Question 1

Equilibrium expenditure is defined as the level of aggregate expenditure where

Accepted Answer

A)  actual aggregate expenditure equals real GDP. 
B)  total inventories equal zero. 
C)  aggregate planned expenditure equals real GDP. 
D)  spending equals output. 
A)  actual aggregate expenditure equals real GDP. 
B)  total inventories equal zero. 
C)  aggregate planned expenditure equals real GDP. 
D)  spending equals output.

Question 2

If a $75 billion increase in autonomous expenditure increases equilibrium expenditure by $150 billion, then the multiplier must be

Accepted Answer

A)  $225 billion. 
B)  0.5. 
C)  $75 billion. 
D)  2. 
A)  $225 billion. 
B)  0.5. 
C)  $75 billion. 
D)  2.

Question 3

Define induced expenditure and autonomous expenditure. Which expenditure items are induced expenditure and which are autonomous expenditure?

Accepted Answer

Induced expenditure is aggregate expendi

Question 4

-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. What is the level of aggregate planned expenditure when real GDP is equal to $900 billion?

Accepted Answer

A)  $675 
B)  $796 
C)  $814 
D)  $1,714 
A)  $675 
B)  $796 
C)  $814 
D)  $1,714

Question 5

A shift in the aggregate expenditure curve as a result of an increase in the price level results in a

Accepted Answer

A)  leftward shift in the aggregate demand curve. 
B)  movement down along the aggregate demand curve. 
C)  rightward shift in the aggregate demand curve. 
D)  movement up along the aggregate demand curve. 
A)  leftward shift in the aggregate demand curve. 
B)  movement down along the aggregate demand curve. 
C)  rightward shift in the aggregate demand curve. 
D)  movement up along the aggregate demand curve.

Question 6

An increase in the size of the multiplier can be caused by

Accepted Answer

A)  an increase in the MPS. 
B)  an increase in the MPC. 
C)  a decrease in induced expenditures. 
D)  an increase in the marginal propensity to import. 
A)  an increase in the MPS. 
B)  an increase in the MPC. 
C)  a decrease in induced expenditures. 
D)  an increase in the marginal propensity to import.

Question 7

"Similar to imports, U.S. exports depend on the level of U.S. real GDP so that if real GDP increases, U.S. exports increase." Explain whether the previous sentence is correct or incorrect.

Accepted Answer

The sentence is incorrect along two dime

Question 8

When the consumption function lies above the 45-degree line, households

Accepted Answer

A)  spend on consumption an increasing percentage of any increase in income. 
B)  spend on consumption a decreasing percentage of any increase in income. 
C)  are dissaving. 
D)  save all of any increase in income. 
A)  spend on consumption an increasing percentage of any increase in income. 
B)  spend on consumption a decreasing percentage of any increase in income. 
C)  are dissaving. 
D)  save all of any increase in income.

Question 9

For a household, the marginal propensity to save plus the marginal propensity to consume

Accepted Answer

A)  equals 1. 
B)  equals 0. 
C)  equals a number that is larger the larger the household's disposable income. 
D)  equals the household's disposable income. 
A)  equals 1. 
B)  equals 0. 
C)  equals a number that is larger the larger the household's disposable income. 
D)  equals the household's disposable income.

Question 10

Between 2013 and 2014 the government estimates that disposable income in the United States decreased. Consequently, as a result of this change, consumption expenditure

Accepted Answer

A)  remained constant. 
B)  decreased. 
C)  increased. 
D)  More information is needed about how taxes changed between 2013 and 2014. 
A)  remained constant. 
B)  decreased. 
C)  increased. 
D)  More information is needed about how taxes changed between 2013 and 2014.

Question 11

When disposable income is 0, consumption is $2,000. Then

Accepted Answer

A)  saving = $0. 
B)  saving = -$2,000. 
C)  saving = $2,000. 
D)  the MPC = 0.2. 
A)  saving = $0. 
B)  saving = -$2,000. 
C)  saving = $2,000. 
D)  the MPC = 0.2.

Question 12

Suppose that last year the slope of the AE curve was 0.67 and this year the slope of the AE curve changed to 0.8. Which of the following best describes what happens to the multiplier?

Accepted Answer

A)  It rises from 3 to 5. 
B)  It falls from 5 to 3. 
C)  It rises from 1.25 to 1.49. 
D)  It falls from 1.49 to 1.25. 
A)  It rises from 3 to 5. 
B)  It falls from 5 to 3. 
C)  It rises from 1.25 to 1.49. 
D)  It falls from 1.49 to 1.25.

Question 13

-In the above table, the marginal propensity to consume equals

Accepted Answer

A)  0.90. 
B)  0.75. 
C)  0.80. 
D)  0.85. 
A)  0.90. 
B)  0.75. 
C)  0.80. 
D)  0.85.

Question 14

Suppose that the slope of the AE curve is 0.80. If prices remain constant and government expenditure increases by $10 billion, what will be the value of the change in real GDP?

