Question 1

When aggregate planned expenditure is greater than real GDP, inventories decrease.

Accepted Answer

A) True 
 B)False

Question 2

Real GDP

Accepted Answer

A)  is always greater than aggregate income. 
B)  is always less than aggregate income. 
C)  might be less than or more than aggregate income depending on consumption. 
D)  is equal to aggregate income. 
A)  is always greater than aggregate income. 
B)  is always less than aggregate income. 
C)  might be less than or more than aggregate income depending on consumption. 
D)  is equal to aggregate income.

Question 3

The U.S. consumption function

Accepted Answer

A)  has shifted upward over time. 
B)  has a positive slope. 
C)  has a slope of about 0.9. 
D)  All of the above answers are correct. 
A)  has shifted upward over time. 
B)  has a positive slope. 
C)  has a slope of about 0.9. 
D)  All of the above answers are correct.

Question 4

-In the above table, equilibrium expenditure is

Accepted Answer

A)  $0.3 trillion. 
B)  $3.0 trillion. 
C)  $4.8 trillion. 
D)  None of the above answers are correct. 
A)  $0.3 trillion. 
B)  $3.0 trillion. 
C)  $4.8 trillion. 
D)  None of the above answers are correct.

Question 5

Expenditure that does NOT depend on real GDP is called

Accepted Answer

A)  spurious expenditure. 
B)  equilibrium expenditure. 
C)  induced expenditure. 
D)  autonomous expenditure. 
A)  spurious expenditure. 
B)  equilibrium expenditure. 
C)  induced expenditure. 
D)  autonomous expenditure.

Question 6

Suppose that in 2019, firms discover that their inventories are falling below their planned levels. Which of the following statements is CORRECT?

Accepted Answer

A)  The level of aggregate savings must equal the level of desired investment. 
B)  Even though firms are trying, they are unable to maximize profits. 
C)  Aggregate demand is less than aggregate supply. 
D)  Real GDP is less than equilibrium expenditure. 
A)  The level of aggregate savings must equal the level of desired investment. 
B)  Even though firms are trying, they are unable to maximize profits. 
C)  Aggregate demand is less than aggregate supply. 
D)  Real GDP is less than equilibrium expenditure.

Question 7

Explain what happens to equilibrium expenditure if autonomous expenditure increases by $100 million.

Accepted Answer

Equilibrium expenditure will increase by

Question 8

Suppose the MPC = 0.90 and there are no taxes or imports. What does the multiplier equal? If the initial equilibrium aggregate expenditure is $12 trillion, what will be the effect on aggregate expenditure of a $100 billion increase in investment?

Accepted Answer

The multiplier equals 1/(1 - MPC), so th

Question 9

At the equilibrium level of aggregate expenditure, what does aggregate planned expenditure equal? What happens at other levels of real GDP to bring about an equilibrium?

Accepted Answer

At the equilibrium level of aggregate ex

Question 10

Suppose that firms find that their inventories are less than planned. In this case, what is the initial relationship between aggregate planned expenditure and real GDP? Using the aggregate expenditure model, what adjustments, if any, take place?

Accepted Answer

If inventories are less than planned, ag

Question 11

If the marginal propensity to import increases, then the

Accepted Answer

A)  multiplier will decrease in value. 
B)  multiplier will increase in value. 
C)  multiplier will not change in value. 
D)  effect on the multiplier will depend on what happens to exports. 
A)  multiplier will decrease in value. 
B)  multiplier will increase in value. 
C)  multiplier will not change in value. 
D)  effect on the multiplier will depend on what happens to exports.

Question 12

Because of the multiplier, a one-time change in expenditure will

Accepted Answer

A)  have little secondary effect on real GDP. 
B)  expand real GDP by an infinite amount. 
C)  generate more additional real GDP than the initial change in expenditure. 
D)  decrease saving and investment activity and thereby decrease future real GDP. 
A)  have little secondary effect on real GDP. 
B)  expand real GDP by an infinite amount. 
C)  generate more additional real GDP than the initial change in expenditure. 
D)  decrease saving and investment activity and thereby decrease future real GDP.

Question 13

The slope of the aggregate expenditure curve increases when the marginal propensity to consume ________ or the marginal propensity to import ________.

Accepted Answer

A)  increases; decreases 
B)  decreases; increases 
C)  decreases; decreases 
D)  increases; increases 
A)  increases; decreases 
B)  decreases; increases 
C)  decreases; decreases 
D)  increases; increases

Question 14

The multiplier is 2.5 and the SAS curve is upward sloping. Investment increases by $20 billion. In the short run, equilibrium real GDP will

Accepted Answer

A)  increase by $50 billion. 
B)  increase by less than $50 billion. 
C)  decrease by $50 billion. 
D)  decrease by less than $50 billion. 
A)  increase by $50 billion. 
B)  increase by less than $50 billion. 
C)  decrease by $50 billion. 
D)  decrease by less than $50 billion.

Question 15

-The figure shows Tropical Isle's aggregate planned expenditure curve. When aggregate planned expenditure is $4 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)  greater; decrease; increase 
D)  less; increase; decrease 
A)  greater; increase; decrease 
B)  less; decrease; increase 
C)  greater; decrease; increase 
D)  less; increase; decrease

Question 16

In general, the steeper the aggregate expenditure curve, the

Accepted Answer

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

Question 17

In the short run, an upward shift in the aggregate expenditure curve leads to a leftward shift in the short-run aggregate supply curve.

