Question 1

-In the above figure, if real GDP equals $10 trillion,

Accepted Answer

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

Question 2

An increase in expected future income .

Accepted Answer

A)  shifts the consumption function upward 
B)  increases saving 
C)  shifts the saving function upward 
D)  decreases consumption expenditure 
A)  shifts the consumption function upward 
B)  increases saving 
C)  shifts the saving function upward 
D)  decreases consumption expenditure

Question 3

If the slope of the AE curve increases, the multiplier

Accepted Answer

A)  increases. 
B)  stays the same. 
C)  decreases. 
D)  can either increase or decrease depending on what happens to the MPC. 
A)  increases. 
B)  stays the same. 
C)  decreases. 
D)  can either increase or decrease depending on what happens to the MPC.

Question 4

Actual aggregate expenditure is

Accepted Answer

A)  never greater than real GDP but can be less than real GDP. 
B)  never less than real GDP but can be greater than real GDP. 
C)  only equal to real GDP at the equilibrium level of aggregate planned expenditure. 
D)  always equal to real GDP. 
A)  never greater than real GDP but can be less than real GDP. 
B)  never less than real GDP but can be greater than real GDP. 
C)  only equal to real GDP at the equilibrium level of aggregate planned expenditure. 
D)  always equal to real GDP.

Question 5

The slope of the aggregate expenditure curve equals the change in

Accepted Answer

A)  government expenditure divided by the change in real GDP. 
B)  planned expenditure divided by the change in real GDP. 
C)  real GDP divided by the change in planned expenditure. 
D)  autonomous expenditure divided by the change in real GDP. 
A)  government expenditure divided by the change in real GDP. 
B)  planned expenditure divided by the change in real GDP. 
C)  real GDP divided by the change in planned expenditure. 
D)  autonomous expenditure divided by the change in real GDP.

Question 6

If firms set prices and then keep them fixed for a period of time, their fixed prices imply that

Accepted Answer

A)  the aggregate price level is fixed and that aggregate demand determines the quantity of goods and services sold. 
B)  the aggregate price level adjusts continuously. 
C)  prices are set by aggregate demand and supply. 
D)  the aggregate price level is fixed and that aggregate supply determines the quantity of goods and services sold. 
A)  the aggregate price level is fixed and that aggregate demand determines the quantity of goods and services sold. 
B)  the aggregate price level adjusts continuously. 
C)  prices are set by aggregate demand and supply. 
D)  the aggregate price level is fixed and that aggregate supply determines the quantity of goods and services sold.

Question 7

When aggregate planned expenditure is less than actual real GDP, unplanned

Accepted Answer

A)  consumption expenditure occurs. 
B)  investment occurs. 
C)  exports are made. 
D)  government expenditures are made. 
A)  consumption expenditure occurs. 
B)  investment occurs. 
C)  exports are made. 
D)  government expenditures are made.

Question 8

The graph of the aggregate expenditure curve has on the y- axis and on the
X- axis.

Accepted Answer

A)  aggregate planned expenditure; real GDP 
B)  real GDP; aggregate planned expenditure 
C)  household expenditures; real GDP 
D)  aggregate actual expenditure; real GDP 
A)  aggregate planned expenditure; real GDP 
B)  real GDP; aggregate planned expenditure 
C)  household expenditures; real GDP 
D)  aggregate actual expenditure; real GDP

Question 9

A change in which of the following changes the slope of the aggregate expenditure curve?

Accepted Answer

A)  a decrease in autonomous consumption expenditures 
B)  an increase in autonomous government expenditures 
C)  an increase in the marginal propensity to consume 
D)  All of the above answers are correct because they all change the slope of the aggregate expenditure curve. 
A)  a decrease in autonomous consumption expenditures 
B)  an increase in autonomous government expenditures 
C)  an increase in the marginal propensity to consume 
D)  All of the above answers are correct because they all change the slope of the aggregate expenditure curve.

Question 10

How is it possible for consumption expenditure to be positive even when disposable income is zero?

Accepted Answer

Consumption expenditure can be positive

Question 11

The vertical distance between the 45- degree line and the consumption line represents

Accepted Answer

A)  saving or dissaving. 
B)  the difference between consumption expenditure and investment. 
C)  total consumption expenditure. 
D)  investment. 
A)  saving or dissaving. 
B)  the difference between consumption expenditure and investment. 
C)  total consumption expenditure. 
D)  investment.

Question 12

The marginal propensity to consume is found by

Accepted Answer

A)  dividing the change in disposable income by the change in consumption expenditure. 
B)  dividing consumption expenditure by disposable income. 
C)  dividing disposable income by consumption expenditure. 
D)  dividing the change in consumption expenditure by the change in disposable income. 
A)  dividing the change in disposable income by the change in consumption expenditure. 
B)  dividing consumption expenditure by disposable income. 
C)  dividing disposable income by consumption expenditure. 
D)  dividing the change in consumption expenditure by the change in disposable income.

Question 13

The slope of the AE curve is 0.9. Investment decreases by $100 million and the price level is constant. Real GDP

Accepted Answer

A)  increases by $90 million. 
B)  decreases by $1 billion. 
C)  increases by $1 billion. 
D)  decreases by $10 million. 
A)  increases by $90 million. 
B)  decreases by $1 billion. 
C)  increases by $1 billion. 
D)  decreases by $10 million.

