Question 1

Saving rather than dissaving occurs at any level of disposable income at which

Accepted Answer

A)  the consumption function intersects the saving/income curve. 
B)  autonomous consumption is positive. 
C)  the consumption function is above the 45-degree line. 
D)  the consumption function is below the 45-degree line. 
A)  the consumption function intersects the saving/income curve. 
B)  autonomous consumption is positive. 
C)  the consumption function is above the 45-degree line. 
D)  the consumption function is below the 45-degree line.

Question 2

In the long run, the multiplier

Accepted Answer

A)  is twice the short-run multiplier. 
B)  is 0. 
C)  is greater than 1 because of the position and slope of the SAS curve. 
D)  depends on the slope of the AD curve. 
A)  is twice the short-run multiplier. 
B)  is 0. 
C)  is greater than 1 because of the position and slope of the SAS curve. 
D)  depends on the slope of the AD curve.

Question 3

$$\begin{array} { | l | l | } 
\hline \begin{array} { l } 
\text { Disposable income } \
\text { (billions of dollars) }
\end{array} & \begin{array} { l } 
\text { Consumption } \
\text { exp enditure } \
\text { (billions of dollars) }
\end{array} \
\hline 400 & 450 \
\hline 600 & 600 \
\hline 800 & 750 \
\hline 1000 & 900 \
\hline 1200 & 1050 \
\hline
\end{array}$$
-Based upon the above table, saving equals $100 billion when disposable income equals

Accepted Answer

A)  $1000 billion. 
B)  $800 billion. 
C)  $1200 billion. 
D)  some amount but we need more information to calculate the amount. 
A)  $1000 billion. 
B)  $800 billion. 
C)  $1200 billion. 
D)  some amount but we need more information to calculate the amount.

Question 4

The saving function shows a __________srelationship between __________.

Accepted Answer

A)  negative; real GDP and saving 
B)  positive; disposable income and saving 
C)  positive; disposable income and dissaving 
D)  negative; disposable income and consumption expenditure 
A)  negative; real GDP and saving 
B)  positive; disposable income and saving 
C)  positive; disposable income and dissaving 
D)  negative; disposable income and consumption expenditure

Question 5

Suppose that last year the slope of the AE curve is 0.67 and this year the slope of the AE curve changes to 0.8. Which of the following best describes what happens to the multiplier?

Accepted Answer

A)  It rises from 3 to 5. 
B)  It rises from 1.25 to 1.49. 
C)  It falls from 5 to 3. 
D)  It falls from 1.49 to 1.25. 
A)  It rises from 3 to 5. 
B)  It rises from 1.25 to 1.49. 
C)  It falls from 5 to 3. 
D)  It falls from 1.49 to 1.25.

Question 6

In the short run with fixed prices, an increase in investment of $100 billion

Accepted Answer

A)  increases real GDP by less than $100 billion. 
B)  decreases real GDP because of the decrease in induced expenditures. 
C)  increases real GDP by more than $100 billion. 
D)  increases real GDP by $100 billion. 
A)  increases real GDP by less than $100 billion. 
B)  decreases real GDP because of the decrease in induced expenditures. 
C)  increases real GDP by more than $100 billion. 
D)  increases real GDP by $100 billion.

Question 7

-In the figure above, negative saving occurs

Accepted Answer

A)  when disposable income is $16 trillion. 
B)  at all levels of disposable income. 
C)  when disposable income is $12 trillion. 
D)  when disposable income is $8 trillion. 
A)  when disposable income is $16 trillion. 
B)  at all levels of disposable income. 
C)  when disposable income is $12 trillion. 
D)  when disposable income is $8 trillion.

Question 8

-The figure above illustrates an economyʹs consumption function. What is the marginal propensity to consume in this economy?

