Question 1

ʺIf the income tax rate is high enough, the multiplier can be negative.ʺ Is the previous statement correct or incorrect?

Accepted Answer

The statement is incorrect. Th

Question 2

The relationship between net exports and GDP makes the slope of the aggregate expenditure curve

Accepted Answer

A)  steeper at low levels of GDP and flatter at high levels of GDP. 
B)  neither flatter nor steeper than it would be otherwise. 
C)  steeper than it would be otherwise. 
D)  flatter than it would be otherwise. 
A)  steeper at low levels of GDP and flatter at high levels of GDP. 
B)  neither flatter nor steeper than it would be otherwise. 
C)  steeper than it would be otherwise. 
D)  flatter than it would be otherwise.

Question 3

If prices are fixed, an increase in aggregate expenditures results in an increase in equilibrium GDP that

Accepted Answer

A)  has no necessary relationship to the size of the change in aggregate expenditure. 
B)  is greater than the change in aggregate expenditure. 
C)  is equal to the change in aggregate expenditure. 
D)  is less than the change in aggregate expenditure. 
A)  has no necessary relationship to the size of the change in aggregate expenditure. 
B)  is greater than the change in aggregate expenditure. 
C)  is equal to the change in aggregate expenditure. 
D)  is less than the change in aggregate expenditure.

Question 4

Which of the following does NOT   occur as the economy moves from an expansion to a recession?

Accepted Answer

A)  Incomes fall during recessions as firms cut production in response to unplanned increases in inventories. 
B)  An initial decrease in autonomous spending is the trigger that creates the business cycle turning point. 
C)  The multiplier process reinforces any decrease in spending and pushes the economy into recession. 
D)  The change in planned spending exceeds the change in real GDP. 
A)  Incomes fall during recessions as firms cut production in response to unplanned increases in inventories. 
B)  An initial decrease in autonomous spending is the trigger that creates the business cycle turning point. 
C)  The multiplier process reinforces any decrease in spending and pushes the economy into recession. 
D)  The change in planned spending exceeds the change in real GDP.

Question 5

The autonomous components of aggregate expenditures are consumption, savings, and investment.

Accepted Answer

A) True 
 B)False

Question 6

-In the above figure, AE0 is the aggregate planned expenditure curve and then investment increases by an additional $3 trillion. As a result, the new equilibrium GDP will be

Accepted Answer

A)  $12 trillion. 
B)  $6 trillion. 
C)  $3 trillion. 
D)  None of the above answers is correct. 
A)  $12 trillion. 
B)  $6 trillion. 
C)  $3 trillion. 
D)  None of the above answers is correct.

Question 7

Suppose disposable income increases from $7 trillion to $8 trillion. At the same time, consumption expenditure increases from $6.8 trillion to_________ . Thus the MPC must equal_________ .

Accepted Answer

A)  $7.6 trillion; 0.80 
B)  $7.8 trillion; 0.80 
C)  $7.4 trillion; 0.40 
D)  $8 trillion; 1.00 
A)  $7.6 trillion; 0.80 
B)  $7.8 trillion; 0.80 
C)  $7.4 trillion; 0.40 
D)  $8 trillion; 1.00

Question 8

The MPS equals the ratio of

Accepted Answer

A)  saving to real GDP. 
B)  saving to consumption expenditure. 
C)  the change in saving to the change in consumption expenditure. 
D)  None of the above answers is correct. 
A)  saving to real GDP. 
B)  saving to consumption expenditure. 
C)  the change in saving to the change in consumption expenditure. 
D)  None of the above answers is correct.

Question 9

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

Accepted Answer

A)  1.00. 
B)  0.25. 
C)  3.00. 
D)  0.67. 
A)  1.00. 
B)  0.25. 
C)  3.00. 
D)  0.67.

Question 10

After an increase in autonomous spending, in the long run, changes in the price level

Accepted Answer

A)  will reduce the effect of the multiplier. 
B)  will make the AE curve flatter. 
C)  will make the AE curve steeper. 
D)  will not affect the multiplier. 
A)  will reduce the effect of the multiplier. 
B)  will make the AE curve flatter. 
C)  will make the AE curve steeper. 
D)  will not affect the multiplier.

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

The consumption function relates the consumption expenditure decisions of households to

Accepted Answer

A)  saving decisions of households. 
B)  investment decisions of firms. 
C)  the level of disposable income. 
D)  the nominal interest rate. 
A)  saving decisions of households. 
B)  investment decisions of firms. 
C)  the level of disposable income. 
D)  the nominal interest rate.

Question 13

-In the above figure, autonomous expenditure along AE2 equals

Accepted Answer

A)  $12 trillion. 
B)  $3 trillion. 
C)  $6 trillion. 
D)  an amount not given in the above answers. 
A)  $12 trillion. 
B)  $3 trillion. 
C)  $6 trillion. 
D)  an amount not given in the above answers.

Question 14

If the price level rises, the purchasing power of wealth

Accepted Answer

A)  does not change. 
B)  decreases. 
C)  increases. 
D)  increases at first but in the long run decreases. 
A)  does not change. 
B)  decreases. 
C)  increases. 
D)  increases at first but in the long run decreases.