Accepted Answer

A)  $8 billion 
B)  $2 billion 
C)  $10 billion 
D)  $50 billion 
A)  $8 billion 
B)  $2 billion 
C)  $10 billion 
D)  $50 billion

Question 15

The marginal propensity to consume is the

Accepted Answer

A)  fraction of a change in disposable income spent on consumption expenditure. 
B)  amount saving increases when consumption expenditure decreases. 
C)  fraction of a change in saving spent on consumption expenditure. 
D)  fraction of a change in consumption expenditure that is not saved. 
A)  fraction of a change in disposable income spent on consumption expenditure. 
B)  amount saving increases when consumption expenditure decreases. 
C)  fraction of a change in saving spent on consumption expenditure. 
D)  fraction of a change in consumption expenditure that is not saved.

Question 16

-In the above figure, autonomous expenditure along AE1 equals

Accepted Answer

A)  $3 trillion. 
B)  $6 trillion. 
C)  $12 trillion. 
D)  an amount not given in the above answers. 
A)  $3 trillion. 
B)  $6 trillion. 
C)  $12 trillion. 
D)  an amount not given in the above answers.

Question 17

You observe that unplanned inventories are increasing. You predict that there will be

Accepted Answer

A)  a business cycle. 
B)  an expansion. 
C)  a trough. 
D)  a recession. 
A)  a business cycle. 
B)  an expansion. 
C)  a trough. 
D)  a recession.

Question 18

-In the above figure, if real GDP equals $17 trillion

Accepted Answer

A)  actual and planned investment will both increase. 
B)  unplanned inventories will increase. 
C)  actual investment will decrease but planned investment will increase. 
D)  unplanned inventories will decrease. 
A)  actual and planned investment will both increase. 
B)  unplanned inventories will increase. 
C)  actual investment will decrease but planned investment will increase. 
D)  unplanned inventories will decrease.

Question 19

Please explain the relationship between consumption, disposable income and saving.

Accepted Answer

In general, the greater the level of dis

Question 20

The marginal propensity to import reflects the relationship between changes in imports and changes in

Accepted Answer

A)  consumption expenditure. 
B)  investment spending. 
C)  exports. 
D)  real GDP. 
A)  consumption expenditure. 
B)  investment spending. 
C)  exports. 
D)  real GDP.

Equilibrium expenditure is defined as the level of aggregate expenditure where

If a $75 billion increase in autonomous expenditure increases equilibrium expenditure by $150 billion, then the multiplier must be

Define induced expenditure and autonomous expenditure. Which expenditure items are induced expenditure and which are autonomous expenditure?

-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. What is the level of aggregate planned expenditure when real GDP is equal to $900 billion?

A shift in the aggregate expenditure curve as a result of an increase in the price level results in a

An increase in the size of the multiplier can be caused by

"Similar to imports, U.S. exports depend on the level of U.S. real GDP so that if real GDP increases, U.S. exports increase." Explain whether the previous sentence is correct or incorrect.

When the consumption function lies above the 45-degree line, households

For a household, the marginal propensity to save plus the marginal propensity to consume

Between 2013 and 2014 the government estimates that disposable income in the United States decreased. Consequently, as a result of this change, consumption expenditure

When disposable income is 0, consumption is $2,000. Then

Suppose that last year the slope of the AE curve was 0.67 and this year the slope of the AE curve changed to 0.8. Which of the following best describes what happens to the multiplier?

-In the above table, the marginal propensity to consume equals

Suppose that the slope of the AE curve is 0.80. If prices remain constant and government expenditure increases by $10 billion, what will be the value of the change in real GDP?

The marginal propensity to consume is the

-In the above figure, autonomous expenditure along AE₁ equals

You observe that unplanned inventories are increasing. You predict that there will be

-In the above figure, if real GDP equals $17 trillion

Please explain the relationship between consumption, disposable income and saving.

The marginal propensity to import reflects the relationship between changes in imports and changes in

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

Equilibrium expenditure is defined as the level of aggregate expenditure where

If a $75 billion increase in autonomous expenditure increases equilibrium expenditure by $150 billion, then the multiplier must be

Define induced expenditure and autonomous expenditure. Which expenditure items are induced expenditure and which are autonomous expenditure?

-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. What is the level of aggregate planned expenditure when real GDP is equal to $900 billion?

A shift in the aggregate expenditure curve as a result of an increase in the price level results in a

An increase in the size of the multiplier can be caused by

"Similar to imports, U.S. exports depend on the level of U.S. real GDP so that if real GDP increases, U.S. exports increase." Explain whether the previous sentence is correct or incorrect.

When the consumption function lies above the 45-degree line, households

For a household, the marginal propensity to save plus the marginal propensity to consume

Between 2013 and 2014 the government estimates that disposable income in the United States decreased. Consequently, as a result of this change, consumption expenditure

When disposable income is 0, consumption is $2,000. Then

Suppose that last year the slope of the AE curve was 0.67 and this year the slope of the AE curve changed to 0.8. Which of the following best describes what happens to the multiplier?

-In the above table, the marginal propensity to consume equals

Suppose that the slope of the AE curve is 0.80. If prices remain constant and government expenditure increases by $10 billion, what will be the value of the change in real GDP?

The marginal propensity to consume is the

-In the above figure, autonomous expenditure along AE1 equals

You observe that unplanned inventories are increasing. You predict that there will be

-In the above figure, if real GDP equals $17 trillion

Please explain the relationship between consumption, disposable income and saving.

The marginal propensity to import reflects the relationship between changes in imports and changes in

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

-In the above figure, autonomous expenditure along AE₁ equals