Question 1

Suppose that investment increases by $10 billion.If the multiplier is 2,the AD curve

Accepted Answer

A) shifts rightward by the horizontal distance $20 billion. 
B) shifts rightward by a horizontal distance greater than $20 billion. 
C) shifts rightward by a horizontal distance less than $20 billion. 
D) is not affected. 
E) shifts upward by a vertical distance equal to $20 billion. 
A) shifts rightward by the horizontal distance $20 billion. 
B) shifts rightward by a horizontal distance greater than $20 billion. 
C) shifts rightward by a horizontal distance less than $20 billion. 
D) is not affected. 
E) shifts upward by a vertical distance equal to $20 billion.

Question 2

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

Accepted Answer

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

Question 3

Use the figure below to answer the following questions.
   
Figure 27.2.2
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 27.2.2.When real GDP is to $300 billion,real GDP

Accepted Answer

A) $25 billion is less than aggregate planned expenditure, and firms decrease production. 
B) exceeds aggregate planned expenditure by $25 billion, and firms increase production. 
C) is the same as aggregate planned expenditure, and firms do not change production. 
D) exceeds aggregate planned expenditure by $25 billion, and firms decrease production. 
E) exceeds aggregate planned expenditure by $50 billion, and firms increase production. 
A) $25 billion is less than aggregate planned expenditure, and firms decrease production. 
B) exceeds aggregate planned expenditure by $25 billion, and firms increase production. 
C) is the same as aggregate planned expenditure, and firms do not change production. 
D) exceeds aggregate planned expenditure by $25 billion, and firms decrease production. 
E) exceeds aggregate planned expenditure by $50 billion, and firms increase production.

Question 4

Use the figure below to answer the following questions.
   
Figure 27.2.2
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 27.2.2.Equilibrium expenditure is

Accepted Answer

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

Question 5

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

Accepted Answer

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

Question 6

The marginal propensity to import is calculated as

Accepted Answer

A) imports divided by the change in real GDP. 
B) the change in imports divided by real GDP. 
C) imports divided by real GDP. 
D) the change in imports divided by the change in real GDP. 
E) none of the above. 
A) imports divided by the change in real GDP. 
B) the change in imports divided by real GDP. 
C) imports divided by real GDP. 
D) the change in imports divided by the change in real GDP. 
E) none of the above.

Question 7

Use the table below to answer the following question(s).
Table 27.3.1
The following table shows the relationship between aggregate planned
expenditure and real GDP in the hypothetical economy of Econoworld.
  
-Refer to Table 27.3.1.Autonomous expenditure is

Accepted Answer

A) $100 billion. 
B) $125 billion. 
C) $50 billion. 
D) $500 billion. 
E) zero. 
A) $100 billion. 
B) $125 billion. 
C) $50 billion. 
D) $500 billion. 
E) zero.

Question 8

If consumption is $8,000 when disposable income is $10,000,the marginal propensity to consume

Accepted Answer

A) is 0.50. 
B) is 0.75. 
C) is 0.80. 
D) is 1.25. 
E) cannot be determined from the information given. 
A) is 0.50. 
B) is 0.75. 
C) is 0.80. 
D) is 1.25. 
E) cannot be determined from the information given.

Question 9

The larger the multiplier,the ________ the AE curve and the ________ the AD curve from a given increase in investment.

Accepted Answer

A) steeper;greater the rightward shift of 
B) steeper;greater the movement upward along 
C) flatter;greater the rightward shift of 
D) flatter;greater the movement upward along 
E) steeper;greater the movement downward along 
A) steeper;greater the rightward shift of 
B) steeper;greater the movement upward along 
C) flatter;greater the rightward shift of 
D) flatter;greater the movement upward along 
E) steeper;greater the movement downward along

Question 10

When disposable income increases

Accepted Answer

A) the consumption function shifts upward. 
B) the saving function shifts downward. 
C) a movement occurs down along the consumption function. 
D) a movement occurs up along the consumption function. 
E) Both A and B are correct. 
A) the consumption function shifts upward. 
B) the saving function shifts downward. 
C) a movement occurs down along the consumption function. 
D) a movement occurs up along the consumption function. 
E) Both A and B are correct.

Question 11

Which of the following events shifts the aggregate expenditure curve and also shifts the aggregate demand curve?
I.a decrease in investment
II.a change in the price level
III.an increase in exports

Accepted Answer

A) I and II 
B) I and III 
C) II and III 
D) I, II, and III 
E) all of the above 
A) I and II 
B) I and III 
C) II and III 
D) I, II, and III 
E) all of the above

Question 12

Autonomous consumption is 50.With every increase of one dollar in disposable income,consumption increases 60 cents.The marginal tax rate is 10 percent.The equation of the consumption function is

Accepted Answer

A) C = 50 + 0.6Y. 
B) C = 50 + 0.54YD. 
C) C = 50 + 0.5YD. 
D) C = 50 + 0.06Y. 
E) C = 50 + 0.54Y. 
A) C = 50 + 0.6Y. 
B) C = 50 + 0.54YD. 
C) C = 50 + 0.5YD. 
D) C = 50 + 0.06Y. 
E) C = 50 + 0.54Y.

