Question 1

In an article regarding Bangladesh's economy, the author suggests that the government ..."[g]ive do tax breaks on investment dollars.

Accepted Answer

A)  upward; rightward 
B)  upward; leftward. 
C)  downward; rightward 
D)  downward; rightward. 
A)  upward; rightward 
B)  upward; leftward. 
C)  downward; rightward 
D)  downward; rightward.

Question 2

In the third quarter of 2008, investment in the U.S. totaled $1.4 trillion and in 2007, investment was
$1)3 trillion. The change in investment

Accepted Answer

A)  will increase the multiplier. 
B)  is a change in autonomous expenditure. 
C)  is a change in induced expenditure. 
D)  is a change in equilibrium expenditure. 
A)  will increase the multiplier. 
B)  is a change in autonomous expenditure. 
C)  is a change in induced expenditure. 
D)  is a change in equilibrium expenditure.

Question 3

"Few if any economists anticipated the extent of the inventory adjustment... Production cutbacks have been much greater than expected. Those cuts have weakened the industrial sector considerably. " As a result of these changes, the U.S. government lowered its estimate of
Fourth- quarter growth in real GDP.
HYPERLINK "http://www.businessweek.com/" www.businessweek.com 3/12/20
The article suggests that _ .

Accepted Answer

A)  the AD curve shifted rightward in 2007. 
B)  the AE curve shifted upward in 2007. 
C)  planned expenditures exceeded real GDP in 2006. 
D)  real GDP exceeded planned expenditures in 2006. 
A)  the AD curve shifted rightward in 2007. 
B)  the AE curve shifted upward in 2007. 
C)  planned expenditures exceeded real GDP in 2006. 
D)  real GDP exceeded planned expenditures in 2006.

Question 4

In the economy of St. Maynard Island, autonomous consumption expenditure is $185 million, and the marginal propensity to consume is 0.75. Investment is $150 million, government expenditure is $100 million, and net taxes are $80 million. Investment, government expenditure, and taxes are constant-they do not vary with incom The island does not trade with the rest of the world.
a) Draw the aggregate expenditure curve.
b) What is the island's autonomous aggregate expenditure?
c) What is the size of the multiplier in St. Maynard Island's economy?
d) What is the island's aggregate planned expenditure and what is happening to inventories when real GDP is million?
e) What is the economy's equilibrium aggregate expenditure?

Accepted Answer

expenditure, AE, equals real GDP. In the

Question 5

The marginal propensity to consume refers to the

Accepted Answer

A)  difficulty that people have with certain consumption decisions. 
B)  last minute purchases that everyone makes. 
C)  many consumption choices that people face. 
D)  fraction of a change in income that an individual spends on consumption expenditure. 
A)  difficulty that people have with certain consumption decisions. 
B)  last minute purchases that everyone makes. 
C)  many consumption choices that people face. 
D)  fraction of a change in income that an individual spends on consumption expenditure.

Question 6

All else being constant, autonomous expenditure

Accepted Answer

A)  does not change with changes in real GDP. 
B)  increases as real GDP decreases. 
C)  increases as real GDP increases. 
D)  is assumed to be zero. 
A)  does not change with changes in real GDP. 
B)  increases as real GDP decreases. 
C)  increases as real GDP increases. 
D)  is assumed to be zero.

Question 7

If there are no taxes or imports and MPC = 0.67, the multiplier is

Accepted Answer

A)  6. 
B)  1.5. 
C)  0.33. 
D)  3. 
A)  6. 
B)  1.5. 
C)  0.33. 
D)  3.

Question 8

In the aggregate expenditure model, when real GDP is greater than aggregate planned expenditure,

Accepted Answer

A)  inventories are not being changed. 
B)  this cannot happen, because the two variables are always equal. 
C)  unplanned inventories are being accumulated. 
D)  inventories are being depleted. 
A)  inventories are not being changed. 
B)  this cannot happen, because the two variables are always equal. 
C)  unplanned inventories are being accumulated. 
D)  inventories are being depleted.

Question 9

The MPC and MPS measure changes in consumption expenditure and saving that result from changes in

Accepted Answer

A)  expected inflation. 
B)  government expenditures on goods and services. 
C)  expected future income. 
D)  disposable income. 
A)  expected inflation. 
B)  government expenditures on goods and services. 
C)  expected future income. 
D)  disposable income.

Question 10

The slope of the consumption function is

Accepted Answer

A)  equal to the MPC. 
B)  equal to 1. 
C)  vertical at the full employment level of income. 
D)  perfectly horizontal at the equilibrium level. 
A)  equal to the MPC. 
B)  equal to 1. 
C)  vertical at the full employment level of income. 
D)  perfectly horizontal at the equilibrium level.

Question 11

If the price level increases, the AE curve shifts

Accepted Answer

A)  downward and we move along the AD curve. 
B)  downward and the AD curve shifts rightward. 
C)  upward and the AD curve shifts leftward. 
D)  upward and we move along the AD curve. 
A)  downward and we move along the AD curve. 
B)  downward and the AD curve shifts rightward. 
C)  upward and the AD curve shifts leftward. 
D)  upward and we move along the AD curve.

