Question 1

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

Accepted Answer

A) the change in aggregate supply. 
B) the change in autonomous expenditure and the multiplier. 
C) changes in induced expenditure. 
D) the change in the price level. 
E) none of the above. 
A) the change in aggregate supply. 
B) the change in autonomous expenditure and the multiplier. 
C) changes in induced expenditure. 
D) the change in the price level. 
E) none of the above.

Question 2

Which one of the following will lead to an increase in the slope of the AE function?

Accepted Answer

A) an increase in the marginal propensity to import 
B) an increase in the marginal tax rate 
C) a decrease in the marginal propensity to consume 
D) a decrease in the marginal propensity to save 
E) an increase in the marginal propensity to save 
A) an increase in the marginal propensity to import 
B) an increase in the marginal tax rate 
C) a decrease in the marginal propensity to consume 
D) a decrease in the marginal propensity to save 
E) an increase in the marginal propensity to save

Question 3

Everything else remaining the same,a decrease in expected future income ________ current consumption expenditure and ________ saving.

Accepted Answer

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

Question 4

Use the figure below to answer the following question.
   
Figure 27.3.2
-In Figure 27.3.2,the multiplier is

Accepted Answer

A) 0.25. 
B) 1.00. 
C) 1.60. 
D) 2.50. 
E) 10. 
A) 0.25. 
B) 1.00. 
C) 1.60. 
D) 2.50. 
E) 10.

Question 5

Use the table below to answer the following questions.
Table 27.1.2
  
-Refer to Table 27.1.2.Saving equals $100 when disposable income is

Accepted Answer

A) $475. 
B) $550. 
C) $525. 
D) $575. 
E) $625. 
A) $475. 
B) $550. 
C) $525. 
D) $575. 
E) $625.

Question 6

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) "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) all of the above 
A) "The new stadium will generate $200 million in spinoff 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) all of the above

Question 7

Use the table below to answer the following questions.
Table 27.1.2
  
-Refer to Table 27.1.2.What is the value of the marginal propensity to consume?

Accepted Answer

A) 0.75 
B) 0.25 
C) 1.33 
D) 0.34 
E) 0.67 
A) 0.75 
B) 0.25 
C) 1.33 
D) 0.34 
E) 0.67

Question 8

As real GDP increases

Accepted Answer

A) autonomous consumption increases. 
B) planned investment increases. 
C) exports increase. 
D) imports increase. 
E) imports decrease. 
A) autonomous consumption increases. 
B) planned investment increases. 
C) exports increase. 
D) imports increase. 
E) imports decrease.

Question 9

Use the figure below to answer the following questions.
   
Figure 27.2.1
There are no exports or imports in this economy.
-Refer to Figure 27.2.1.When real GDP is equal to Y?,then

Accepted Answer

A) actual expenditure is less than planned expenditure. 
B) actual expenditure is greater than planned expenditure. 
C) planned expenditure is equal to actual expenditure. 
D) the economy is in equilibrium. 
E) real GDP decreases. 
A) actual expenditure is less than planned expenditure. 
B) actual expenditure is greater than planned expenditure. 
C) planned expenditure is equal to actual expenditure. 
D) the economy is in equilibrium. 
E) real GDP decreases.

Question 10

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

Accepted Answer

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

Question 11

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

Question 12

Use the information below to answer the following question.
Fact 27.5.1
The economy of Beverly Hills 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 27.5.1.If autonomous consumption increases by 10,what is the new equation of the aggregate expenditure function for this economy?

Accepted Answer

A) AE = 26 + 0.7Y 
B) AE = 36 + 0.7Y 
C) AE = 46 + 0.7Y 
D) AE = 46 + 0.8Y 
E) AE = 46 + 0.9Y 
A) AE = 26 + 0.7Y 
B) AE = 36 + 0.7Y 
C) AE = 46 + 0.7Y 
D) AE = 46 + 0.8Y 
E) AE = 46 + 0.9Y

Question 13

The formula for the multiplier in an open economy is

Accepted Answer

A) 1/(1 + slope of the AE curve). 
B) 1/(1 - marginal propensity to import). 
C) 1/(1 + marginal propensity to import). 
D) 1/(1 - slope of the AE curve). 
E) 1/(1 - MP
C) . 
A) 1/(1 + slope of the AE curve). 
B) 1/(1 - marginal propensity to import). 
C) 1/(1 + marginal propensity to import). 
D) 1/(1 - slope of the AE curve). 
E) 1/(1 - MP
C) .

Question 14

You are given the following information about the Canadian economy.Autonomous consumption expenditure is $50 billion,investment is $200 billion,and government expenditure is $250 billion.The marginal propensity to consume is 0.7 and net taxes are $250 billion.Net taxes are assumed to be constant and not vary with income.Exports are $500 billion and imports are $450 billion.
The consumption function in billions of dollars is ________.

