Question 1

All else being equal, autonomous expenditure

Accepted Answer

A)  increases as real GDP increases. 
B)  increases as real GDP decreases. 
C)  does not change with changes in real GDP. 
D)  is assumed to be zero. 
A)  increases as real GDP increases. 
B)  increases as real GDP decreases. 
C)  does not change with changes in real GDP. 
D)  is assumed to be zero.

Question 2

If there are no income taxes or imports, the multiplier equals 1/(1 - marginal propensity to consume).

Accepted Answer

A) True 
 B)False

Question 3

-Using the data in above table, the marginal propensity to consume is

Accepted Answer

A)  increasing as disposable income increases. 
B)  equal to 1.0 when disposable income equals $600. 
C)  constant at 0.75. 
D)  constant at 0.25. 
A)  increasing as disposable income increases. 
B)  equal to 1.0 when disposable income equals $600. 
C)  constant at 0.75. 
D)  constant at 0.25.

Question 4

Business cycle turning points are

Accepted Answer

A)  unaffected by, and unrelated to the multiplier. 
B)  easy to predict. 
C)  brought about by changes in autonomous expenditures that are then subject to the multiplier effect. 
D)  None of the above is correct. 
A)  unaffected by, and unrelated to the multiplier. 
B)  easy to predict. 
C)  brought about by changes in autonomous expenditures that are then subject to the multiplier effect. 
D)  None of the above is correct.

Question 5

"Few if any economists anticipated the extent of the inventory adjustment... Production cutbacks have been much greater than expected. Those cuts have weakened the industrial sector considerably." As a result of these changes, the U.S. government lowered its estimate of fourth-quarter growth in real GDP. www.businessweek.com 3/12/2007
The article suggests that

Accepted Answer

A)  planned expenditures exceeded real GDP in 2006. 
B)  real GDP exceeded planned expenditures in 2006. 
C)  the AE curve shifted upward in 2007. 
D)  the AD curve shifted rightward in 2007. 
A)  planned expenditures exceeded real GDP in 2006. 
B)  real GDP exceeded planned expenditures in 2006. 
C)  the AE curve shifted upward in 2007. 
D)  the AD curve shifted rightward in 2007.

Question 6

Discuss how the marginal propensity to consume, imports, and income tax rates influence the multiplier.

Accepted Answer

The simple multiplier, in an economy wit

Question 7

The larger the slope of the AE curve, the

Accepted Answer

A)  larger the value of the multiplier. 
B)  smaller the value of the multiplier. 
C)  less likely that the multiplier will be affected. 
D)  more likely that the multiplier will be inconsequential. 
A)  larger the value of the multiplier. 
B)  smaller the value of the multiplier. 
C)  less likely that the multiplier will be affected. 
D)  more likely that the multiplier will be inconsequential.

Question 8

Which of the following is TRUE?

Accepted Answer

A)  MPS = MPC 
B)  MPS + MPC = 1 
C)  MPS + MPC = 0 
D)  MPS - MPC = 1 
A)  MPS = MPC 
B)  MPS + MPC = 1 
C)  MPS + MPC = 0 
D)  MPS - MPC = 1

Question 9

-If aggregate planned expenditure is less than real GDP, then in the short run

Accepted Answer

A)  aggregate planned expenditure will increase. 
B)  exports change to restore equilibrium. 
C)  the price level will fall. 
D)  real GDP will decrease. 
A)  aggregate planned expenditure will increase. 
B)  exports change to restore equilibrium. 
C)  the price level will fall. 
D)  real GDP will decrease.

Question 10

-In the above figure, when disposable income is $12 trillion , induced consumption equals

Accepted Answer

A)  $4 trillion. 
B)  $8 trillion. 
C)  $12 trillion. 
D)  $16 trillion. 
A)  $4 trillion. 
B)  $8 trillion. 
C)  $12 trillion. 
D)  $16 trillion.

Question 11

In the aggregate expenditure model, when real GDP is greater than aggregate planned expenditure

Accepted Answer

A)  unplanned inventories are being accumulated. 
B)  inventories are being depleted. 
C)  inventories are not being changed. 
D)  this cannot happen, because the two variables are always equal. 
A)  unplanned inventories are being accumulated. 
B)  inventories are being depleted. 
C)  inventories are not being changed. 
D)  this cannot happen, because the two variables are always equal.

Question 12

When the consumption function becomes steeper,

Accepted Answer

A)  less of every dollar is consumed. 
B)  the saving function also become steeper. 
C)  the MPC rises. 
D)  the MPC falls. 
A)  less of every dollar is consumed. 
B)  the saving function also become steeper. 
C)  the MPC rises. 
D)  the MPC falls.

Question 13

-According to the data in the above table, what is the marginal propensity to save?

Accepted Answer

A)  25. 
B)  0.75. 
C)  0.25. 
D)  1. 
A)  25. 
B)  0.75. 
C)  0.25. 
D)  1.

Question 14

Suppose disposable income increases from $5 trillion to $6 trillion. As a result, consumption expenditure increases from $4 trillion to ________. This result means the MPC equals ________.