Question 12

The multiplier effect occurs because

Accepted Answer

A)  of income taxes. 
B)  an autonomous change in expenditure causes an induced change in consumption expenditure. 
C)  changes in price levels affect our willingness to invest, consume, import and export. 
D)  of government stabilization policies. 
A)  of income taxes. 
B)  an autonomous change in expenditure causes an induced change in consumption expenditure. 
C)  changes in price levels affect our willingness to invest, consume, import and export. 
D)  of government stabilization policies.

Question 13

1 - MPC equals

Accepted Answer

A)  induced consumption. 
B)  the net national product. 
C)  autonomous consumption. 
D)  the marginal propensity to save. 
A)  induced consumption. 
B)  the net national product. 
C)  autonomous consumption. 
D)  the marginal propensity to save.

Question 14

The aggregate demand curve slopes downward because of

Accepted Answer

A)  wealth and substitution effects. 
B)  the multiplier. 
C)  the MPC. 
D)  import and taxation effects. 
A)  wealth and substitution effects. 
B)  the multiplier. 
C)  the MPC. 
D)  import and taxation effects.

Question 15

The multiplier is greater than 1 because the change in autonomous expenditure leads to _ .

Accepted Answer

A)  more saving 
B)  more induced expenditure 
C)  less consumption expenditure 
D)  more investment 
A)  more saving 
B)  more induced expenditure 
C)  less consumption expenditure 
D)  more investment

Question 16

-In the above figure, the increase in autonomous expenditure moves the economy from point E to

Accepted Answer

A)  point H. 
B)  point I. 
C)  point G. 
D)  point F. 
A)  point H. 
B)  point I. 
C)  point G. 
D)  point F.

Question 17

The marginal propensity to consume

Accepted Answer

A)  shows how much disposable income changes when consumption expenditure decreases. 
B)  shows how much of an extra dollar of disposable income is consumed. 
C)  is greater than 1 only if the marginal propensity to save is greater than 1. 
D)  shows the percentage of disposable income consumed at each level of income. 
A)  shows how much disposable income changes when consumption expenditure decreases. 
B)  shows how much of an extra dollar of disposable income is consumed. 
C)  is greater than 1 only if the marginal propensity to save is greater than 1. 
D)  shows the percentage of disposable income consumed at each level of income.

Question 18

At equilibrium expenditure

Accepted Answer

A)  consumers' expenditures on goods and services equal firms' purchases of investment goods. 
B)  aggregate planned expenditure equals real GDP minus net exports. 
C)  aggregate planned expenditure equals real GDP. 
D)  firms hold no inventories of raw materials or final goods. 
A)  consumers' expenditures on goods and services equal firms' purchases of investment goods. 
B)  aggregate planned expenditure equals real GDP minus net exports. 
C)  aggregate planned expenditure equals real GDP. 
D)  firms hold no inventories of raw materials or final goods.

Question 19

Saving equals

Accepted Answer

A)  disposable income minus taxes. 
B)  disposable income plus consumption expenditure. 
C)  consumption expenditure minus disposable income. 
D)  disposable income minus consumption expenditure. 
A)  disposable income minus taxes. 
B)  disposable income plus consumption expenditure. 
C)  consumption expenditure minus disposable income. 
D)  disposable income minus consumption expenditure.

Question 20

"Dissaving" occurs when

Accepted Answer

A)  saving is positive. 
B)  the consumption function is below the 45- degree line drawn from the origin. 
C)  income exceeds consumption expenditure. 
D)  saving is negative. 
A)  saving is positive. 
B)  the consumption function is below the 45- degree line drawn from the origin. 
C)  income exceeds consumption expenditure. 
D)  saving is negative.

In an article regarding Bangladesh's economy, the author suggests that the government ..."[g]ive do tax breaks on investment dollars.

In the third quarter of 2008, investment in the U.S. totaled $1.4 trillion and in 2007, investment was $1)3 trillion. The change in investment

The marginal propensity to consume refers to the

All else being constant, autonomous expenditure

If there are no taxes or imports and MPC = 0.67, the multiplier is

In the aggregate expenditure model, when real GDP is greater than aggregate planned expenditure,

The MPC and MPS measure changes in consumption expenditure and saving that result from changes in

The slope of the consumption function is

If the price level increases, the AE curve shifts

The multiplier effect occurs because

1 - MPC equals

The aggregate demand curve slopes downward because of

The multiplier is greater than 1 because the change in autonomous expenditure leads to _ .

-In the above figure, the increase in autonomous expenditure moves the economy from point E to

The marginal propensity to consume

At equilibrium expenditure

Saving equals

"Dissaving" occurs when

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 an article regarding Bangladesh's economy, the author suggests that the government ..."[g]ive do tax breaks on investment dollars.

In the third quarter of 2008, investment in the U.S. totaled $1.4 trillion and in 2007, investment was $1)3 trillion. The change in investment

The marginal propensity to consume refers to the

All else being constant, autonomous expenditure

If there are no taxes or imports and MPC = 0.67, the multiplier is

In the aggregate expenditure model, when real GDP is greater than aggregate planned expenditure,

The MPC and MPS measure changes in consumption expenditure and saving that result from changes in

The slope of the consumption function is

If the price level increases, the AE curve shifts

The multiplier effect occurs because

1 - MPC equals

The aggregate demand curve slopes downward because of

The multiplier is greater than 1 because the change in autonomous expenditure leads to _ .

-In the above figure, the increase in autonomous expenditure moves the economy from point E to

The marginal propensity to consume

At equilibrium expenditure

Saving equals

"Dissaving" occurs when

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