Question 1

In the short run, the multiplier typically is less than 1.

Accepted Answer

A) True 
 B)False

Question 2

-In the above figure, if the level of real GDP is $17 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 3

Imports and income taxes make the multiplier larger than it would otherwise be.

Accepted Answer

A) True 
 B)False

Question 4

-In the figure above, the multiplier equals

Accepted Answer

A)  0.5. 
B)  1.67. 
C)  2.5. 
D)  some amount that cannot be calculated without additional information. 
A)  0.5. 
B)  1.67. 
C)  2.5. 
D)  some amount that cannot be calculated without additional information.

Question 5

Suppose that the slope of the AE curve is 0.67. Then a $100 increase in autonomous spending means equilibrium expenditure will

Accepted Answer

A)  decrease by $200. 
B)  increase by $200. 
C)  decrease by $300. 
D)  increase by $300. 
A)  decrease by $200. 
B)  increase by $200. 
C)  decrease by $300. 
D)  increase by $300.

Question 6

If real disposable income increases by $1,500, consumption expenditures will

Accepted Answer

A)  stay constant. 
B)  decrease by less than $1,500. 
C)  increase by less than $1,500. 
D)  increase by more than $1,500. 
A)  stay constant. 
B)  decrease by less than $1,500. 
C)  increase by less than $1,500. 
D)  increase by more than $1,500.

Question 7

-In the above figure the economy is initially at point A on the aggregate expenditure curve AE0. Suppose firms expect profits to increase and decide to increase investment. As a result

Accepted Answer

A)  the AE curve shifts upward to a curve such as AE2. 
B)  the AE curve shifts downward to a curve such as AE1. 
C)  there is a movement along AE0 to a point such as B. 
D)  there is a movement along AE0 to a point such as C. 
A)  the AE curve shifts upward to a curve such as AE2. 
B)  the AE curve shifts downward to a curve such as AE1. 
C)  there is a movement along AE0 to a point such as B. 
D)  there is a movement along AE0 to a point such as C.

Question 8

-In the figure above, negative saving occurs

Accepted Answer

A)  at all levels of disposable income. 
B)  when disposable income is $10 trillion. 
C)  when disposable income is $15 trillion. 
D)  when disposable income is $20 trillion. 
A)  at all levels of disposable income. 
B)  when disposable income is $10 trillion. 
C)  when disposable income is $15 trillion. 
D)  when disposable income is $20 trillion.

Question 9

If real GDP exceeds aggregate planned expenditure, what happens to firm's unplanned inventories?

Accepted Answer

If real GDP exceeds aggregate planned ex

Question 10

How does the concept of the multiplier help explain business cycle turning points?

Accepted Answer

Business cycle turning points are the po

Question 11

If the price level is constant and the slope of the AE curve is 0.75, a decrease in government expenditures of $100 leads to a decrease in real GDP of

Accepted Answer

A)  $25. 
B)  $100. 
C)  $400. 
D)  $800. 
A)  $25. 
B)  $100. 
C)  $400. 
D)  $800.

Question 12

Mauritius, an island off the coast of Africa, competes with other countries producing goods with low-skilled labor. In 2006, it was reported that its "... factories have been exposed to ... competition from China, India and other Asian mass producers." As a result, "the main export industry has seen a 30 per cent reduction in volume..." www.ft.com, 3/13/2006
The decrease in exports represents a change in ________ expenditure and will cause ________.

Accepted Answer

A)  induced; a downward shift in the AE curve and a leftward shift in the AD curve 
B)  autonomous; a downward shift in the AE curve and a leftward shift in the AD curve 
C)  induced; an upward shift in the AE curve and a leftward shift in the AD curve 
D)  autonomous; a downward shift in the AE curve and a rightward shift in the AD curve 
A)  induced; a downward shift in the AE curve and a leftward shift in the AD curve 
B)  autonomous; a downward shift in the AE curve and a leftward shift in the AD curve 
C)  induced; an upward shift in the AE curve and a leftward shift in the AD curve 
D)  autonomous; a downward shift in the AE curve and a rightward shift in the AD curve

Question 13

When the economy is in equilibrium

Accepted Answer

A)  planned investment equals actual investment. 
B)  planned savings will equal zero. 
C)  there can be no unemployment. 
D)  changes in autonomous spending will have no impact on real GDP. 
A)  planned investment equals actual investment. 
B)  planned savings will equal zero. 
C)  there can be no unemployment. 
D)  changes in autonomous spending will have no impact on real GDP.

Question 14

-The data in the above table indicate that the slope of the AE curve is

Accepted Answer

A)  0.30. 
B)  0.50. 
C)  0.90. 
D)  indeterminate from the information given. 
A)  0.30. 
B)  0.50. 
C)  0.90. 
D)  indeterminate from the information given.

Question 15

If there are no income taxes or imports, the multiplier equals

Accepted Answer

A)  1/(1 - marginal propensity to consume). 
B)  1/(1 - marginal propensity to save). 
C)  1/(1 - marginal propensity to import). 
D)  1/(1 - marginal propensity to invest). 
A)  1/(1 - marginal propensity to consume). 
B)  1/(1 - marginal propensity to save). 
C)  1/(1 - marginal propensity to import). 
D)  1/(1 - marginal propensity to invest).

