Question 1

How does an increase in the price level affect the aggregate expenditure curve and the aggregate demand curve?

Accepted Answer

An increase in the price level

Question 2

Taking into account the upward-sloping short-run aggregate supply curve, the short-run effect of an increase in government expenditure on real GDP is that

Accepted Answer

A)  real GDP increases by more in the short run than in the long run. 
B)  real GDP increases by the same amount in the short run as in the long run. 
C)  real GDP increases by less in the short run than in the long run. 
D)  real GDP does not change in the short run because the price level increases. 
A)  real GDP increases by more in the short run than in the long run. 
B)  real GDP increases by the same amount in the short run as in the long run. 
C)  real GDP increases by less in the short run than in the long run. 
D)  real GDP does not change in the short run because the price level increases.

Question 3

Dissaving

Accepted Answer

A)  is equal to consumption expenditure when disposable income is greater than zero. 
B)  is equal to the amount of saving when consumption is less than disposable income. 
C)  is equal to taxation when disposable income is zero. 
D)  occurs when consumption is greater than disposable income. 
A)  is equal to consumption expenditure when disposable income is greater than zero. 
B)  is equal to the amount of saving when consumption is less than disposable income. 
C)  is equal to taxation when disposable income is zero. 
D)  occurs when consumption is greater than disposable income.

Question 4

Does aggregate planned expenditure always equal real GDP?

Accepted Answer

No, aggregate planned expenditure does n

Question 5

A movement along the consumption function is the result of changes in disposable income.

Accepted Answer

A) True 
 B)False

Question 6

-In the above figure, at the equilibrium, induced 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 7

The marginal propensity to consume refers to

Accepted Answer

A)  the additional saving that occurs out of an additional dollar of disposable income. 
B)  the additional consumption expenditure that occurs out of an additional dollar of disposable income. 
C)  the additional consumption expenditure that occurs out of an additional dollar of investment. 
D)  the ratio of total consumption expenditure to total disposable income. 
A)  the additional saving that occurs out of an additional dollar of disposable income. 
B)  the additional consumption expenditure that occurs out of an additional dollar of disposable income. 
C)  the additional consumption expenditure that occurs out of an additional dollar of investment. 
D)  the ratio of total consumption expenditure to total disposable income.

Question 8

The marginal propensity to save is

Accepted Answer

A)  always greater than the marginal propensity to consume. 
B)  equal to the slope of the saving function. 
C)  equal to 1 plus the slope of the consumption function. 
D)  equal to the inverse of the marginal propensity to consume. 
A)  always greater than the marginal propensity to consume. 
B)  equal to the slope of the saving function. 
C)  equal to 1 plus the slope of the consumption function. 
D)  equal to the inverse of the marginal propensity to consume.

Question 9

"When the price level increases, aggregate planned expenditure increases and equilibrium expenditure increases." Is the preceding statement correct or incorrect? Briefly explain your answer.

Accepted Answer

The statement is incorrect. An increase

Question 10

-Based upon the above table, if disposable income is $400 billion, saving equals

Accepted Answer

A)  -$50 billion. 
B)  $0 billion. 
C)  $50 billion. 
D)  $100 billion. 
A)  -$50 billion. 
B)  $0 billion. 
C)  $50 billion. 
D)  $100 billion.

Question 11

In general, the flatter the aggregate expenditure curve, the

Accepted Answer

A)  greater the value of autonomous expenditure. 
B)  larger the marginal propensity to consume. 
C)  larger the multiplier. 
D)  smaller the multiplier. 
A)  greater the value of autonomous expenditure. 
B)  larger the marginal propensity to consume. 
C)  larger the multiplier. 
D)  smaller the multiplier.

Question 12

If investment increases by $150 and, in response, equilibrium expenditure rises by $600

Accepted Answer

A)  the multiplier is 0.25. 
B)  the multiplier is 4.0. 
C)  the MPC is 4. 
D)  the slope of the AE curve is 3.0. 
A)  the multiplier is 0.25. 
B)  the multiplier is 4.0. 
C)  the MPC is 4. 
D)  the slope of the AE curve is 3.0.

Question 13

A fall in the price level shifts the aggregate expenditure curve upward and increases the quantity of real GDP demanded.

Accepted Answer

A) True 
 B)False

Question 14

-The equilibrium in the above figure is shown at point

Accepted Answer

A)  a. 
B)  b. 
C)  c. 
D)  d. 
A)  a. 
B)  b. 
C)  c. 
D)  d.

Question 15

Between 2012 and 2013 real GDP increased by $600 billion and imports increased by $90 billion. Based on these data, the marginal propensity to import equals

Accepted Answer

A)  0.15. 
B)  0.25. 
C)  0.90. 
D)  6.67. 
A)  0.15. 
B)  0.25. 
C)  0.90. 
D)  6.67.

Question 16

Autonomous consumption is equal to

Accepted Answer

A)  saving when consumption equals disposable income. 
B)  consumption when disposable income is zero. 
C)  consumption caused by an increase in disposable income. 
D)  dissaving when disposable income is greater than zero. 
A)  saving when consumption equals disposable income. 
B)  consumption when disposable income is zero. 
C)  consumption caused by an increase in disposable income. 
D)  dissaving when disposable income is greater than zero.

