Question 1

-In the above figure, the marginal propensity to save equals

Accepted Answer

A)  0. 
B)  0.10. 
C)  0.20. 
D)  0.90. 
A)  0. 
B)  0.10. 
C)  0.20. 
D)  0.90.

Question 2

If the multiplier is 4.0 and investment decreases by $2.5 billion, the AD curve

Accepted Answer

A)  shifts rightward by $10 billion. 
B)  shifts rightward by less than $10 billion. 
C)  shifts leftward by $10 billion. 
D)  shifts leftward by more than $30 billion. 
A)  shifts rightward by $10 billion. 
B)  shifts rightward by less than $10 billion. 
C)  shifts leftward by $10 billion. 
D)  shifts leftward by more than $30 billion.

Question 3

-In the above figure, AE0 is the aggregate planned expenditure curve and then investment increases by an additional $3 trillion. As a result, the new equilibrium GDP will be

Accepted Answer

A)  $3 trillion. 
B)  $6 trillion. 
C)  $12 trillion. 
D)  None of the above answers is correct. 
A)  $3 trillion. 
B)  $6 trillion. 
C)  $12 trillion. 
D)  None of the above answers is correct.

Question 4

What is the mathematical formula for the multiplier? Why is there a multiplier?

Accepted Answer

In general, the multiplier equals @#IMG-DLM& . If,

Question 5

-In the above table, C is consumption expenditure, I is investment, G is government expenditure, and X - M is net exports. All entries are in dollars. The equilibrium level of real GDP is

Accepted Answer

A)  $2,500. 
B)  $2,400. 
C)  $2,300. 
D)  $2,200. 
A)  $2,500. 
B)  $2,400. 
C)  $2,300. 
D)  $2,200.

Question 6

-In the above figure, if real GDP is below $15 trillion, inventories will be

Accepted Answer

A)  below target levels, so firms will increase production. 
B)  below target levels, so firms will decrease production. 
C)  above target levels, so firms will increase production. 
D)  above target levels, so firms will decrease production. 
A)  below target levels, so firms will increase production. 
B)  below target levels, so firms will decrease production. 
C)  above target levels, so firms will increase production. 
D)  above target levels, so firms will decrease production.

Question 7

How does the economy adjust so that aggregate planned expenditure equals real GDP?

Accepted Answer

Equilibrium occurs when real GDP equals

Question 8

Suppose that the slope of the AE curve is 0.75. Then a $100 increase in autonomous spending means equilibrium expenditure will

Accepted Answer

A)  decrease by $400. 
B)  increase by $400. 
C)  decrease by $750. 
D)  increase by $750. 
A)  decrease by $400. 
B)  increase by $400. 
C)  decrease by $750. 
D)  increase by $750.

Question 9

In a diagram with the consumption function, the ________ shows all points where disposable income equals consumption expenditure.

Accepted Answer

A)  consumption function 
B)  aggregate demand curve 
C)  45-degree line 
D)  saving function 
A)  consumption function 
B)  aggregate demand curve 
C)  45-degree line 
D)  saving function

Question 10

If real GDP is $19 trillion and planned aggregate expenditure is $19.5 trillion, inventories will be

Accepted Answer

A)  below their target and real GDP will increase. 
B)  below their target and real GDP will decrease. 
C)  above their target and real GDP will decrease. 
D)  above their target and real GDP will increase. 
A)  below their target and real GDP will increase. 
B)  below their target and real GDP will decrease. 
C)  above their target and real GDP will decrease. 
D)  above their target and real GDP will increase.

Question 11

If the slope of the AE curve is 0.80, the value of the multiplier is

Accepted Answer

A)  5. 
B)  1.25. 
C)  2. 
D)  indeterminate from the information given. 
A)  5. 
B)  1.25. 
C)  2. 
D)  indeterminate from the information given.

Question 12

If there are no taxes or imports and MPC = 0.75, the multiplier equals

Accepted Answer

A)  0.25. 
B)  1.33. 
C)  4.0. 
D)  6.0. 
A)  0.25. 
B)  1.33. 
C)  4.0. 
D)  6.0.

Question 13

When there is unplanned inventory investment, aggregate planned expenditure is ________ real GDP and actual investment is ________ planned investment.

Accepted Answer

A)  greater than; greater than 
B)  greater than; less than 
C)  less than; greater than 
D)  less than; less than 
A)  greater than; greater than 
B)  greater than; less than 
C)  less than; greater than 
D)  less than; less than

Question 14

"Dissaving" occurs when

Accepted Answer

A)  income exceeds consumption expenditure. 
B)  saving is negative. 
C)  the consumption function is below the 45-degree line drawn from the origin. 
D)  saving is positive. 
A)  income exceeds consumption expenditure. 
B)  saving is negative. 
C)  the consumption function is below the 45-degree line drawn from the origin. 
D)  saving is positive.

Question 15

Discuss the relationship between the business cycle and changes in autonomous expenditures.

