Question 1

If overall inventories rise in a month because of unplanned inventory investment, MOST likely:

Accepted Answer

A)  the economy is slowing down. 
B)  sales were above forecasts. 
C)  inventory investment is negative. 
D)  the accelerator principle was contradicted. 
A)  the economy is slowing down. 
B)  sales were above forecasts. 
C)  inventory investment is negative. 
D)  the accelerator principle was contradicted.

Question 2

Use the following to answer questions:  
-(Figure: Aggregate Expenditures and Real GDP) Use Figure: Aggregate Expenditures and Real GDP. If the level of real GDP equals $9,000 billion and there are no changes in the consumption function or in planned investment, then real GDP will _____in the next period.

Accepted Answer

A)  rise 
B)  remain unchanged 
C)  fall 
D)  fall, but only if there is an offsetting change in autonomous consumption 
A)  rise 
B)  remain unchanged 
C)  fall 
D)  fall, but only if there is an offsetting change in autonomous consumption

Question 3

Suppose that the U.S. economy is in a severe recession. Most households are trying to save more of their income than before. This increase in private savings will lead to:

Accepted Answer

A)  an increase in real GDP, as more savings means more funds for business investment. 
B)  a fall in real GDP, as more savings means people will spend less. 
C)  no change in real GDP, because there is no savings multiplier. 
D)  an increase in real GDP, as an increase in savings will make people wealthier. 
A)  an increase in real GDP, as more savings means more funds for business investment. 
B)  a fall in real GDP, as more savings means people will spend less. 
C)  no change in real GDP, because there is no savings multiplier. 
D)  an increase in real GDP, as an increase in savings will make people wealthier.

Question 4

If the multiplier equals 4, then the marginal propensity to save must be equal to:

Accepted Answer

A)  0.25. 
B)  0.5. 
C)  0.75. 
D)  the marginal propensity to consume. 
A)  0.25. 
B)  0.5. 
C)  0.75. 
D)  the marginal propensity to consume.

Question 5

In a simple, closed economy (no government or foreign sector), if disposable income increases by $100 and $70 is consumed, _____ is saved.

Accepted Answer

A)  $30 
B)  $70 
C)  $100 
D)  $170 
A)  $30 
B)  $70 
C)  $100 
D)  $170

Question 6

Suppose that a financial crisis decreases investment spending by $100 billion and the marginal propensity to consume is 0.8. Assuming no taxes and no trade, real GDP will _____ by _____.

Accepted Answer

A)  decrease; $500 billion 
B)  decrease; $200 billion 
C)  decrease; $800 billion 
D)  increase; $400 billion 
A)  decrease; $500 billion 
B)  decrease; $200 billion 
C)  decrease; $800 billion 
D)  increase; $400 billion

Question 7

According to the accelerator principle, a _____ rate of growth in real GDP leads to _____.

Accepted Answer

A)  lower; lower unplanned inventory investment 
B)  higher; higher inventory investment 
C)  higher; higher planned investment spending 
D)  lower; higher inventory investment 
A)  lower; lower unplanned inventory investment 
B)  higher; higher inventory investment 
C)  higher; higher planned investment spending 
D)  lower; higher inventory investment

Question 8

The initial impact of an unexpected decrease in consumer spending will be a(n) _____ investment spending.

Accepted Answer

A)  decrease in planned 
B)  decrease in unplanned 
C)  increase in planned 
D)  increase in unplanned 
A)  decrease in planned 
B)  decrease in unplanned 
C)  increase in planned 
D)  increase in unplanned

Question 9

Rising inventories typically indicate _____ unplanned inventory investment and a _____ economy.

Accepted Answer

A)  positive; slowing 
B)  negative; slowing 
C)  positive; expanding 
D)  negative; expanding 
A)  positive; slowing 
B)  negative; slowing 
C)  positive; expanding 
D)  negative; expanding

Question 10

Suppose the marginal propensity to consume equals 0.9 and investment spending increases by $50 billion. Assuming no taxes and no trade, real GDP will _____ by _____.

Accepted Answer

A)  increase; $450 billion 
B)  increase; $90 billion 
C)  increase; $500 billion 
D)  decrease; $500 billion 
A)  increase; $450 billion 
B)  increase; $90 billion 
C)  increase; $500 billion 
D)  decrease; $500 billion

Question 11

Planned investment spending is _____ related to the interest rate and _____.

