Question 1

Suppose the consumption function is given by the equation C = 100 + 0.8YD, where YD is disposable income. What is the multiplier in this economy?

Accepted Answer

A)  5 
B)  2 
C)  0.8 
D)  0.2 
A)  5 
B)  2 
C)  0.8 
D)  0.2

Question 2

-In the above figure, an increase in autonomous expenditure is depicted by the movement from point E to

Accepted Answer

A)  point F. 
B)  point G. 
C)  point H. 
D)  point I. 
A)  point F. 
B)  point G. 
C)  point H. 
D)  point I.

Question 3

In an economy with no income taxes or imports, the multiplier equals

Accepted Answer

A)  1/MPC. 
B)  1/MPS. 
C)  1/(1 - MPS). 
D)  1/(MPC + MPS). 
A)  1/MPC. 
B)  1/MPS. 
C)  1/(1 - MPS). 
D)  1/(MPC + MPS).

Question 4

The marginal propensity to save equals the

Accepted Answer

A)  change in savings resulting from a one dollar change in disposable income. 
B)  change in savings from a change in consumption expenditure. 
C)  average amount of income saved. 
D)  ability to save the same percentage of income each month. 
A)  change in savings resulting from a one dollar change in disposable income. 
B)  change in savings from a change in consumption expenditure. 
C)  average amount of income saved. 
D)  ability to save the same percentage of income each month.

Question 5

If the price level is constant, a change in investment has a multiplied impact on real GDP.

Accepted Answer

A) True 
 B)False

Question 6

If the multiplier is 6 and exports decrease by $30, what impact will that have on aggregate expenditure? Aggregate expenditure will

Accepted Answer

A)  increase by $30. 
B)  increase by $180. 
C)  decrease by $30. 
D)  decrease by $180. 
A)  increase by $30. 
B)  increase by $180. 
C)  decrease by $30. 
D)  decrease by $180.

Question 7

The MPC is equal to

Accepted Answer

A)  △ C / △ S . 
B)  △ S / △ C. 
C)  △ C / △ YD. 
D)  △ S / △ YD. 
A)  △ C / △ S . 
B)  △ S / △ C. 
C)  △ C / △ YD. 
D)  △ S / △ YD.

Question 8

A fall in the price level

Accepted Answer

A)  shifts the aggregate expenditure curve upward and increases the quantity of real GDP demanded. 
B)  shifts the aggregate demand curve rightward and increases equilibrium GDP. 
C)  decreases aggregate planned expenditures and shifts the aggregate demand curve leftward. 
D)  shifts both the aggregate expenditures curve and aggregate demand curve upward. 
A)  shifts the aggregate expenditure curve upward and increases the quantity of real GDP demanded. 
B)  shifts the aggregate demand curve rightward and increases equilibrium GDP. 
C)  decreases aggregate planned expenditures and shifts the aggregate demand curve leftward. 
D)  shifts both the aggregate expenditures curve and aggregate demand curve upward.

Question 9

The size of the multiplier

Accepted Answer

A)  is unaffected by the amount of time that elapses. 
B)  increases in the long run. 
C)  decreases in the long run. 
D)  is constant in the long run. 
A)  is unaffected by the amount of time that elapses. 
B)  increases in the long run. 
C)  decreases in the long run. 
D)  is constant in the long run.

Question 10

An economy has no imports and no taxes. The marginal propensity to save is 0.2. The multiplier is ________ so a ________ increase in autonomous expenditure increases equilibrium expenditure by $60 billion.

Accepted Answer

A)  5; $300 billion 
B)  5; $12 billion 
C)  10; $6 billion 
D)  10; $20 billion 
A)  5; $300 billion 
B)  5; $12 billion 
C)  10; $6 billion 
D)  10; $20 billion

Question 11

An increase in disposable income

Accepted Answer

A)  shifts the saving function upward. 
B)  results in a movement upward along the saving function. 
C)  shifts the saving function downward. 
D)  results in a movement downward along the saving function. 
A)  shifts the saving function upward. 
B)  results in a movement upward along the saving function. 
C)  shifts the saving function downward. 
D)  results in a movement downward along the saving function.

Question 12

Which of the following shifts the aggregate expenditure curve AND 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)  III only 
A)  I and II 
B)  I and III 
C)  II and III 
D)  III only

Question 13

1 - MPC equals

Accepted Answer

A)  autonomous consumption. 
B)  the marginal propensity to save. 
C)  induced consumption. 
D)  the net national product. 
A)  autonomous consumption. 
B)  the marginal propensity to save. 
C)  induced consumption. 
D)  the net national product.

Question 14

As real disposable income increases, consumption expenditure ________ and saving ________.

Accepted Answer

A)  increases; increases 
B)  increases; decreases 
C)  decreases; increases 
D)  decreases; decreases 
A)  increases; increases 
B)  increases; decreases 
C)  decreases; increases 
D)  decreases; decreases

Question 15

If the MPC increases from 0.75 to 0.80 and there are no income taxes or imports

Accepted Answer

A)  the multiplier becomes larger. 
B)  the multiplier becomes smaller. 
C)  the slope of the consumption function becomes smaller. 
D)  the slope of the savings function becomes larger. 
A)  the multiplier becomes larger. 
B)  the multiplier becomes smaller. 
C)  the slope of the consumption function becomes smaller. 
D)  the slope of the savings function becomes larger.