Question 16

The positive slope of the consumption function indicates that

Accepted Answer

A)  consumers spend less out of each extra dollar of income. 
B)  the amount of household wealth is subject to change. 
C)  when prices fall consumers spend more. 
D)  consumers increase their total consumption expenditure when disposable income increases. 
A)  consumers spend less out of each extra dollar of income. 
B)  the amount of household wealth is subject to change. 
C)  when prices fall consumers spend more. 
D)  consumers increase their total consumption expenditure when disposable income increases.

Question 17

The slope of the consumption function

Accepted Answer

A)  is positive and equals 1 - MPC. 
B)  is negative. 
C)  equals the MPC. 
D)  is undefined below the 45-degree line. 
A)  is positive and equals 1 - MPC. 
B)  is negative. 
C)  equals the MPC. 
D)  is undefined below the 45-degree line.

Question 18

The presence of imports ________ the size of the U.S. multiplier because with an increase of U.S. real GDP, ________.

Accepted Answer

A)  increases; U.S. consumers buy goods from other countries 
B)  increases; U.S. firms can sell goods to other countries 
C)  decreases; U.S. consumers buy goods from other countries 
D)  decreases; U.S. firms can sell goods to other countries 
A)  increases; U.S. consumers buy goods from other countries 
B)  increases; U.S. firms can sell goods to other countries 
C)  decreases; U.S. consumers buy goods from other countries 
D)  decreases; U.S. firms can sell goods to other countries

Question 19

-In the figure above, autonomous consumption is

Accepted Answer

A)  zero. 
B)  $5 trillion. 
C)  $10 trillion. 
D)  $15 trillion. 
A)  zero. 
B)  $5 trillion. 
C)  $10 trillion. 
D)  $15 trillion.

Question 20

Which of the following shifts the aggregate demand curve rightward?

Accepted Answer

A)  an increase in the price level 
B)  an increase in the income tax rate 
C)  an increase in government expenditure 
D)  a decrease in investment 
A)  an increase in the price level 
B)  an increase in the income tax rate 
C)  an increase in government expenditure 
D)  a decrease in investment

In the short run, the multiplier typically is less than 1.

-In the above figure, if the level of real GDP is $17 trillion

Imports and income taxes make the multiplier larger than it would otherwise be.

-In the figure above, the multiplier equals

Suppose that the slope of the AE curve is 0.67. Then a $100 increase in autonomous spending means equilibrium expenditure will

If real disposable income increases by $1,500, consumption expenditures will

-In the above figure the economy is initially at point A on the aggregate expenditure curve AE₀. Suppose firms expect profits to increase and decide to increase investment. As a result

-In the figure above, negative saving occurs

If real GDP exceeds aggregate planned expenditure, what happens to firm's unplanned inventories?

How does the concept of the multiplier help explain business cycle turning points?

If the price level is constant and the slope of the AE curve is 0.75, a decrease in government expenditures of $100 leads to a decrease in real GDP of

When the economy is in equilibrium

-The data in the above table indicate that the slope of the AE curve is

If there are no income taxes or imports, the multiplier equals

The positive slope of the consumption function indicates that

The slope of the consumption function

The presence of imports the size of the U.S. multiplier because with an increase of U.S. real GDP, .

-In the figure above, autonomous consumption is

Which of the following shifts the aggregate demand curve rightward?

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

In the short run, the multiplier typically is less than 1.

-In the above figure, if the level of real GDP is $17 trillion

Imports and income taxes make the multiplier larger than it would otherwise be.

-In the figure above, the multiplier equals

Suppose that the slope of the AE curve is 0.67. Then a $100 increase in autonomous spending means equilibrium expenditure will

If real disposable income increases by $1,500, consumption expenditures will

-In the above figure the economy is initially at point A on the aggregate expenditure curve AE0. Suppose firms expect profits to increase and decide to increase investment. As a result

-In the figure above, negative saving occurs

If real GDP exceeds aggregate planned expenditure, what happens to firm's unplanned inventories?

How does the concept of the multiplier help explain business cycle turning points?

If the price level is constant and the slope of the AE curve is 0.75, a decrease in government expenditures of $100 leads to a decrease in real GDP of

When the economy is in equilibrium

-The data in the above table indicate that the slope of the AE curve is

If there are no income taxes or imports, the multiplier equals

The positive slope of the consumption function indicates that

The slope of the consumption function

The presence of imports ________ the size of the U.S. multiplier because with an increase of U.S. real GDP, ________.

-In the figure above, autonomous consumption is

Which of the following shifts the aggregate demand curve rightward?

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

-In the above figure the economy is initially at point A on the aggregate expenditure curve AE₀. Suppose firms expect profits to increase and decide to increase investment. As a result

The presence of imports the size of the U.S. multiplier because with an increase of U.S. real GDP, .