Question 1

If planned expenditures equal $19 trillion when real GDP is $19.5 trillion, then

Accepted Answer

A)  inventories will decrease by $0.5 trillion. 
B)  actual investment will exceed planned investment. 
C)  there will be excess demand for most goods. 
D)  the economy must have a trade surplus to sell the excess goods and services. 
A)  inventories will decrease by $0.5 trillion. 
B)  actual investment will exceed planned investment. 
C)  there will be excess demand for most goods. 
D)  the economy must have a trade surplus to sell the excess goods and services.

Question 2

The government estimates that the multiplier is 2.0. In this case an increase in government expenditure of $500 billion increases real GDP by ________ and results in an increase in induced expenditure of ________.

Accepted Answer

A)  $500 billion; $0 
B)  $500 billion; $500 billion 
C)  $1,000 billion; $1,000 billion 
D)  $1,000 billion; $500 billion 
A)  $500 billion; $0 
B)  $500 billion; $500 billion 
C)  $1,000 billion; $1,000 billion 
D)  $1,000 billion; $500 billion

Question 3

-In the above figure, autonomous expenditure is

Accepted Answer

A)  $5 trillion. 
B)  $10 trillion. 
C)  $15 trillion. 
D)  some amount not given in the above answers. 
A)  $5 trillion. 
B)  $10 trillion. 
C)  $15 trillion. 
D)  some amount not given in the above answers.

Question 4

When disposable income equals consumption expenditure, then

Accepted Answer

A)  saving is zero. 
B)  the MPC = zero. 
C)  the MPS = zero. 
D)  None of the above answers is correct. 
A)  saving is zero. 
B)  the MPC = zero. 
C)  the MPS = zero. 
D)  None of the above answers is correct.

Question 5

When prices are fixed and there are no imports or income taxes, the value of the multiplier is

Accepted Answer

A)  less than one. 
B)  greater than one. 
C)  equal to one. 
D)  equal to zero. 
A)  less than one. 
B)  greater than one. 
C)  equal to one. 
D)  equal to zero.

Question 6

-In the above figure, autonomous expenditure along AE0 equals

Accepted Answer

A)  $3 trillion. 
B)  $6 trillion. 
C)  $12 trillion. 
D)  an amount not given in the above answers. 
A)  $3 trillion. 
B)  $6 trillion. 
C)  $12 trillion. 
D)  an amount not given in the above answers.

Question 7

The marginal propensity to save is

Accepted Answer

A)  total saving divided by total disposable income. 
B)  total saving divided by the change in disposable income. 
C)  the change in saving divided by the change in consumption expenditure. 
D)  the change in saving divided by the change in disposable income. 
A)  total saving divided by total disposable income. 
B)  total saving divided by the change in disposable income. 
C)  the change in saving divided by the change in consumption expenditure. 
D)  the change in saving divided by the change in disposable income.

Question 8

The part of aggregate planned expenditure that does not vary with real GDP

Accepted Answer

A)  equals equilibrium expenditure. 
B)  is autonomous expenditure. 
C)  is induced expenditure. 
D)  equals zero. 
A)  equals equilibrium expenditure. 
B)  is autonomous expenditure. 
C)  is induced expenditure. 
D)  equals zero.

Question 9

List and explain factors that determine the size of the multiplier in the aggregate expenditure model when prices are constant.

Accepted Answer

The size of the multiplier depends on th

Question 10

Since 1970, U.S. consumption function has generally shifted ________ because of ________.

Accepted Answer

A)  upward; higher expected future income and rising wealth 
B)  upward; higher real interest rates 
C)  downward; higher real interest rates 
D)  downward; falling wealth 
A)  upward; higher expected future income and rising wealth 
B)  upward; higher real interest rates 
C)  downward; higher real interest rates 
D)  downward; falling wealth

Question 11

When disposable income increases from $7 trillion to $7.5 trillion, consumption expenditure increase from $6.5 trillion to $6.9 trillion. The MPS is equal to

Accepted Answer

A)  0.75. 
B)  0.76. 
C)  0.8. 
D)  0.2. 
A)  0.75. 
B)  0.76. 
C)  0.8. 
D)  0.2.

Question 12

Saving equals

Accepted Answer

A)  disposable income minus taxes. 
B)  disposable income minus consumption expenditure. 
C)  disposable income plus consumption expenditure. 
D)  consumption expenditure minus disposable income. 
A)  disposable income minus taxes. 
B)  disposable income minus consumption expenditure. 
C)  disposable income plus consumption expenditure. 
D)  consumption expenditure minus disposable income.

Question 13

-In the above table, there are no taxes and no imports or exports. Investment increases from $500 to $750. After the increase in investment, the new equilibrium level of output is

Accepted Answer

A)  $5,000. 
B)  $7,000. 
C)  $6,000. 
D)  $5,750. 
A)  $5,000. 
B)  $7,000. 
C)  $6,000. 
D)  $5,750.

Question 14

What is the relationship between the aggregate expenditure curve and the aggregate demand curve? Explain the relationship.