Accepted Answer

A)  positively; existing productive capacity 
B)  negatively; existing productive capacity 
C)  positively; expected GDP 
D)  negatively; expected GDP 
A)  positively; existing productive capacity 
B)  negatively; existing productive capacity 
C)  positively; expected GDP 
D)  negatively; expected GDP

Question 12

If real GDP is smaller than planned aggregate spending:

Accepted Answer

A)  unplanned inventory investment is positive. 
B)  real GDP will fall. 
C)  the economy is in equilibrium. 
D)  unplanned inventory investment is negative. 
A)  unplanned inventory investment is positive. 
B)  real GDP will fall. 
C)  the economy is in equilibrium. 
D)  unplanned inventory investment is negative.

Question 13

Rising inventories usually indicate an:

Accepted Answer

A)  economy that grows unexpectedly. 
B)  economy that slows unexpectedly. 
C)  unexpected spurt in sales. 
D)  inflationary cycle. 
A)  economy that grows unexpectedly. 
B)  economy that slows unexpectedly. 
C)  unexpected spurt in sales. 
D)  inflationary cycle.

Question 14

Planned aggregate expenditures are represented by a line that is:

Accepted Answer

A)  upward sloping. 
B)  downward sloping. 
C)  vertical. 
D)  horizontal. 
A)  upward sloping. 
B)  downward sloping. 
C)  vertical. 
D)  horizontal.

Question 15

The marginal propensity to consume is the increase in consumer spending when _____ increase(s) by $1.

Accepted Answer

A)  investment spending 
B)  taxes 
C)  disposable income 
D)  savings 
A)  investment spending 
B)  taxes 
C)  disposable income 
D)  savings

Question 16

The main reasons that retail sales fell in Finland during 2016 were:

Accepted Answer

A)  a decrease in imports and declining sales at Nokia, which led to reduced household incomes. 
B)  an increase in imports and declining sales at Nokia, which led to reduced household incomes. 
C)  an increase in exports and rising sales at Nokia, which led to reduced household incomes. 
D)  a decrease in exports and declining sales at Nokia, which led to reduced household incomes. 
A)  a decrease in imports and declining sales at Nokia, which led to reduced household incomes. 
B)  an increase in imports and declining sales at Nokia, which led to reduced household incomes. 
C)  an increase in exports and rising sales at Nokia, which led to reduced household incomes. 
D)  a decrease in exports and declining sales at Nokia, which led to reduced household incomes.

Question 17

Falling inventories indicate _____ unplanned inventory investment and a _____ economy.

Accepted Answer

A)  positive; growing 
B)  positive; slowing 
C)  negative; slowing 
D)  negative; growing 
A)  positive; growing 
B)  positive; slowing 
C)  negative; slowing 
D)  negative; growing

Question 18

Actual investment equals planned investment:

Accepted Answer

A)  plus unplanned investment. 
B)  minus unplanned investment. 
C)  plus unplanned investment plus inventory investment. 
D)  times unplanned investment minus inventory investment. 
A)  plus unplanned investment. 
B)  minus unplanned investment. 
C)  plus unplanned investment plus inventory investment. 
D)  times unplanned investment minus inventory investment.

Question 19

If the multiplier is 4 and investment spending falls by $100 billion, the change in real GDP will be:

Accepted Answer

A)  -$400 billion. 
B)  $400 billion. 
C)  $25 billion. 
D)  -$25 billion. 
A)  -$400 billion. 
B)  $400 billion. 
C)  $25 billion. 
D)  -$25 billion.

Question 20

The marginal propensity to consume is the change in _____ divided by the change in _____.

Accepted Answer

A)  savings; disposable income 
B)  disposable income; consumption 
C)  disposable income; savings 
D)  consumption; disposable income 
A)  savings; disposable income 
B)  disposable income; consumption 
C)  disposable income; savings 
D)  consumption; disposable income

If overall inventories rise in a month because of unplanned inventory investment, MOST likely:

Suppose that the U.S. economy is in a severe recession. Most households are trying to save more of their income than before. This increase in private savings will lead to:

If the multiplier equals 4, then the marginal propensity to save must be equal to:

In a simple, closed economy (no government or foreign sector), if disposable income increases by $100 and $70 is consumed, _____ is saved.

Suppose that a financial crisis decreases investment spending by $100 billion and the marginal propensity to consume is 0.8. Assuming no taxes and no trade, real GDP will _ by _.

