Question 1

What is the relationship between U.S. real GDP and U.S. imports?

Accepted Answer

When U.S. real GDP increases,

Question 2

Explain what happens to equilibrium expenditure if autonomous expenditure increases by $100 million.

Accepted Answer

Equilibrium expenditure will increase by

Question 3

-In the above figure, if the level of real GDP is $13 trillion,

Accepted Answer

A)  inventories are equal to the levels planned by firms. 
B)  inventories are above the levels planned by firms. 
C)  planned expenditures are zero. 
D)  inventories are below the levels planned by firms. 
A)  inventories are equal to the levels planned by firms. 
B)  inventories are above the levels planned by firms. 
C)  planned expenditures are zero. 
D)  inventories are below the levels planned by firms.

Question 4

In the economy of St. Maynard Island, autonomous consumption expenditure is $185 million, and the marginal propensity to consume is 0.75. Investment is $150 million, government expenditure is $100 million, and net taxes are $80 million. Investment, government expenditure, and taxes are constant they do not vary with income. The island does not trade with the rest of the world.
a) Draw the aggregate expenditure curve.
b) What is the islandʹs autonomous aggregate expenditure?
c) What is the size of the multiplier in St. Maynard Islandʹs economy?
d) What is the islandʹs aggregate planned expenditure and what is happening to inventories when real GDP is
$1,100 million?
e) What is the economyʹs equilibrium aggregate expenditure?

Accepted Answer

See the figure above. Because the island

Question 5

Actual aggregate expenditure is

Accepted Answer

A)  always equal to real GDP. 
B)  never greater than real GDP but can be less than real GDP. 
C)  never less than real GDP but can be greater than real GDP. 
D)  only equal to real GDP at the equilibrium level of aggregate planned expenditure. 
A)  always equal to real GDP. 
B)  never greater than real GDP but can be less than real GDP. 
C)  never less than real GDP but can be greater than real GDP. 
D)  only equal to real GDP at the equilibrium level of aggregate planned expenditure.

Question 6

In 2007, investment in France increased by 7 billion euros, consumption increased by 4 billion euros and government spending increased by 1.5 billion euros. Assume the price level was constant and the economy was at full employment. As a result, suppose that equilibrium expenditure increased by 21 billion euros. In this example,__________ is the induced expenditure and__________ is autonomous expenditure.

Accepted Answer

A)  investment; government spending 
B)  government spending; equilibrium expenditure 
C)  investment; consumption 
D)  consumption; government spending 
A)  investment; government spending 
B)  government spending; equilibrium expenditure 
C)  investment; consumption 
D)  consumption; government spending

Question 7

As globalization has increased, the trend in the U.S. marginal propensity to import has been for it to

Accepted Answer

A)  remain steady. 
B)  decrease to more than 0.8. 
C)  increase. 
D)  decrease to less than 0.8. 
A)  remain steady. 
B)  decrease to more than 0.8. 
C)  increase. 
D)  decrease to less than 0.8.

Question 8

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

Accepted Answer

A)  an increase in the marginal propensity to import. 
B)  an increase in autonomous consumption expenditure. 
C)  a decrease in the marginal propensity to consume. 
D)  an increase in the marginal propensity to consume. 
A)  an increase in the marginal propensity to import. 
B)  an increase in autonomous consumption expenditure. 
C)  a decrease in the marginal propensity to consume. 
D)  an increase in the marginal propensity to consume.

Question 9

The multiplier is the amount by which__________ is multiplied to determine__________ .

Accepted Answer

A)  induced expenditure; real GDP 
B)  a change in induced expenditure; the change in equilibrium expenditure 
C)  a change in autonomous expenditure; the change in equilibrium expenditure 
D)  autonomous expenditure; real GDP 
A)  induced expenditure; real GDP 
B)  a change in induced expenditure; the change in equilibrium expenditure 
C)  a change in autonomous expenditure; the change in equilibrium expenditure 
D)  autonomous expenditure; real GDP

Question 10

Suppose disposable income increases from $5 trillion to $6 trillion. As a result, consumption expenditure increases from $4 trillion to_________ . This result means the MPC equals_________ .

Accepted Answer

A)  $5 trillion; 0.80 
B)  $6 trillion; 1.00 
C)  $4.8 trillion; 0.80 
D)  $4.5 trillion; 4.50 
A)  $5 trillion; 0.80 
B)  $6 trillion; 1.00 
C)  $4.8 trillion; 0.80 
D)  $4.5 trillion; 4.50

Question 11

Discuss the relationship between the business cycle and changes in autonomous expenditures.

Accepted Answer

An increase in autonomous expenditure in

Question 12

The Keynesian model of aggregate expenditure assumes that

Accepted Answer

A)  both individual firmsʹ prices and the price level are fixed. 
B)  both individual firmsʹ prices and the price level are flexible. 
C)  individual firmsʹ prices are flexible but the price level is fixed. 
D)  individual firmsʹ prices are fixed but the price level is flexible. 
A)  both individual firmsʹ prices and the price level are fixed. 
B)  both individual firmsʹ prices and the price level are flexible. 
C)  individual firmsʹ prices are flexible but the price level is fixed. 
D)  individual firmsʹ prices are fixed but the price level is flexible.

