Question 1

-The presence of income taxes and imports make the slope of the aggregate expenditure curve

Accepted Answer

A)  the same as it would be without income taxes and exports. 
B)  steeper than it would be without income taxes and exports. 
C)  flatter than it would be without income taxes and exports. 
D)  probably different than it would be without income taxes and exports but income taxes make it steeper while imports make it flatter. 
A)  the same as it would be without income taxes and exports. 
B)  steeper than it would be without income taxes and exports. 
C)  flatter than it would be without income taxes and exports. 
D)  probably different than it would be without income taxes and exports but income taxes make it steeper while imports make it flatter.

Question 2

If the multiplier is 3, a $750,000 increase in autonomous expenditure increases equilibrium expenditure by $2.25 million.

Accepted Answer

A) True 
 B)False

Question 3

Changes in which of the following will affect the size of the multiplier?
I. marginal propensity to import
II. marginal propensity to consume
III. marginal income tax rate

Accepted Answer

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

Question 4

The MPS equals the ratio of

Accepted Answer

A)  saving to real GDP. 
B)  the change in saving to the change in consumption expenditure. 
C)  saving to consumption expenditure. 
D)  None of the above answers is correct. 
A)  saving to real GDP. 
B)  the change in saving to the change in consumption expenditure. 
C)  saving to consumption expenditure. 
D)  None of the above answers is correct.

Question 5

Which of the following concerning the marginal propensity to consume and the consumption function is TRUE?
I. The larger the marginal propensity to consume, the greater the amount of autonomous consumption.
II. The larger the marginal propensity to consume, the steeper the consumption function.

Accepted Answer

A)  I is true. 
B)  II is true. 
C)  I and II are true. 
D)  Neither I nor II is true. 
A)  I is true. 
B)  II is true. 
C)  I and II are true. 
D)  Neither I nor II is true.

Question 6

-In the above figure, autonomous expenditure is equal to

Accepted Answer

A)  $0. 
B)  $12 trillion. 
C)  $14 trillion. 
D)  $16 trillion. 
A)  $0. 
B)  $12 trillion. 
C)  $14 trillion. 
D)  $16 trillion.

Question 7

-In the above table, C is consumption expenditure, I is investment, G is government expenditure, X is exports, and M is imports. All entries are in dollars. If investment increased by $26 to $51 then equilibrium expenditure will

Accepted Answer

A)  increase by $25. 
B)  decrease by $50. 
C)  increase by $100. 
D)  decrease by $100. 
A)  increase by $25. 
B)  decrease by $50. 
C)  increase by $100. 
D)  decrease by $100.

Question 8

Actual aggregate expenditure is

Accepted Answer

A)  always equal to real GDP. 
B)  only equal to real GDP at the equilibrium level of aggregate planned expenditure. 
C)  never greater than real GDP but can be less than real GDP. 
D)  never less than real GDP but can be greater than real GDP. 
A)  always equal to real GDP. 
B)  only equal to real GDP at the equilibrium level of aggregate planned expenditure. 
C)  never greater than real GDP but can be less than real GDP. 
D)  never less than real GDP but can be greater than real GDP.

Question 9

Suppose the consumption function is given by the equation C = 100 + 0.8YD, where YD is disposable income. What is the marginal propensity to save?

Accepted Answer

A)  0.2 
B)  0.8 
C)  2.0 
D)  100 
A)  0.2 
B)  0.8 
C)  2.0 
D)  100

Question 10

Aggregate planned expenditure

Accepted Answer

A)  always equals actual aggregate expenditure. 
B)  is always less than actual aggregate expenditure. 
C)  is always greater than actual aggregate expenditure. 
D)  equals actual aggregate expenditure at the equilibrium level of real GDP. 
A)  always equals actual aggregate expenditure. 
B)  is always less than actual aggregate expenditure. 
C)  is always greater than actual aggregate expenditure. 
D)  equals actual aggregate expenditure at the equilibrium level of real GDP.

Question 11

When disposable income increases from $6 trillion to $6.5 trillion, consumption expenditure increase from $5.5 trillion to $5.9 trillion. The MPC equals

Accepted Answer

A)  0.75. 
B)  0.76. 
C)  0.8. 
D)  0.2. 
A)  0.75. 
B)  0.76. 
C)  0.8. 
D)  0.2.

