Question 1

The marginal propensity to save equals the

Accepted Answer

A)  average amount of income saved. 
B)  change in savings from a change in consumption expenditure. 
C)  ability to save the same percentage of income each month. 
D)  change in savings resulting from a one dollar change in disposable income. 
A)  average amount of income saved. 
B)  change in savings from a change in consumption expenditure. 
C)  ability to save the same percentage of income each month. 
D)  change in savings resulting from a one dollar change in disposable income.

Question 2

Dissaving occurs when a household

Accepted Answer

A)  spends less than it receives in disposable income. 
B)  consumes more than it receives in disposable income. 
C)  spends more than it saves. 
D)  saves more than it spends. 
A)  spends less than it receives in disposable income. 
B)  consumes more than it receives in disposable income. 
C)  spends more than it saves. 
D)  saves more than it spends.

Question 3

When autonomous expenditure increases, equilibrium aggregate expenditure

Accepted Answer

A)  increases by an equal amount. 
B)  decreases by a greater amount due to the multiplier. 
C)  decreases by an equal amount to offset the unplanned portion. 
D)  increases by a greater amount due to the multiplier. 
A)  increases by an equal amount. 
B)  decreases by a greater amount due to the multiplier. 
C)  decreases by an equal amount to offset the unplanned portion. 
D)  increases by a greater amount due to the multiplier.

Question 4

In the Keynesian model of aggregate expenditure, real GDP is determined by the

Accepted Answer

A)  price level. 
B)  level of taxes. 
C)  level of aggregate supply. 
D)  level of aggregate demand. 
A)  price level. 
B)  level of taxes. 
C)  level of aggregate supply. 
D)  level of aggregate demand.

Question 5

In a diagram with the consumption function, the 45- degree line indicates all points where

Accepted Answer

A)  consumption expenditures and saving are equal. 
B)  saving and investment are equal. 
C)  saving and disposable income are equal. 
D)  consumption expenditures and disposable income are equal. 
A)  consumption expenditures and saving are equal. 
B)  saving and investment are equal. 
C)  saving and disposable income are equal. 
D)  consumption expenditures and disposable income are equal.

Question 6

Discuss the relationship between the business cycle and changes in autonomous expenditures.

Accepted Answer

An increase in autonomous expenditure in

Question 7

The relationship between the multiplier and the MPC is

Accepted Answer

A)  converging at higher incomes. 
B)  that as the MPC increases, so does the value of the multiplier. 
C)  unrelated because the multiplier relates to the MPS not the MPC. 
D)  that as the MPC increases, the value of the multiplier decreases. 
A)  converging at higher incomes. 
B)  that as the MPC increases, so does the value of the multiplier. 
C)  unrelated because the multiplier relates to the MPS not the MPC. 
D)  that as the MPC increases, the value of the multiplier decreases.

Question 8

-Using the above table, if disposable income is $400, saving is

Accepted Answer

A)  - $50. 
B)  $50. 
C)  $100. 
D)  $0. 
A)  - $50. 
B)  $50. 
C)  $100. 
D)  $0.

Question 9

List the four components of aggregate expenditure. Explain the two- way link with real GDP.

Accepted Answer

The four components of aggregate expendi

Question 10

Explain the different components of autonomous versus induced expenditures.

Accepted Answer

The spending that does not change when r

Question 11

The multiplier is 2.5 and the SAS curve is upward sloping. Investment increases by $20 billion. In the short run, equilibrium real GDP will

Accepted Answer

A)  increase by less than $50 billion. 
B)  decrease by $50 billion. 
C)  increase by $50 billion. 
D)  decrease by less than $50 billion. 
A)  increase by less than $50 billion. 
B)  decrease by $50 billion. 
C)  increase by $50 billion. 
D)  decrease by less than $50 billion.

Question 12

-In the figure above, the multiplier equals

Accepted Answer

A)  0.5. 
B)  10.0. 
C)  2.5. 
D)  some amount that cannot be calculated without additional information. 
A)  0.5. 
B)  10.0. 
C)  2.5. 
D)  some amount that cannot be calculated without additional information.

Question 13

The international 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 14

When disposable income is 0, consumption is $2000. Then

Accepted Answer

A)  saving = $2000. 
B)  saving = $0. 
C)  the MPC = 0.2. 
D)  saving = - $2000. 
A)  saving = $2000. 
B)  saving = $0. 
C)  the MPC = 0.2. 
D)  saving = - $2000.

