Question 1

A consumption function shows a

Accepted Answer

A)  negative (inverse) relationship between consumption expenditure and saving. 
B)  positive (direct) relationship between consumption expenditure and the price level. 
C)  negative (inverse) relationship between consumption expenditure and disposable income. 
D)  positive (direct) relationship between consumption expenditure and disposable income. 
A)  negative (inverse) relationship between consumption expenditure and saving. 
B)  positive (direct) relationship between consumption expenditure and the price level. 
C)  negative (inverse) relationship between consumption expenditure and disposable income. 
D)  positive (direct) relationship between consumption expenditure and disposable income.

Question 2

Suppose the economy has no income taxes or imports. How is the size of the expenditure multiplier related to the marginal propensity to consume? What is the multiplier if the MPC equals 0.25? If the MPC equals 0.50? If the MPC equals 0.90?

Accepted Answer

The multiplier equals @#IMG-DLM& , so the larger t

Question 3

The sum of the components of aggregate expenditure that vary with real GDP equal

Accepted Answer

A)  induced expenditures. 
B)  the MPC. 
C)  autonomous expenditures. 
D)  autonomous consumption. 
A)  induced expenditures. 
B)  the MPC. 
C)  autonomous expenditures. 
D)  autonomous consumption.

Question 4

The marginal propensity to consume is the

Accepted Answer

A)  fraction of total disposable income consumed. 
B)  fraction of GDP consumed. 
C)  fraction of a change in disposable income that is consumed. 
D)  total amount of disposable income consumed. 
A)  fraction of total disposable income consumed. 
B)  fraction of GDP consumed. 
C)  fraction of a change in disposable income that is consumed. 
D)  total amount of disposable income consumed.

Question 5

Between 2012 and 2013 the government reports that investment decreased by $400 billion. The government also estimates that the marginal propensity to save is 0.20. If the entire decrease in investment is autonomous, then real GDP

Accepted Answer

A)  decreases by $2000 billion. 
B)  increases by $2000 billion. 
C)  decreases by $80 billion. 
D)  decreases by $320 billion. 
A)  decreases by $2000 billion. 
B)  increases by $2000 billion. 
C)  decreases by $80 billion. 
D)  decreases by $320 billion.

Question 6

-In the above figure, equilibrium real GDP is equal to

Accepted Answer

A)  $12 trillion. 
B)  $14 trillion. 
C)  $16 trillion. 
D)  $18 trillion. 
A)  $12 trillion. 
B)  $14 trillion. 
C)  $16 trillion. 
D)  $18 trillion.

Question 7

An increase in real GDP leads to

Accepted Answer

A)  a decrease in aggregate planned expenditure. 
B)  no change in aggregate planned expenditure. 
C)  an increase in aggregate planned expenditure. 
D)  a change in aggregate planned expenditure but whether the change is an increase or a decrease depends on whether nominal GDP increases or decreases. 
A)  a decrease in aggregate planned expenditure. 
B)  no change in aggregate planned expenditure. 
C)  an increase in aggregate planned expenditure. 
D)  a change in aggregate planned expenditure but whether the change is an increase or a decrease depends on whether nominal GDP increases or decreases.

Question 8

The expenditure multiplier equals

Accepted Answer

A)  APC - APS where APC is the average propensity to consume and APS is the average propensity to save. 
B)  1/(1 - slope of AE curve). 
C)  MPC - MPS where MPC is the marginal propensity to consume and MPS is the marginal propensity to consume. 
D)  1/(slope of AE curve). 
A)  APC - APS where APC is the average propensity to consume and APS is the average propensity to save. 
B)  1/(1 - slope of AE curve). 
C)  MPC - MPS where MPC is the marginal propensity to consume and MPS is the marginal propensity to consume. 
D)  1/(slope of AE curve).

Question 9

Read the two statements below and indicate if they are true or false.
I. Autonomous expenditures change when GDP changes.
II. Aggregate planned expenditure is the sum of planned consumption expenditure, investment,
Government expenditure, and net exports.

Accepted Answer

A)  I and II are both true. 
B)  I and II are both false. 
C)  I is true and II is false 
D)  I is false and II is true. 
A)  I and II are both true. 
B)  I and II are both false. 
C)  I is true and II is false 
D)  I is false and II is true.

Question 10

The positive relationship between consumption expenditure and disposable income is shown by a movement along the consumption function.

Accepted Answer

A) True 
 B)False

Question 11

-The figure above illustrates an economy's consumption function. What is the marginal propensity to save in this economy?

Accepted Answer

A)  0.67 
B)  1.00 
C)  0.75 
D)  0.33 
A)  0.67 
B)  1.00 
C)  0.75 
D)  0.33

Question 12

-In the above figure, the increase in autonomous expenditure moves the economy 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 13

-In the above figure, consumption and disposable income are equal at

Accepted Answer

A)  any point along the consumption function. 
B)  a saving level of $1 trillion and disposable income level of $4 trillion. 
C)  a disposable income level of $0. 
D)  a disposable income level of $2 trillion. 
A)  any point along the consumption function. 
B)  a saving level of $1 trillion and disposable income level of $4 trillion. 
C)  a disposable income level of $0. 
D)  a disposable income level of $2 trillion.

Question 14

-In the above figure, a change in autonomous consumption to $4 trillion with no change to the MPC would cause the consumption function to

Accepted Answer

A)  become steeper. 
B)  become flatter. 
C)  exhibit a parallel shift downward. 
D)  exhibit a parallel shift upward. 
A)  become steeper. 
B)  become flatter. 
C)  exhibit a parallel shift downward. 
D)  exhibit a parallel shift upward.

