Question 1

The figure given below represents the saving function of an economy.?Figure 9.1
  
-Refer to Figure 9.1. When disposable income equals zero:

Accepted Answer

A)  autonomous consumption equals zero. 
B)  the maximum amount of saving equals $10 billion. 
C)  autonomous income equals $10 billion. 
D)  autonomous consumption equals $10 billion. 
E)  consumption is negative. 
A)  autonomous consumption equals zero. 
B)  the maximum amount of saving equals $10 billion. 
C)  autonomous income equals $10 billion. 
D)  autonomous consumption equals $10 billion. 
E)  consumption is negative.

Question 2

-Refer to Table 9.2. If a firm purchases the machine by taking out a one-year loan, what is the firm's profit from the investment?

Accepted Answer

A)  $25,500 
B)  $35,000 
C)  $8,000 
D)  $0 
E)  $6,525 
A)  $25,500 
B)  $35,000 
C)  $8,000 
D)  $0 
E)  $6,525

Question 3

The figure given below shows the consumption functions of an economy.?Figure 9.4
  
-Refer to Figure 9.4. The shift of the consumption function from C₁ to C₂ has caused autonomous saving to:

Accepted Answer

A)  decrease by the distance between H and B. 
B)  increase by the distance between C and B. 
C)  decrease by the distance between C and B. 
D)  increase by the distance between H and G. 
E)  decrease by the distance between D and E. 
A)  decrease by the distance between H and B. 
B)  increase by the distance between C and B. 
C)  decrease by the distance between C and B. 
D)  increase by the distance between H and G. 
E)  decrease by the distance between D and E.

Question 4

A key assumption of the Keynesian model of macroeconomics is a fixed _____.

Accepted Answer

A)  interest rate 
B)  price level 
C)  exchange rate 
D)  growth rate 
E)  unemployment level 
A)  interest rate 
B)  price level 
C)  exchange rate 
D)  growth rate 
E)  unemployment level

Question 5

The net export function illustrates that:

Accepted Answer

A)  net exports are a positive function of domestic income. 
B)  net exports are independent of domestic income. 
C)  net exports are a negative function of domestic income. 
D)  exports are a negative function of foreign income. 
E)  exports are independent of foreign income. 
A)  net exports are a positive function of domestic income. 
B)  net exports are independent of domestic income. 
C)  net exports are a negative function of domestic income. 
D)  exports are a negative function of foreign income. 
E)  exports are independent of foreign income.

Question 6

In most derivations of the aggregate expenditures model, investment is assumed to be independent of real GDP. What would be the effect on the aggregate expenditures (AE) function if investment spending were positively related to income?

Accepted Answer

A)  The intercept of the AE function would rise. 
B)  The slope of the AE function would become flatter. 
C)  Both the slope and the intercept of the AE function would increase. 
D)  The slope of the AE function would become steeper. 
E)  The intercept of the AE function would increase, and its slope would become flatter. 
A)  The intercept of the AE function would rise. 
B)  The slope of the AE function would become flatter. 
C)  Both the slope and the intercept of the AE function would increase. 
D)  The slope of the AE function would become steeper. 
E)  The intercept of the AE function would increase, and its slope would become flatter.

Question 7

The figure given below shows the consumption function of a household.?Figure 9.2
  
-In Figure 9.2, an increase in autonomous consumption would be illustrated by:

Accepted Answer

A)  a movement from point A to point D. 
B)  a movement from point A to point B. 
C)  an upward shift of the consumption function. 
D)  a downward shift of the consumption function. 
E)  a movement from point C to point B. 
A)  a movement from point A to point D. 
B)  a movement from point A to point B. 
C)  an upward shift of the consumption function. 
D)  a downward shift of the consumption function. 
E)  a movement from point C to point B.

Question 8

Suppose that the U.S. trade balance is positive. Hence, when the net export function is added to C+I+G, the slope of the U.S. aggregate expenditures function will become steeper.