Question 13

In a diagram with the___________ consumption function, the 45 -degree line indicates all points where

Accepted Answer

A)  consumption expenditures and disposable income are equal. 
B)  saving and disposable income are equal. 
C)  saving and investment are equal. 
D)  consumption expenditures and saving are equal. 
A)  consumption expenditures and disposable income are equal. 
B)  saving and disposable income are equal. 
C)  saving and investment are equal. 
D)  consumption expenditures and saving are equal.

Question 14

List the components of aggregate expenditure and describe how each of them change as real GDP increases.

Accepted Answer

The components of aggregate expenditure

Question 15

In the Keynesian model of aggregate expenditure, real GDP is determined by the

Accepted Answer

A)  price level. 
B)  level of aggregate supply. 
C)  level of aggregate demand. 
D)  level of taxes. 
A)  price level. 
B)  level of aggregate supply. 
C)  level of aggregate demand. 
D)  level of taxes.

Question 16

When disposable income increases from $7 trillion to $7.5 trillion, consumption expenditure increase from $6.5 trillion to $6.9 trillion. The MPS is equal to

Accepted Answer

A)  0.8. 
B)  0.75. 
C)  0.76. 
D)  0.2. 
A)  0.8. 
B)  0.75. 
C)  0.76. 
D)  0.2.

Question 17

The multiplier is the ratio of the

Accepted Answer

A)  equilibrium level of real GDP to the change in induced expenditures. 
B)  change in induced expenditures to the change in autonomous expenditures. 
C)  change in real GDP to the change in autonomous expenditures. 
D)  change in autonomous expenditures to the change in real GDP. 
A)  equilibrium level of real GDP to the change in induced expenditures. 
B)  change in induced expenditures to the change in autonomous expenditures. 
C)  change in real GDP to the change in autonomous expenditures. 
D)  change in autonomous expenditures to the change in real GDP.

Question 18

The slope of the consumption function is

Accepted Answer

A)  negative. 
B)  greater than 1. 
C)  less than 1. 
D)  1. 
A)  negative. 
B)  greater than 1. 
C)  less than 1. 
D)  1.

Question 19

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

Accepted Answer

A)  0.25. 
B)  0.75. 
C)  4.0. 
D)  1.33. 
A)  0.25. 
B)  0.75. 
C)  4.0. 
D)  1.33.

Question 20

In the short run, the multiplier typically is less than 1.

Accepted Answer

A) True 
 B)False

What is the relationship between U.S. real GDP and U.S. imports?

Explain what happens to equilibrium expenditure if autonomous expenditure increases by $100 million.

-In the above figure, if the level of real GDP is $13 trillion,

Actual aggregate expenditure is

As globalization has increased, the trend in the U.S. marginal propensity to import has been for it to

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

The multiplier is the amount by which is multiplied to determine .

Suppose disposable income increases from $5 trillion to $6 trillion. As a result, consumption expenditure increases from $4 trillion to_ . This result means the MPC equals_ .

Discuss the relationship between the business cycle and changes in autonomous expenditures.

The Keynesian model of aggregate expenditure assumes that

In a diagram with the___________ consumption function, the 45 -degree line indicates all points where

List the components of aggregate expenditure and describe how each of them change as real GDP increases.

In the Keynesian model of aggregate expenditure, real GDP is determined by the

When disposable income increases from $7 trillion to $7.5 trillion, consumption expenditure increase from $6.5 trillion to $6.9 trillion. The MPS is equal to

The multiplier is the ratio of the

The slope of the consumption function is

In the short run, the multiplier typically is less than 1.

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

What is the relationship between U.S. real GDP and U.S. imports?

Explain what happens to equilibrium expenditure if autonomous expenditure increases by $100 million.

-In the above figure, if the level of real GDP is $13 trillion,

Actual aggregate expenditure is

As globalization has increased, the trend in the U.S. marginal propensity to import has been for it to

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

The multiplier is the amount by which__________ is multiplied to determine__________ .

Suppose disposable income increases from $5 trillion to $6 trillion. As a result, consumption expenditure increases from $4 trillion to_________ . This result means the MPC equals_________ .

Discuss the relationship between the business cycle and changes in autonomous expenditures.

The Keynesian model of aggregate expenditure assumes that

In a diagram with the___________ consumption function, the 45 -degree line indicates all points where

List the components of aggregate expenditure and describe how each of them change as real GDP increases.

In the Keynesian model of aggregate expenditure, real GDP is determined by the

When disposable income increases from $7 trillion to $7.5 trillion, consumption expenditure increase from $6.5 trillion to $6.9 trillion. The MPS is equal to

The multiplier is the ratio of the

The slope of the consumption function is

In the short run, the multiplier typically is less than 1.

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 is the amount by which is multiplied to determine .

Suppose disposable income increases from $5 trillion to $6 trillion. As a result, consumption expenditure increases from $4 trillion to_ . This result means the MPC equals_ .