Question 1

Suppose that investment decreases by $15 billion.If the multiplier is 2.5, the aggregate demand curve

Accepted Answer

A) shifts upward by a vertical distance of $37.5 billion. 
B) shifts leftward by a horizontal distance of $37.5 billion. 
C) shifts leftward by a horizontal distance greater than $37.5 billion. 
D) shifts leftward by a horizontal distance less than $37.5 billion. 
E) is not affected. 
A) shifts upward by a vertical distance of $37.5 billion. 
B) shifts leftward by a horizontal distance of $37.5 billion. 
C) shifts leftward by a horizontal distance greater than $37.5 billion. 
D) shifts leftward by a horizontal distance less than $37.5 billion. 
E) is not affected.

Question 2

Everything else remaining the same, an increase in the marginal propensity to import _______the slope of the AE curve and _______ equilibrium expenditure.

Accepted Answer

A) decreases; decreases 
B) decreases; increases 
C) increases; decreases 
D) increases; increases 
E) does not change; does not change 
A) decreases; decreases 
B) decreases; increases 
C) increases; decreases 
D) increases; increases 
E) does not change; does not change

Question 3

An increase in business investment at a constant price level

Accepted Answer

A) shifts the AE curve downward and decreases equilibrium expenditure. 
B) increases the slope of the AE curve and increases equilibrium expenditure. 
C) shifts the AE curve upward and increases equilibrium expenditure. 
D) has no effect on the AE curve. 
E) decreases the slope of the AE curve and decreases equilibrium expenditure. 
A) shifts the AE curve downward and decreases equilibrium expenditure. 
B) increases the slope of the AE curve and increases equilibrium expenditure. 
C) shifts the AE curve upward and increases equilibrium expenditure. 
D) has no effect on the AE curve. 
E) decreases the slope of the AE curve and decreases equilibrium expenditure.

Question 4

Suppose that investment decreases by $15 billion.The multiplier is 2, and the short- run aggregate supply curve is positively sloped.In the short run, equilibrium real GDP

Accepted Answer

A) decreases by less than $30 billion. 
B) decreases by $30 billion. 
C) decreases by more than $30 billion. 
D) increases by less than $30 billion. 
E) does not change. 
A) decreases by less than $30 billion. 
B) decreases by $30 billion. 
C) decreases by more than $30 billion. 
D) increases by less than $30 billion. 
E) does not change.

Question 5

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.Equilibrium real GDP

Accepted Answer

A) is decreasing. 
B) is equal to Yb. 
C) is equal to Ya. 
D) is equal to Yc. 
E) can be any of Ya, Yb, or Yc depending on what is happening to inventories. 
A) is decreasing. 
B) is equal to Yb. 
C) is equal to Ya. 
D) is equal to Yc. 
E) can be any of Ya, Yb, or Yc depending on what is happening to inventories.

Question 6

If a household's disposable income increases from $12,000 to $22,000 and at the same time its consumption expenditure increases from $4,000 to $9,000, then

Accepted Answer

A) the marginal propensity to consume over this range is negative. 
B) the slope of the consumption function is 0.5. 
C) the slope of the consumption function is 0.6. 
D) the household is dissaving. 
E) the marginal propensity to save over this range is negative. 
A) the marginal propensity to consume over this range is negative. 
B) the slope of the consumption function is 0.5. 
C) the slope of the consumption function is 0.6. 
D) the household is dissaving. 
E) the marginal propensity to save over this range is negative.

Question 7

A rise in the price level

Accepted Answer

A) decreases aggregate expenditure and produces a movement up along the aggregate demand curve. 
B) decreases aggregate expenditure and produces a leftward shift of the aggregate demand curve. 
C) increases aggregate expenditure, but has no effect on the aggregate demand curve. 
D) has no effect on aggregate expenditure. 
E) decreases aggregate expenditure and produces a rightward shift of the aggregate demand curve. 
A) decreases aggregate expenditure and produces a movement up along the aggregate demand curve. 
B) decreases aggregate expenditure and produces a leftward shift of the aggregate demand curve. 
C) increases aggregate expenditure, but has no effect on the aggregate demand curve. 
D) has no effect on aggregate expenditure. 
E) decreases aggregate expenditure and produces a rightward shift of the aggregate demand curve.

