Question 1

Autonomous consumption is

Accepted Answer

A)  consumption expenditure that does not depend on the level of GDP or disposable income. 
B)  consumption expenditure that is earned rather than transferred from the government. 
C)  the amount spent on consumption when saving equals zero. 
D)  consumption expenditure when the marginal propensity to consume is 1. 
A)  consumption expenditure that does not depend on the level of GDP or disposable income. 
B)  consumption expenditure that is earned rather than transferred from the government. 
C)  the amount spent on consumption when saving equals zero. 
D)  consumption expenditure when the marginal propensity to consume is 1.

Question 2

There is a movement along the consumption function if there is .

Accepted Answer

A)  an increase in disposable income 
B)  a decrease in the real interest rate 
C)  an increase in autonomous consumption 
D)  an increase in the expected future income 
A)  an increase in disposable income 
B)  a decrease in the real interest rate 
C)  an increase in autonomous consumption 
D)  an increase in the expected future income

Question 3

List and explain factors that determine the size of the multiplier in the aggregate expenditure model when prices are constant.

Accepted Answer

The size of the multiplier depends on th

Question 4

The marginal propensity to consume must increase as disposable income increases.

Accepted Answer

A) True 
 B)False

Question 5

Real GDP

Accepted Answer

A)  is always greater then aggregate income. 
B)  is equal to aggregate income. 
C)  might be less than or more than aggregate income depending on consumption. 
D)  is always less than aggregate income. 
A)  is always greater then aggregate income. 
B)  is equal to aggregate income. 
C)  might be less than or more than aggregate income depending on consumption. 
D)  is always less than aggregate income.

Question 6

At the equilibrium expenditure

Accepted Answer

A)  purchasers are willing to buy exactly the amount of real GDP that is produced. 
B)  purchasers will be prone to bid up prices. 
C)  there can be unplanned inventory accumulation. 
D)  an increase in desired expenditure cannot increase the level of real GDP. 
A)  purchasers are willing to buy exactly the amount of real GDP that is produced. 
B)  purchasers will be prone to bid up prices. 
C)  there can be unplanned inventory accumulation. 
D)  an increase in desired expenditure cannot increase the level of real GDP.

Question 7

With consumption expenditure on the vertical axis and disposable income on the horizontal axis, the consumption function intersects the 45- degree line at $8 trillion. This result indicates that

Accepted Answer

A)  autonomous consumption spending is $8 trillion. 
B)  consumption spending is less than $8 trillion because taxes must be paid. 
C)  consumption spending is more than $8 trillion because taxes have been paid. 
D)  consumption spending is $8 trillion when disposable income is $8 trillion. 
A)  autonomous consumption spending is $8 trillion. 
B)  consumption spending is less than $8 trillion because taxes must be paid. 
C)  consumption spending is more than $8 trillion because taxes have been paid. 
D)  consumption spending is $8 trillion when disposable income is $8 trillion.

Question 8

In the very short run, the components of aggregate planned expenditure that depend on the level of real GDP are

Accepted Answer

A)  planned government expenditures on goods and services and planned imports. 
B)  planned investment and planned exports. 
C)  planned wealth and planned imports. 
D)  planned consumption expenditure and planned imports. 
A)  planned government expenditures on goods and services and planned imports. 
B)  planned investment and planned exports. 
C)  planned wealth and planned imports. 
D)  planned consumption expenditure and planned imports.

Question 9

-In the above figure, if the marginal propensity to consume increases, the slope of the AE curve would

Accepted Answer

A)  decrease. 
B)  stay the same but the AE curve would shift upwards. 
C)  stay the same but the AE curve would shift downwards. 
D)  increase. 
A)  decrease. 
B)  stay the same but the AE curve would shift upwards. 
C)  stay the same but the AE curve would shift downwards. 
D)  increase.

Question 10

-Real GDP equals $20 billion and aggregate planned expenditure is $30 billion. There is an unplanned _ in inventories of and real GDP will .

Accepted Answer

A)  decrease; $10 billion; decrease 
B)  decrease; $10 billion; increase 
C)  increase; $10 billion; increase 
D)  increase; $50 billion; decrease 
A)  decrease; $10 billion; decrease 
B)  decrease; $10 billion; increase 
C)  increase; $10 billion; increase 
D)  increase; $50 billion; decrease

Question 11

If a $75 billion increase in autonomous expenditure increases equilibrium expenditure by $150 billion, then the multiplier is .

Accepted Answer

A)  $75 billion 
B)  2 
C)  0.625 
D)  $225 billion 
A)  $75 billion 
B)  2 
C)  0.625 
D)  $225 billion

Question 12

At a level of disposable income of $0, consumption expenditure is $3500. Then

Accepted Answer

A)  the MPC = zero. 
B)  saving equals $3500. 
C)  saving equals - $3500. 
D)  saving equals 0. 
A)  the MPC = zero. 
B)  saving equals $3500. 
C)  saving equals - $3500. 
D)  saving equals 0.

