Question 1

An increase in real GDP leads to

Accepted Answer

A)  an increase in aggregate planned expenditure. 
B)  a decrease aggregate planned expenditure. 
C)  no change in aggregate planned expenditure. 
D)  a change in aggregate planned expenditure but whether the change is an increase or a decrease depends on whether nominal GDP increases or decreases. 
A)  an increase in aggregate planned expenditure. 
B)  a decrease aggregate planned expenditure. 
C)  no change in aggregate planned expenditure. 
D)  a change in aggregate planned expenditure but whether the change is an increase or a decrease depends on whether nominal GDP increases or decreases.

Question 2

In the above figure, if the level of real GDP is $11 trillion,

Accepted Answer

A)  inventories are below the levels planned by firms. 
B)  inventories are equal to the levels planned by firms. 
C)  inventories are above the levels planned by firms. 
D)  planned expenditures are zero. 
A)  inventories are below the levels planned by firms. 
B)  inventories are equal to the levels planned by firms. 
C)  inventories are above the levels planned by firms. 
D)  planned expenditures are zero.

Question 3

The slope of the consumption function is

Accepted Answer

A)  equal to the slope of the 45- degree line. 
B)  less than the slope of the 45- degree line but not equal to zero. 
C)  equal to zero. 
D)  greater than the slope of the 45- degree line. 
A)  equal to the slope of the 45- degree line. 
B)  less than the slope of the 45- degree line but not equal to zero. 
C)  equal to zero. 
D)  greater than the slope of the 45- degree line.

Question 4

-In the above table, equilibrium expenditure is

Accepted Answer

A)  $4.8 trillion. 
B)  $0.3 trillion. 
C)  $3.0 trillion. 
D)  None of the above answers are correct. 
A)  $4.8 trillion. 
B)  $0.3 trillion. 
C)  $3.0 trillion. 
D)  None of the above answers are correct.

Question 5

-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 level of aggregate planned expenditure when real GDP is equal to $900 billion?

Accepted Answer

A)  $675 
B)  $814 
C)  $1,714 
D)  $796 
A)  $675 
B)  $814 
C)  $1,714 
D)  $796

Question 6

How does the concept of the multiplier help explain business cycle turning points?

Accepted Answer

Business cycle turning points are the po

Question 7

An increase in U.S. exports because of increasing foreign incomes is in the United States.

Accepted Answer

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

Question 8

-The figure shows Tropical Isle's aggregate planned expenditure curve. When aggregate planned expenditure is $2 trillion, aggregate planned expenditure is than real GDP, firms' inventories , and firms their production.

Accepted Answer

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

Question 9

-In the above table, there are no taxes and no imports or exports. Investment increases from $500 to
$750. After the increase in investment, the new equilibrium level of output is

Accepted Answer

A)  $7,000. 
B)  $6,000. 
C)  $5,000. 
D)  $5,750. 
A)  $7,000. 
B)  $6,000. 
C)  $5,000. 
D)  $5,750.

Question 10

The marginal propensity to import is the that is spent on imports.

Accepted Answer

A)  fraction of an increase in real GDP 
B)  fraction of an increase in potential GDP 
C)  total amount of real GDP 
D)  total amount of potential GDP 
A)  fraction of an increase in real GDP 
B)  fraction of an increase in potential GDP 
C)  total amount of real GDP 
D)  total amount of potential GDP

Question 11

The slope of the consumption function

Accepted Answer

A)  is negative. 
B)  equals the MPC. 
C)  is undefined below the 45- degree line. 
D)  is positive and equals 1 - MPC. 
A)  is negative. 
B)  equals the MPC. 
C)  is undefined below the 45- degree line. 
D)  is positive and equals 1 - MPC.

Question 12

-In the above table, the marginal propensity to consume equals

Accepted Answer

A)  0.75. 
B)  0.90. 
C)  0.85. 
D)  0.80. 
A)  0.75. 
B)  0.90. 
C)  0.85. 
D)  0.80.

Question 13

Suppose the consumption function is given by the equation C = 100 + 0.8YD, where YD is disposable income. What is the marginal propensity to save?

Accepted Answer

A)  2.0 
B)  0.2 
C)  0.8 
D)  100 
A)  2.0 
B)  0.2 
C)  0.8 
D)  100

Question 14

At the level of disposable income where the consumption function crosses the 45- degree line,

Accepted Answer

A)  saving is zero. 
B)  saving is negative. 
C)  the marginal propensity to consume is 0.50. 
D)  consumption expenditure equals only autonomous consumption expenditure. 
A)  saving is zero. 
B)  saving is negative. 
C)  the marginal propensity to consume is 0.50. 
D)  consumption expenditure equals only autonomous consumption expenditure.

Question 15

-The data in the above table indicate that autonomous expenditure is

Accepted Answer

A)  $4.8 trillion. 
B)  $0.3 trillion. 
C)  $3.0 trillion. 
D)  None of the above answers is correct. 
A)  $4.8 trillion. 
B)  $0.3 trillion. 
C)  $3.0 trillion. 
D)  None of the above answers is correct.

