Question 1

The multiplier is larger if the

Accepted Answer

A)  marginal propensity to consume is larger. 
B)  marginal propensity to save is larger. 
C)  income tax rate is higher. 
D)  marginal propensity to import is larger. 
A)  marginal propensity to consume is larger. 
B)  marginal propensity to save is larger. 
C)  income tax rate is higher. 
D)  marginal propensity to import is larger.

Question 2

The government estimates that the multiplier is 2.0. If this estimate is accurate, then the slope of the AE curve is

Accepted Answer

A)  0.20. 
B)  0.80. 
C)  2.00. 
D)  0.50. 
A)  0.20. 
B)  0.80. 
C)  2.00. 
D)  0.50.

Question 3

If investment decreases, the AE curve shifts

Accepted Answer

A)  upward and the AD curve shifts rightward. 
B)  downward and the AD curve shifts leftward. 
C)  upward and there is a movement along the AD curve. 
D)  downward and there is a movement along the AD curve. 
A)  upward and the AD curve shifts rightward. 
B)  downward and the AD curve shifts leftward. 
C)  upward and there is a movement along the AD curve. 
D)  downward and there is a movement along the AD curve.

Question 4

-In the above table, there are no taxes (so that real GDP equals disposable income) and no imports or exports. If real GDP decreases from $6,000 to $5,000, the marginal propensity to consume is

Accepted Answer

A)  -750. 
B)  -0.75. 
C)  0.75. 
D)  0.80. 
A)  -750. 
B)  -0.75. 
C)  0.75. 
D)  0.80.

Question 5

In the economy of St. Maynard Island, autonomous consumption expenditure is $185 million, and the marginal propensity to consume is 0.75. Investment is $150 million, government expenditure is $100 million, and net taxes are $80 million. Investment, government expenditure, and taxes are constant-they do not vary with income. The island does not trade with the rest of the world.
a) Draw the aggregate expenditure curve.
b) What is the island's autonomous aggregate expenditure?
c) What is the size of the multiplier in St. Maynard Island's economy?
d) What is the island's aggregate planned expenditure and what is happening to inventories when real GDP is $1,100 million?
e) What is the economy's equilibrium aggregate expenditure?

Accepted Answer

@#IMG-DLM& a) See the figure above. Because the is

Question 6

If prices are fixed, an increase in aggregate expenditures results in an increase in equilibrium GDP that

Accepted Answer

A)  is greater than the change in aggregate expenditure. 
B)  is equal to the change in aggregate expenditure. 
C)  is less than the change in aggregate expenditure. 
D)  has no necessary relationship to the size of the change in aggregate expenditure. 
A)  is greater than the change in aggregate expenditure. 
B)  is equal to the change in aggregate expenditure. 
C)  is less than the change in aggregate expenditure. 
D)  has no necessary relationship to the size of the change in aggregate expenditure.

Question 7

The slope of the consumption function is

Accepted Answer

A)  less than 1. 
B)  1. 
C)  greater than 1. 
D)  negative. 
A)  less than 1. 
B)  1. 
C)  greater than 1. 
D)  negative.

Question 8

If the MPC equals 0.75, then

Accepted Answer

A)  for every $100 increase in consumption expenditure, disposable income increases by $75. 
B)  consumption expenditure is always more than disposable income. 
C)  for every $100 increase in disposable income, saving increases by $75. 
D)  for every $100 increase in disposable income, saving increases by $25. 
A)  for every $100 increase in consumption expenditure, disposable income increases by $75. 
B)  consumption expenditure is always more than disposable income. 
C)  for every $100 increase in disposable income, saving increases by $75. 
D)  for every $100 increase in disposable income, saving increases by $25.

Question 9

Which of the following statements is CORRECT?

Accepted Answer

A)  Actual aggregate expenditures does not always equal real GDP. 
B)  Planned investment exceeds actual investment when real GDP is greater than aggregate planned expenditures. 
C)  Actual investment exceeds planned investment when real GDP is less than aggregate planned expenditures. 
D)  None of the above is correct. 
A)  Actual aggregate expenditures does not always equal real GDP. 
B)  Planned investment exceeds actual investment when real GDP is greater than aggregate planned expenditures. 
C)  Actual investment exceeds planned investment when real GDP is less than aggregate planned expenditures. 
D)  None of the above is correct.

Question 10

What is the marginal propensity to consume? Can the marginal propensity to consume be greater than 1?

Accepted Answer

The marginal propensity to consume is th

Question 11

Between 2015 and 2016 the government reported that disposable income decreased by $400 billion. If the MPC equals 0.8, then consumption expenditure

Accepted Answer

A)  decreases by $400 billion. 
B)  decreases by $3,200 billion. 
C)  decreases by $320 billion. 
D)  decreases by $32 billion. 
A)  decreases by $400 billion. 
B)  decreases by $3,200 billion. 
C)  decreases by $320 billion. 
D)  decreases by $32 billion.

Question 12

If the MPC is .9 and there are no income taxes or imports, the multiplier for a change in autonomous expenditure equals

Accepted Answer

A)  0.1. 
B)  9.0. 
C)  10.0. 
D)  100.0. 
A)  0.1. 
B)  9.0. 
C)  10.0. 
D)  100.0.

Question 13

"Aggregate planned expenditure is the sum of planned consumption expenditure, investment, government expenditure on goods and services, and exports minus imports." Is the previous statement correct or incorrect?

Accepted Answer

The statement accura

Question 14

Which of the following makes the multiplier larger?