Question 15

What effect does an increase in the MPC have on the slope of the AE curve?

Accepted Answer

An increase in the M

Question 16

When the consumption function lies above the 45- degree line, households

Accepted Answer

A)  save all of any increase in income. 
B)  spend on consumption an increasing percentage of any increase in income. 
C)  spend on consumption a decreasing percentage of any increase in income. 
D)  are dissaving. 
A)  save all of any increase in income. 
B)  spend on consumption an increasing percentage of any increase in income. 
C)  spend on consumption a decreasing percentage of any increase in income. 
D)  are dissaving.

Question 17

-In the above figure, when disposable income is greater than $6 trillion, then

Accepted Answer

A)  savings are negative. 
B)  savings are positive. 
C)  the MPS is negative. 
D)  the MPC is greater than 1. 
A)  savings are negative. 
B)  savings are positive. 
C)  the MPS is negative. 
D)  the MPC is greater than 1.

Question 18

What is the marginal propensity to consume? Why it is an important concept?

Accepted Answer

The marginal propensity to consume, MPC,

Question 19

If consumption expenditures for a household increase from $1000 to $1800 when disposable income rises from $1000 to $2000, the marginal propensity to consume is

Accepted Answer

A)  0.18. 
B)  0.3. 
C)  0.2. 
D)  0.8. 
A)  0.18. 
B)  0.3. 
C)  0.2. 
D)  0.8.

Question 20

In 2007, investment in France increased by 7 billion euros, consumption increased by 4 billion euros and government spending increased by 1.5 billion euros. Assume the price level was constant and the economy was at full employment. As a result, suppose that equilibrium expenditure increased by 21 billion euros. In this example, is the induced expenditure and is autonomous expenditure.

Accepted Answer

A)  government spending; equilibrium expenditure 
B)  investment; government spending 
C)  consumption; government spending 
D)  investment; consumption 
A)  government spending; equilibrium expenditure 
B)  investment; government spending 
C)  consumption; government spending 
D)  investment; consumption

The marginal propensity to save equals the

Dissaving occurs when a household

When autonomous expenditure increases, equilibrium aggregate expenditure

In the Keynesian model of aggregate expenditure, real GDP is determined by the

In a diagram with the consumption function, the 45- degree line indicates all points where

Discuss the relationship between the business cycle and changes in autonomous expenditures.

The relationship between the multiplier and the MPC is

-Using the above table, if disposable income is $400, saving is

List the four components of aggregate expenditure. Explain the two- way link with real GDP.

Explain the different components of autonomous versus induced expenditures.

The multiplier is 2.5 and the SAS curve is upward sloping. Investment increases by $20 billion. In the short run, equilibrium real GDP will

-In the figure above, the multiplier equals

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

When disposable income is 0, consumption is $2000. Then

What effect does an increase in the MPC have on the slope of the AE curve?

When the consumption function lies above the 45- degree line, households

-In the above figure, when disposable income is greater than $6 trillion, then

What is the marginal propensity to consume? Why it is an important concept?

If consumption expenditures for a household increase from $1000 to $1800 when disposable income rises from $1000 to $2000, the marginal propensity to consume is

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

The marginal propensity to save equals the

Dissaving occurs when a household

When autonomous expenditure increases, equilibrium aggregate expenditure

In the Keynesian model of aggregate expenditure, real GDP is determined by the

In a diagram with the consumption function, the 45- degree line indicates all points where

Discuss the relationship between the business cycle and changes in autonomous expenditures.

The relationship between the multiplier and the MPC is

-Using the above table, if disposable income is $400, saving is

List the four components of aggregate expenditure. Explain the two- way link with real GDP.

Explain the different components of autonomous versus induced expenditures.

The multiplier is 2.5 and the SAS curve is upward sloping. Investment increases by $20 billion. In the short run, equilibrium real GDP will

-In the figure above, the multiplier equals

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

When disposable income is 0, consumption is $2000. Then

What effect does an increase in the MPC have on the slope of the AE curve?

When the consumption function lies above the 45- degree line, households

-In the above figure, when disposable income is greater than $6 trillion, then

What is the marginal propensity to consume? Why it is an important concept?

If consumption expenditures for a household increase from $1000 to $1800 when disposable income rises from $1000 to $2000, the marginal propensity to consume is

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