Question 16

Inventories are part of

Accepted Answer

A)  consumption expenditure. 
B)  investment. 
C)  government expenditure. 
D)  net exports. 
A)  consumption expenditure. 
B)  investment. 
C)  government expenditure. 
D)  net exports.

Question 17

-The above figure shows the AE curve and 45° line for an economy.
a) If real GDP equals $6 trillion, how do firms' inventories compare to their planned inventories?
b) If real GDP equals $12 trillion, how do firms' inventories compare to their planned inventories?
c) What is the equilibrium level of expenditure? Why is this amount the equilibrium?

Accepted Answer

a) If real GDP equals $6 trillion, aggre

Question 18

If an increase in a household's disposable income from $10,000 to $12,000 boosts its consumption expenditure from $8,000 to $9,000, the

Accepted Answer

A)  household is dissaving. 
B)  slope of the consumption function is 0.5 
C)  slope of the consumption function is 0.2 
D)  slope of the consumption function is 1000. 
A)  household is dissaving. 
B)  slope of the consumption function is 0.5 
C)  slope of the consumption function is 0.2 
D)  slope of the consumption function is 1000.

Question 19

All of the following statements about equilibrium expenditure are true EXCEPT .

Accepted Answer

A)  unplanned inventory investment is zero 
B)  actual investment is less than planned investment 
C)  aggregate planned expenditure equals actual aggregate expenditure 
D)  aggregate planned expenditure equals real GDP 
A)  unplanned inventory investment is zero 
B)  actual investment is less than planned investment 
C)  aggregate planned expenditure equals actual aggregate expenditure 
D)  aggregate planned expenditure equals real GDP

Question 20

An estimate of the MPC in the U.S. is 0.80.
Paul Krugman, the 2008 Nobel Prize winner in economics, stated, "... you'd be hard pressed to argu an overall multiplier as high as 2." HYPERLINK "http://www.nytimes.com/" (www.nytimes.com, 11/10/2008)
What factors could explain the difference between the MPC and Krugman's estimate of the multipli

Accepted Answer

A)  investment and imports. 
B)  imports and taxes. 
C)  exports and investment. 
D)  taxes and investment. 
A)  investment and imports. 
B)  imports and taxes. 
C)  exports and investment. 
D)  taxes and investment.

An increase in real GDP leads to

In the above figure, if the level of real GDP is $11 trillion,

The slope of the consumption function is

-In the above table, equilibrium expenditure is

-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 level of aggregate planned expenditure when real GDP is equal to $900 billion?

How does the concept of the multiplier help explain business cycle turning points?

An increase in U.S. exports because of increasing foreign incomes is in the United States.

-The figure shows Tropical Isle's aggregate planned expenditure curve. When aggregate planned expenditure is $2 trillion, aggregate planned expenditure is than real GDP, firms' inventories , and firms their production.

-In the above table, there are no taxes and no imports or exports. Investment increases from $500 to $750. After the increase in investment, the new equilibrium level of output is

The marginal propensity to import is the that is spent on imports.

The slope of the consumption function

-In the above table, the marginal propensity to consume equals

Suppose the consumption function is given by the equation C = 100 + 0.8YD, where YD is disposable income. What is the marginal propensity to save?

At the level of disposable income where the consumption function crosses the 45- degree line,

-The data in the above table indicate that autonomous expenditure is

Inventories are part of

If an increase in a household's disposable income from $10,000 to $12,000 boosts its consumption expenditure from $8,000 to $9,000, the

All of the following statements about equilibrium expenditure are true EXCEPT .

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

An increase in real GDP leads to

In the above figure, if the level of real GDP is $11 trillion,

The slope of the consumption function is

-In the above table, equilibrium expenditure is

-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 level of aggregate planned expenditure when real GDP is equal to $900 billion?

How does the concept of the multiplier help explain business cycle turning points?

An increase in U.S. exports because of increasing foreign incomes is in the United States.

-The figure shows Tropical Isle's aggregate planned expenditure curve. When aggregate planned expenditure is $2 trillion, aggregate planned expenditure is than real GDP, firms' inventories , and firms their production.

-In the above table, there are no taxes and no imports or exports. Investment increases from $500 to $750. After the increase in investment, the new equilibrium level of output is

The marginal propensity to import is the that is spent on imports.

The slope of the consumption function

-In the above table, the marginal propensity to consume equals

Suppose the consumption function is given by the equation C = 100 + 0.8YD, where YD is disposable income. What is the marginal propensity to save?

At the level of disposable income where the consumption function crosses the 45- degree line,

-The data in the above table indicate that autonomous expenditure is

Inventories are part of

If an increase in a household's disposable income from $10,000 to $12,000 boosts its consumption expenditure from $8,000 to $9,000, the

All of the following statements about equilibrium expenditure are true EXCEPT .

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