Question 1

The slope of the consumption function is also known as

Accepted Answer

A)  the consumption ratio 
B)  the average propensity to consume 
C)  autonomous consumption spending 
D)  the marginal propensity to consume 
E)  multiplying propensity to consume 
A)  the consumption ratio 
B)  the average propensity to consume 
C)  autonomous consumption spending 
D)  the marginal propensity to consume 
E)  multiplying propensity to consume

Question 2

If aggregate expenditure is less than GDP,inventories will

Accepted Answer

A)  grow and prices will fall 
B)  grow and GDP will rise 
C)  grow and GDP will fall 
D)  shrink and GDP will rise 
E)  shrink and GDP will fall 
A)  grow and prices will fall 
B)  grow and GDP will rise 
C)  grow and GDP will fall 
D)  shrink and GDP will rise 
E)  shrink and GDP will fall

Question 3

In the short-run macro model,which of the following is the cause of cyclical unemployment?

Accepted Answer

A)  It takes time for people to move to new jobs. 
B)  Insufficient aggregate spending. 
C)  It takes time for firms to find new employees. 
D)  It takes time for people to retrain. 
E)  Fewer people want to work than before. 
A)  It takes time for people to move to new jobs. 
B)  Insufficient aggregate spending. 
C)  It takes time for firms to find new employees. 
D)  It takes time for people to retrain. 
E)  Fewer people want to work than before.

Question 4

-Refer to Figure 11-6.Which point represents the value of equilibrium GDP?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
E)  E or F 
A)  A 
B)  B 
C)  C 
D)  D 
E)  E or F

Question 5

The vertical intercept of the consumption function measures autonomous consumption.It represents the combined impact on consumption spending of all factors other than disposable income.

Accepted Answer

A) True 
 B)False

Question 6

If income increased by $20,000,investment spending is fixed at $5,000,government purchases are fixed at $10,000,net exports are fixed at $500,and aggregate expenditure increases by $15,000,what is the marginal propensity to consume (MPC)?

Accepted Answer

A)  0.25 
B)  0.75 
C)  0.33 
D)  0.50 
E)  0.70 
A)  0.25 
B)  0.75 
C)  0.33 
D)  0.50 
E)  0.70

Question 7

Why is the effect of saving so controversial to economists?

Accepted Answer

A)  Increased saving always has an unambiguously positive effect on the economy 
B)  Increased saving always has an unambiguously negative effect on the economy 
C)  Increased saving may hurt the economy in the short run but help it in the long run 
D)  Decreased saving my hurt the economy in the short run but help it in the long run 
E)  Because different schools of economic thought use different definitions 
A)  Increased saving always has an unambiguously positive effect on the economy 
B)  Increased saving always has an unambiguously negative effect on the economy 
C)  Increased saving may hurt the economy in the short run but help it in the long run 
D)  Decreased saving my hurt the economy in the short run but help it in the long run 
E)  Because different schools of economic thought use different definitions

Question 8

Which of the following would not increase autonomous consumption spending?

Accepted Answer

A)  Expectations of greater future income 
B)  A lower interest rate 
C)  Reduced consumer debt 
D)  Increased household wealth 
E)  Increased disposable income. 
A)  Expectations of greater future income 
B)  A lower interest rate 
C)  Reduced consumer debt 
D)  Increased household wealth 
E)  Increased disposable income.

Question 9

If people regard economic fluctuations as temporary,

Accepted Answer

A)  spending will be less sensitive to changes in income,and the multiplier will be larger. 
B)  spending will be less sensitive to changes in income,and the multiplier will be smaller. 
C)  they will be pessimistic about the future. 
D)  spending will be more sensitive to changes in income. 
E)  spending will be independent of changes in income. 
A)  spending will be less sensitive to changes in income,and the multiplier will be larger. 
B)  spending will be less sensitive to changes in income,and the multiplier will be smaller. 
C)  they will be pessimistic about the future. 
D)  spending will be more sensitive to changes in income. 
E)  spending will be independent of changes in income.