Question 16

In a simple economy in which prices are constant and there are no income taxes or imports, the marginal propensity to save is 0.2. If exports increase $50, what impact will that have on aggregate expenditure?

Accepted Answer

A)  increase by $250 
B)  increase by $100 
C)  decrease by $250 
D)  decrease by $100 
A)  increase by $250 
B)  increase by $100 
C)  decrease by $250 
D)  decrease by $100

Question 17

When autonomous expenditure changes, the horizontal distance by which the aggregate demand curve shifts

Accepted Answer

A)  depends on the size of the multiplier. 
B)  depends on the size of the wealth effect. 
C)  is increased by the existence of automatic stabilizers. 
D)  is determined by the inverse of the multiplier. 
A)  depends on the size of the multiplier. 
B)  depends on the size of the wealth effect. 
C)  is increased by the existence of automatic stabilizers. 
D)  is determined by the inverse of the multiplier.

Question 18

What is the difference between movements along the consumption function and shifts in the consumption function? What factor or factors lead to movements along the consumption function and what factor or factors lead to shifts in the consumption function?

Accepted Answer

The consumption function describes the r

Question 19

-The above figure shows the AE curve and 45° line for an economy.
a) If real GDP equals $8 trillion, how do firms' inventories compare to their planned inventories?
b) If real GDP equals $16 trillion, how do firms' inventories compare to their planned inventories?
c) What is the equilibrium level of expenditure? Why is this amount the equilibrium?

Accepted Answer

a) If real GDP equals $8 trillion, aggre

Question 20

The MPC and MPS sum to

Accepted Answer

A)  1. 
B)  a number that exceeds 1. 
C)  100. 
D)  zero. 
A)  1. 
B)  a number that exceeds 1. 
C)  100. 
D)  zero.

Suppose the consumption function is given by the equation C = 100 + 0.8YD, where YD is disposable income. What is the multiplier in this economy?

-In the above figure, an increase in autonomous expenditure is depicted by the movement from point E to

In an economy with no income taxes or imports, the multiplier equals

The marginal propensity to save equals the

If the price level is constant, a change in investment has a multiplied impact on real GDP.

If the multiplier is 6 and exports decrease by $30, what impact will that have on aggregate expenditure? Aggregate expenditure will

The MPC is equal to

A fall in the price level

The size of the multiplier

An economy has no imports and no taxes. The marginal propensity to save is 0.2. The multiplier is so a increase in autonomous expenditure increases equilibrium expenditure by $60 billion.

An increase in disposable income

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

1 - MPC equals

As real disposable income increases, consumption expenditure and saving .

If the MPC increases from 0.75 to 0.80 and there are no income taxes or imports

In a simple economy in which prices are constant and there are no income taxes or imports, the marginal propensity to save is 0.2. If exports increase $50, what impact will that have on aggregate expenditure?

When autonomous expenditure changes, the horizontal distance by which the aggregate demand curve shifts

What is the difference between movements along the consumption function and shifts in the consumption function? What factor or factors lead to movements along the consumption function and what factor or factors lead to shifts in the consumption function?

The MPC and MPS sum to

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

Suppose the consumption function is given by the equation C = 100 + 0.8YD, where YD is disposable income. What is the multiplier in this economy?

-In the above figure, an increase in autonomous expenditure is depicted by the movement from point E to

In an economy with no income taxes or imports, the multiplier equals

The marginal propensity to save equals the

If the price level is constant, a change in investment has a multiplied impact on real GDP.

If the multiplier is 6 and exports decrease by $30, what impact will that have on aggregate expenditure? Aggregate expenditure will

The MPC is equal to

A fall in the price level

The size of the multiplier

An economy has no imports and no taxes. The marginal propensity to save is 0.2. The multiplier is ________ so a ________ increase in autonomous expenditure increases equilibrium expenditure by $60 billion.

An increase in disposable income

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

1 - MPC equals

As real disposable income increases, consumption expenditure ________ and saving ________.

If the MPC increases from 0.75 to 0.80 and there are no income taxes or imports

In a simple economy in which prices are constant and there are no income taxes or imports, the marginal propensity to save is 0.2. If exports increase $50, what impact will that have on aggregate expenditure?

When autonomous expenditure changes, the horizontal distance by which the aggregate demand curve shifts

What is the difference between movements along the consumption function and shifts in the consumption function? What factor or factors lead to movements along the consumption function and what factor or factors lead to shifts in the consumption function?

The MPC and MPS sum to

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

An economy has no imports and no taxes. The marginal propensity to save is 0.2. The multiplier is so a increase in autonomous expenditure increases equilibrium expenditure by $60 billion.

As real disposable income increases, consumption expenditure and saving .