Question 1

-In the figure above, if income taxes increase,

Accepted Answer

A)  the AE curve becomes steeper. 
B)  there is a movement rightward along the unchanged AE curve. 
C)  there is a movement leftward along the unchanged AE curve. 
D)  the AE curve becomes flatter. 
A)  the AE curve becomes steeper. 
B)  there is a movement rightward along the unchanged AE curve. 
C)  there is a movement leftward along the unchanged AE curve. 
D)  the AE curve becomes flatter.

Question 2

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

Accepted Answer

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

Question 3

$$\begin{array} { | l | l | l | l | } 
\hline \begin{array} { l } 
\text { Real GDP } \
\text { (dollars) }
\end{array} & \begin{array} { l } 
\text { Consumption } \
\text { expenditure } \
\text { (dollars) }
\end{array} & \begin{array} { l } 
\text { Investment } \
\text { (dollars) }
\end{array} & \begin{array} { l } 
\text { Government } \
\text { expenditure } \
\text { (dollars) }
\end{array} \
\hline 3,000 & 2,500 & 500 & 500 \
\hline 4,000 & 3,250 & 500 & 500 \
\hline 5,000 & 4,000 & 500 & 500 \
\hline 6,000 & 4,750 & 500 & 500 \
\hline 7,000 & 5,500 & 500 & 500 \
\hline 8,000 & 6,250 & 500 & 500 \
\hline
\end{array}$$
-In the above table, there are no taxes and no imports or exports. The equilibrium level of expenditure for this economy is

Accepted Answer

A)  $3,000. 
B)  $5,000. 
C)  any level because investment always equals government expenditures. 
D)  no level because consumption expenditure is always less than real GDP. 
A)  $3,000. 
B)  $5,000. 
C)  any level because investment always equals government expenditures. 
D)  no level because consumption expenditure is always less than real GDP.

Question 4

If the change in autonomous investment equals $1 trillion and the change in real GDP equals $4 trillion, the multiplier equals 1/4.

Accepted Answer

A) True 
 B)False

Question 5

Given an MPC of 0.80, if there are no income taxes or imports and prices are constant, then when investment increases by $50 million, when prices are fixed equilibrium GDP would

Accepted Answer

A)  increase by $250 million. 
B)  increase by $400 million. 
C)  increase by $50 million. 
D)  To answer the question more information on income is needed. 
A)  increase by $250 million. 
B)  increase by $400 million. 
C)  increase by $50 million. 
D)  To answer the question more information on income is needed.

Question 6

If the MPC equals 0.75, then

Accepted Answer

A)  consumption expenditure is always more than disposable income. 
B)  for every $100 increase in consumption expenditure, disposable income increases by $75. 
C)  for every $100 increase in disposable income, saving increases by $25. 
D)  for every $100 increase in disposable income, saving increases by $75. 
A)  consumption expenditure is always more than disposable income. 
B)  for every $100 increase in consumption expenditure, disposable income increases by $75. 
C)  for every $100 increase in disposable income, saving increases by $25. 
D)  for every $100 increase in disposable income, saving increases by $75.

Question 7

The government increases its expenditures. The steeper the SAS curve, the _________will be the increase in the price level and the_________ will be the increase in real GDP.

Accepted Answer

A)  smaller; larger 
B)  smaller; smaller 
C)  larger; larger 
D)  larger; smaller 
A)  smaller; larger 
B)  smaller; smaller 
C)  larger; larger 
D)  larger; smaller

Question 8

A fall in the price level

Accepted Answer

A)  decreases aggregate planned expenditures and shifts the aggregate demand curve leftward. 
B)  shifts the aggregate expenditure curve upward and increases the quantity of real GDP demanded. 
C)  shifts both the aggregate expenditures curve and aggregate demand curve upward. 
D)  shifts the aggregate demand curve rightward and increases equilibrium GDP. 
A)  decreases aggregate planned expenditures and shifts the aggregate demand curve leftward. 
B)  shifts the aggregate expenditure curve upward and increases the quantity of real GDP demanded. 
C)  shifts both the aggregate expenditures curve and aggregate demand curve upward. 
D)  shifts the aggregate demand curve rightward and increases equilibrium GDP.

Question 9

If the marginal propensity to consume is 0.8, every $10 increase in disposable income increases

Accepted Answer

A)  saving by $0.20. 
B)  consumption expenditure by $8.00. 
C)  consumption expenditure by $0.80. 
D)  consumption expenditure by $18.00. 
A)  saving by $0.20. 
B)  consumption expenditure by $8.00. 
C)  consumption expenditure by $0.80. 
D)  consumption expenditure by $18.00.

Question 10

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

Question 11

The multiplier is larger if the

Accepted Answer

A)  marginal propensity to save is larger. 
B)  income tax rate is higher. 
C)  marginal propensity to consume is larger. 
D)  marginal propensity to import is larger. 
A)  marginal propensity to save is larger. 
B)  income tax rate is higher. 
C)  marginal propensity to consume is larger. 
D)  marginal propensity to import is larger.

