Question 1

If aggregate planned expenditure exceeds real GDP,

Accepted Answer

A)  actual inventories decrease below their target. 
B)  planned investment is greater than planned savings. 
C)  firms are not maximizing their profits. 
D)  planned consumption expenditure is less than actual consumption expenditure. 
A)  actual inventories decrease below their target. 
B)  planned investment is greater than planned savings. 
C)  firms are not maximizing their profits. 
D)  planned consumption expenditure is less than actual consumption expenditure.

Question 2

$$\begin{array} { | l | l | } 
\hline \begin{array} { l } 
\text { Real GDP } \
\text { (trillions of 2005 } \
\text { dollars) }
\end{array} & \begin{array} { l } 
\text { A ggregate } \
\text { expenditure } \
\text { (trillions of 2005 } \
\text { dollars) }
\end{array} \
\hline 0 & 0.3 \
\hline 1.0 & 1.2 \
\hline 2.0 & 2.1 \
\hline 3.0 & 3.0 \
\hline 4.0 & 3.9 \
\hline 5.0 & 4.8 \
\hline
\end{array}$$
-The data in the above table indicate that autonomous expenditure is

Accepted Answer

A)  $3.0 trillion. 
B)  $0.3 trillion. 
C)  $4.8 trillion. 
D)  None of the above answers is correct. 
A)  $3.0 trillion. 
B)  $0.3 trillion. 
C)  $4.8 trillion. 
D)  None of the above answers is correct.

Question 3

Real GDP

Accepted Answer

A)  is always less than aggregate income. 
B)  is always greater then aggregate income. 
C)  is equal to aggregate income. 
D)  might be less than or more than aggregate income depending on consumption. 
A)  is always less than aggregate income. 
B)  is always greater then aggregate income. 
C)  is equal to aggregate income. 
D)  might be less than or more than aggregate income depending on consumption.

Question 4

-If AE0 is the aggregate planned expenditure curve, then equilibrium real GDP in the figure above is

Accepted Answer

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

Question 5

In a simple economy in which prices are constant and with no income taxes or imports, the marginal propensity to save is 0.2. If exports increase $50, what impact will that have on aggregate expenditure?

Accepted Answer

A)  increase by $250 
B)  decrease by $250 
C)  decrease by $100 
D)  increase by $100 
A)  increase by $250 
B)  decrease by $250 
C)  decrease by $100 
D)  increase by $100

Question 6

Induced consumption is equal to

Accepted Answer

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

Question 7

A movement along the consumption function is the result of changes in

Accepted Answer

A)  expected future income. 
B)  disposable income. 
C)  the real interest rate. 
D)  All of the above answers are correct. 
A)  expected future income. 
B)  disposable income. 
C)  the real interest rate. 
D)  All of the above answers are correct.

Question 8

Components of induced aggregate expenditure include government expenditure, investment and consumption expenditure.

Accepted Answer

A) True 
 B)False

Question 9

As a nationʹs GDP increases, that nationʹs

Accepted Answer

A)  exports increase. 
B)  imports increase. 
C)  autonomous consumption increases. 
D)  autonomous consumption decreases. 
A)  exports increase. 
B)  imports increase. 
C)  autonomous consumption increases. 
D)  autonomous consumption decreases.

Question 10

$$\begin{array} { | l | l | } 
\hline \begin{array} { l } 
\text { Real GDP } \
\text { (trillions of 2005 } \
\text { dollars) }
\end{array} & \begin{array} { l } 
\text { A ggregate } \
\text { expenditure } \
\text { (trillions of 2005 } \
\text { dollars) }
\end{array} \
\hline 0 & 0.3 \
\hline 1.0 & 1.2 \
\hline 2.0 & 2.1 \
\hline 3.0 & 3.0 \
\hline 4.0 & 3.9 \
\hline 5.0 & 4.8 \
\hline
\end{array}$$
-In the above table, suppose investment decreases by $0.1 trillion. The multiplier equals

Accepted Answer

A)  9.0. 
B)  10.0. 
C)  5.0. 
D)  None of the above answers are correct. 
A)  9.0. 
B)  10.0. 
C)  5.0. 
D)  None of the above answers are correct.

Question 11

Intertemporal substitution means changes in purchases

Accepted Answer

A)  between imports and exports. 
B)  across different stores. 
C)  through time. 
D)  across different goods and services. 
A)  between imports and exports. 
B)  across different stores. 
C)  through time. 
D)  across different goods and services.

Question 12

A change in which of the following changes the slope of the aggregate expenditure curve?

Accepted Answer

A)  a decrease in autonomous consumption expenditures 
B)  an increase in the marginal propensity to consume 
C)  an increase in autonomous government expenditures 
D)  All of the above answers are correct because they all change the slope of the aggregate expenditure curve. 
A)  a decrease in autonomous consumption expenditures 
B)  an increase in the marginal propensity to consume 
C)  an increase in autonomous government expenditures 
D)  All of the above answers are correct because they all change the slope of the aggregate expenditure curve.

Question 13

If firms set prices and then keep them fixed for a period of time, their fixed prices imply that

Accepted Answer

A)  prices are set by aggregate demand and supply. 
B)  the aggregate price level is fixed and that aggregate supply determines the quantity of goods and services sold. 
C)  the aggregate price level is fixed and that aggregate demand determines the quantity of goods and services sold. 
D)  the aggregate price level adjusts continuously. 
A)  prices are set by aggregate demand and supply. 
B)  the aggregate price level is fixed and that aggregate supply determines the quantity of goods and services sold. 
C)  the aggregate price level is fixed and that aggregate demand determines the quantity of goods and services sold. 
D)  the aggregate price level adjusts continuously.

