Question 1

The marginal propensity to save

Accepted Answer

A) is greater than 1 but less than 2. 
B) equals 1 - MPC. 
C) is greater than 1. 
D) is between zero and 1/2. 
E) is negative. 
A) is greater than 1 but less than 2. 
B) equals 1 - MPC. 
C) is greater than 1. 
D) is between zero and 1/2. 
E) is negative.

Question 2

In a recent study, the University of Underfunded argued that it created four times as many jobs as people that it hired directly.This argument illustrates the idea

Accepted Answer

A) of the multiplier. 
B) that universities are wasting taxpayers' dollars. 
C) of the tax multiplier. 
D) of government spending. 
E) of the marginal propensity to consume. 
A) of the multiplier. 
B) that universities are wasting taxpayers' dollars. 
C) of the tax multiplier. 
D) of government spending. 
E) of the marginal propensity to consume.

Question 3

If real GDP is $3 billion and aggregate planned expenditure is $3.5 billion, then inventories

Accepted Answer

A) increase and productions increases. 
B) remain the same and production decreases. 
C) decrease and production increases. 
D) decrease and production decreases. 
E) increase and production decreases. 
A) increase and productions increases. 
B) remain the same and production decreases. 
C) decrease and production increases. 
D) decrease and production decreases. 
E) increase and production decreases.

Question 4

Everything else remaining the same, if aggregate demand changes, the amount by which the AD curve shifts depends on

Accepted Answer

A) changes in induced expenditure. 
B) potential GDP. 
C) the change in the price level. 
D) the change in aggregate supply. 
E) the change in autonomous expenditure and the multiplier. 
A) changes in induced expenditure. 
B) potential GDP. 
C) the change in the price level. 
D) the change in aggregate supply. 
E) the change in autonomous expenditure and the multiplier.

Question 5

The marginal propensity to consume

Accepted Answer

A) increases as the economy moves upward along the consumption function. 
B) is negative when saving is positive. 
C) is greater than the slope of the 45- degree line. 
D) is equal to zero when disposable income equals consumption expenditure. 
E) is equal to 1 minus the slope of the saving function. 
A) increases as the economy moves upward along the consumption function. 
B) is negative when saving is positive. 
C) is greater than the slope of the 45- degree line. 
D) is equal to zero when disposable income equals consumption expenditure. 
E) is equal to 1 minus the slope of the saving function.

Question 6

Use the information below to answer the following questions.
Fact 11.5.1
An economy has a consumption function of C = 10 + 0.8Y, investment equal to 6, government expenditure equal to 10, exports equal to 10, and an import function of M = 0.1Y.
-Refer to Fact 11.5.1.What is the multiplier for this economy?

Accepted Answer

A) 5 
B) 0.3 
C) 3.33 
D) 1.43 
E) 10 
A) 5 
B) 0.3 
C) 3.33 
D) 1.43 
E) 10

Question 7

If there is a decrease in autonomous expenditure, the new AE curve is

Accepted Answer

A) downward sloping. 
B) parallel and below the original AE curve. 
C) steeper than the original AE curve. 
D) parallel and above the original AE curve. 
E) flatter than the original AE curve. 
A) downward sloping. 
B) parallel and below the original AE curve. 
C) steeper than the original AE curve. 
D) parallel and above the original AE curve. 
E) flatter than the original AE curve.

Question 8

Use the figure below to answer the following questions.
   Figure 11.2.1
There are no exports or imports in this economy.
-Refer to Figure 11.2.1.When real GDP is equal to Yb, then

Accepted Answer

A) real GDP increases. 
B) real GDP decreases. 
C) actual expenditure is less than planned expenditure. 
D) actual expenditure is greater than planned expenditure. 
E) planned expenditure is equal to actual expenditure. 
A) real GDP increases. 
B) real GDP decreases. 
C) actual expenditure is less than planned expenditure. 
D) actual expenditure is greater than planned expenditure. 
E) planned expenditure is equal to actual expenditure.

Question 9

Use the figure below to answer the following questions.
   Figure 11.2.2
The economy depicted does not engage in international trade and has no government.Planned aggregate expenditure AE) is equal to the sum of consumption expenditure C) and investment I).
-Refer to Figure 11.2.2.Investment is

Accepted Answer

A) $100 billion. 
B) $25 billion. 
C) $75 billion. 
D) $50 billion. 
E) increasing as real GDP increases. 
A) $100 billion. 
B) $25 billion. 
C) $75 billion. 
D) $50 billion. 
E) increasing as real GDP increases.