According to the accelerator principle, a _ rate of growth in real GDP leads to _.

The initial impact of an unexpected decrease in consumer spending will be a(n) _____ investment spending.

Rising inventories typically indicate _ unplanned inventory investment and a _ economy.

Suppose the marginal propensity to consume equals 0.9 and investment spending increases by $50 billion. Assuming no taxes and no trade, real GDP will _ by _.

Planned investment spending is _ related to the interest rate and _.

If real GDP is smaller than planned aggregate spending:

Rising inventories usually indicate an:

Planned aggregate expenditures are represented by a line that is:

The marginal propensity to consume is the increase in consumer spending when _____ increase(s) by $1.

The main reasons that retail sales fell in Finland during 2016 were:

Falling inventories indicate _ unplanned inventory investment and a _ economy.

Actual investment equals planned investment:

If the multiplier is 4 and investment spending falls by $100 billion, the change in real GDP will be:

The marginal propensity to consume is the change in _ divided by the change in _.

First Principles

Economic Models: Trade-Offs and Trade

Supply and Demand

Price Controls and Quotas: Meddling With Markets

International Trade

Macroeconomics: the Big Picture

GDP and the CPI: Tracking the Macroeconomy

Unemployment and Inflation

Long-Run Economic Growth

Savings, Investment Spending, and the Financial Syst

Aggregate Demand and Aggregate Supply

Fiscal Policy

Money, Banking, and the Federal Reserve System

Monetary Policy

Inflation, Disinflation, and Deflation

Macroeconomics: Events and Ideas

International Macroeconomics

Filters

Exam 11: Income and Expenditure

If overall inventories rise in a month because of unplanned inventory investment, MOST likely:

Suppose that the U.S. economy is in a severe recession. Most households are trying to save more of their income than before. This increase in private savings will lead to:

If the multiplier equals 4, then the marginal propensity to save must be equal to:

In a simple, closed economy (no government or foreign sector), if disposable income increases by $100 and $70 is consumed, _____ is saved.

Suppose that a financial crisis decreases investment spending by $100 billion and the marginal propensity to consume is 0.8. Assuming no taxes and no trade, real GDP will _____ by _____.

According to the accelerator principle, a _____ rate of growth in real GDP leads to _____.

The initial impact of an unexpected decrease in consumer spending will be a(n) _____ investment spending.

Rising inventories typically indicate _____ unplanned inventory investment and a _____ economy.

Suppose the marginal propensity to consume equals 0.9 and investment spending increases by $50 billion. Assuming no taxes and no trade, real GDP will _____ by _____.

Planned investment spending is _____ related to the interest rate and _____.

If real GDP is smaller than planned aggregate spending:

Rising inventories usually indicate an:

Planned aggregate expenditures are represented by a line that is:

The marginal propensity to consume is the increase in consumer spending when _____ increase(s) by $1.

The main reasons that retail sales fell in Finland during 2016 were:

Falling inventories indicate _____ unplanned inventory investment and a _____ economy.

Actual investment equals planned investment:

If the multiplier is 4 and investment spending falls by $100 billion, the change in real GDP will be:

The marginal propensity to consume is the change in _____ divided by the change in _____.

First Principles

Economic Models: Trade-Offs and Trade

Supply and Demand

Price Controls and Quotas: Meddling With Markets

International Trade

Macroeconomics: the Big Picture

GDP and the CPI: Tracking the Macroeconomy

Unemployment and Inflation

Long-Run Economic Growth

Savings, Investment Spending, and the Financial Syst

Aggregate Demand and Aggregate Supply

Fiscal Policy

Money, Banking, and the Federal Reserve System

Monetary Policy

Inflation, Disinflation, and Deflation

Macroeconomics: Events and Ideas

International Macroeconomics

Filters

Suppose that a financial crisis decreases investment spending by $100 billion and the marginal propensity to consume is 0.8. Assuming no taxes and no trade, real GDP will _ by _.

According to the accelerator principle, a _ rate of growth in real GDP leads to _.

Rising inventories typically indicate _ unplanned inventory investment and a _ economy.

Suppose the marginal propensity to consume equals 0.9 and investment spending increases by $50 billion. Assuming no taxes and no trade, real GDP will _ by _.

Planned investment spending is _ related to the interest rate and _.

Falling inventories indicate _ unplanned inventory investment and a _ economy.

The marginal propensity to consume is the change in _ divided by the change in _.