Question 1

The short-run impact changes in autonomous spending have on real GDP and the price level depends on aggregate supply.

Accepted Answer

A) True 
 B)False

Question 2

What is unplanned investment? How does it occur?

Accepted Answer

Unplanned investment occurs when invento

Question 3

An increase in the price level decreases planned expenditures because

Accepted Answer

A)  real wealth increases, decreasing expenditure. 
B)  domestic prices rise relative to foreign prices, increasing net exports. 
C)  current prices rise relative to future prices, decreasing expenditure. 
D)  the real interest rate rises, increasing expenditure. 
A)  real wealth increases, decreasing expenditure. 
B)  domestic prices rise relative to foreign prices, increasing net exports. 
C)  current prices rise relative to future prices, decreasing expenditure. 
D)  the real interest rate rises, increasing expenditure.

Question 4

An increase in the size of the multiplier can be caused by

Accepted Answer

A)  a decrease in induced expenditures. 
B)  an increase in the MPS. 
C)  an increase in the MPC. 
D)  an increase in the marginal propensity to import. 
A)  a decrease in induced expenditures. 
B)  an increase in the MPS. 
C)  an increase in the MPC. 
D)  an increase in the marginal propensity to import.

Question 5

The marginal propensity to consume is

Accepted Answer

A)  the change in consumption expenditure divided by total saving. 
B)  the change in consumption expenditure divided by total disposable income. 
C)  total consumption expenditure divided by the change in disposable income. 
D)  the change in consumption expenditure divided by the change in disposable income. 
A)  the change in consumption expenditure divided by total saving. 
B)  the change in consumption expenditure divided by total disposable income. 
C)  total consumption expenditure divided by the change in disposable income. 
D)  the change in consumption expenditure divided by the change in disposable income.

Question 6

In the very short term, planned investment ____________when GDP changes and planned consumption expenditure ____________when GDP changes.

Accepted Answer

A)  changes; changes. 
B)  does not change; changes 
C)  does not change; does not change 
D)  changes; does not change 
A)  changes; changes. 
B)  does not change; changes 
C)  does not change; does not change 
D)  changes; does not change

Question 7

If aggregate planned expenditure is less than real GDP then

Accepted Answer

A)  firmsʹ inventories will decrease and real GDP will decrease as production falls. 
B)  consumers increase their planned expenditure until aggregate planned expenditure increases to equal real GDP. 
C)  firms increase their planned expenditure until aggregate planned expenditure increases to equal real GDP. 
D)  firmsʹ inventories will increase and real GDP will decrease as production falls. 
A)  firmsʹ inventories will decrease and real GDP will decrease as production falls. 
B)  consumers increase their planned expenditure until aggregate planned expenditure increases to equal real GDP. 
C)  firms increase their planned expenditure until aggregate planned expenditure increases to equal real GDP. 
D)  firmsʹ inventories will increase and real GDP will decrease as production falls.

Question 8

Suppose that firms find that their inventories are less than planned. In this case, what is the initial relationship between aggregate planned expenditure and real GDP? Using the aggregate expenditure model, what adjustments, if any, take place?

Accepted Answer

If inventories are less than planned, ag

Question 9

The presence of income taxes and imports make the multiplier

Accepted Answer

A)  rise in value. 
B)  fall in value but remain positive. 
C)  not change in value. 
D)  become negative. 
A)  rise in value. 
B)  fall in value but remain positive. 
C)  not change in value. 
D)  become negative.

Question 10

The multiplier effect

Accepted Answer

A)  increases the MPC. 
B)  generates instability in autonomous expenditure. 
C)  magnifies small changes in spending into larger changes in real GDP. 
D)  promotes stability of the general price level. 
A)  increases the MPC. 
B)  generates instability in autonomous expenditure. 
C)  magnifies small changes in spending into larger changes in real GDP. 
D)  promotes stability of the general price level.

Question 11

What is the marginal propensity to consume?

Accepted Answer

A)  the percentage of disposable income that is consumed. 
B)  the percentage of total income that is consumed. 
C)  the change in consumption expenditure divided by the change in disposable income. 
D)  one minus the fraction of total disposable income that is saved. 
A)  the percentage of disposable income that is consumed. 
B)  the percentage of total income that is consumed. 
C)  the change in consumption expenditure divided by the change in disposable income. 
D)  one minus the fraction of total disposable income that is saved.

Question 12

If the price level increases, the AE curve shifts

Accepted Answer

A)  upward and we move along the AD curve. 
B)  downward and the AD curve shifts rightward. 
C)  downward and we move along the AD curve. 
D)  upward and the AD curve shifts leftward. 
A)  upward and we move along the AD curve. 
B)  downward and the AD curve shifts rightward. 
C)  downward and we move along the AD curve. 
D)  upward and the AD curve shifts leftward.

Question 13

The relationship between the multiplier and the MPC is

Accepted Answer

A)  converging at higher incomes. 
B)  that as the MPC increases, so does the value of the multiplier. 
C)  that as the MPC increases, the value of the multiplier decreases. 
D)  unrelated because the multiplier relates to the MPS not the MPC. 
A)  converging at higher incomes. 
B)  that as the MPC increases, so does the value of the multiplier. 
C)  that as the MPC increases, the value of the multiplier decreases. 
D)  unrelated because the multiplier relates to the MPS not the MPC.