Accepted Answer

A) C = 50 + 0.7Y 
B) C = 0.7(Y - 250) 
C) C = 50 + 0.7(Y - 250) 
D) C = 50 + 0.7(YD - 250) 
E) C = 50 + 0.7Y - 250 
A) C = 50 + 0.7Y 
B) C = 0.7(Y - 250) 
C) C = 50 + 0.7(Y - 250) 
D) C = 50 + 0.7(YD - 250) 
E) C = 50 + 0.7Y - 250

Question 15

The slope of the consumption function is

Accepted Answer

A) less than the slope of the 45° line. 
B) greater than the slope of the 45° line. 
C) equal to the slope of the 45° line. 
D) one. 
E) zero. 
A) less than the slope of the 45° line. 
B) greater than the slope of the 45° line. 
C) equal to the slope of the 45° line. 
D) one. 
E) zero.

Question 16

If there is an unplanned decrease in inventories,aggregate planned expenditure is

Accepted Answer

A) greater than real GDP, and firms increase production. 
B) greater than real GDP, and firms decrease production. 
C) less than real GDP, and firms increase production. 
D) less than real GDP, and firms decrease production. 
E) greater than real GDP, and firms increase investment. 
A) greater than real GDP, and firms increase production. 
B) greater than real GDP, and firms decrease production. 
C) less than real GDP, and firms increase production. 
D) less than real GDP, and firms decrease production. 
E) greater than real GDP, and firms increase investment.

Question 17

Use the figure below to answer the following questions.
   
Figure 27.1.1
This figure describes the relationship between consumption expenditure and disposable income for a model economy.
-When the consumption function lies below the 45° line,households

Accepted Answer

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

Question 18

Use the figure below to answer the following questions.
   
Figure 27.5.2
-Refer to Figure 27.5.2.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 + 0.8YD. 
C) S = 200 + 0.75YD. 
D) S = -200 + 0.75YD. 
E) S = -200 + 0.25YD. 
A) S = 200 + 0.8YD. 
B) S = -200 + 0.8YD. 
C) S = 200 + 0.75YD. 
D) S = -200 + 0.75YD. 
E) S = -200 + 0.25YD.

Question 19

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

Accepted Answer

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

Question 20

In an economy,autonomous spending is $20 trillion and the slope of the AE curve is 0.8.
The equation of the AE curve is ________.

Accepted Answer

A) AE = 0.2Y-20 
B) AE = 20 + 0.2 Y 
C) AE = 20 + 0.8 Y 
D) AE = 0.8 Y - 20 
E) AE = 20 - 0.8 Y 
A) AE = 0.2Y-20 
B) AE = 20 + 0.2 Y 
C) AE = 20 + 0.8 Y 
D) AE = 0.8 Y - 20 
E) AE = 20 - 0.8 Y

Exam 27: Expenditure Multipliers: The Keynesian Model

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

Which one of the following will lead to an increase in the slope of the AE function?

Everything else remaining the same,a decrease in expected future income ________ current consumption expenditure and ________ saving.

Use the figure below to answer the following question. Figure 27.3.2 -In Figure 27.3.2,the multiplier is

Use the table below to answer the following questions. Table 27.1.2 -Refer to Table 27.1.2.Saving equals $100 when disposable income is

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

Use the table below to answer the following questions. Table 27.1.2 -Refer to Table 27.1.2.What is the value of the marginal propensity to consume?

As real GDP increases

Use the figure below to answer the following questions. Figure 27.2.1 There are no exports or imports in this economy. -Refer to Figure 27.2.1.When real GDP is equal to Y?,then

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

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

The formula for the multiplier in an open economy is

The slope of the consumption function is

If there is an unplanned decrease in inventories,aggregate planned expenditure is

Use the figure below to answer the following questions. Figure 27.1.1 This figure describes the relationship between consumption expenditure and disposable income for a model economy. -When the consumption function lies below the 45° line,households

Use the figure below to answer the following questions. Figure 27.5.2 -Refer to Figure 27.5.2.The equation of the saving function that corresponds to the consumption function in this figure is

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

In an economy,autonomous spending is $20 trillion and the slope of the AE curve is 0.8. The equation of the AE curve is ________.

What Is Economics?

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Externalities

Public Goods and Common Resources

Markets for Factors of Production

Economic Inequality

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

Canadian Inflation, Unemployment, and Business Cycle

Fiscal Policy

Monetary Policy

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Filters

Everything else remaining the same,a decrease in expected future income current consumption expenditure and saving.