer

A)  0.20 
B)  0.64 
C)  0.25 
D)  0.80 
A)  0.20 
B)  0.64 
C)  0.25 
D)  0.80

Question 3

-In the above figure, autonomous 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 4

Which of the following is true?

Accepted Answer

A)  MPS + MPC = 0 
B)  MPS + MPC = 1 
C)  MPS = MPC 
D)  MPS - MPC = 1 
A)  MPS + MPC = 0 
B)  MPS + MPC = 1 
C)  MPS = MPC 
D)  MPS - MPC = 1

Question 5

The intertemporal substitution effect of a change in the price level results from a

Accepted Answer

A)  change in the price of foreign goods relative to domestic goods. 
B)  change in the price of current goods relative to future goods. 
C)  change in the purchasing power of wealth. 
D)  Both answers B and C are correct. 
A)  change in the price of foreign goods relative to domestic goods. 
B)  change in the price of current goods relative to future goods. 
C)  change in the purchasing power of wealth. 
D)  Both answers B and C are correct.

Question 6

-According to the data in the above table, what is the marginal propensity to consume?

Accepted Answer

A)  100. 
B)  1. 
C)  75. 
D)  0.75. 
A)  100. 
B)  1. 
C)  75. 
D)  0.75.

Question 7

The MPS equals the ratio of

Accepted Answer

A)  saving to consumption expenditure. 
B)  the change in saving to the change in consumption expenditure. 
C)  saving to real GDP. 
D)  None of the above answers is correct. 
A)  saving to consumption expenditure. 
B)  the change in saving to the change in consumption expenditure. 
C)  saving to real GDP. 
D)  None of the above answers is correct.

Question 8

When investment exceeds planned investment, aggregate planned expenditure is than actual aggregate expenditure and inventories are than planned.

Accepted Answer

A)  less; greater 
B)  greater; greater 
C)  less; less 
D)  greater; less 
A)  less; greater 
B)  greater; greater 
C)  less; less 
D)  greater; less

Question 9

An increase in the size of the multiplier can be caused by

Accepted Answer

A)  an increase in the MPS. 
B)  an increase in the marginal propensity to import. 
C)  a decrease in induced expenditures. 
D)  an increase in the MPC. 
A)  an increase in the MPS. 
B)  an increase in the marginal propensity to import. 
C)  a decrease in induced expenditures. 
D)  an increase in the MPC.

Question 10

Discuss how the marginal propensity to consume, imports, and income tax rates influence the multiplier.

Accepted Answer

The simple multiplier, in an economy wit

Question 11

Any expenditure component that depends on the level of real GDP is called

Accepted Answer

A)  induced expenditure. 
B)  spurious expenditure. 
C)  autonomous expenditure. 
D)  equilibrium expenditure. 
A)  induced expenditure. 
B)  spurious expenditure. 
C)  autonomous expenditure. 
D)  equilibrium expenditure.

Question 12

When the consumption function becomes steeper,

Accepted Answer

A)  the MPC rises. 
B)  the saving function also become steeper. 
C)  less of every dollar is consumed. 
D)  the MPC falls. 
A)  the MPC rises. 
B)  the saving function also become steeper. 
C)  less of every dollar is consumed. 
D)  the MPC falls.

Question 13

At the equilibrium level of aggregate expenditure, what does aggregate expenditure equal? What happens at other levels of real GDP to bring about an equilibrium?

Accepted Answer

At the equilibrium level of aggregate ex

Question 14

An increase in investment spending results in a the aggregate expenditure curve and
The aggregate demand curve.

Accepted Answer

A)  shift in; has no effect on 
B)  movement along; a shift in 
C)  shift in; a shift in 
D)  shift in; a movement along 
A)  shift in; has no effect on 
B)  movement along; a shift in 
C)  shift in; a shift in 
D)  shift in; a movement along

Question 15

The presence of imports the size of the multiplier because with an increase of real GDP,
)

Accepted Answer

A)  decreases; U.S. firms can sell goods to other countries 
B)  increases; U.S. consumers buy goods from other countries 
C)  decreases; U.S. consumers buy goods from other countries 
D)  increases; U.S. firms can sell goods to other countries 
A)  decreases; U.S. firms can sell goods to other countries 
B)  increases; U.S. consumers buy goods from other countries 
C)  decreases; U.S. consumers buy goods from other countries 
D)  increases; U.S. firms can sell goods to other countries

Question 16

The MPC and MPS

Accepted Answer

A)  each are usually less than .5. 
B)  sum to 1. 
C)  can sum to anything greater than 0. 
D)  sum to 100. 
A)  each are usually less than .5. 
B)  sum to 1. 
C)  can sum to anything greater than 0. 
D)  sum to 100.

