Question 1

If there is an unplanned increase 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) less than real GDP and firms decrease 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) less than real GDP and firms decrease investment.

Question 2

Use the figure below to answer the following questions.
   
Figure 27.2.3
There are no taxes in this economy.
-In Figure 27.2.3,at the equilibrium level of real GDP,induced expenditure is

Accepted Answer

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

Question 3

Use the figure below to answer the following question(s).
   
Figure 27.3.1
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 27.3.1.The slope of the AE curve is

Accepted Answer

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

Question 4

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

Accepted Answer

A) flatter than the original AE curve. 
B) steeper than the original AE curve. 
C) parallel and above the original AE curve. 
D) parallel and below the original AE curve. 
E) none of the above. 
A) flatter than the original AE curve. 
B) steeper than the original AE curve. 
C) parallel and above the original AE curve. 
D) parallel and below the original AE curve. 
E) none of the above.

Question 5

If the marginal propensity to save is 0.2,then

Accepted Answer

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

Question 6

Table 27.2.1
  
-Table 27.2.1 gives the aggregate expenditure schedule.Equilibrium expenditure is equal to ________.

Accepted Answer

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

Question 7

The consumption function shows the relationship between consumption expenditure and

Accepted Answer

A) the interest rate. 
B) the price level. 
C) disposable income. 
D) saving. 
E) nominal income. 
A) the interest rate. 
B) the price level. 
C) disposable income. 
D) saving. 
E) nominal income.

Question 8

The multiplier shows that as ________ expenditure changes,real GDP changes by ________ amount.

Accepted Answer

A) autonomous;an even larger 
B) autonomous;the same 
C) induced;the same 
D) induced;an even larger 
E) induced;a smaller 
A) autonomous;an even larger 
B) autonomous;the same 
C) induced;the same 
D) induced;an even larger 
E) induced;a smaller

Question 9

Suppose the multiplier is 2.5 and investment increases by $20 billion.Starting at potential GDP,in the long run,equilibrium real GDP

Accepted Answer

A) increases by $50 billion. 
B) increases by more than $50 billion. 
C) decreases by less than $50 billion. 
D) does not change. 
E) increases by less than $50 billion. 
A) increases by $50 billion. 
B) increases by more than $50 billion. 
C) decreases by less than $50 billion. 
D) does not change. 
E) increases by less than $50 billion.

Question 10

Suppose the multiplier is 2 and the short-run aggregate supply curve is positively sloped.Investment increases by $10 billion.In the short run,equilibrium real GDP

Accepted Answer

A) increases by $20 billion. 
B) increases by more than $20 billion. 
C) decreases by less than $20 billion. 
D) does not change. 
E) increases by less than $20 billion. 
A) increases by $20 billion. 
B) increases by more than $20 billion. 
C) decreases by less than $20 billion. 
D) does not change. 
E) increases by less than $20 billion.

Question 11

An increase in autonomous expenditure shifts the AE curve

Accepted Answer

A) upward but leaves its slope unchanged. 
B) upward and the curve becomes steeper. 
C) downward but leaves its slope unchanged. 
D) downward and the curve becomes steeper. 
E) upward and the curve becomes less steep. 
A) upward but leaves its slope unchanged. 
B) upward and the curve becomes steeper. 
C) downward but leaves its slope unchanged. 
D) downward and the curve becomes steeper. 
E) upward and the curve becomes less steep.

Question 12

The aggregate expenditure curve and the aggregate demand curve are

Accepted Answer

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

Question 13

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 Yb,then aggregate planned expenditure is

Accepted Answer

A) less than real GDP and real GDP decreases. 
B) less than real GDP and real GDP increases. 
C) greater than real GDP and real GDP increases. 
D) greater than real GDP and real GDP decreases. 
E) equal to real GDP and real GDP neither increases nor decreases. 
A) less than real GDP and real GDP decreases. 
B) less than real GDP and real GDP increases. 
C) greater than real GDP and real GDP increases. 
D) greater than real GDP and real GDP decreases. 
E) equal to real GDP and real GDP neither increases nor decreases.

