Question 1

Autonomous expenditure refers to

Accepted Answer

A)  aggregate expenditure solely prompted by policy. 
B)  aggregate expenditure that varies because of changes in real GDP. 
C)  aggregate expenditure that does not change when real GDP changes. 
D)  changes in short-run aggregate supply. 
A)  aggregate expenditure solely prompted by policy. 
B)  aggregate expenditure that varies because of changes in real GDP. 
C)  aggregate expenditure that does not change when real GDP changes. 
D)  changes in short-run aggregate supply.

Question 2

If investment increases by $150 and, in response, equilibrium expenditure rises by $600,

Accepted Answer

A)  the MPC is 4. 
B)  the multiplier is 0.25. 
C)  the slope of the AE curve is 3.0. 
D)  the multiplier is 4.0. 
A)  the MPC is 4. 
B)  the multiplier is 0.25. 
C)  the slope of the AE curve is 3.0. 
D)  the multiplier is 4.0.

Question 3

If investment decreases, the AE curve shifts

Accepted Answer

A)  upward and there is a movement along the AD curve. 
B)  upward and the AD curve shifts rightward. 
C)  downward and there is a movement along the AD curve. 
D)  downward and the AD curve shifts leftward. 
A)  upward and there is a movement along the AD curve. 
B)  upward and the AD curve shifts rightward. 
C)  downward and there is a movement along the AD curve. 
D)  downward and the AD curve shifts leftward.

Question 4

An increase in the price level shifts the aggregate expenditure curve downward and results in a movement along the aggregate demand curve. Why does an increase in the price level result in a shift in the aggregate expenditure curve rather than a movement along it?

Accepted Answer

The increase in the price level shifts t

Question 5

In 2007, investment in France increased by 7 billion euros. Assume the price level was constant, the multiplier was 5 and the economy was at full employment. As a result, equilibrium expenditure

Accepted Answer

A)  decreased by 35 billion euros. 
B)  decreased by .71 billion euros. 
C)  increased by 35 billion euros. 
D)  increased by 1.4 billion euros 
A)  decreased by 35 billion euros. 
B)  decreased by .71 billion euros. 
C)  increased by 35 billion euros. 
D)  increased by 1.4 billion euros

Question 6

As disposable income increases, there is a _________the saving function.

Accepted Answer

A)  change in the slope of 
B)  movement along 
C)  leftward shift of the 
D)  rightward shift of 
A)  change in the slope of 
B)  movement along 
C)  leftward shift of the 
D)  rightward shift of

Question 7

If the multiplier is 6 and exports decrease by $30, what impact will that have on aggregate expenditure?

Accepted Answer

A)  increase by $180 
B)  decrease by $180 
C)  increase by $30 
D)  decrease by $30 
A)  increase by $180 
B)  decrease by $180 
C)  increase by $30 
D)  decrease by $30

Question 8

Discuss how the marginal propensity to consume, imports, and income tax rates influence the multiplier.

Accepted Answer

The simple multiplier, in an economy wit

Question 9

The marginal propensity to save equals the

Accepted Answer

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

Question 10

Suppose that the slope of the AE curve is 0.80. Then an increase of investment of $10 billion leads to an increase in equilibrium real GDP equal to

Accepted Answer

A)  $12.5 billion. 
B)  $10.0 billion. 
C)  $8.0 billion. 
D)  $50.0 billion. 
A)  $12.5 billion. 
B)  $10.0 billion. 
C)  $8.0 billion. 
D)  $50.0 billion.

Question 11

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

Accepted Answer

Business cycle turning points are the po

Question 12

If the marginal propensity to consume is 0.8 and there no income taxes or imports, the multiplier for a change in autonomous expenditure equals

Accepted Answer

A)  4.0. 
B)  1.0 
C)  0.8. 
D)  5.0. 
A)  4.0. 
B)  1.0 
C)  0.8. 
D)  5.0.

Question 13

The multiplier shows that as ____________changes, real GDP changes by a__________ amount.

Accepted Answer

A)  induced expenditure; larger 
B)  autonomous expenditure; larger 
C)  induced expenditure; smaller 
D)  autonomous expenditure; smaller 
A)  induced expenditure; larger 
B)  autonomous expenditure; larger 
C)  induced expenditure; smaller 
D)  autonomous expenditure; smaller

Question 14

An increase in investment spending results in a_________ the aggregate expenditure curve and_________ the aggregate demand curve.

Accepted Answer

A)  shift in; a movement along 
B)  shift in; has no effect on 
C)  shift in; a shift in 
D)  movement along; a shift in 
A)  shift in; a movement along 
B)  shift in; has no effect on 
C)  shift in; a shift in 
D)  movement along; a shift in

Question 15

Explain the relationship between real GDP and aggregate planned expenditure, AE. What change to inventories takes place when the two are not equal?

Accepted Answer

If the GDP and aggregate planned expendi

Question 16

Income taxes reduce the size of the multiplier.