Question 10

The slope of the AE curve equals

Accepted Answer

A) the change in consumption divided by the change in real GDP. 
B) the change in income divided by the change in autonomous expenditure. 
C) aggregate expenditure divided by real GDP. 
D) the change in consumption plus government expenditure divided by the change in aggregate income. 
E) the change in aggregate expenditure divided by the change in real GDP. 
A) the change in consumption divided by the change in real GDP. 
B) the change in income divided by the change in autonomous expenditure. 
C) aggregate expenditure divided by real GDP. 
D) the change in consumption plus government expenditure divided by the change in aggregate income. 
E) the change in aggregate expenditure divided by the change in real GDP.

Question 11

The fact that imports increase as real GDP increases implies that imports are part of

Accepted Answer

A) induced expenditure. 
B) autonomous expenditure. 
C) equilibrium expenditure. 
D) marginal expenditure. 
E) consumption expenditure. 
A) induced expenditure. 
B) autonomous expenditure. 
C) equilibrium expenditure. 
D) marginal expenditure. 
E) consumption expenditure.

Question 12

Use the information below to answer the following questions.
Fact 11.5.1
An economy has a consumption function of C = 10 + 0.8Y, investment equal to 6, government expenditure equal to 10, exports equal to 10, and an import function of M = 0.1Y.
-Refer to Fact 11.5.1.What is consumption expenditure in equilibrium in this economy?

Accepted Answer

A) 26.8 
B) 38.8 
C) 106 
D) 298 
E) 114 
A) 26.8 
B) 38.8 
C) 106 
D) 298 
E) 114

Question 13

When the consumption function lies below the 45° line, households

Accepted Answer

A) are dissaving. 
B) spend all of any increase in disposable income. 
C) consume more than their disposable income. 
D) save all of any increase in disposable income. 
E) are saving some portion of their disposable income. 
A) are dissaving. 
B) spend all of any increase in disposable income. 
C) consume more than their disposable income. 
D) save all of any increase in disposable income. 
E) are saving some portion of their disposable income.

Question 14

Suppose that the economy is at full employment when government expenditure increases by $10 billion.In the long run

Accepted Answer

A) neither real GDP nor the price level change. 
B) the price level falls with no change in real GDP. 
C) real GDP increases and the price level remains constant. 
D) real GDP increases by an unknown amount. 
E) the price level rises with no change in real GDP. 
A) neither real GDP nor the price level change. 
B) the price level falls with no change in real GDP. 
C) real GDP increases and the price level remains constant. 
D) real GDP increases by an unknown amount. 
E) the price level rises with no change in real GDP.

Question 15

Use the figure below to answer the following questions.
   Figure 11.5.2
-Refer to Figure 11.5.2.The equation of the saving function that corresponds to the consumption function in this figure is

Accepted Answer

A) S = - 200 + 0.8YD. 
B) S = - 200 + 0.75YD. 
C) S = - 200 + 0.25YD. 
D) S = 200 + 0.75YD. 
E) S = 200 + 0.8YD. 
A) S = - 200 + 0.8YD. 
B) S = - 200 + 0.75YD. 
C) S = - 200 + 0.25YD. 
D) S = 200 + 0.75YD. 
E) S = 200 + 0.8YD.

Question 16

Use the figure below to answer the following questions.
   Figure 11.1.1
This figure describes the relationship between consumption expenditure and disposable income for an economy.
-Refer to Figure 11.1.1.Consumption and disposable income are equal

Accepted Answer

A) when disposable income is greater than or equal to $500 billion. 
B) when saving equals $40 billion and disposable income equals $540 billion. 
C) when disposable income is $600 billion. 
D) at all points along the consumption function. 
E) when disposable income is $500 billion. 
A) when disposable income is greater than or equal to $500 billion. 
B) when saving equals $40 billion and disposable income equals $540 billion. 
C) when disposable income is $600 billion. 
D) at all points along the consumption function. 
E) when disposable income is $500 billion.

Question 17

The slope of the aggregate planned expenditure curve is equal to

Accepted Answer

A) the autonomous expenditure multiplier. 
B) the marginal propensity to consume. 
C) the marginal propensity to import. 
D) [b1 - t)- m]. 
E) 1 minus the marginal propensity to import. 
A) the autonomous expenditure multiplier. 
B) the marginal propensity to consume. 
C) the marginal propensity to import. 
D) [b1 - t)- m]. 
E) 1 minus the marginal propensity to import.

Question 18

Everything else remaining the same, which one of the following would increase equilibrium real GDP?

Accepted Answer

A) a decrease in exports 
B) an increase in taxes 
C) an increase in exports 
D) a decrease in investment 
E) an increase in saving 
A) a decrease in exports 
B) an increase in taxes 
C) an increase in exports 
D) a decrease in investment 
E) an increase in saving

Question 19

If the marginal propensity to save is 0.2, then

Accepted Answer

A) the marginal propensity to consume is 0.8. 
B) the slope of the consumption function is 0.2. 
C) the marginal propensity to consume is also 0.2. 
D) the slope of the saving function is 0.8. 
E) the marginal propensity to consume is larger than 0.8. 
A) the marginal propensity to consume is 0.8. 
B) the slope of the consumption function is 0.2. 
C) the marginal propensity to consume is also 0.2. 
D) the slope of the saving function is 0.8. 
E) the marginal propensity to consume is larger than 0.8.