Question 12

How does an increase in the price level affect the aggregate expenditure curve and the aggregate demand curve?

Accepted Answer

An increase in the price level

Question 13

If the slope of the AE curve increases, the multiplier

Accepted Answer

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

Question 14

The larger the multiplier, the _________the AE curve and the ___________the AD curve from an increase in investment.

Accepted Answer

A)  flatter; larger the movement along 
B)  steeper; smaller the shift in 
C)  flatter; smaller the movement along 
D)  steeper; larger the shift in 
A)  flatter; larger the movement along 
B)  steeper; smaller the shift in 
C)  flatter; smaller the movement along 
D)  steeper; larger the shift in

Question 15

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

Accepted Answer

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

Question 16

-In the above figure, an increase in autonomous expenditure is depicted by the movement from point E to

Accepted Answer

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

Question 17

An increase in real GDP leads to

Accepted Answer

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

Question 18

In the Keynesian model of aggregate expenditure, we assume that firms will

Accepted Answer

A)  not change prices. 
B)  raise prices when inventory levels fall. 
C)  change prices only when inventory levels rise. 
D)  lower prices when inventory levels rise. 
A)  not change prices. 
B)  raise prices when inventory levels fall. 
C)  change prices only when inventory levels rise. 
D)  lower prices when inventory levels rise.

Question 19

If there are no taxes or imports and MPC = 0.75, the multiplier equals

Accepted Answer

A)  0.25. 
B)  4.0. 
C)  6.0. 
D)  1.33. 
A)  0.25. 
B)  4.0. 
C)  6.0. 
D)  1.33.

Question 20

$$\begin{array} { | l | l | } 
\hline \begin{array} { l } 
\text { Disposable income } \
\text { (billions of dollars) }
\end{array} & \begin{array} { l } 
\text { Consumption } \
\text { exp enditure } \
\text { (billions of dollars) }
\end{array} \
\hline 400 & 450 \
\hline 600 & 600 \
\hline 800 & 750 \
\hline 1000 & 900 \
\hline 1200 & 1050 \
\hline
\end{array}$$
-Based upon the above table, if disposable income is $400 billion, saving equals

Accepted Answer

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

-In the figure above, if income taxes increase,

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

If the change in autonomous investment equals $1 trillion and the change in real GDP equals $4 trillion, the multiplier equals 1/4.

Given an MPC of 0.80, if there are no income taxes or imports and prices are constant, then when investment increases by $50 million, when prices are fixed equilibrium GDP would

If the MPC equals 0.75, then

The government increases its expenditures. The steeper the SAS curve, the _will be the increase in the price level and the_ will be the increase in real GDP.

A fall in the price level

If the marginal propensity to consume is 0.8, every $10 increase in disposable income increases

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

The multiplier is larger if the

How does an increase in the price level affect the aggregate expenditure curve and the aggregate demand curve?

If the slope of the AE curve increases, the multiplier

The larger the multiplier, the _the AE curve and the ___the AD curve from an increase in investment.

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

-In the above figure, an increase in autonomous expenditure is depicted by the movement from point E to

An increase in real GDP leads to

In the Keynesian model of aggregate expenditure, we assume that firms will

If there are no taxes or imports and MPC = 0.75, the multiplier equals

Disposable income (billions of dollars) Consumption exp enditure (billions of dollars) 400 450 600 600 800 750 1000 900 1200 1050 -Based upon the above table, if disposable income is $400 billion, saving 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

Review

Filters

Exam 11: Expenditure Multipliers: the Keynesian Model

-In the figure above, if income taxes increase,

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

If the change in autonomous investment equals $1 trillion and the change in real GDP equals $4 trillion, the multiplier equals 1/4.

Given an MPC of 0.80, if there are no income taxes or imports and prices are constant, then when investment increases by $50 million, when prices are fixed equilibrium GDP would

If the MPC equals 0.75, then

The government increases its expenditures. The steeper the SAS curve, the _________will be the increase in the price level and the_________ will be the increase in real GDP.

A fall in the price level

If the marginal propensity to consume is 0.8, every $10 increase in disposable income increases

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

The multiplier is larger if the

How does an increase in the price level affect the aggregate expenditure curve and the aggregate demand curve?

If the slope of the AE curve increases, the multiplier

The larger the multiplier, the _________the AE curve and the ___________the AD curve from an increase in investment.

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

-In the above figure, an increase in autonomous expenditure is depicted by the movement from point E to

An increase in real GDP leads to

In the Keynesian model of aggregate expenditure, we assume that firms will

If there are no taxes or imports and MPC = 0.75, the multiplier equals

Disposable income (billions of dollars) Consumption exp enditure (billions of dollars) 400 450 600 600 800 750 1000 900 1200 1050 -Based upon the above table, if disposable income is $400 billion, saving 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

Review

Filters

The government increases its expenditures. The steeper the SAS curve, the _will be the increase in the price level and the_ will be the increase in real GDP.

The larger the multiplier, the _the AE curve and the ___the AD curve from an increase in investment.