Accepted Answer

A)  0.33 
B)  1.00 
C)  0.67 
D)  0.75 
A)  0.33 
B)  1.00 
C)  0.67 
D)  0.75

Question 9

In 2007, investment in France increased by 7 billion euros. Which of following occurs?
i. an upward shift in the AE curve.
ii. a leftward shift in the AD curve.
iii. an increase in the price level and real GDP in the short run.
iv. an increase in the price level and no change in real GDP in the long run.

Accepted Answer

A)  i, ii, iii and iv. 
B)  iii and iv only. 
C)  i, iii and iv only. 
D)  i and iii only. 
A)  i, ii, iii and iv. 
B)  iii and iv only. 
C)  i, iii and iv only. 
D)  i and iii only.

Question 10

When investment exceeds planned investment, aggregate planned expenditure is ___________than actual aggregate expenditure and inventories are ___________than planned.

Accepted Answer

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

Question 11

Where the consumption function crosses the 45° line

Accepted Answer

A)  saving is positive. 
B)  saving is negative. 
C)  consumption expenditure equals saving. 
D)  consumption expenditure equals disposable income. 
A)  saving is positive. 
B)  saving is negative. 
C)  consumption expenditure equals saving. 
D)  consumption expenditure equals disposable income.

Question 12

In the very short term, planned investment, planned government expenditure, planned exports, planned consumption, and planned imports are all fixed and do not change when GDP changes.

Accepted Answer

A) True 
 B)False

Question 13

If the marginal propensity to save is 0.6, then the marginal propensity to consume is

Accepted Answer

A)  0.4. 
B)  0.6. 
C)  1.0. 
D)  not determinable. 
A)  0.4. 
B)  0.6. 
C)  1.0. 
D)  not determinable.

Question 14

Which of the following concerning the marginal propensity to consume and the consumption function is true?
I. The larger the marginal propensity to consume, the greater the amount of autonomous consumption.
II. The larger the marginal propensity to consume, the steeper the consumption function.

Accepted Answer

A)  I and II are true. 
B)  Neither I nor II is true. 
C)  I is true. 
D)  II is true. 
A)  I and II are true. 
B)  Neither I nor II is true. 
C)  I is true. 
D)  II is true.

Question 15

If the price level is constant, a change in investment has a multiplied impact on real GDP.

Accepted Answer

A) True 
 B)False

Question 16

In the third quarter of 2008, investment in the U.S. totalled $1.4 trillion and in 2007, investment was $1.3 trillion. In addition, third quarter real GDP was $11 trillion. Suppose the MPC in the U.S. is 0.80.
Ignoring the effects of imports and taxes, the multiplier is and__________ the change in investment will decrease equilibrium expenditure by __________.

Accepted Answer

A)  2; $200 million. 
B)  2; $1 trillion. 
C)  5; $1 trillion. 
D)  5; $500 million. 
A)  2; $200 million. 
B)  2; $1 trillion. 
C)  5; $1 trillion. 
D)  5; $500 million.

Question 17

Suppose a country has no income taxes or imports. If the MPC is 0.75, what does the multiplier equal?

Accepted Answer

The answer of Suppose a country has no income taxes...

Question 18

Which of the following shifts the aggregate expenditure curve AND shifts the aggregate demand curve?
I. a decrease in investment
II. a change in the price level
III. an increase in exports

Accepted Answer

A)  II and III 
B)  III only 
C)  I and II 
D)  I and III 
A)  II and III 
B)  III only 
C)  I and II 
D)  I and III

Question 19

-In the above figure, if real GDP is greater than $12 trillion, inventories will be

Accepted Answer

A)  below target levels so firms decrease production. 
B)  above target levels so firms increase production. 
C)  above target levels so firms decrease production. 
D)  below target levels so firms increase production. 
A)  below target levels so firms decrease production. 
B)  above target levels so firms increase production. 
C)  above target levels so firms decrease production. 
D)  below target levels so firms increase production.

Question 20

In an economy, the multiplier is 3. If government expenditure increases by $1 million, then in the short run, the price level _________and real GDP_________ $3 million.