Accepted Answer

A) True 
 B)False

Question 18

-In the above figure, autonomous consumption equals

Accepted Answer

A)  0. 
B)  $4 trillion. 
C)  $12 trillion. 
D)  -$4 trillion. 
A)  0. 
B)  $4 trillion. 
C)  $12 trillion. 
D)  -$4 trillion.

Question 19

________ consumption expenditure is greater than disposable income.

Accepted Answer

A)  It is always the case that 
B)  Saving is positive whenever 
C)  Dissaving occurs whenever 
D)  None of the above answers is correct because it is impossible for consumption expenditure to be greater than disposable income. 
A)  It is always the case that 
B)  Saving is positive whenever 
C)  Dissaving occurs whenever 
D)  None of the above answers is correct because it is impossible for consumption expenditure to be greater than disposable income.

Question 20

-Using the data from the above table, the marginal propensity to save is

Accepted Answer

A)  falling as disposable income is rising. 
B)  0 when disposable income is equal to $600. 
C)  constant at 0.25. 
D)  constant at 0.75. 
A)  falling as disposable income is rising. 
B)  0 when disposable income is equal to $600. 
C)  constant at 0.25. 
D)  constant at 0.75.

When aggregate planned expenditure is greater than real GDP, inventories decrease.

Real GDP

The U.S. consumption function

-In the above table, equilibrium expenditure is

Expenditure that does NOT depend on real GDP is called

Suppose that in 2019, firms discover that their inventories are falling below their planned levels. Which of the following statements is CORRECT?

Explain what happens to equilibrium expenditure if autonomous expenditure increases by $100 million.

Suppose the MPC = 0.90 and there are no taxes or imports. What does the multiplier equal? If the initial equilibrium aggregate expenditure is $12 trillion, what will be the effect on aggregate expenditure of a $100 billion increase in investment?

At the equilibrium level of aggregate expenditure, what does aggregate planned expenditure equal? What happens at other levels of real GDP to bring about an equilibrium?

Suppose that firms find that their inventories are less than planned. In this case, what is the initial relationship between aggregate planned expenditure and real GDP? Using the aggregate expenditure model, what adjustments, if any, take place?

If the marginal propensity to import increases, then the

Because of the multiplier, a one-time change in expenditure will

The slope of the aggregate expenditure curve increases when the marginal propensity to consume or the marginal propensity to import .

The multiplier is 2.5 and the SAS curve is upward sloping. Investment increases by $20 billion. In the short run, equilibrium real GDP will

-The figure shows Tropical Isle's aggregate planned expenditure curve. When aggregate planned expenditure is $4 trillion, aggregate planned expenditure is than real GDP, firms' inventories , and firms their production.

In general, the steeper the aggregate expenditure curve, the

In the short run, an upward shift in the aggregate expenditure curve leads to a leftward shift in the short-run aggregate supply curve.

-In the above figure, autonomous consumption equals

________ consumption expenditure is greater than disposable income.

-Using the data from the above table, the marginal propensity to save is

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

When aggregate planned expenditure is greater than real GDP, inventories decrease.

Real GDP

The U.S. consumption function

-In the above table, equilibrium expenditure is

Expenditure that does NOT depend on real GDP is called

Suppose that in 2019, firms discover that their inventories are falling below their planned levels. Which of the following statements is CORRECT?

Explain what happens to equilibrium expenditure if autonomous expenditure increases by $100 million.

Suppose the MPC = 0.90 and there are no taxes or imports. What does the multiplier equal? If the initial equilibrium aggregate expenditure is $12 trillion, what will be the effect on aggregate expenditure of a $100 billion increase in investment?

At the equilibrium level of aggregate expenditure, what does aggregate planned expenditure equal? What happens at other levels of real GDP to bring about an equilibrium?

Suppose that firms find that their inventories are less than planned. In this case, what is the initial relationship between aggregate planned expenditure and real GDP? Using the aggregate expenditure model, what adjustments, if any, take place?

If the marginal propensity to import increases, then the

Because of the multiplier, a one-time change in expenditure will

The slope of the aggregate expenditure curve increases when the marginal propensity to consume ________ or the marginal propensity to import ________.

The multiplier is 2.5 and the SAS curve is upward sloping. Investment increases by $20 billion. In the short run, equilibrium real GDP will

-The figure shows Tropical Isle's aggregate planned expenditure curve. When aggregate planned expenditure is $4 trillion, aggregate planned expenditure is ________ than real GDP, firms' inventories ________, and firms ________ their production.

In general, the steeper the aggregate expenditure curve, the

In the short run, an upward shift in the aggregate expenditure curve leads to a leftward shift in the short-run aggregate supply curve.

-In the above figure, autonomous consumption equals

________ consumption expenditure is greater than disposable income.

-Using the data from the above table, the marginal propensity to save is

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 slope of the aggregate expenditure curve increases when the marginal propensity to consume or the marginal propensity to import .

-The figure shows Tropical Isle's aggregate planned expenditure curve. When aggregate planned expenditure is $4 trillion, aggregate planned expenditure is than real GDP, firms' inventories , and firms their production.