Question 8

Dissaving occurs when a household

Accepted Answer

A) consumes more than it receives in disposable income. 
B) borrows. 
C) saves more than it spends. 
D) spends more than it saves. 
E) spends less than it receives in disposable income. 
A) consumes more than it receives in disposable income. 
B) borrows. 
C) saves more than it spends. 
D) spends more than it saves. 
E) spends less than it receives in disposable income.

Question 9

A shift in the aggregate expenditure curve as a result of a rise in the price level

Accepted Answer

A) shifts the aggregate demand curve rightward. 
B) creates a movement up along the aggregate demand curve. 
C) creates a movement down along the aggregate demand curve. 
D) has no effect on the aggregate demand curve. 
E) shifts the aggregate demand curve leftward. 
A) shifts the aggregate demand curve rightward. 
B) creates a movement up along the aggregate demand curve. 
C) creates a movement down along the aggregate demand curve. 
D) has no effect on the aggregate demand curve. 
E) shifts the aggregate demand curve leftward.

Question 10

The marginal propensity to save is calculated as

Accepted Answer

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

Question 11

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 equilibrium real GDP in this economy?

Accepted Answer

A) 21 
B) 36 
C) 120 
D) 130 
E) 360 
A) 21 
B) 36 
C) 120 
D) 130 
E) 360

Question 12

Use the table below to answer the following questions.
Table 11.1.3
  
-Refer to Table 11.1.3.The marginal propensity to consume is

Accepted Answer

A) 1.54. 
B) 0.35. 
C) 1.65. 
D) 1.15. 
E) 0.65. 
A) 1.54. 
B) 0.35. 
C) 1.65. 
D) 1.15. 
E) 0.65.

Question 13

If the saving function is S = - 25 + 0.4YD, then the consumption function is

Accepted Answer

A) C = 25 + 0.4YD. 
B) C = - 25 + 0.4YD. 
C) C = 25 - 0.4YD. 
D) C = 25 + 0.6YD. 
E) C = 25 + 0.6Y. 
A) C = 25 + 0.4YD. 
B) C = - 25 + 0.4YD. 
C) C = 25 - 0.4YD. 
D) C = 25 + 0.6YD. 
E) C = 25 + 0.6Y.

Question 14

Use the figure below to answer the following questions.
   Figure 11.1.2
-Refer to Figure 11.1.2.Autonomous consumption is

Accepted Answer

A) zero. 
B) $200. 
C) $600. 
D) - $200. 
E) $800. 
A) zero. 
B) $200. 
C) $600. 
D) - $200. 
E) $800.

Question 15

The aggregate expenditure curve and the aggregate demand curve are

Accepted Answer

A) the same curve, just with different names. 
B) linked because if the price level rises, the aggregate expenditure curve shifts downward, and there is a movement down along the aggregate demand curve. 
C) linked because if the price level rises, the aggregate expenditure curve shifts downward, and there is a movement up along the aggregate demand curve. 
D) not related at all. 
E) linked because if the price level rises, the aggregate expenditure curve shifts downward, and the aggregate demand curve shifts leftward. 
A) the same curve, just with different names. 
B) linked because if the price level rises, the aggregate expenditure curve shifts downward, and there is a movement down along the aggregate demand curve. 
C) linked because if the price level rises, the aggregate expenditure curve shifts downward, and there is a movement up along the aggregate demand curve. 
D) not related at all. 
E) linked because if the price level rises, the aggregate expenditure curve shifts downward, and the aggregate demand curve shifts leftward.

Question 16

If investment increases by $200, and as a result income increases by $800, then the

Accepted Answer

A) multiplier is 3. 
B) slope of the AE curve is 1/4. 
C) multiplier is 1/4. 
D) slope of the AE curve is 0.75. 
E) marginal propensity to consume is 0.75. 
A) multiplier is 3. 
B) slope of the AE curve is 1/4. 
C) multiplier is 1/4. 
D) slope of the AE curve is 0.75. 
E) marginal propensity to consume is 0.75.

Question 17

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.The marginal propensity to save is

Accepted Answer

A) 0.75. 
B) 4. 
C) equal to zero when YD equals $600. 
D) 0.25. 
E) decreasing as YD increases. 
A) 0.75. 
B) 4. 
C) equal to zero when YD equals $600. 
D) 0.25. 
E) decreasing as YD increases.