Accepted Answer

The aggregate demand curve is derived us

Question 15

If disposable income increases

Accepted Answer

A)  the consumption function shifts upward. 
B)  there is a movement upward along the consumption function. 
C)  the consumption function shifts downward. 
D)  there is movement downward along the consumption function. 
A)  the consumption function shifts upward. 
B)  there is a movement upward along the consumption function. 
C)  the consumption function shifts downward. 
D)  there is movement downward along the consumption function.

Question 16

-In the above figure, if the level of real GDP is $15 trillion

Accepted Answer

A)  inventories are above the levels planned by firms. 
B)  inventories are below the levels planned by firms. 
C)  inventories are equal to the levels planned by firms. 
D)  planned expenditures are zero. 
A)  inventories are above the levels planned by firms. 
B)  inventories are below the levels planned by firms. 
C)  inventories are equal to the levels planned by firms. 
D)  planned expenditures are zero.

Question 17

In 2007, investment in France increased by 7 billion euros, consumption increased by 4 billion euros and government spending increased by 1.5 billion euros. Assume the price level was constant and the economy was at full employment. As a result, suppose that equilibrium expenditure increased by 21 billion euros. In this example, ________ is the induced expenditure and ________ is autonomous expenditure.

Accepted Answer

A)  consumption; government spending 
B)  investment; consumption 
C)  investment; government spending 
D)  government spending; equilibrium expenditure 
A)  consumption; government spending 
B)  investment; consumption 
C)  investment; government spending 
D)  government spending; equilibrium expenditure

Question 18

Which of the following will NOT shift the consumption function upward?

Accepted Answer

A)  an increase in disposable income 
B)  a fall in the real interest rate 
C)  an increase in wealth 
D)  an increase in price 
A)  an increase in disposable income 
B)  a fall in the real interest rate 
C)  an increase in wealth 
D)  an increase in price

Question 19

The slope of the aggregate expenditure curve is

Accepted Answer

A)  0. 
B)  greater than 0 and less than 1. 
C)  1. 
D)  greater than 1. 
A)  0. 
B)  greater than 0 and less than 1. 
C)  1. 
D)  greater than 1.

Question 20

-In the above figure, when disposable income is greater than $12 trillion, then

Accepted Answer

A)  savings are negative. 
B)  the MPC is greater than 1. 
C)  savings are positive. 
D)  the MPS is negative. 
A)  savings are negative. 
B)  the MPC is greater than 1. 
C)  savings are positive. 
D)  the MPS is negative.

If planned expenditures equal $19 trillion when real GDP is $19.5 trillion, then

The government estimates that the multiplier is 2.0. In this case an increase in government expenditure of $500 billion increases real GDP by and results in an increase in induced expenditure of .

-In the above figure, autonomous expenditure is

When disposable income equals consumption expenditure, then

When prices are fixed and there are no imports or income taxes, the value of the multiplier is

-In the above figure, autonomous expenditure along AE₀ equals

The marginal propensity to save is

The part of aggregate planned expenditure that does not vary with real GDP

List and explain factors that determine the size of the multiplier in the aggregate expenditure model when prices are constant.

Since 1970, U.S. consumption function has generally shifted because of .

When disposable income increases from $7 trillion to $7.5 trillion, consumption expenditure increase from $6.5 trillion to $6.9 trillion. The MPS is equal to

Saving equals

-In the above table, there are no taxes and no imports or exports. Investment increases from $500 to $750. After the increase in investment, the new equilibrium level of output is

What is the relationship between the aggregate expenditure curve and the aggregate demand curve? Explain the relationship.

If disposable income increases

-In the above figure, if the level of real GDP is $15 trillion

Which of the following will NOT shift the consumption function upward?

The slope of the aggregate expenditure curve is

-In the above figure, when disposable income is greater than $12 trillion, then

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

If planned expenditures equal $19 trillion when real GDP is $19.5 trillion, then

The government estimates that the multiplier is 2.0. In this case an increase in government expenditure of $500 billion increases real GDP by ________ and results in an increase in induced expenditure of ________.

-In the above figure, autonomous expenditure is

When disposable income equals consumption expenditure, then

When prices are fixed and there are no imports or income taxes, the value of the multiplier is

-In the above figure, autonomous expenditure along AE0 equals

The marginal propensity to save is

The part of aggregate planned expenditure that does not vary with real GDP

List and explain factors that determine the size of the multiplier in the aggregate expenditure model when prices are constant.

Since 1970, U.S. consumption function has generally shifted ________ because of ________.

When disposable income increases from $7 trillion to $7.5 trillion, consumption expenditure increase from $6.5 trillion to $6.9 trillion. The MPS is equal to

Saving equals

-In the above table, there are no taxes and no imports or exports. Investment increases from $500 to $750. After the increase in investment, the new equilibrium level of output is

What is the relationship between the aggregate expenditure curve and the aggregate demand curve? Explain the relationship.

If disposable income increases

-In the above figure, if the level of real GDP is $15 trillion

Which of the following will NOT shift the consumption function upward?

The slope of the aggregate expenditure curve is

-In the above figure, when disposable income is greater than $12 trillion, then

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

The government estimates that the multiplier is 2.0. In this case an increase in government expenditure of $500 billion increases real GDP by and results in an increase in induced expenditure of .

-In the above figure, autonomous expenditure along AE₀ equals

Since 1970, U.S. consumption function has generally shifted because of .