Question 12

Which of the following does NOT occur as the economy moves from an expansion to a recession?

Accepted Answer

A)  An initial decrease in autonomous spending is the trigger that creates the business cycle turning point. 
B)  The change in planned spending exceeds the change in real GDP. 
C)  The multiplier process reinforces any decrease in spending and pushes the economy into recession. 
D)  Incomes fall during recessions as firms cut production in response to unplanned increases in inventories. 
A)  An initial decrease in autonomous spending is the trigger that creates the business cycle turning point. 
B)  The change in planned spending exceeds the change in real GDP. 
C)  The multiplier process reinforces any decrease in spending and pushes the economy into recession. 
D)  Incomes fall during recessions as firms cut production in response to unplanned increases in inventories.

Question 13

After an increase in autonomous spending, in the long run a change in the price level

Accepted Answer

A)  will make the AE curve steeper. 
B)  will make the AE curve flatter. 
C)  will reduce the effect of the multiplier. 
D)  will not affect the multiplier. 
A)  will make the AE curve steeper. 
B)  will make the AE curve flatter. 
C)  will reduce the effect of the multiplier. 
D)  will not affect the multiplier.

Question 14

Suppose real GDP increases from $13 trillion to $14 trillion and, as a result, consumption expenditure increases from $13 trillion to $13.75 trillion. This result implies that the MPS equals

Accepted Answer

A)  0.75. 
B)  0.25. 
C)  0. 
D)  some amount that cannot be determined without more information. 
A)  0.75. 
B)  0.25. 
C)  0. 
D)  some amount that cannot be determined without more information.

Question 15

An estimate of the MPC in the U.S. is 0.90. Paul Krugman, the 2008 Nobel Prize winner in economics, stated, "... you'd be hard pressed to argue for an overall multiplier as high as 2."
Www)nytimes.com, 11/10/2008
What factors could explain the difference between the MPC and Krugman's estimate of the multiplier?

Accepted Answer

A)  exports and investment 
B)  investment and imports 
C)  imports and taxes 
D)  taxes and investment 
A)  exports and investment 
B)  investment and imports 
C)  imports and taxes 
D)  taxes and investment

Question 16

-The figure shows Tropical Isle's aggregate planned expenditure curve. When aggregate planned expenditure is $2 trillion, aggregate planned expenditure is ________ than real GDP, firms' inventories ________, and firms ________ their production.

Accepted Answer

A)  greater; increase; decrease 
B)  less; decrease; increase 
C)  less; increase; decrease 
D)  greater; decrease; increase 
A)  greater; increase; decrease 
B)  less; decrease; increase 
C)  less; increase; decrease 
D)  greater; decrease; increase

Question 17

Equilibrium real GDP is $500 billion, government expenditures are $80 billion, the MPC = 0.9, and there are no income taxes or imports. Suppose that government expenditures increase to $100 billion. If the price level is constant, after the increase in government expenditures, equilibrium real GDP will be

Accepted Answer

A)  $520 billion. 
B)  $580 billion. 
C)  $600 billion. 
D)  $700 billion. 
A)  $520 billion. 
B)  $580 billion. 
C)  $600 billion. 
D)  $700 billion.

Question 18

Autonomous expenditure refers to

Accepted Answer

A)  aggregate expenditure solely prompted by policy. 
B)  changes in short-run aggregate supply. 
C)  aggregate expenditure that does not change when real GDP changes. 
D)  aggregate expenditure that varies because of changes in real GDP. 
A)  aggregate expenditure solely prompted by policy. 
B)  changes in short-run aggregate supply. 
C)  aggregate expenditure that does not change when real GDP changes. 
D)  aggregate expenditure that varies because of changes in real GDP.

Question 19

The graph of the aggregate expenditure curve has ________ on the y-axis and ________ on the x-axis.