Accepted Answer

A) True 
 B)False

Question 9

When disposable income is zero, consumption is also zero.

Accepted Answer

A) True 
 B)False

Question 10

The second-largest component of aggregate expenditures in the United States is _____.

Accepted Answer

A)  consumption 
B)  investment 
C)  government expenditure 
D)  imports 
E)  exports 
A)  consumption 
B)  investment 
C)  government expenditure 
D)  imports 
E)  exports

Question 11

The figure given below represents the consumption function of a country.?Figure 9.3
  
-According to Figure 9.3, saving is zero when disposable income is _____.

Accepted Answer

A)  $0 
B)  $400 
C)  $250 
D)  $800 
E)  $300 
A)  $0 
B)  $400 
C)  $250 
D)  $800 
E)  $300

Question 12

Other things equal, when Europeans want to buy more grains from the United States:

Accepted Answer

A)  U.S. imports will increase. 
B)  European exports will increase at every level of domestic income. 
C)  U.S. exports will increase at every level of domestic income. 
D)  the U.S. balance of payments will show a deficit. 
E)  U.S. consumption spending will fall. 
A)  U.S. imports will increase. 
B)  European exports will increase at every level of domestic income. 
C)  U.S. exports will increase at every level of domestic income. 
D)  the U.S. balance of payments will show a deficit. 
E)  U.S. consumption spending will fall.

Question 13

The figure given below shows the aggregate expenditures function of an economy.?Figure 9.5
  
-Refer to Figure 9.5. The amount of government spending is indicated by the distance _____.

Accepted Answer

A)  Y₁Y₂ 
B)  EF 
C)  Y₂Y₃ 
D)  BC 
E)  AB 
A)  Y₁Y₂ 
B)  EF 
C)  Y₂Y₃ 
D)  BC 
E)  AB

Question 14

Which of the following statements is true?

Accepted Answer

A)  Real GDP is a positive function of net exports. 
B)  In the 1980s, the United States experienced a large trade surplus with Japan. 
C)  Positive net exports mean that the domestic country imports more than it exports. 
D)  Total U.S. net exports with Western Europe are zero. 
E)  U.S. net exports are negative because of large trade deficits with other industrial nations. 
A)  Real GDP is a positive function of net exports. 
B)  In the 1980s, the United States experienced a large trade surplus with Japan. 
C)  Positive net exports mean that the domestic country imports more than it exports. 
D)  Total U.S. net exports with Western Europe are zero. 
E)  U.S. net exports are negative because of large trade deficits with other industrial nations.

Question 15

Changes in autonomous consumption will affect the slope of the consumption function.

Accepted Answer

A) True 
 B)False

Question 16

The 45-degree line used in a consumption function represents:

Accepted Answer

A)  the saving function. 
B)  all points at which saving equals disposable income. 
C)  all points at which consumption equals saving. 
D)  all points at which all disposable income is consumed. 
E)  the aggregate income of the economy. 
A)  the saving function. 
B)  all points at which saving equals disposable income. 
C)  all points at which consumption equals saving. 
D)  all points at which all disposable income is consumed. 
E)  the aggregate income of the economy.

Question 17

Which of the following would cause a change in imports?

Accepted Answer

A)  A change in foreign income 
B)  A change in foreign consumption 
C)  A change in domestic tastes for foreign products 
D)  A change in foreign tastes for domestic products 
E)  A change in domestic investment spending 
A)  A change in foreign income 
B)  A change in foreign consumption 
C)  A change in domestic tastes for foreign products 
D)  A change in foreign tastes for domestic products 
E)  A change in domestic investment spending

Question 18

The table given below reports the consumption expenditure of a nation at different levels of disposable income.?
  
-Refer to Table 9.1. Autonomous consumption expenditure in this nation will be equal to:

Accepted Answer

A)  $10,000. 
B)  $5,500. 
C)  $4,500. 
D)  $3,000. 
E)  $4,000. 
A)  $10,000. 
B)  $5,500. 
C)  $4,500. 
D)  $3,000. 
E)  $4,000.