Question 17

Taking into account the upward- sloping short- run aggregate supply curve, the short- run effect of an increase in government expenditures on real GDP is that

Accepted Answer

A)  real GDP increases by the same amount in the short run as in the long run. 
B)  real GDP does not change in the short run because the price level increases. 
C)  real GDP increases by more in the short run than in the long run. 
D)  real GDP increases by less in the short run than in the long run. 
A)  real GDP increases by the same amount in the short run as in the long run. 
B)  real GDP does not change in the short run because the price level increases. 
C)  real GDP increases by more in the short run than in the long run. 
D)  real GDP increases by less in the short run than in the long run.

Question 18

Suppose that real GDP is $14 trillion. Explain what happens when planned expenditures are greater than real GDP.

Accepted Answer

If real GDP is less than plann

Question 19

Suppose the economy has no income taxes or imports. How is the size of the expenditure multiplier related to the marginal propensity to consume? What is the multiplier if the MPC equals 0.25? If the MPC equals 0.50? If the MPC equals 0.90?

Accepted Answer

The multiplier equals¹, so the larger the

Question 20

Suppose that in 2006 the slope of the AE curve is 0.67 and in 2007 the slope of the AE curve changes to 0.8. Which of the following best describes what happens to the multiplier?

Accepted Answer

A)  It falls from 5 to 3. 
B)  It falls from 1.49 to 1.25. 
C)  It rises from 3 to 5. 
D)  It rises from 1.25 to 1.49. 
A)  It falls from 5 to 3. 
B)  It falls from 1.49 to 1.25. 
C)  It rises from 3 to 5. 
D)  It rises from 1.25 to 1.49.

In the figure above, if income taxes increase,

When disposable income equals $800 billion, planned consumption expenditure equals $600 billion, and when disposable income equals $1,000 billion, planned consumption expenditure equals $760 billion. What is the marginal propensity to save?

-In the above figure, autonomous expenditure is

Which of the following is true?

The intertemporal substitution effect of a change in the price level results from a

-According to the data in the above table, what is the marginal propensity to consume?

The MPS equals the ratio of

When investment exceeds planned investment, aggregate planned expenditure is than actual aggregate expenditure and inventories are than planned.

An increase in the size of the multiplier can be caused by

Discuss how the marginal propensity to consume, imports, and income tax rates influence the multiplier.

Any expenditure component that depends on the level of real GDP is called

When the consumption function becomes steeper,

At the equilibrium level of aggregate expenditure, what does aggregate expenditure equal? What happens at other levels of real GDP to bring about an equilibrium?

An increase in investment spending results in a the aggregate expenditure curve and The aggregate demand curve.

The presence of imports the size of the multiplier because with an increase of real GDP, )

The MPC and MPS

Taking into account the upward- sloping short- run aggregate supply curve, the short- run effect of an increase in government expenditures on real GDP is that

Suppose that real GDP is $14 trillion. Explain what happens when planned expenditures are greater than real GDP.

Suppose the economy has no income taxes or imports. How is the size of the expenditure multiplier related to the marginal propensity to consume? What is the multiplier if the MPC equals 0.25? If the MPC equals 0.50? If the MPC equals 0.90?

Suppose that in 2006 the slope of the AE curve is 0.67 and in 2007 the slope of the AE curve changes to 0.8. Which of the following best describes what happens to the multiplier?

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 figure above, if income taxes increase,

When disposable income equals $800 billion, planned consumption expenditure equals $600 billion, and when disposable income equals $1,000 billion, planned consumption expenditure equals $760 billion. What is the marginal propensity to save?

-In the above figure, autonomous expenditure is

Which of the following is true?

The intertemporal substitution effect of a change in the price level results from a

-According to the data in the above table, what is the marginal propensity to consume?

The MPS equals the ratio of

When investment exceeds planned investment, aggregate planned expenditure is than actual aggregate expenditure and inventories are than planned.

An increase in the size of the multiplier can be caused by

Discuss how the marginal propensity to consume, imports, and income tax rates influence the multiplier.

Any expenditure component that depends on the level of real GDP is called

When the consumption function becomes steeper,

At the equilibrium level of aggregate expenditure, what does aggregate expenditure equal? What happens at other levels of real GDP to bring about an equilibrium?

An increase in investment spending results in a the aggregate expenditure curve and The aggregate demand curve.

The presence of imports the size of the multiplier because with an increase of real GDP, )

The MPC and MPS

Taking into account the upward- sloping short- run aggregate supply curve, the short- run effect of an increase in government expenditures on real GDP is that

Suppose that real GDP is $14 trillion. Explain what happens when planned expenditures are greater than real GDP.

Suppose the economy has no income taxes or imports. How is the size of the expenditure multiplier related to the marginal propensity to consume? What is the multiplier if the MPC equals 0.25? If the MPC equals 0.50? If the MPC equals 0.90?

Suppose that in 2006 the slope of the AE curve is 0.67 and in 2007 the slope of the AE curve changes to 0.8. Which of the following best describes what happens to the multiplier?

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