Question 1

An increase in autonomous consumption

Accepted Answer

A) shifts the consumption function upward. 
B) creates a movement upward along the consumption function. 
C) creates a movement downward along the consumption function. 
D) changes the slope of the consumption function. 
E) shifts the consumption function downward. 
A) shifts the consumption function upward. 
B) creates a movement upward along the consumption function. 
C) creates a movement downward along the consumption function. 
D) changes the slope of the consumption function. 
E) shifts the consumption function downward.

Question 2

A change in consumption, in response to a change in income, is

Accepted Answer

A) equilibrium consumption. 
B) planned consumption. 
C) autonomous consumption. 
D) induced consumption. 
E) unplanned consumption. 
A) equilibrium consumption. 
B) planned consumption. 
C) autonomous consumption. 
D) induced consumption. 
E) unplanned consumption.

Question 3

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.Equilibrium expenditure is

Accepted Answer

A) $100 billion. 
B) $400 billion. 
C) $200 billion. 
D) $250 billion. 
E) $300 billion. 
A) $100 billion. 
B) $400 billion. 
C) $200 billion. 
D) $250 billion. 
E) $300 billion.

Question 4

A decrease in the price level

Accepted Answer

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

Question 5

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.When disposable income is equal to $200 billion, saving is

Accepted Answer

A) $60 billion. 
B) $200 billion. 
C) $150 billion. 
D) zero. 
E) - $60 billion. 
A) $60 billion. 
B) $200 billion. 
C) $150 billion. 
D) zero. 
E) - $60 billion.

Question 6

Use the figure below to answer the following questions.
   Figure 11.2.3
There are no taxes in this economy.
-In Figure 11.2.3, at the equilibrium level of real GDP, induced expenditure is

Accepted Answer

A) $375 billion. 
B) $225 billion. 
C) $347 billion. 
D) $28 billion. 
E) $150 billion. 
A) $375 billion. 
B) $225 billion. 
C) $347 billion. 
D) $28 billion. 
E) $150 billion.

Question 7

Which of the following quotations illustrates the idea of the multiplier?

Accepted Answer

A) "The new stadium will generate $200 million in spinoff spending." 
B) "Taking the grain elevator out of our small town will destroy 300 jobs." 
C) "Higher expected profits are leading to higher investment spending by business, and will lead to higher consumer spending." 
D) "The projected cuts in government jobs will hurt the local retail industry." 
E) All of the above 
A) "The new stadium will generate $200 million in spinoff spending." 
B) "Taking the grain elevator out of our small town will destroy 300 jobs." 
C) "Higher expected profits are leading to higher investment spending by business, and will lead to higher consumer spending." 
D) "The projected cuts in government jobs will hurt the local retail industry." 
E) All of the above

Question 8

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 multiplier for this economy is

Accepted Answer

A) 1. 
B) 2.5. 
C) 2. 
D) 3. 
E) 4. 
A) 1. 
B) 2.5. 
C) 2. 
D) 3. 
E) 4.

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.When real GDP is $100 billion,

Accepted Answer

A) aggregate planned expenditure equals real GDP, and the economy is in equilibrium. 
B) aggregate planned expenditure is greater than real GDP, and firms decrease production. 
C) aggregate planned expenditure is less than real GDP, and firms increase production. 
D) real GDP is less than aggregate planned expenditure, and firms increase production. 
E) real GDP is greater than aggregate planned expenditure, and firms decrease production. 
A) aggregate planned expenditure equals real GDP, and the economy is in equilibrium. 
B) aggregate planned expenditure is greater than real GDP, and firms decrease production. 
C) aggregate planned expenditure is less than real GDP, and firms increase production. 
D) real GDP is less than aggregate planned expenditure, and firms increase production. 
E) real GDP is greater than aggregate planned expenditure, and firms decrease production.

Question 10

Which of the following quotations illustrates an increase in aggregate expenditure?