Accepted Answer

A)  $4.5 trillion; 4.50 
B)  $5 trillion; 0.80 
C)  $4.8 trillion; 0.80 
D)  $6 trillion; 1.00 
A)  $4.5 trillion; 4.50 
B)  $5 trillion; 0.80 
C)  $4.8 trillion; 0.80 
D)  $6 trillion; 1.00

Question 15

When autonomous expenditure increases, equilibrium aggregate expenditure

Accepted Answer

A)  decreases by an equal amount. 
B)  increases by an equal amount. 
C)  decreases by a greater amount due to the multiplier. 
D)  increases by a greater amount due to the multiplier. 
A)  decreases by an equal amount. 
B)  increases by an equal amount. 
C)  decreases by a greater amount due to the multiplier. 
D)  increases by a greater amount due to the multiplier.

Question 16

The components of aggregate expenditure include
I. imports.
II. consumption.
III. government transfer payments.

Accepted Answer

A)  I and II 
B)  II only 
C)  II and III 
D)  I, II and III 
A)  I and II 
B)  II only 
C)  II and III 
D)  I, II and III

Question 17

If the price level increases, the AE curve shifts

Accepted Answer

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

Question 18

-According to the data in the above table, what is the marginal propensity to consume?

Accepted Answer

A)  75. 
B)  100. 
C)  0.75. 
D)  1. 
A)  75. 
B)  100. 
C)  0.75. 
D)  1.

Question 19

Autonomous expenditure is not influenced by

Accepted Answer

A)  the price level. 
B)  the interest rate. 
C)  real GDP. 
D)  any other variable. 
A)  the price level. 
B)  the interest rate. 
C)  real GDP. 
D)  any other variable.

Question 20

An increase in ________ shifts the AE curve ________ and an increase in ________ shifts the aggregate demand curve ________.

Accepted Answer

A)  autonomous expenditure; upward; the price level; leftward 
B)  the price level; downward; autonomous expenditure; rightward 
C)  the price level; upward; autonomous expenditure; leftward 
D)  autonomous expenditure; upward; the price level; rightward 
A)  autonomous expenditure; upward; the price level; leftward 
B)  the price level; downward; autonomous expenditure; rightward 
C)  the price level; upward; autonomous expenditure; leftward 
D)  autonomous expenditure; upward; the price level; rightward

All else being equal, autonomous expenditure

If there are no income taxes or imports, the multiplier equals 1/(1 - marginal propensity to consume).

-Using the data in above table, the marginal propensity to consume is

Business cycle turning points are

Discuss how the marginal propensity to consume, imports, and income tax rates influence the multiplier.

The larger the slope of the AE curve, the

Which of the following is TRUE?

-If aggregate planned expenditure is less than real GDP, then in the short run

-In the above figure, when disposable income is $12 trillion , induced consumption equals

In the aggregate expenditure model, when real GDP is greater than aggregate planned expenditure

When the consumption function becomes steeper,

-According to the data in the above table, what is the marginal propensity to save?

Suppose disposable income increases from $5 trillion to $6 trillion. As a result, consumption expenditure increases from $4 trillion to . This result means the MPC equals .

When autonomous expenditure increases, equilibrium aggregate expenditure

The components of aggregate expenditure include I. imports. II. consumption. III. government transfer payments.

If the price level increases, the AE curve shifts

-According to the data in the above table, what is the marginal propensity to consume?

Autonomous expenditure is not influenced by

An increase in shifts the AE curve and an increase in shifts the aggregate demand curve .

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

All else being equal, autonomous expenditure

If there are no income taxes or imports, the multiplier equals 1/(1 - marginal propensity to consume).

-Using the data in above table, the marginal propensity to consume is

Business cycle turning points are

Discuss how the marginal propensity to consume, imports, and income tax rates influence the multiplier.

The larger the slope of the AE curve, the

Which of the following is TRUE?

-If aggregate planned expenditure is less than real GDP, then in the short run

-In the above figure, when disposable income is $12 trillion , induced consumption equals

In the aggregate expenditure model, when real GDP is greater than aggregate planned expenditure

When the consumption function becomes steeper,

-According to the data in the above table, what is the marginal propensity to save?

Suppose disposable income increases from $5 trillion to $6 trillion. As a result, consumption expenditure increases from $4 trillion to ________. This result means the MPC equals ________.

When autonomous expenditure increases, equilibrium aggregate expenditure

The components of aggregate expenditure include I. imports. II. consumption. III. government transfer payments.

If the price level increases, the AE curve shifts

-According to the data in the above table, what is the marginal propensity to consume?

Autonomous expenditure is not influenced by

An increase in ________ shifts the AE curve ________ and an increase in ________ shifts the aggregate demand curve ________.

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

Suppose disposable income increases from $5 trillion to $6 trillion. As a result, consumption expenditure increases from $4 trillion to . This result means the MPC equals .

An increase in shifts the AE curve and an increase in shifts the aggregate demand curve .