Question 10

In the short-run macro model,planned investment is defined as

Accepted Answer

A)  plant and equipment purchases by business firms plus inventory changes 
B)  plant and equipment purchases by business firms plus new home construction 
C)  plant and equipment purchases by business firms 
D)  new home construction plus inventory changes 
E)  inventory changes 
A)  plant and equipment purchases by business firms plus inventory changes 
B)  plant and equipment purchases by business firms plus new home construction 
C)  plant and equipment purchases by business firms 
D)  new home construction plus inventory changes 
E)  inventory changes

Question 11

Which of the following components of spending is not treated as a given value in the short-run macro model?

Accepted Answer

A)  Net exports 
B)  Imports 
C)  Investment spending 
D)  Consumption spending 
E)  Government spending 
A)  Net exports 
B)  Imports 
C)  Investment spending 
D)  Consumption spending 
E)  Government spending

Question 12

If the marginal propensity to consume is 0.8,what is the value of the expenditure multiplier?

Accepted Answer

A)  0.2 
B)  0.8 
C)  1.25 
D)  5.0 
E)  8.0 
A)  0.2 
B)  0.8 
C)  1.25 
D)  5.0 
E)  8.0

Question 13

What is the difference between actual investment (as defined in GDP)and planned investment?

Accepted Answer

A)  Planned investment does not include unplanned inventory changes;actual investment does. 
B)  There is no difference;they are the same. 
C)  Planned investment does not include depreciation;actual investment does. 
D)  Planned investment includes inventories;actual investment does not. 
E)  Planned investment includes depreciation;actual investment does not. 
A)  Planned investment does not include unplanned inventory changes;actual investment does. 
B)  There is no difference;they are the same. 
C)  Planned investment does not include depreciation;actual investment does. 
D)  Planned investment includes inventories;actual investment does not. 
E)  Planned investment includes depreciation;actual investment does not.

Question 14

Which of the following would lead to a rightward movement along the aggregate expenditure line rather than a shift of the line itself?

Accepted Answer

A)  A reduction of the marginal propensity to consume 
B)  A decrease in income of $100 billion 
C)  An increase in income of $50 billion 
D)  An increase in the interest rate 
E)  A $50 billion decrease in autonomous consumption spending. 
A)  A reduction of the marginal propensity to consume 
B)  A decrease in income of $100 billion 
C)  An increase in income of $50 billion 
D)  An increase in the interest rate 
E)  A $50 billion decrease in autonomous consumption spending.

Question 15

Which of the following is held constant in the short-run macro model?

Accepted Answer

A)  GDP 
B)  Prices 
C)  Investment spending 
D)  Consumption 
E)  The money supply 
A)  GDP 
B)  Prices 
C)  Investment spending 
D)  Consumption 
E)  The money supply

Question 16

In the short-run macro model,cyclical unemployment is caused by insufficient spending.

Accepted Answer

A) True 
 B)False

Question 17

A recession causes

Accepted Answer

A)  transfer payments and corporate profits to increase 
B)  military spending and corporate profits to increase 
C)  unemployment to increase and transfer payments to decrease 
D)  transfer payments to increase and corporate profits to decrease 
E)  household income and government transfer payments to decrease 
A)  transfer payments and corporate profits to increase 
B)  military spending and corporate profits to increase 
C)  unemployment to increase and transfer payments to decrease 
D)  transfer payments to increase and corporate profits to decrease 
E)  household income and government transfer payments to decrease

Question 18

In the short-run macro model,if GDP is $5 trillion and aggregate expenditure is $4 trillion,

Accepted Answer

A)  GDP will rise because inventories will rise 
B)  GDP will fall because inventories will fall 
C)  GDP will remain the same because this is an equilibrium 
D)  investment will decrease 
E)  the government will have to increase taxes 
A)  GDP will rise because inventories will rise 
B)  GDP will fall because inventories will fall 
C)  GDP will remain the same because this is an equilibrium 
D)  investment will decrease 
E)  the government will have to increase taxes

Question 19

-Refer to Figure 11-6.Which point represents the level of autonomous consumption?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
E)  E or F 
A)  A 
B)  B 
C)  C 
D)  D 
E)  E or F

Question 20

In the short-run macro model,the change in inventories will

Accepted Answer

A)  equal output minus aggregate expenditures 
B)  trigger a price change 
C)  equal investment minus depreciation 
D)  equal sales minus investment 
E)  be matched by an equal and opposite change in the subsequent period 
A)  equal output minus aggregate expenditures 
B)  trigger a price change 
C)  equal investment minus depreciation 
D)  equal sales minus investment 
E)  be matched by an equal and opposite change in the subsequent period

The slope of the consumption function is also known as

If aggregate expenditure is less than GDP,inventories will

In the short-run macro model,which of the following is the cause of cyclical unemployment?