Accepted Answer

A) "The new stadium will generate $200 million in spin off spending." 
B) "Higher expected profits are leading to higher investment spending by business, and will lead to higher consumer spending." 
C) "The projected cuts in government jobs will hurt the local retail industry." 
D) "Taking the grain elevator out of our small town will destroy 300 jobs." 
E) Both A and B 
A) "The new stadium will generate $200 million in spin off spending." 
B) "Higher expected profits are leading to higher investment spending by business, and will lead to higher consumer spending." 
C) "The projected cuts in government jobs will hurt the local retail industry." 
D) "Taking the grain elevator out of our small town will destroy 300 jobs." 
E) Both A and B

Question 11

Use the table below to answer the following questions.
Table 11.1.2
  
-Refer to Table 11.1.2.When saving is zero, what is the level of disposable income?

Accepted Answer

A) $475 
B) $625 
C) $550 
D) $325 
E) $400 
A) $475 
B) $625 
C) $550 
D) $325 
E) $400

Question 12

An increase in investment shifts the AE curve upward by an amount equal to the _______, and shifts the AD curve rightward by an amount equal to the _______.

Accepted Answer

A) change in investment divided by the multiplier; change in investment 
B) change in investment times the multiplier; change in investment times the multiplier 
C) change in investment; change in investment times the multiplier 
D) change in investment; change in investment 
E) change in investment times the multiplier; change in investment 
A) change in investment divided by the multiplier; change in investment 
B) change in investment times the multiplier; change in investment times the multiplier 
C) change in investment; change in investment times the multiplier 
D) change in investment; change in investment 
E) change in investment times the multiplier; change in investment

Question 13

Everything else remaining the same, autonomous consumption

Accepted Answer

A) increases as disposable income decreases. 
B) decreases as disposable income decreases. 
C) does not change as disposable income changes. 
D) increases as disposable income increases. 
E) is usually assumed to be zero. 
A) increases as disposable income decreases. 
B) decreases as disposable income decreases. 
C) does not change as disposable income changes. 
D) increases as disposable income increases. 
E) is usually assumed to be zero.

Question 14

Use the figure below to answer the following questions.
   Figure 11.2.3
There are no taxes in this economy.
-In Figure 11.2.3, equilibrium expenditure is

Accepted Answer

A) $375 billion. 
B) $150 billion. 
C) $10 billion. 
D) $100 billion. 
E) $347 billion. 
A) $375 billion. 
B) $150 billion. 
C) $10 billion. 
D) $100 billion. 
E) $347 billion.

Question 15

You observe that unplanned inventories are increasing.You predict that there will be

Accepted Answer

A) a recession. 
B) an expansion. 
C) a trough. 
D) a collapse of the stock market. 
E) a business cycle. 
A) a recession. 
B) an expansion. 
C) a trough. 
D) a collapse of the stock market. 
E) a business cycle.

Question 16

If aggregate planned expenditure is less than real GDP, then inventories

Accepted Answer

A) increase and real GDP increases. 
B) remain constant and real GDP remains constant. 
C) decrease and real GDP decreases. 
D) decrease and real GDP increases. 
E) increase and real GDP falls. 
A) increase and real GDP increases. 
B) remain constant and real GDP remains constant. 
C) decrease and real GDP decreases. 
D) decrease and real GDP increases. 
E) increase and real GDP falls.

Question 17

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.If autonomous consumption increases by 10, what is the new equilibrium real GDP for this economy?

Accepted Answer

A) 86.67 
B) 460 
C) 120 
D) 153.33 
E) 230 
A) 86.67 
B) 460 
C) 120 
D) 153.33 
E) 230

Question 18

Use the figure below to answer the following questions.
   Figure 11.1.2
-Refer to Figure 11.1.2.The marginal propensity to consume is

Accepted Answer

A) 0.75. 
B) 0.2. 
C) 0.25. 
D) 0.8. 
E) 800. 
A) 0.75. 
B) 0.2. 
C) 0.25. 
D) 0.8. 
E) 800.