Question 18

In the long run, the multiplier

Accepted Answer

A) has a larger effect on real GDP than it has in the short run, because the multiplier effect has a longer time period to exert its impact on the economy. 
B) has a smaller effect on real GDP than it has in the short run because of changes in the price level. 
C) can have a smaller or larger effect on real GDP than it has in the short run. 
D) has a larger effect on real GDP than it has in the short run because of changes in the price level. 
E) has a larger effect on real GDP than it has in the short run, because there are more induced expenditures in the long run. 
A) has a larger effect on real GDP than it has in the short run, because the multiplier effect has a longer time period to exert its impact on the economy. 
B) has a smaller effect on real GDP than it has in the short run because of changes in the price level. 
C) can have a smaller or larger effect on real GDP than it has in the short run. 
D) has a larger effect on real GDP than it has in the short run because of changes in the price level. 
E) has a larger effect on real GDP than it has in the short run, because there are more induced expenditures in the long run.

Question 19

Use the figure below to answer the following questions.
   Figure 11.3.1
The economy shown in the graph does not engage in international trade and has no government.Planned aggregate expenditure equals the sum of consumption expenditure C) and investment I).
-Refer to Figure 11.3.1.The slope of the AE curve is

Accepted Answer

A) 1.33. 
B) 0.25. 
C) 0.67. 
D) 0.75. 
E) 0.50. 
A) 1.33. 
B) 0.25. 
C) 0.67. 
D) 0.75. 
E) 0.50.

Question 20

As the aggregate expenditure curve becomes steeper, the value of the multiplier becomes

Accepted Answer

A) greater than 1. 
B) negative. 
C) larger. 
D) smaller. 
E) equal to the marginal propensity to save. 
A) greater than 1. 
B) negative. 
C) larger. 
D) smaller. 
E) equal to the marginal propensity to save.

Suppose that investment decreases by $15 billion.If the multiplier is 2.5, the aggregate demand curve

Everything else remaining the same, an increase in the marginal propensity to import _the slope of the AE curve and _ equilibrium expenditure.

An increase in business investment at a constant price level

Suppose that investment decreases by $15 billion.The multiplier is 2, and the short- run aggregate supply curve is positively sloped.In the short run, equilibrium real GDP

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.Equilibrium real GDP

If a household's disposable income increases from $12,000 to $22,000 and at the same time its consumption expenditure increases from $4,000 to $9,000, then

A rise in the price level

Dissaving occurs when a household

A shift in the aggregate expenditure curve as a result of a rise in the price level

The marginal propensity to save is calculated as

Use the table below to answer the following questions. Table 11.1.3 -Refer to Table 11.1.3.The marginal propensity to consume is

If the saving function is S = - 25 + 0.4YD, then the consumption function is

Use the figure below to answer the following questions. Figure 11.1.2 -Refer to Figure 11.1.2.Autonomous consumption is

The aggregate expenditure curve and the aggregate demand curve are

If investment increases by $200, and as a result income increases by $800, then the

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.The marginal propensity to save is

In the long run, the multiplier

As the aggregate expenditure curve becomes steeper, the value of the multiplier becomes

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

Suppose that investment decreases by $15 billion.If the multiplier is 2.5, the aggregate demand curve

Everything else remaining the same, an increase in the marginal propensity to import _______the slope of the AE curve and _______ equilibrium expenditure.

An increase in business investment at a constant price level

Suppose that investment decreases by $15 billion.The multiplier is 2, and the short- run aggregate supply curve is positively sloped.In the short run, equilibrium real GDP

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.Equilibrium real GDP

If a household's disposable income increases from $12,000 to $22,000 and at the same time its consumption expenditure increases from $4,000 to $9,000, then

A rise in the price level

Dissaving occurs when a household

A shift in the aggregate expenditure curve as a result of a rise in the price level

The marginal propensity to save is calculated as

Use the table below to answer the following questions. Table 11.1.3 -Refer to Table 11.1.3.The marginal propensity to consume is

If the saving function is S = - 25 + 0.4YD, then the consumption function is

Use the figure below to answer the following questions. Figure 11.1.2 -Refer to Figure 11.1.2.Autonomous consumption is

The aggregate expenditure curve and the aggregate demand curve are

If investment increases by $200, and as a result income increases by $800, then the

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.The marginal propensity to save is

In the long run, the multiplier

As the aggregate expenditure curve becomes steeper, the value of the multiplier becomes

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

Everything else remaining the same, an increase in the marginal propensity to import _the slope of the AE curve and _ equilibrium expenditure.