Question 15

With consumption expenditure on the vertical axis and disposable income on the horizontal axis, the consumption function intersects the 45-degree line at $8 trillion. This result indicates that

Accepted Answer

A)  autonomous consumption spending is $8 trillion. 
B)  consumption spending is $8 trillion when disposable income is $8 trillion. 
C)  consumption spending is less than $8 trillion because taxes must be paid. 
D)  consumption spending is more than $8 trillion because taxes have been paid. 
A)  autonomous consumption spending is $8 trillion. 
B)  consumption spending is $8 trillion when disposable income is $8 trillion. 
C)  consumption spending is less than $8 trillion because taxes must be paid. 
D)  consumption spending is more than $8 trillion because taxes have been paid.

Question 16

Components of aggregate expenditure include saving, consumption expenditure, investment and government expenditure.

Accepted Answer

A) True 
 B)False

Question 17

In the short run with fixed prices, an increase in investment of $100 billion

Accepted Answer

A)  increases real GDP by $100 billion. 
B)  increases real GDP by less than $100 billion. 
C)  increases real GDP by more than $100 billion. 
D)  decreases real GDP by $100 billion because of the decrease in induced expenditures. 
A)  increases real GDP by $100 billion. 
B)  increases real GDP by less than $100 billion. 
C)  increases real GDP by more than $100 billion. 
D)  decreases real GDP by $100 billion because of the decrease in induced expenditures.

Question 18

What is the relationship between the slope of the aggregate expenditure curve and the multiplier?

Accepted Answer

The multiplier equals @#IMG-DLM& . This

Question 19

The multiplier is greater than 1 because the change in autonomous expenditure leads to

Accepted Answer

A)  more investment. 
B)  more saving. 
C)  less consumption expenditure. 
D)  more induced expenditure. 
A)  more investment. 
B)  more saving. 
C)  less consumption expenditure. 
D)  more induced expenditure.

Question 20

What is the difference between induced and autonomous expenditure? Which components of aggregate expenditure fall under which category?

Accepted Answer

Induced expenditure is expenditure that

A consumption function shows a

Suppose the economy has no income taxes or imports. How is the size of the expenditure multiplier related to the marginal propensity to consume? What is the multiplier if the MPC equals 0.25? If the MPC equals 0.50? If the MPC equals 0.90?

The sum of the components of aggregate expenditure that vary with real GDP equal

The marginal propensity to consume is the

Between 2012 and 2013 the government reports that investment decreased by $400 billion. The government also estimates that the marginal propensity to save is 0.20. If the entire decrease in investment is autonomous, then real GDP

-In the above figure, equilibrium real GDP is equal to

An increase in real GDP leads to

The expenditure multiplier equals

Read the two statements below and indicate if they are true or false. I. Autonomous expenditures change when GDP changes. II. Aggregate planned expenditure is the sum of planned consumption expenditure, investment, Government expenditure, and net exports.

The positive relationship between consumption expenditure and disposable income is shown by a movement along the consumption function.

-The figure above illustrates an economy's consumption function. What is the marginal propensity to save in this economy?

-In the above figure, the increase in autonomous expenditure moves the economy from point E to

-In the above figure, consumption and disposable income are equal at

-In the above figure, a change in autonomous consumption to $4 trillion with no change to the MPC would cause the consumption function to

With consumption expenditure on the vertical axis and disposable income on the horizontal axis, the consumption function intersects the 45-degree line at $8 trillion. This result indicates that

Components of aggregate expenditure include saving, consumption expenditure, investment and government expenditure.

In the short run with fixed prices, an increase in investment of $100 billion

What is the relationship between the slope of the aggregate expenditure curve and the multiplier?

The multiplier is greater than 1 because the change in autonomous expenditure leads to

What is the difference between induced and autonomous expenditure? Which components of aggregate expenditure fall under which category?

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

A consumption function shows a

Suppose the economy has no income taxes or imports. How is the size of the expenditure multiplier related to the marginal propensity to consume? What is the multiplier if the MPC equals 0.25? If the MPC equals 0.50? If the MPC equals 0.90?

The sum of the components of aggregate expenditure that vary with real GDP equal

The marginal propensity to consume is the

Between 2012 and 2013 the government reports that investment decreased by $400 billion. The government also estimates that the marginal propensity to save is 0.20. If the entire decrease in investment is autonomous, then real GDP

-In the above figure, equilibrium real GDP is equal to

An increase in real GDP leads to

The expenditure multiplier equals

Read the two statements below and indicate if they are true or false. I. Autonomous expenditures change when GDP changes. II. Aggregate planned expenditure is the sum of planned consumption expenditure, investment, Government expenditure, and net exports.

The positive relationship between consumption expenditure and disposable income is shown by a movement along the consumption function.

-The figure above illustrates an economy's consumption function. What is the marginal propensity to save in this economy?

-In the above figure, the increase in autonomous expenditure moves the economy from point E to

-In the above figure, consumption and disposable income are equal at

-In the above figure, a change in autonomous consumption to $4 trillion with no change to the MPC would cause the consumption function to

With consumption expenditure on the vertical axis and disposable income on the horizontal axis, the consumption function intersects the 45-degree line at $8 trillion. This result indicates that

Components of aggregate expenditure include saving, consumption expenditure, investment and government expenditure.

In the short run with fixed prices, an increase in investment of $100 billion

What is the relationship between the slope of the aggregate expenditure curve and the multiplier?

The multiplier is greater than 1 because the change in autonomous expenditure leads to

What is the difference between induced and autonomous expenditure? Which components of aggregate expenditure fall under which category?

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