Question 19

The figure given below represents the consumption function of a country.?Figure 9.3
  
-Refer to Figure 9.3. If the marginal propensity to consume is equal to 0.3, then:

Accepted Answer

A)  autonomous consumption would decrease. 
B)  the total amount of dissaving would increase. 
C)  consumption spending would equal disposable income at an income level greater than $400. 
D)  consumption spending would equal disposable income at an income level less than $400. 
E)  consumption spending would equal disposable income at the income level of $400. 
A)  autonomous consumption would decrease. 
B)  the total amount of dissaving would increase. 
C)  consumption spending would equal disposable income at an income level greater than $400. 
D)  consumption spending would equal disposable income at an income level less than $400. 
E)  consumption spending would equal disposable income at the income level of $400.

Question 20

The figure given below shows the consumption function of a household.?Figure 9.2
  
-In Figure 9.2, a decrease in disposable income would be illustrated by:

Accepted Answer

A)  an upward shift of the consumption function. 
B)  a downward shift of the consumption function. 
C)  a leftward movement along the consumption function. 
D)  a rightward movement along the consumption function. 
E)  a movement from point A to point D. 
A)  an upward shift of the consumption function. 
B)  a downward shift of the consumption function. 
C)  a leftward movement along the consumption function. 
D)  a rightward movement along the consumption function. 
E)  a movement from point A to point D.

Exam 9: Aggregate Expenditures

The figure given below represents the saving function of an economy.?Figure 9.1 -Refer to Figure 9.1. When disposable income equals zero:

-Refer to Table 9.2. If a firm purchases the machine by taking out a one-year loan, what is the firm's profit from the investment?

The figure given below shows the consumption functions of an economy.?Figure 9.4 -Refer to Figure 9.4. The shift of the consumption function from C₁ to C₂ has caused autonomous saving to:

A key assumption of the Keynesian model of macroeconomics is a fixed _____.

The net export function illustrates that:

In most derivations of the aggregate expenditures model, investment is assumed to be independent of real GDP. What would be the effect on the aggregate expenditures (AE) function if investment spending were positively related to income?

The figure given below shows the consumption function of a household.?Figure 9.2 -In Figure 9.2, an increase in autonomous consumption would be illustrated by:

Suppose that the U.S. trade balance is positive. Hence, when the net export function is added to C+I+G, the slope of the U.S. aggregate expenditures function will become steeper.

When disposable income is zero, consumption is also zero.

The second-largest component of aggregate expenditures in the United States is _____.

The figure given below represents the consumption function of a country.?Figure 9.3 -According to Figure 9.3, saving is zero when disposable income is _____.

Other things equal, when Europeans want to buy more grains from the United States:

The figure given below shows the aggregate expenditures function of an economy.?Figure 9.5 -Refer to Figure 9.5. The amount of government spending is indicated by the distance _____.

Which of the following statements is true?

Changes in autonomous consumption will affect the slope of the consumption function.

The 45-degree line used in a consumption function represents:

Which of the following would cause a change in imports?

The table given below reports the consumption expenditure of a nation at different levels of disposable income.? -Refer to Table 9.1. Autonomous consumption expenditure in this nation will be equal to:

The figure given below represents the consumption function of a country.?Figure 9.3 -Refer to Figure 9.3. If the marginal propensity to consume is equal to 0.3, then:

The figure given below shows the consumption function of a household.?Figure 9.2 -In Figure 9.2, a decrease in disposable income would be illustrated by:

The Wealth of Nations: Ownership and Economic Freedom

Scarcity and Opportunity Costs

The Market and Price System

The Aggregate Economy

National Income Accounting

An Introduction to the Foreign Exchapterange Market and the Balance of Payments

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Income and Expenditures Equilibrium

Fiscal Policy

Money and Banking

Monetary Policy

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

Economic Growth

Development Economics

Globalization

World Trade Equilibrium

International Trade Restrictions

Exchapterange Rates and Financial Links Between Countries

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