Question 14

The aggregate expenditure curve shows the relationship between aggregate planned expenditure and

Accepted Answer

A) disposable income. 
B) real GDP. 
C) the interest rate. 
D) consumption expenditure. 
E) the price level. 
A) disposable income. 
B) real GDP. 
C) the interest rate. 
D) consumption expenditure. 
E) the price level.

Question 15

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

Accepted Answer

A) multiplier is 1/4. 
B) slope of the AE curve is 0.75. 
C) slope of the AE curve is 1/4. 
D) multiplier is 3. 
E) none of the above. 
A) multiplier is 1/4. 
B) slope of the AE curve is 0.75. 
C) slope of the AE curve is 1/4. 
D) multiplier is 3. 
E) none of the above.

Question 16

Use the figure below to answer the following questions.
   
Figure 27.1.2
-Refer to Figure 27.1.2.Autonomous consumption is

Accepted Answer

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

Question 17

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,saving would be $125 if YD were

Accepted Answer

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

Question 18

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 Yc,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 increases. 
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 increases.

Question 19

Suppose there is an increase in exports.Assuming the price level is held constant,which one of the following best describes the sequence of changes in the economy?

Accepted Answer

A) Autonomous expenditure increases, induced expenditure increases, real GDP increases, and the price level rises. 
B) Induced expenditure increases, autonomous expenditure increases, real GDP increases, and consumption increases. 
C) Induced expenditure increases, real GDP increases, autonomous expenditure increases, and the price level increases, lowering autonomous expenditure and real GDP increases by a smaller amount. 
D) Induced expenditure increases, real GDP increases, autonomous expenditure increases, real GDP increases more, autonomous expenditure increases again, etc. 
E) Autonomous expenditure increases, real GDP increases, induced expenditure increases, real GDP increases more, induced expenditure increases again, and the process continues until equilibrium expenditure is reached. 
A) Autonomous expenditure increases, induced expenditure increases, real GDP increases, and the price level rises. 
B) Induced expenditure increases, autonomous expenditure increases, real GDP increases, and consumption increases. 
C) Induced expenditure increases, real GDP increases, autonomous expenditure increases, and the price level increases, lowering autonomous expenditure and real GDP increases by a smaller amount. 
D) Induced expenditure increases, real GDP increases, autonomous expenditure increases, real GDP increases more, autonomous expenditure increases again, etc. 
E) Autonomous expenditure increases, real GDP increases, induced expenditure increases, real GDP increases more, induced expenditure increases again, and the process continues until equilibrium expenditure is reached.

Question 20

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.What is consumption expenditure in equilibrium in this economy?

Accepted Answer

A) 298 
B) 106 
C) 38.8 
D) 114 
E) none of the above 
A) 298 
B) 106 
C) 38.8 
D) 114 
E) none of the above

Exam 27: Expenditure Multipliers: The Keynesian Model

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

Use the figure below to answer the following questions. Figure 27.2.3 There are no taxes in this economy. -In Figure 27.2.3,at the equilibrium level of real GDP,induced expenditure is

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

If the marginal propensity to save is 0.2,then

Table 27.2.1 -Table 27.2.1 gives the aggregate expenditure schedule.Equilibrium expenditure is equal to ________.

The consumption function shows the relationship between consumption expenditure and

The multiplier shows that as ________ expenditure changes,real GDP changes by ________ amount.

Suppose the multiplier is 2.5 and investment increases by $20 billion.Starting at potential GDP,in the long run,equilibrium real GDP

Suppose the multiplier is 2 and the short-run aggregate supply curve is positively sloped.Investment increases by $10 billion.In the short run,equilibrium real GDP

An increase in autonomous expenditure shifts the AE curve

The aggregate expenditure curve and the aggregate demand curve are

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 Yb,then aggregate planned expenditure is

The aggregate expenditure curve shows the relationship between aggregate planned expenditure and

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

Use the figure below to answer the following questions. Figure 27.1.2 -Refer to Figure 27.1.2.Autonomous consumption 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,saving would be $125 if YD were

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 Yc,then

Suppose there is an increase in exports.Assuming the price level is held constant,which one of the following best describes the sequence of changes in the economy?

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

International Trade Policy

Filters

The multiplier shows that as expenditure changes,real GDP changes by amount.