Accepted Answer

A) True 
 B)False

Question 17

Disposable income is equal to

Accepted Answer

A)  aggregate income plus transfer payments. 
B)  consumption expenditure minus taxes plus transfer payments. 
C)  aggregate income minus taxes plus government expenditures on goods and services. 
D)  aggregate income minus taxes plus transfer payments. 
A)  aggregate income plus transfer payments. 
B)  consumption expenditure minus taxes plus transfer payments. 
C)  aggregate income minus taxes plus government expenditures on goods and services. 
D)  aggregate income minus taxes plus transfer payments.

Question 18

A country reports that it has an unplanned inventory increase of $1.0 trillion. Discuss how the economy adjusts until it reaches an unplanned inventory change of $0.0 trillion.

Accepted Answer

When unplanned inventory changes are pos

Question 19

If real disposable income increases by $1500, consumption expenditures will

Accepted Answer

A)  increase by more than $1500. 
B)  stay constant. 
C)  increase by less than $1500. 
D)  decrease by less than $1500. 
A)  increase by more than $1500. 
B)  stay constant. 
C)  increase by less than $1500. 
D)  decrease by less than $1500.

Question 20

When investment is less than planned investment, aggregate planned expenditure is___________
Than actual aggregate expenditure and inventories are ___________than planned.

Accepted Answer

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

Autonomous expenditure refers to

If investment increases by $150 and, in response, equilibrium expenditure rises by $600,

If investment decreases, the AE curve shifts

An increase in the price level shifts the aggregate expenditure curve downward and results in a movement along the aggregate demand curve. Why does an increase in the price level result in a shift in the aggregate expenditure curve rather than a movement along it?

In 2007, investment in France increased by 7 billion euros. Assume the price level was constant, the multiplier was 5 and the economy was at full employment. As a result, equilibrium expenditure

As disposable income increases, there is a _________the saving function.

If the multiplier is 6 and exports decrease by $30, what impact will that have on aggregate expenditure?

Discuss how the marginal propensity to consume, imports, and income tax rates influence the multiplier.

The marginal propensity to save equals the

Suppose that the slope of the AE curve is 0.80. Then an increase of investment of $10 billion leads to an increase in equilibrium real GDP equal to

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

If the marginal propensity to consume is 0.8 and there no income taxes or imports, the multiplier for a change in autonomous expenditure equals

The multiplier shows that as __changes, real GDP changes by a amount.

An increase in investment spending results in a_ the aggregate expenditure curve and_ the aggregate demand curve.

Explain the relationship between real GDP and aggregate planned expenditure, AE. What change to inventories takes place when the two are not equal?

Income taxes reduce the size of the multiplier.

Disposable income is equal to

A country reports that it has an unplanned inventory increase of $1.0 trillion. Discuss how the economy adjusts until it reaches an unplanned inventory change of $0.0 trillion.

If real disposable income increases by $1500, consumption expenditures will

When investment is less than planned investment, aggregate planned expenditure is_ Than actual aggregate expenditure and inventories are _than planned.

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

Autonomous expenditure refers to

If investment increases by $150 and, in response, equilibrium expenditure rises by $600,

If investment decreases, the AE curve shifts

An increase in the price level shifts the aggregate expenditure curve downward and results in a movement along the aggregate demand curve. Why does an increase in the price level result in a shift in the aggregate expenditure curve rather than a movement along it?

In 2007, investment in France increased by 7 billion euros. Assume the price level was constant, the multiplier was 5 and the economy was at full employment. As a result, equilibrium expenditure

As disposable income increases, there is a _________the saving function.

If the multiplier is 6 and exports decrease by $30, what impact will that have on aggregate expenditure?

Discuss how the marginal propensity to consume, imports, and income tax rates influence the multiplier.

The marginal propensity to save equals the

Suppose that the slope of the AE curve is 0.80. Then an increase of investment of $10 billion leads to an increase in equilibrium real GDP equal to

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

If the marginal propensity to consume is 0.8 and there no income taxes or imports, the multiplier for a change in autonomous expenditure equals

The multiplier shows that as ____________changes, real GDP changes by a__________ amount.

An increase in investment spending results in a_________ the aggregate expenditure curve and_________ the aggregate demand curve.

Explain the relationship between real GDP and aggregate planned expenditure, AE. What change to inventories takes place when the two are not equal?

Income taxes reduce the size of the multiplier.

Disposable income is equal to

A country reports that it has an unplanned inventory increase of $1.0 trillion. Discuss how the economy adjusts until it reaches an unplanned inventory change of $0.0 trillion.

If real disposable income increases by $1500, consumption expenditures will

When investment is less than planned investment, aggregate planned expenditure is___________ Than actual aggregate expenditure and inventories are ___________than planned.

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 multiplier shows that as __changes, real GDP changes by a amount.

An increase in investment spending results in a_ the aggregate expenditure curve and_ the aggregate demand curve.

When investment is less than planned investment, aggregate planned expenditure is_ Than actual aggregate expenditure and inventories are _than planned.