Accepted Answer

A)  rises; equals 
B)  rises; increases by less than 
C)  rises; decreases by less than 
D)  falls; decreases by less than 
A)  rises; equals 
B)  rises; increases by less than 
C)  rises; decreases by less than 
D)  falls; decreases by less than

Saving rather than dissaving occurs at any level of disposable income at which

In the long run, the multiplier

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, saving equals $100 billion when disposable income equals

The saving function shows a srelationship between .

Suppose that last year the slope of the AE curve is 0.67 and this year the slope of the AE curve changes to 0.8. Which of the following best describes what happens to the multiplier?

In the short run with fixed prices, an increase in investment of $100 billion

-In the figure above, negative saving occurs

-The figure above illustrates an economyʹs consumption function. What is the marginal propensity to consume in this economy?

When investment exceeds planned investment, aggregate planned expenditure is _than actual aggregate expenditure and inventories are _than planned.

Where the consumption function crosses the 45° line

In the very short term, planned investment, planned government expenditure, planned exports, planned consumption, and planned imports are all fixed and do not change when GDP changes.

If the marginal propensity to save is 0.6, then the marginal propensity to consume is

Which of the following concerning the marginal propensity to consume and the consumption function is true? I. The larger the marginal propensity to consume, the greater the amount of autonomous consumption. II. The larger the marginal propensity to consume, the steeper the consumption function.

If the price level is constant, a change in investment has a multiplied impact on real GDP.

Suppose a country has no income taxes or imports. If the MPC is 0.75, what does the multiplier equal?

Which of the following shifts the aggregate expenditure curve AND shifts the aggregate demand curve? I. a decrease in investment II. a change in the price level III. an increase in exports

-In the above figure, if real GDP is greater than $12 trillion, inventories will be

In an economy, the multiplier is 3. If government expenditure increases by $1 million, then in the short run, the price level _and real GDP_ $3 million.

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

Saving rather than dissaving occurs at any level of disposable income at which

In the long run, the multiplier

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, saving equals $100 billion when disposable income equals

The saving function shows a __________srelationship between __________.

Suppose that last year the slope of the AE curve is 0.67 and this year the slope of the AE curve changes to 0.8. Which of the following best describes what happens to the multiplier?

In the short run with fixed prices, an increase in investment of $100 billion

-In the figure above, negative saving occurs

-The figure above illustrates an economyʹs consumption function. What is the marginal propensity to consume in this economy?

When investment exceeds planned investment, aggregate planned expenditure is ___________than actual aggregate expenditure and inventories are ___________than planned.

Where the consumption function crosses the 45° line

In the very short term, planned investment, planned government expenditure, planned exports, planned consumption, and planned imports are all fixed and do not change when GDP changes.

If the marginal propensity to save is 0.6, then the marginal propensity to consume is

Which of the following concerning the marginal propensity to consume and the consumption function is true? I. The larger the marginal propensity to consume, the greater the amount of autonomous consumption. II. The larger the marginal propensity to consume, the steeper the consumption function.

If the price level is constant, a change in investment has a multiplied impact on real GDP.

Suppose a country has no income taxes or imports. If the MPC is 0.75, what does the multiplier equal?

Which of the following shifts the aggregate expenditure curve AND shifts the aggregate demand curve? I. a decrease in investment II. a change in the price level III. an increase in exports

-In the above figure, if real GDP is greater than $12 trillion, inventories will be

In an economy, the multiplier is 3. If government expenditure increases by $1 million, then in the short run, the price level _________and real GDP_________ $3 million.

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 saving function shows a srelationship between .

When investment exceeds planned investment, aggregate planned expenditure is _than actual aggregate expenditure and inventories are _than planned.

In an economy, the multiplier is 3. If government expenditure increases by $1 million, then in the short run, the price level _and real GDP_ $3 million.