Question 14

Which of the following is true?

Accepted Answer

A)  MPS - MPC = 1 
B)  MPS + MPC = 0 
C)  MPS + MPC = 1 
D)  MPS = MPC 
A)  MPS - MPC = 1 
B)  MPS + MPC = 0 
C)  MPS + MPC = 1 
D)  MPS = MPC

Question 15

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

Accepted Answer

A)  0.75. 
B)  $6,500. 
C)  $7,000. 
D)  $13,500. 
A)  0.75. 
B)  $6,500. 
C)  $7,000. 
D)  $13,500.

Question 16

In the country of Midland, autonomous consumption expenditure is $60 million, and the marginal propensity to consume is 0.6. Investment is $110 million, government expenditure is $70 million, and there are no income taxes. Investment and government expenditure are constant they do not vary with income. The nation does not trade with the rest of the world.
a) Draw the aggregate expenditure curve.
b) What is the autonomous aggregate expenditure?
c) What is the size of the multiplier in Midlandʹs economy?
d) What is aggregate planned expenditure and what is happening to inventories when real GDP is $800 million?
e) What is the economyʹs equilibrium aggregate expenditure?

Accepted Answer

See the figure above. Because the nation

Question 17

A movement along the consumption function is the result of changes in disposable income.

Accepted Answer

A) True 
 B)False

Question 18

The slope of the aggregate expenditure curve increases when the marginal propensity to consume___________ or the marginal propensity to import ___________ .

Accepted Answer

A)  increases; increases 
B)  increases; decreases 
C)  decreases; decreases 
D)  decreases; increases 
A)  increases; increases 
B)  increases; decreases 
C)  decreases; decreases 
D)  decreases; increases

Question 19

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

Accepted Answer

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

Question 20

Does aggregate planned expenditure always equal real GDP?

Accepted Answer

No, aggregate planned expenditure does n

If aggregate planned expenditure exceeds real GDP,

Real GDP (trillions of 2005 dollars) A ggregate expenditure (trillions of 2005 dollars) 0 0.3 1.0 1.2 2.0 2.1 3.0 3.0 4.0 3.9 5.0 4.8 -The data in the above table indicate that autonomous expenditure is

Real GDP

-If AE₀is the aggregate planned expenditure curve, then equilibrium real GDP in the figure above is

In a simple economy in which prices are constant and with no income taxes or imports, the marginal propensity to save is 0.2. If exports increase $50, what impact will that have on aggregate expenditure?

Induced consumption is equal to

A movement along the consumption function is the result of changes in

Components of induced aggregate expenditure include government expenditure, investment and consumption expenditure.

As a nationʹs GDP increases, that nationʹs

Real GDP (trillions of 2005 dollars) A ggregate expenditure (trillions of 2005 dollars) 0 0.3 1.0 1.2 2.0 2.1 3.0 3.0 4.0 3.9 5.0 4.8 -In the above table, suppose investment decreases by $0.1 trillion. The multiplier equals

Intertemporal substitution means changes in purchases

A change in which of the following changes the slope of the aggregate expenditure curve?

If firms set prices and then keep them fixed for a period of time, their fixed prices imply that

Which of the following is true?

A movement along the consumption function is the result of changes in disposable income.

The slope of the aggregate expenditure curve increases when the marginal propensity to consume_ or the marginal propensity to import _ .

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

Does aggregate planned expenditure always equal real GDP?

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

If aggregate planned expenditure exceeds real GDP,

Real GDP (trillions of 2005 dollars) A ggregate expenditure (trillions of 2005 dollars) 0 0.3 1.0 1.2 2.0 2.1 3.0 3.0 4.0 3.9 5.0 4.8 -The data in the above table indicate that autonomous expenditure is

Real GDP

-If AE0 is the aggregate planned expenditure curve, then equilibrium real GDP in the figure above is

In a simple economy in which prices are constant and with no income taxes or imports, the marginal propensity to save is 0.2. If exports increase $50, what impact will that have on aggregate expenditure?

Induced consumption is equal to

A movement along the consumption function is the result of changes in

Components of induced aggregate expenditure include government expenditure, investment and consumption expenditure.

As a nationʹs GDP increases, that nationʹs

Real GDP (trillions of 2005 dollars) A ggregate expenditure (trillions of 2005 dollars) 0 0.3 1.0 1.2 2.0 2.1 3.0 3.0 4.0 3.9 5.0 4.8 -In the above table, suppose investment decreases by $0.1 trillion. The multiplier equals

Intertemporal substitution means changes in purchases

A change in which of the following changes the slope of the aggregate expenditure curve?

If firms set prices and then keep them fixed for a period of time, their fixed prices imply that

Which of the following is true?

A movement along the consumption function is the result of changes in disposable income.

The slope of the aggregate expenditure curve increases when the marginal propensity to consume___________ or the marginal propensity to import ___________ .

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

Does aggregate planned expenditure always equal real GDP?

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

-If AE₀is the aggregate planned expenditure curve, then equilibrium real GDP in the figure above is

The slope of the aggregate expenditure curve increases when the marginal propensity to consume_ or the marginal propensity to import _ .