Question 14

Equilibrium expenditure is defined as the level of aggregate expenditure where

Accepted Answer

A)  spending equals output. 
B)  aggregate planned expenditure equals real GDP. 
C)  total inventories equal zero. 
D)  actual aggregate expenditure equals real GDP. 
A)  spending equals output. 
B)  aggregate planned expenditure equals real GDP. 
C)  total inventories equal zero. 
D)  actual aggregate expenditure equals real GDP.

Question 15

The U.S. consumption function

Accepted Answer

A)  has a positive slope. 
B)  has a slope of about 0.9. 
C)  has shifted upward over time. 
D)  All of the above answers are correct. 
A)  has a positive slope. 
B)  has a slope of about 0.9. 
C)  has shifted upward over time. 
D)  All of the above answers are correct.

Question 16

If the marginal propensity to save is 0.6, then the marginal propensity to consume is

Accepted Answer

A)  1.0. 
B)  0.4. 
C)  0.6. 
D)  not determinable. 
A)  1.0. 
B)  0.4. 
C)  0.6. 
D)  not determinable.

Question 17

-Suppose the price level is fixed. If investment increases by $1 trillion and the aggregate expenditure curve is shown in the figure above, in response equilibrium expenditure increases by _ .

Accepted Answer

A)  less than $1 trillion. 
B)  $1 trillion. 
C)  $3 trillion. 
D)  None of the above answers are correct. 
A)  less than $1 trillion. 
B)  $1 trillion. 
C)  $3 trillion. 
D)  None of the above answers are correct.

Question 18

What is the relationship between the MPC and the slope of the AE curve?

Accepted Answer

If there are no imports or income taxes,

Question 19

The multiplier is the amount by which is multiplied to determine _.

Accepted Answer

A)  a change in autonomous expenditure; the change in equilibrium expenditure 
B)  autonomous expenditure; real GDP 
C)  induced expenditure; real GDP 
D)  a change in induced expenditure; the change in equilibrium expenditure 
A)  a change in autonomous expenditure; the change in equilibrium expenditure 
B)  autonomous expenditure; real GDP 
C)  induced expenditure; real GDP 
D)  a change in induced expenditure; the change in equilibrium expenditure

Question 20

If the marginal propensity to consume is 0.8 and there no income taxes or imports, the multiplier for a change in autonomous expenditure equals

Accepted Answer

A)  5.0. 
B)  0.8. 
C)  1.0 
D)  4.0. 
A)  5.0. 
B)  0.8. 
C)  1.0 
D)  4.0.

-In the above figure, if real GDP equals $10 trillion,

An increase in expected future income .

If the slope of the AE curve increases, the multiplier

Actual aggregate expenditure is

The slope of the aggregate expenditure curve equals the change in

If firms set prices and then keep them fixed for a period of time, their fixed prices imply that

When aggregate planned expenditure is less than actual real GDP, unplanned

The graph of the aggregate expenditure curve has on the y- axis and on the X- axis.

A change in which of the following changes the slope of the aggregate expenditure curve?

How is it possible for consumption expenditure to be positive even when disposable income is zero?

The vertical distance between the 45- degree line and the consumption line represents

The marginal propensity to consume is found by

The slope of the AE curve is 0.9. Investment decreases by $100 million and the price level is constant. Real GDP

Equilibrium expenditure is defined as the level of aggregate expenditure where

The U.S. consumption function

If the marginal propensity to save is 0.6, then the marginal propensity to consume is

-Suppose the price level is fixed. If investment increases by $1 trillion and the aggregate expenditure curve is shown in the figure above, in response equilibrium expenditure increases by _ .

What is the relationship between the MPC and the slope of the AE curve?

The multiplier is the amount by which is multiplied to determine _.

If the marginal propensity to consume is 0.8 and there no income taxes or imports, the multiplier for a change in autonomous expenditure equals

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 figure, if real GDP equals $10 trillion,

An increase in expected future income .

If the slope of the AE curve increases, the multiplier

Actual aggregate expenditure is

The slope of the aggregate expenditure curve equals the change in

If firms set prices and then keep them fixed for a period of time, their fixed prices imply that

When aggregate planned expenditure is less than actual real GDP, unplanned

The graph of the aggregate expenditure curve has on the y- axis and on the X- axis.

A change in which of the following changes the slope of the aggregate expenditure curve?

How is it possible for consumption expenditure to be positive even when disposable income is zero?

The vertical distance between the 45- degree line and the consumption line represents

The marginal propensity to consume is found by

The slope of the AE curve is 0.9. Investment decreases by $100 million and the price level is constant. Real GDP

Equilibrium expenditure is defined as the level of aggregate expenditure where

The U.S. consumption function

If the marginal propensity to save is 0.6, then the marginal propensity to consume is

-Suppose the price level is fixed. If investment increases by $1 trillion and the aggregate expenditure curve is shown in the figure above, in response equilibrium expenditure increases by _ .

What is the relationship between the MPC and the slope of the AE curve?

The multiplier is the amount by which is multiplied to determine _.

If the marginal propensity to consume is 0.8 and there no income taxes or imports, the multiplier for a change in autonomous expenditure equals

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