Question 17

Real GDP equals $20 billion and aggregate planned expenditure is $30 billion. There is an unplanned ________ in inventories of ________ and real GDP will ________.

Accepted Answer

A)  increase; $10 billion; increase 
B)  increase; $50 billion; decrease 
C)  decrease; $10 billion; increase 
D)  decrease; $10 billion; decrease 
A)  increase; $10 billion; increase 
B)  increase; $50 billion; decrease 
C)  decrease; $10 billion; increase 
D)  decrease; $10 billion; decrease

Question 18

-Suppose the price level is fixed. If investment increases by $1 trillion and the aggregate expenditure curve is shown in the figure above, equilibrium expenditure will increase by

Accepted Answer

A)  $1 trillion. 
B)  $3 trillion. 
C)  less than $1 trillion. 
D)  indeterminate from the information given. 
A)  $1 trillion. 
B)  $3 trillion. 
C)  less than $1 trillion. 
D)  indeterminate from the information given.

Question 19

If the multiplier is 3.33 and there are no imports or income taxes, then the

Accepted Answer

A)  MPC is 0.7. 
B)  MPS is 0.3. 
C)  Both of the above answers are correct. 
D)  None of the above answers are correct. 
A)  MPC is 0.7. 
B)  MPS is 0.3. 
C)  Both of the above answers are correct. 
D)  None of the above answers are correct.

Question 20

In an article regarding Bangladesh's economy, the author suggests that the government ..."[g]ive double tax breaks on investment dollars. Give tax break to R&D [research and development]. Give tax break on donations to educational institutions." www.groundreport.com, March 24, 2008
As a result of enacting the policies, the AE curve will shift ________ and the AD curve will shift ________.

Accepted Answer

A)  upward; leftward 
B)  upward; rightward 
C)  downward; rightward 
D)  downward; leftward 
A)  upward; leftward 
B)  upward; rightward 
C)  downward; rightward 
D)  downward; leftward

How does an increase in the price level affect the aggregate expenditure curve and the aggregate demand curve?

Taking into account the upward-sloping short-run aggregate supply curve, the short-run effect of an increase in government expenditure on real GDP is that

Dissaving

Does aggregate planned expenditure always equal real GDP?

A movement along the consumption function is the result of changes in disposable income.

-In the above figure, at the equilibrium, induced expenditure is

The marginal propensity to consume refers to

The marginal propensity to save is

"When the price level increases, aggregate planned expenditure increases and equilibrium expenditure increases." Is the preceding statement correct or incorrect? Briefly explain your answer.

-Based upon the above table, if disposable income is $400 billion, saving equals

In general, the flatter the aggregate expenditure curve, the

If investment increases by $150 and, in response, equilibrium expenditure rises by $600

A fall in the price level shifts the aggregate expenditure curve upward and increases the quantity of real GDP demanded.

-The equilibrium in the above figure is shown at point

Between 2012 and 2013 real GDP increased by $600 billion and imports increased by $90 billion. Based on these data, the marginal propensity to import equals

Autonomous consumption is equal to

Real GDP equals $20 billion and aggregate planned expenditure is $30 billion. There is an unplanned in inventories of and real GDP will .

-Suppose the price level is fixed. If investment increases by $1 trillion and the aggregate expenditure curve is shown in the figure above, equilibrium expenditure will increase by

If the multiplier is 3.33 and there are no imports or income taxes, then the

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

How does an increase in the price level affect the aggregate expenditure curve and the aggregate demand curve?

Taking into account the upward-sloping short-run aggregate supply curve, the short-run effect of an increase in government expenditure on real GDP is that

Dissaving

Does aggregate planned expenditure always equal real GDP?

A movement along the consumption function is the result of changes in disposable income.

-In the above figure, at the equilibrium, induced expenditure is

The marginal propensity to consume refers to

The marginal propensity to save is

"When the price level increases, aggregate planned expenditure increases and equilibrium expenditure increases." Is the preceding statement correct or incorrect? Briefly explain your answer.

-Based upon the above table, if disposable income is $400 billion, saving equals

In general, the flatter the aggregate expenditure curve, the

If investment increases by $150 and, in response, equilibrium expenditure rises by $600

A fall in the price level shifts the aggregate expenditure curve upward and increases the quantity of real GDP demanded.

-The equilibrium in the above figure is shown at point

Between 2012 and 2013 real GDP increased by $600 billion and imports increased by $90 billion. Based on these data, the marginal propensity to import equals

Autonomous consumption is equal to

Real GDP equals $20 billion and aggregate planned expenditure is $30 billion. There is an unplanned ________ in inventories of ________ and real GDP will ________.

-Suppose the price level is fixed. If investment increases by $1 trillion and the aggregate expenditure curve is shown in the figure above, equilibrium expenditure will increase by

If the multiplier is 3.33 and there are no imports or income taxes, then the

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

Real GDP equals $20 billion and aggregate planned expenditure is $30 billion. There is an unplanned in inventories of and real GDP will .