Question 13

The part of aggregate planned expenditure that does not vary with real GDP .

Accepted Answer

A)  is induced expenditure 
B)  equals zero 
C)  equals equilibrium expenditure 
D)  is autonomous expenditure 
A)  is induced expenditure 
B)  equals zero 
C)  equals equilibrium expenditure 
D)  is autonomous expenditure

Question 14

If disposable income increases,

Accepted Answer

A)  the consumption function shifts downward. 
B)  the consumption function shifts upward. 
C)  there is movement downward along the consumption function. 
D)  there is a movement upward along the consumption function. 
A)  the consumption function shifts downward. 
B)  the consumption function shifts upward. 
C)  there is movement downward along the consumption function. 
D)  there is a movement upward along the consumption function.

Question 15

An increase in the price level decreases planned expenditure because

Accepted Answer

A)  domestic prices rise relative to foreign prices, increasing net exports. 
B)  real wealth decreases, thus decreasing expenditure. 
C)  current prices rise relative to future prices, increasing expenditure. 
D)  the real interest rate rises, increasing consumption expenditure. 
A)  domestic prices rise relative to foreign prices, increasing net exports. 
B)  real wealth decreases, thus decreasing expenditure. 
C)  current prices rise relative to future prices, increasing expenditure. 
D)  the real interest rate rises, increasing consumption expenditure.

Question 16

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

Accepted Answer

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

Question 17

If there are no income taxes or imports, the multiplier equals 1/(1 - marginal propensity to consume).

Accepted Answer

A) True 
 B)False

Question 18

If the slope of the AE curve is 0.60, the value of the multiplier is

Accepted Answer

A)  0.4. 
B)  4.0. 
C)  1.67. 
D)  2.5. 
A)  0.4. 
B)  4.0. 
C)  1.67. 
D)  2.5.

Question 19

-Using the data from the above table, the marginal propensity to save is

Accepted Answer

A)  constant at 0.75. 
B)  falling as disposable income is rising. 
C)  0 when disposable income is $600. 
D)  constant at 0.25. 
A)  constant at 0.75. 
B)  falling as disposable income is rising. 
C)  0 when disposable income is $600. 
D)  constant at 0.25.

Question 20

A change in the real interest rate creates a movement along the consumption function.

Accepted Answer

A) True 
 B)False

Autonomous consumption is

There is a movement along the consumption function if there is .

List and explain factors that determine the size of the multiplier in the aggregate expenditure model when prices are constant.

The marginal propensity to consume must increase as disposable income increases.

Real GDP

At the equilibrium expenditure

With consumption expenditure on the vertical axis and disposable income on the horizontal axis, the consumption function intersects the 45- degree line at $8 trillion. This result indicates that

In the very short run, the components of aggregate planned expenditure that depend on the level of real GDP are

-In the above figure, if the marginal propensity to consume increases, the slope of the AE curve would

-Real GDP equals $20 billion and aggregate planned expenditure is $30 billion. There is an unplanned _ in inventories of and real GDP will .

If a $75 billion increase in autonomous expenditure increases equilibrium expenditure by $150 billion, then the multiplier is .

At a level of disposable income of $0, consumption expenditure is $3500. Then

The part of aggregate planned expenditure that does not vary with real GDP .

If disposable income increases,

An increase in the price level decreases planned expenditure because

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

If there are no income taxes or imports, the multiplier equals 1/(1 - marginal propensity to consume).

If the slope of the AE curve is 0.60, the value of the multiplier is

-Using the data from the above table, the marginal propensity to save is

A change in the real interest rate creates a movement along the consumption function.

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

Autonomous consumption is

There is a movement along the consumption function if there is .

List and explain factors that determine the size of the multiplier in the aggregate expenditure model when prices are constant.

The marginal propensity to consume must increase as disposable income increases.

Real GDP

At the equilibrium expenditure

With consumption expenditure on the vertical axis and disposable income on the horizontal axis, the consumption function intersects the 45- degree line at $8 trillion. This result indicates that

In the very short run, the components of aggregate planned expenditure that depend on the level of real GDP are

-In the above figure, if the marginal propensity to consume increases, the slope of the AE curve would

-Real GDP equals $20 billion and aggregate planned expenditure is $30 billion. There is an unplanned _ in inventories of and real GDP will .

If a $75 billion increase in autonomous expenditure increases equilibrium expenditure by $150 billion, then the multiplier is .

At a level of disposable income of $0, consumption expenditure is $3500. Then

The part of aggregate planned expenditure that does not vary with real GDP .

If disposable income increases,

An increase in the price level decreases planned expenditure because

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

If there are no income taxes or imports, the multiplier equals 1/(1 - marginal propensity to consume).

If the slope of the AE curve is 0.60, the value of the multiplier is

-Using the data from the above table, the marginal propensity to save is

A change in the real interest rate creates a movement along the consumption function.

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