Accepted Answer

A)  real GDP; aggregate planned expenditure 
B)  aggregate actual expenditure; real GDP 
C)  household expenditures; real GDP 
D)  aggregate planned expenditure; real GDP 
A)  real GDP; aggregate planned expenditure 
B)  aggregate actual expenditure; real GDP 
C)  household expenditures; real GDP 
D)  aggregate planned expenditure; real GDP

Question 20

-In the above figure, the multiplier is equal to

Accepted Answer

A)  zero. 
B)  one. 
C)  two. 
D)  three. 
A)  zero. 
B)  one. 
C)  two. 
D)  three.

-The presence of income taxes and imports make the slope of the aggregate expenditure curve

If the multiplier is 3, a $750,000 increase in autonomous expenditure increases equilibrium expenditure by $2.25 million.

Changes in which of the following will affect the size of the multiplier? I. marginal propensity to import II. marginal propensity to consume III. marginal income tax rate

The MPS equals the ratio of

Which of the following concerning the marginal propensity to consume and the consumption function is TRUE? I. The larger the marginal propensity to consume, the greater the amount of autonomous consumption. II. The larger the marginal propensity to consume, the steeper the consumption function.

-In the above figure, autonomous expenditure is equal to

-In the above table, C is consumption expenditure, I is investment, G is government expenditure, X is exports, and M is imports. All entries are in dollars. If investment increased by $26 to $51 then equilibrium expenditure will

Actual aggregate expenditure is

Suppose the consumption function is given by the equation C = 100 + 0.8YD, where YD is disposable income. What is the marginal propensity to save?

Aggregate planned expenditure

When disposable income increases from $6 trillion to $6.5 trillion, consumption expenditure increase from $5.5 trillion to $5.9 trillion. The MPC equals

Which of the following does NOT occur as the economy moves from an expansion to a recession?

After an increase in autonomous spending, in the long run a change in the price level

Suppose real GDP increases from $13 trillion to $14 trillion and, as a result, consumption expenditure increases from $13 trillion to $13.75 trillion. This result implies that the MPS equals

-The figure shows Tropical Isle's aggregate planned expenditure curve. When aggregate planned expenditure is $2 trillion, aggregate planned expenditure is than real GDP, firms' inventories , and firms their production.

Autonomous expenditure refers to

The graph of the aggregate expenditure curve has on the y-axis and on the x-axis.

-In the above figure, the multiplier is equal to

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 presence of income taxes and imports make the slope of the aggregate expenditure curve

If the multiplier is 3, a $750,000 increase in autonomous expenditure increases equilibrium expenditure by $2.25 million.

Changes in which of the following will affect the size of the multiplier? I. marginal propensity to import II. marginal propensity to consume III. marginal income tax rate

The MPS equals the ratio of

Which of the following concerning the marginal propensity to consume and the consumption function is TRUE? I. The larger the marginal propensity to consume, the greater the amount of autonomous consumption. II. The larger the marginal propensity to consume, the steeper the consumption function.

-In the above figure, autonomous expenditure is equal to

-In the above table, C is consumption expenditure, I is investment, G is government expenditure, X is exports, and M is imports. All entries are in dollars. If investment increased by $26 to $51 then equilibrium expenditure will

Actual aggregate expenditure is

Suppose the consumption function is given by the equation C = 100 + 0.8YD, where YD is disposable income. What is the marginal propensity to save?

Aggregate planned expenditure

When disposable income increases from $6 trillion to $6.5 trillion, consumption expenditure increase from $5.5 trillion to $5.9 trillion. The MPC equals

Which of the following does NOT occur as the economy moves from an expansion to a recession?

After an increase in autonomous spending, in the long run a change in the price level

Suppose real GDP increases from $13 trillion to $14 trillion and, as a result, consumption expenditure increases from $13 trillion to $13.75 trillion. This result implies that the MPS equals

-The figure shows Tropical Isle's aggregate planned expenditure curve. When aggregate planned expenditure is $2 trillion, aggregate planned expenditure is ________ than real GDP, firms' inventories ________, and firms ________ their production.

Autonomous expenditure refers to

The graph of the aggregate expenditure curve has ________ on the y-axis and ________ on the x-axis.

-In the above figure, the multiplier is equal to

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 figure shows Tropical Isle's aggregate planned expenditure curve. When aggregate planned expenditure is $2 trillion, aggregate planned expenditure is than real GDP, firms' inventories , and firms their production.

The graph of the aggregate expenditure curve has on the y-axis and on the x-axis.