Question 19

Refer to the table below to answer the following question.
Table 11.2.1
  
-Table 11.2.1 gives the aggregate expenditure schedule.Equilibrium expenditure is equal to

Accepted Answer

A) $5 trillion. 
B) $3 trillion. 
C) $4 trillion. 
D) $2 trillion. 
E) zero. 
A) $5 trillion. 
B) $3 trillion. 
C) $4 trillion. 
D) $2 trillion. 
E) zero.

Question 20

Suppose real GDP increases by $1 billion and, as a result, consumption increases by $500 million.This change in consumption is

Accepted Answer

A) unplanned. 
B) planned. 
C) too little. 
D) autonomous. 
E) induced. 
A) unplanned. 
B) planned. 
C) too little. 
D) autonomous. 
E) induced.

An increase in autonomous consumption

A change in consumption, in response to a change in income, is

A decrease in the price level

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.When disposable income is equal to $200 billion, saving is

Use the figure below to answer the following questions. Figure 11.2.3 There are no taxes in this economy. -In Figure 11.2.3, at the equilibrium level of real GDP, induced expenditure is

Which of the following quotations illustrates the idea of the multiplier?

Which of the following quotations illustrates an increase in aggregate expenditure?

Use the table below to answer the following questions. Table 11.1.2 -Refer to Table 11.1.2.When saving is zero, what is the level of disposable income?

An increase in investment shifts the AE curve upward by an amount equal to the _, and shifts the AD curve rightward by an amount equal to the _.

Everything else remaining the same, autonomous consumption

Use the figure below to answer the following questions. Figure 11.2.3 There are no taxes in this economy. -In Figure 11.2.3, equilibrium expenditure is

You observe that unplanned inventories are increasing.You predict that there will be

If aggregate planned expenditure is less than real GDP, then inventories

Use the figure below to answer the following questions. Figure 11.1.2 -Refer to Figure 11.1.2.The marginal propensity to consume is

Refer to the table below to answer the following question. Table 11.2.1 -Table 11.2.1 gives the aggregate expenditure schedule.Equilibrium expenditure is equal to

Suppose real GDP increases by $1 billion and, as a result, consumption increases by $500 million.This change in consumption is

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

An increase in autonomous consumption

A change in consumption, in response to a change in income, is

A decrease in the price level

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.When disposable income is equal to $200 billion, saving is

Use the figure below to answer the following questions. Figure 11.2.3 There are no taxes in this economy. -In Figure 11.2.3, at the equilibrium level of real GDP, induced expenditure is

Which of the following quotations illustrates the idea of the multiplier?

Which of the following quotations illustrates an increase in aggregate expenditure?

Use the table below to answer the following questions. Table 11.1.2 -Refer to Table 11.1.2.When saving is zero, what is the level of disposable income?

An increase in investment shifts the AE curve upward by an amount equal to the _______, and shifts the AD curve rightward by an amount equal to the _______.

Everything else remaining the same, autonomous consumption

Use the figure below to answer the following questions. Figure 11.2.3 There are no taxes in this economy. -In Figure 11.2.3, equilibrium expenditure is

You observe that unplanned inventories are increasing.You predict that there will be

If aggregate planned expenditure is less than real GDP, then inventories

Use the figure below to answer the following questions. Figure 11.1.2 -Refer to Figure 11.1.2.The marginal propensity to consume is

Refer to the table below to answer the following question. Table 11.2.1 -Table 11.2.1 gives the aggregate expenditure schedule.Equilibrium expenditure is equal to

Suppose real GDP increases by $1 billion and, as a result, consumption increases by $500 million.This change in consumption is

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

An increase in investment shifts the AE curve upward by an amount equal to the _, and shifts the AD curve rightward by an amount equal to the _.