-Refer to Figure 11-6.Which point represents the value of equilibrium GDP?

The vertical intercept of the consumption function measures autonomous consumption.It represents the combined impact on consumption spending of all factors other than disposable income.

If income increased by $20,000,investment spending is fixed at $5,000,government purchases are fixed at $10,000,net exports are fixed at $500,and aggregate expenditure increases by $15,000,what is the marginal propensity to consume (MPC)?

Why is the effect of saving so controversial to economists?

Which of the following would not increase autonomous consumption spending?

If people regard economic fluctuations as temporary,

In the short-run macro model,planned investment is defined as

Which of the following components of spending is not treated as a given value in the short-run macro model?

If the marginal propensity to consume is 0.8,what is the value of the expenditure multiplier?

What is the difference between actual investment (as defined in GDP)and planned investment?

Which of the following would lead to a rightward movement along the aggregate expenditure line rather than a shift of the line itself?

Which of the following is held constant in the short-run macro model?

In the short-run macro model,cyclical unemployment is caused by insufficient spending.

A recession causes

In the short-run macro model,if GDP is $5 trillion and aggregate expenditure is $4 trillion,

-Refer to Figure 11-6.Which point represents the level of autonomous consumption?

In the short-run macro model,the change in inventories will

What is Economics?

Scarcity, Choice, and Economic Systems

Supply and Demand

Working With Supply and Demand

What Macroeconomics Tries to Explain

Production, Income, and Employment

The Price Level and Inflation

The Classical Long run Model

Economic Growth and Rising Living Standards

Economic Fluctuations

Fiscal Policy

Money, Banks, and the Federal Reserve

The Money Market and Monetary Policy

Aggregate Demand and Aggregate Supply

Inflation and Monetary Policy

Exchange Rates and Macroeconomic Policy

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Exam 11: The Short-run Macro Model

The slope of the consumption function is also known as

If aggregate expenditure is less than GDP,inventories will

In the short-run macro model,which of the following is the cause of cyclical unemployment?

-Refer to Figure 11-6.Which point represents the value of equilibrium GDP?

The vertical intercept of the consumption function measures autonomous consumption.It represents the combined impact on consumption spending of all factors other than disposable income.

If income increased by $20,000,investment spending is fixed at $5,000,government purchases are fixed at $10,000,net exports are fixed at $500,and aggregate expenditure increases by $15,000,what is the marginal propensity to consume (MPC)?

Why is the effect of saving so controversial to economists?

Which of the following would not increase autonomous consumption spending?

If people regard economic fluctuations as temporary,

In the short-run macro model,planned investment is defined as

Which of the following components of spending is not treated as a given value in the short-run macro model?

If the marginal propensity to consume is 0.8,what is the value of the expenditure multiplier?

What is the difference between actual investment (as defined in GDP)and planned investment?

Which of the following would lead to a rightward movement along the aggregate expenditure line rather than a shift of the line itself?

Which of the following is held constant in the short-run macro model?

In the short-run macro model,cyclical unemployment is caused by insufficient spending.

A recession causes

In the short-run macro model,if GDP is $5 trillion and aggregate expenditure is $4 trillion,

-Refer to Figure 11-6.Which point represents the level of autonomous consumption?

In the short-run macro model,the change in inventories will

What is Economics?

Scarcity, Choice, and Economic Systems

Supply and Demand

Working With Supply and Demand

What Macroeconomics Tries to Explain

Production, Income, and Employment

The Price Level and Inflation

The Classical Long run Model

Economic Growth and Rising Living Standards

Economic Fluctuations

Fiscal Policy

Money, Banks, and the Federal Reserve

The Money Market and Monetary Policy

Aggregate Demand and Aggregate Supply

Inflation and Monetary Policy

Exchange Rates and Macroeconomic Policy

Filters