Accepted Answer

A)  an increase in the marginal propensity to import 
B)  an increase in the tax rate 
C)  an increase in the marginal propensity to consume 
D)  an increase in the marginal propensity to save 
A)  an increase in the marginal propensity to import 
B)  an increase in the tax rate 
C)  an increase in the marginal propensity to consume 
D)  an increase in the marginal propensity to save

Question 15

-In the above table, there are no taxes and no imports or exports. If current real GDP is equal to $7,000, then firms will

Accepted Answer

A)  not change production because $7,000 is the equilibrium level of real GDP. 
B)  increase production to rebuild inventories to their target level. 
C)  decrease production to restore inventories to their target level. 
D)  None of the above answers is correct. 
A)  not change production because $7,000 is the equilibrium level of real GDP. 
B)  increase production to rebuild inventories to their target level. 
C)  decrease production to restore inventories to their target level. 
D)  None of the above answers is correct.

Question 16

In a simple economy with no income taxes or imports, prices are constant and the slope of the AE curve is 0.8. In order to increase real GDP by $500 billion, then

Accepted Answer

A)  consumption expenditure needs to increase by $500 billion. 
B)  saving needs to be reduced by $500 billion. 
C)  investment needs to increase by $200 billion. 
D)  investment needs to increase by $100 billion. 
A)  consumption expenditure needs to increase by $500 billion. 
B)  saving needs to be reduced by $500 billion. 
C)  investment needs to increase by $200 billion. 
D)  investment needs to increase by $100 billion.

Question 17

The saving function shows a ________ relationship between ________.

Accepted Answer

A)  positive; disposable income and saving 
B)  positive; disposable income and dissaving 
C)  negative; disposable income and consumption expenditure 
D)  negative; real GDP and saving 
A)  positive; disposable income and saving 
B)  positive; disposable income and dissaving 
C)  negative; disposable income and consumption expenditure 
D)  negative; real GDP and saving

Question 18

One reason the aggregate expenditure curve slopes upward is because ________ increase(s) when real GDP increases.

Accepted Answer

A)  investment 
B)  consumption expenditure 
C)  government expenditure on goods and services 
D)  exports 
A)  investment 
B)  consumption expenditure 
C)  government expenditure on goods and services 
D)  exports

Question 19

Consumers divide disposable income into

Accepted Answer

A)  consumption and taxes. 
B)  saving and taxes. 
C)  consumption, saving, and taxes. 
D)  consumption and saving. 
A)  consumption and taxes. 
B)  saving and taxes. 
C)  consumption, saving, and taxes. 
D)  consumption and saving.

Question 20

-In the above figure, the line AB is called

Accepted Answer

A)  the saving function. 
B)  the consumption function. 
C)  the 45-degree line. 
D)  the expenditure function. 
A)  the saving function. 
B)  the consumption function. 
C)  the 45-degree line. 
D)  the expenditure function.

The multiplier is larger if the

The government estimates that the multiplier is 2.0. If this estimate is accurate, then the slope of the AE curve is

If investment decreases, the AE curve shifts

-In the above table, there are no taxes (so that real GDP equals disposable income) and no imports or exports. If real GDP decreases from $6,000 to $5,000, the marginal propensity to consume is

If prices are fixed, an increase in aggregate expenditures results in an increase in equilibrium GDP that

The slope of the consumption function is

If the MPC equals 0.75, then

Which of the following statements is CORRECT?

What is the marginal propensity to consume? Can the marginal propensity to consume be greater than 1?

Between 2015 and 2016 the government reported that disposable income decreased by $400 billion. If the MPC equals 0.8, then consumption expenditure

If the MPC is .9 and there are no income taxes or imports, the multiplier for a change in autonomous expenditure equals

"Aggregate planned expenditure is the sum of planned consumption expenditure, investment, government expenditure on goods and services, and exports minus imports." Is the previous statement correct or incorrect?

Which of the following makes the multiplier larger?

-In the above table, there are no taxes and no imports or exports. If current real GDP is equal to $7,000, then firms will

In a simple economy with no income taxes or imports, prices are constant and the slope of the AE curve is 0.8. In order to increase real GDP by $500 billion, then

The saving function shows a relationship between .

One reason the aggregate expenditure curve slopes upward is because ________ increase(s) when real GDP increases.

Consumers divide disposable income into

-In the above figure, the line AB is called

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

The multiplier is larger if the

The government estimates that the multiplier is 2.0. If this estimate is accurate, then the slope of the AE curve is

If investment decreases, the AE curve shifts

-In the above table, there are no taxes (so that real GDP equals disposable income) and no imports or exports. If real GDP decreases from $6,000 to $5,000, the marginal propensity to consume is

If prices are fixed, an increase in aggregate expenditures results in an increase in equilibrium GDP that

The slope of the consumption function is

If the MPC equals 0.75, then

Which of the following statements is CORRECT?

What is the marginal propensity to consume? Can the marginal propensity to consume be greater than 1?

Between 2015 and 2016 the government reported that disposable income decreased by $400 billion. If the MPC equals 0.8, then consumption expenditure

If the MPC is .9 and there are no income taxes or imports, the multiplier for a change in autonomous expenditure equals

"Aggregate planned expenditure is the sum of planned consumption expenditure, investment, government expenditure on goods and services, and exports minus imports." Is the previous statement correct or incorrect?

Which of the following makes the multiplier larger?

-In the above table, there are no taxes and no imports or exports. If current real GDP is equal to $7,000, then firms will

In a simple economy with no income taxes or imports, prices are constant and the slope of the AE curve is 0.8. In order to increase real GDP by $500 billion, then

The saving function shows a ________ relationship between ________.

One reason the aggregate expenditure curve slopes upward is because ________ increase(s) when real GDP increases.

Consumers divide disposable income into

-In the above figure, the line AB is called

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 saving function shows a relationship between .