Question 20

Use the table below to answer the following questions.
Table 11.1.1
The following table shows the relationship between consumption expenditure C) and disposable income YD) for a hypothetical economy.  
-Refer to Table 11.1.1.Using the information given in the table, saving is $125 when YD equals

Accepted Answer

A) $1,300. 
B) $1,000. 
C) $900. 
D) $1,200. 
E) $1,100. 
A) $1,300. 
B) $1,000. 
C) $900. 
D) $1,200. 
E) $1,100.

The marginal propensity to save

In a recent study, the University of Underfunded argued that it created four times as many jobs as people that it hired directly.This argument illustrates the idea

If real GDP is $3 billion and aggregate planned expenditure is $3.5 billion, then inventories

Everything else remaining the same, if aggregate demand changes, the amount by which the AD curve shifts depends on

The marginal propensity to consume

If there is a decrease in autonomous expenditure, the new AE curve is

Use the figure below to answer the following questions. Figure 11.2.1 There are no exports or imports in this economy. -Refer to Figure 11.2.1.When real GDP is equal to Y_b, then

Use the figure below to answer the following questions. Figure 11.2.2 The economy depicted does not engage in international trade and has no government.Planned aggregate expenditure AE) is equal to the sum of consumption expenditure C) and investment I). -Refer to Figure 11.2.2.Investment is

The slope of the AE curve equals

The fact that imports increase as real GDP increases implies that imports are part of

When the consumption function lies below the 45° line, households

Suppose that the economy is at full employment when government expenditure increases by $10 billion.In the long run

Use the figure below to answer the following questions. Figure 11.5.2 -Refer to Figure 11.5.2.The equation of the saving function that corresponds to the consumption function in this figure is

Use the figure below to answer the following questions. Figure 11.1.1 This figure describes the relationship between consumption expenditure and disposable income for an economy. -Refer to Figure 11.1.1.Consumption and disposable income are equal

The slope of the aggregate planned expenditure curve is equal to

Everything else remaining the same, which one of the following would increase equilibrium real GDP?

If the marginal propensity to save is 0.2, then

Use the table below to answer the following questions. Table 11.1.1 The following table shows the relationship between consumption expenditure C) and disposable income YD) for a hypothetical economy. -Refer to Table 11.1.1.Using the information given in the table, saving is $125 when YD equals

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

The Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

Exam 11: Expenditure Multipliers

The marginal propensity to save

In a recent study, the University of Underfunded argued that it created four times as many jobs as people that it hired directly.This argument illustrates the idea

If real GDP is $3 billion and aggregate planned expenditure is $3.5 billion, then inventories

Everything else remaining the same, if aggregate demand changes, the amount by which the AD curve shifts depends on

The marginal propensity to consume

If there is a decrease in autonomous expenditure, the new AE curve is

Use the figure below to answer the following questions. Figure 11.2.1 There are no exports or imports in this economy. -Refer to Figure 11.2.1.When real GDP is equal to Yb, then

Use the figure below to answer the following questions. Figure 11.2.2 The economy depicted does not engage in international trade and has no government.Planned aggregate expenditure AE) is equal to the sum of consumption expenditure C) and investment I). -Refer to Figure 11.2.2.Investment is

The slope of the AE curve equals

The fact that imports increase as real GDP increases implies that imports are part of

When the consumption function lies below the 45° line, households

Suppose that the economy is at full employment when government expenditure increases by $10 billion.In the long run

Use the figure below to answer the following questions. Figure 11.5.2 -Refer to Figure 11.5.2.The equation of the saving function that corresponds to the consumption function in this figure is

Use the figure below to answer the following questions. Figure 11.1.1 This figure describes the relationship between consumption expenditure and disposable income for an economy. -Refer to Figure 11.1.1.Consumption and disposable income are equal

The slope of the aggregate planned expenditure curve is equal to

Everything else remaining the same, which one of the following would increase equilibrium real GDP?

If the marginal propensity to save is 0.2, then

Use the table below to answer the following questions. Table 11.1.1 The following table shows the relationship between consumption expenditure C) and disposable income YD) for a hypothetical economy. -Refer to Table 11.1.1.Using the information given in the table, saving is $125 when YD equals

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

The Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

Use the figure below to answer the following questions. Figure 11.2.1 There are no exports or imports in this economy. -Refer to Figure 11.2.1.When real GDP is equal to Y_b, then