Accepted Answer

An increase in autonomous expenditure in

Question 16

The autonomous components of aggregate expenditures are consumption, savings, and investment.

Accepted Answer

A) True 
 B)False

Question 17

At equilibrium expenditure

Accepted Answer

A)  consumers' expenditures on goods and services equal firms' purchases of investment goods. 
B)  firms hold no inventories of raw materials or final goods. 
C)  aggregate planned expenditure equals real GDP. 
D)  aggregate planned expenditure equals real GDP minus net exports. 
A)  consumers' expenditures on goods and services equal firms' purchases of investment goods. 
B)  firms hold no inventories of raw materials or final goods. 
C)  aggregate planned expenditure equals real GDP. 
D)  aggregate planned expenditure equals real GDP minus net exports.

Question 18

An increase in U.S. exports prompted by a rise in foreign incomes represents ________ in the United States.

Accepted Answer

A)  an increase in autonomous expenditure 
B)  a decrease in autonomous expenditure 
C)  an increase in induced expenditure 
D)  a decrease in induced expenditure 
A)  an increase in autonomous expenditure 
B)  a decrease in autonomous expenditure 
C)  an increase in induced expenditure 
D)  a decrease in induced expenditure

Question 19

Explain why the multiplier is greater than 1.

Accepted Answer

The multiplier is greater than 1 because

Question 20

-In the above figure, point b represents the point where planned expenditures are ________ real GDP.

Accepted Answer

A)  less than 
B)  equal to 
C)  greater than 
D)  There is not enough information to answer the question. 
A)  less than 
B)  equal to 
C)  greater than 
D)  There is not enough information to answer the question.

-In the above figure, the marginal propensity to save equals

If the multiplier is 4.0 and investment decreases by $2.5 billion, the AD curve

-In the above figure, AE₀ is the aggregate planned expenditure curve and then investment increases by an additional $3 trillion. As a result, the new equilibrium GDP will be

What is the mathematical formula for the multiplier? Why is there a multiplier?

-In the above table, C is consumption expenditure, I is investment, G is government expenditure, and X - M is net exports. All entries are in dollars. The equilibrium level of real GDP is

-In the above figure, if real GDP is below $15 trillion, inventories will be

How does the economy adjust so that aggregate planned expenditure equals real GDP?

Suppose that the slope of the AE curve is 0.75. Then a $100 increase in autonomous spending means equilibrium expenditure will

In a diagram with the consumption function, the ________ shows all points where disposable income equals consumption expenditure.

If real GDP is $19 trillion and planned aggregate expenditure is $19.5 trillion, inventories will be

If the slope of the AE curve is 0.80, the value of the multiplier is

If there are no taxes or imports and MPC = 0.75, the multiplier equals

When there is unplanned inventory investment, aggregate planned expenditure is real GDP and actual investment is planned investment.

"Dissaving" occurs when

Discuss the relationship between the business cycle and changes in autonomous expenditures.

The autonomous components of aggregate expenditures are consumption, savings, and investment.

At equilibrium expenditure

An increase in U.S. exports prompted by a rise in foreign incomes represents ________ in the United States.

Explain why the multiplier is greater than 1.

-In the above figure, point b represents the point where planned expenditures are ________ real GDP.

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

-In the above figure, the marginal propensity to save equals

If the multiplier is 4.0 and investment decreases by $2.5 billion, the AD curve

-In the above figure, AE0 is the aggregate planned expenditure curve and then investment increases by an additional $3 trillion. As a result, the new equilibrium GDP will be

What is the mathematical formula for the multiplier? Why is there a multiplier?

-In the above table, C is consumption expenditure, I is investment, G is government expenditure, and X - M is net exports. All entries are in dollars. The equilibrium level of real GDP is

-In the above figure, if real GDP is below $15 trillion, inventories will be

How does the economy adjust so that aggregate planned expenditure equals real GDP?

Suppose that the slope of the AE curve is 0.75. Then a $100 increase in autonomous spending means equilibrium expenditure will

In a diagram with the consumption function, the ________ shows all points where disposable income equals consumption expenditure.

If real GDP is $19 trillion and planned aggregate expenditure is $19.5 trillion, inventories will be

If the slope of the AE curve is 0.80, the value of the multiplier is

If there are no taxes or imports and MPC = 0.75, the multiplier equals

When there is unplanned inventory investment, aggregate planned expenditure is ________ real GDP and actual investment is ________ planned investment.

"Dissaving" occurs when

Discuss the relationship between the business cycle and changes in autonomous expenditures.

The autonomous components of aggregate expenditures are consumption, savings, and investment.

At equilibrium expenditure

An increase in U.S. exports prompted by a rise in foreign incomes represents ________ in the United States.

Explain why the multiplier is greater than 1.

-In the above figure, point b represents the point where planned expenditures are ________ real GDP.

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, AE₀ is the aggregate planned expenditure curve and then investment increases by an additional $3 trillion. As a result, the new equilibrium GDP will be

When there is unplanned inventory investment, aggregate planned expenditure is real GDP and actual investment is planned investment.