Question 14

Which of the following shifts the aggregate demand curve rightward?

Accepted Answer

A)  a decrease in investment 
B)  an increase in government expenditure 
C)  an increase in the income tax rate 
D)  an increase in the price level 
A)  a decrease in investment 
B)  an increase in government expenditure 
C)  an increase in the income tax rate 
D)  an increase in the price level

Question 15

Expenditure that does NOT depend on real GDP is called

Accepted Answer

A)  induced expenditure. 
B)  spurious expenditure. 
C)  equilibrium expenditure. 
D)  autonomous expenditure. 
A)  induced expenditure. 
B)  spurious expenditure. 
C)  equilibrium expenditure. 
D)  autonomous expenditure.

Question 16

In an article regarding Bangladeshʹs economy, the author suggests that the government ...ʺ[g]ive double tax breaks on investment dollars. Give tax break to R&D [research and development]. Give tax break on donations to educational institutions.ʺ
As a result of enacting the policies, the AE curve will shift __________and the AD curve will shift__________

Accepted Answer

A)  downward; rightward 
B)  upward; leftward. 
C)  downward; rightward. 
D)  upward; rightward 
A)  downward; rightward 
B)  upward; leftward. 
C)  downward; rightward. 
D)  upward; rightward

Question 17

Suppose the consumption function is given by the equation C = 100 + 0.8YD, where YD is disposable income. What is the marginal propensity to consume?

Accepted Answer

A)  2.0 
B)  0.2 
C)  0.8 
D)  100 
A)  2.0 
B)  0.2 
C)  0.8 
D)  100

Question 18

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

Accepted Answer

A)  constant at 0.75. 
B)  increasing as income rises. 
C)  constant at 0.25. 
D)  equal to 1.0 at $600 billion. 
A)  constant at 0.75. 
B)  increasing as income rises. 
C)  constant at 0.25. 
D)  equal to 1.0 at $600 billion.

Question 19

The larger the slope of the AE curve, the

Accepted Answer

A)  more likely that the multiplier will be inconsequential. 
B)  larger the value of the multiplier. 
C)  less likely that the multiplier will be affected. 
D)  smaller the value of the multiplier. 
A)  more likely that the multiplier will be inconsequential. 
B)  larger the value of the multiplier. 
C)  less likely that the multiplier will be affected. 
D)  smaller the value of the multiplier.

Question 20

ʺFew if any economists anticipated the extent of the inventory adjustment... Production cutbacks have been much greater than expected. Those cuts have weakened the industrial sector considerably.ʺ As a result of these changes, the U.S. government lowered its estimate of
Fourth-quarter growth in real GDP.
The article suggests that__________ .

Accepted Answer

A)  the AD curve shifted rightward in 2007. 
B)  real GDP exceeded planned expenditures in 2006. 
C)  the AE curve shifted upward in 2007. 
D)  planned expenditures exceeded real GDP in 2006. 
A)  the AD curve shifted rightward in 2007. 
B)  real GDP exceeded planned expenditures in 2006. 
C)  the AE curve shifted upward in 2007. 
D)  planned expenditures exceeded real GDP in 2006.

The short-run impact changes in autonomous spending have on real GDP and the price level depends on aggregate supply.

What is unplanned investment? How does it occur?

An increase in the price level decreases planned expenditures because

An increase in the size of the multiplier can be caused by

The marginal propensity to consume is

In the very short term, planned investment when GDP changes and planned consumption expenditure when GDP changes.

If aggregate planned expenditure is less than real GDP then

Suppose that firms find that their inventories are less than planned. In this case, what is the initial relationship between aggregate planned expenditure and real GDP? Using the aggregate expenditure model, what adjustments, if any, take place?

The presence of income taxes and imports make the multiplier

The multiplier effect

What is the marginal propensity to consume?

If the price level increases, the AE curve shifts

The relationship between the multiplier and the MPC is

Which of the following shifts the aggregate demand curve rightward?

Expenditure that does NOT depend on real GDP is called

Suppose the consumption function is given by the equation C = 100 + 0.8YD, where YD is disposable income. What is the marginal propensity to consume?

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, the MPC for the consumption function is

The larger the slope of the AE curve, the

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

The short-run impact changes in autonomous spending have on real GDP and the price level depends on aggregate supply.

What is unplanned investment? How does it occur?

An increase in the price level decreases planned expenditures because

An increase in the size of the multiplier can be caused by

The marginal propensity to consume is

In the very short term, planned investment ____________when GDP changes and planned consumption expenditure ____________when GDP changes.

If aggregate planned expenditure is less than real GDP then

Suppose that firms find that their inventories are less than planned. In this case, what is the initial relationship between aggregate planned expenditure and real GDP? Using the aggregate expenditure model, what adjustments, if any, take place?

The presence of income taxes and imports make the multiplier

The multiplier effect

What is the marginal propensity to consume?

If the price level increases, the AE curve shifts

The relationship between the multiplier and the MPC is

Which of the following shifts the aggregate demand curve rightward?

Expenditure that does NOT depend on real GDP is called

Suppose the consumption function is given by the equation C = 100 + 0.8YD, where YD is disposable income. What is the marginal propensity to consume?

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, the MPC for the consumption function is

The larger the slope of the AE curve, the

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 very short term, planned investment when GDP changes and planned consumption expenditure when GDP changes.