Question 15

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

Accepted Answer

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

Question 16

Autonomous consumption is equal to

Accepted Answer

A)  consumption caused by an increase in disposable income. 
B)  saving when consumption equals disposable income. 
C)  dissaving when disposable income is greater than zero. 
D)  consumption when disposable income is zero. 
A)  consumption caused by an increase in disposable income. 
B)  saving when consumption equals disposable income. 
C)  dissaving when disposable income is greater than zero. 
D)  consumption when disposable income is zero.

Question 17

If the consumption function lies below the 45-degree line, then saving at these levels of disposable income will

Accepted Answer

A)  equal zero. 
B)  be negative. 
C)  be positive. 
D)  be some amount that cannot be determined without additional information. 
A)  equal zero. 
B)  be negative. 
C)  be positive. 
D)  be some amount that cannot be determined without additional information.

Question 18

When the economy is in equilibrium,

Accepted Answer

A)  there can be no unemployment. 
B)  changes in autonomous spending will have no impact on real GDP. 
C)  planned savings will equal zero. 
D)  planned investment equals actual investment. 
A)  there can be no unemployment. 
B)  changes in autonomous spending will have no impact on real GDP. 
C)  planned savings will equal zero. 
D)  planned investment equals actual investment.

Question 19

-In the above figure, if real GDP equals $15 trillion,

Accepted Answer

A)  actual and planned investment will both increase. 
B)  unplanned inventories will decrease. 
C)  unplanned inventories will increase. 
D)  actual investment will decrease but planned investment will increase. 
A)  actual and planned investment will both increase. 
B)  unplanned inventories will decrease. 
C)  unplanned inventories will increase. 
D)  actual investment will decrease but planned investment will increase.

Question 20

Suppose that in 2013, firms discover that their inventories are falling below their planned levels. Which of the following statements is correct?

Accepted Answer

A)  Aggregate demand is less than aggregate supply. 
B)  Even though firms are trying, they are unable to maximize profits. 
C)  The level of aggregate savings must equal the level of desired investment. 
D)  Real GDP is less than equilibrium expenditure. 
A)  Aggregate demand is less than aggregate supply. 
B)  Even though firms are trying, they are unable to maximize profits. 
C)  The level of aggregate savings must equal the level of desired investment. 
D)  Real GDP is less than equilibrium expenditure.

ʺIf the income tax rate is high enough, the multiplier can be negative.ʺ Is the previous statement correct or incorrect?

The relationship between net exports and GDP makes the slope of the aggregate expenditure curve

If prices are fixed, an increase in aggregate expenditures results in an increase in equilibrium GDP that

Which of the following does NOT occur as the economy moves from an expansion to a recession?

The autonomous components of aggregate expenditures are consumption, savings, and investment.

-In the above figure, AE₀is the aggregate planned expenditure curve and then investment increases by an additional $3 trillion. As a result, the new equilibrium GDP will be

Suppose disposable income increases from $7 trillion to $8 trillion. At the same time, consumption expenditure increases from $6.8 trillion to_ . Thus the MPC must equal_ .

The MPS equals the ratio of

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

After an increase in autonomous spending, in the long run, changes in the price level

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

The consumption function relates the consumption expenditure decisions of households to

-In the above figure, autonomous expenditure along AE₂equals

If the price level rises, the purchasing power of wealth

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

Autonomous consumption is equal to

If the consumption function lies below the 45-degree line, then saving at these levels of disposable income will

When the economy is in equilibrium,

-In the above figure, if real GDP equals $15 trillion,

Suppose that in 2013, firms discover that their inventories are falling below their planned levels. Which of the following statements is correct?

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

ʺIf the income tax rate is high enough, the multiplier can be negative.ʺ Is the previous statement correct or incorrect?

The relationship between net exports and GDP makes the slope of the aggregate expenditure curve

If prices are fixed, an increase in aggregate expenditures results in an increase in equilibrium GDP that

Which of the following does NOT occur as the economy moves from an expansion to a recession?

The autonomous components of aggregate expenditures are consumption, savings, and investment.

-In the above figure, AE0 is the aggregate planned expenditure curve and then investment increases by an additional $3 trillion. As a result, the new equilibrium GDP will be

Suppose disposable income increases from $7 trillion to $8 trillion. At the same time, consumption expenditure increases from $6.8 trillion to_________ . Thus the MPC must equal_________ .

The MPS equals the ratio of

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

After an increase in autonomous spending, in the long run, changes in the price level

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

The consumption function relates the consumption expenditure decisions of households to

-In the above figure, autonomous expenditure along AE2 equals

If the price level rises, the purchasing power of wealth

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

Autonomous consumption is equal to

If the consumption function lies below the 45-degree line, then saving at these levels of disposable income will

When the economy is in equilibrium,

-In the above figure, if real GDP equals $15 trillion,

Suppose that in 2013, firms discover that their inventories are falling below their planned levels. Which of the following statements is correct?

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

-In the above figure, AE₀is the aggregate planned expenditure curve and then investment increases by an additional $3 trillion. As a result, the new equilibrium GDP will be

Suppose disposable income increases from $7 trillion to $8 trillion. At the same time, consumption expenditure increases from $6.8 trillion to_ . Thus the MPC must equal_ .

-In the above figure, autonomous expenditure along AE₂equals