Question 13

All else constant,a decrease in the income tax rate will result in

Accepted Answer

A) a movement down along the aggregate expenditure curve. 
B) an upward shift of the AE curve with no change in its slope. 
C) a downward shift of the AE curve with no change in its slope. 
D) a decrease in the consumption expenditure. 
E) an AE curve with a steeper slope. 
A) a movement down along the aggregate expenditure curve. 
B) an upward shift of the AE curve with no change in its slope. 
C) a downward shift of the AE curve with no change in its slope. 
D) a decrease in the consumption expenditure. 
E) an AE curve with a steeper slope.

Question 14

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

Question 15

Use the figure below to answer the following question.
   
Figure 27.5.1
This figure describes the relationship between consumption expenditure and disposable income.
-Refer to Figure 27.5.1.The equation of the consumption function is

Accepted Answer

A) C = 100 + 0.8Y. 
B) C = 100 + 0.8YD. 
C) C = 100 + 0.2YD. 
D) C = 100 + 0.6YD. 
E) C = 500 + 0.8YD. 
A) C = 100 + 0.8Y. 
B) C = 100 + 0.8YD. 
C) C = 100 + 0.2YD. 
D) C = 100 + 0.6YD. 
E) C = 500 + 0.8YD.

Question 16

Use the information below to answer the following questions.
Fact 27.5.2
The economy of Tinseltown has a consumption function of C = 15 + 0.7Y , investment equal to 8, government expenditure equal to 12, exports equal to 20, and an import function of M = 0.2Y.
-Refer to Fact 27.5.2.What is consumption expenditure in equilibrium in this economy?

Accepted Answer

A) 35.25 
B) 62 
C) 53.5 
D) 77 
E) 92 
A) 35.25 
B) 62 
C) 53.5 
D) 77 
E) 92

Question 17

Use the table below to answer the following questions.
Table 27.1.3
  
-Refer to Table 27.1.3.Autonomous consumption is equal to

Accepted Answer

A) $0. 
B) $65. 
C) $100. 
D) $260. 
E) $400. 
A) $0. 
B) $65. 
C) $100. 
D) $260. 
E) $400.

Question 18

Consumption expenditure minus imports,which varies with real GDP,is

Accepted Answer

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

Question 19

Use the table below to answer the following question.
Table 27.1.1
The following table shows the relationship between consumption
expenditure (C)and disposable income (YD)for a hypothetical economy.
  
-Refer to Table 27.1.1.Based on the information in the table,if YD were zero,then

Accepted Answer

A) consumption would be zero. 
B) consumption would be $150. 
C) saving would be zero. 
D) consumption would be -$150. 
E) consumption would be $100. 
A) consumption would be zero. 
B) consumption would be $150. 
C) saving would be zero. 
D) consumption would be -$150. 
E) consumption would be $100.

Question 20

As real GDP decreases

Accepted Answer

A) induced consumption decreases. 
B) planned investment increases. 
C) exports increase. 
D) imports increase. 
E) induced consumption increases. 
A) induced consumption decreases. 
B) planned investment increases. 
C) exports increase. 
D) imports increase. 
E) induced consumption increases.

Exam 27: Expenditure Multipliers: The Keynesian Model

Suppose that investment increases by $10 billion.If the multiplier is 2,the AD curve

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

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

The marginal propensity to import is calculated as

Use the table below to answer the following question(s). Table 27.3.1 The following table shows the relationship between aggregate planned expenditure and real GDP in the hypothetical economy of Econoworld. -Refer to Table 27.3.1.Autonomous expenditure is

If consumption is $8,000 when disposable income is $10,000,the marginal propensity to consume

The larger the multiplier,the ________ the AE curve and the ________ the AD curve from a given increase in investment.

When disposable income increases

Which of the following events shifts the aggregate expenditure curve and also shifts the aggregate demand curve? I.a decrease in investment II.a change in the price level III.an increase in exports

Autonomous consumption is 50.With every increase of one dollar in disposable income,consumption increases 60 cents.The marginal tax rate is 10 percent.The equation of the consumption function is

All else constant,a decrease in the income tax rate will result in

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

Use the figure below to answer the following question. Figure 27.5.1 This figure describes the relationship between consumption expenditure and disposable income. -Refer to Figure 27.5.1.The equation of the consumption function is

Use the table below to answer the following questions. Table 27.1.3 -Refer to Table 27.1.3.Autonomous consumption is equal to

Consumption expenditure minus imports,which varies with real GDP,is

Use the table below to answer the following question. Table 27.1.1 The following table shows the relationship between consumption expenditure (C)and disposable income (YD)for a hypothetical economy. -Refer to Table 27.1.1.Based on the information in the table,if YD were zero,then

As real GDP decreases

What Is Economics?

The Economic Problem

Demand and Supply

Elasticity

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Possibilities, Preferences, and Choices

Organizing Production

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Filters

The larger the multiplier,the the AE curve and the the AD curve from a given increase in investment.