Question 1

A decrease in the price level in an economy implies that _____

Accepted Answer

A)  the spending multiplier will be equal to the marginal propensity to consume. 
B)  there will be an increase in investment. 
C)  there will be a decrease in investment. 
D)  the value of the spending multiplier will be equal to one. 
E)  the value of the spending multiplier will be equal to zero. 
A)  the spending multiplier will be equal to the marginal propensity to consume. 
B)  there will be an increase in investment. 
C)  there will be a decrease in investment. 
D)  the value of the spending multiplier will be equal to one. 
E)  the value of the spending multiplier will be equal to zero.

Question 2

Along the consumption function, an increase in disposable income will _____

Accepted Answer

A)  cause autonomous consumption to rise. 
B)  shift the consumption function upward. 
C)  cause a corresponding downward shift of the saving function. 
D)  cause a movement along the given consumption function. 
E)  shift the consumption function downward. 
A)  cause autonomous consumption to rise. 
B)  shift the consumption function upward. 
C)  cause a corresponding downward shift of the saving function. 
D)  cause a movement along the given consumption function. 
E)  shift the consumption function downward.

Question 3

Which of the following will shift the consumption function upward?

Accepted Answer

A)  a decrease in stock prices 
B)  an increase in stock prices 
C)  a higher price level 
D)  a lower disposable income 
E)  a higher disposable income 
A)  a decrease in stock prices 
B)  an increase in stock prices 
C)  a higher price level 
D)  a lower disposable income 
E)  a higher disposable income

Question 4

If in the income-expenditure model, firms increase their investments by $100 billion, how do they respond to this increased investment spending initially?

Accepted Answer

A)  by increasing inventories by $100 billion 
B)  by drawing down inventories and increasing production by $100 billion 
C)  by increasing the price of goods and services 
D)  by waiting for demand to decrease 
E)  They will not respond to the increased demand, and will lose sales. 
A)  by increasing inventories by $100 billion 
B)  by drawing down inventories and increasing production by $100 billion 
C)  by increasing the price of goods and services 
D)  by waiting for demand to decrease 
E)  They will not respond to the increased demand, and will lose sales.

Question 5

If the marginal propensity to consume (MPC) is 0, the simple multiplier is _____

Accepted Answer

A)  0. 
B)  1. 
C)  10. 
D)  100. 
E)  infinity. 
A)  0. 
B)  1. 
C)  10. 
D)  100. 
E)  infinity.

Question 6

If planned spending exceeds planned output in an economy, the result is a(n) _____

Accepted Answer

A)  increase in inventories. 
B)  decrease in gross domestic product. 
C)  decrease in imports. 
D)  increase in government purchases. 
E)  unintended decrease in inventories. 
A)  increase in inventories. 
B)  decrease in gross domestic product. 
C)  decrease in imports. 
D)  increase in government purchases. 
E)  unintended decrease in inventories.

Question 7

Identify the correct statement.

Accepted Answer

A)  During a recession, investment decreases while consumption increases. 
B)  During a recession, investment increases while consumption decreases. 
C)  During a recession, investment is constant while consumption increases. 
D)  Annual variations in investment are larger than annual variations in consumption. 
E)  Annual variations in investment are smaller than annual variations in consumption. 
A)  During a recession, investment decreases while consumption increases. 
B)  During a recession, investment increases while consumption decreases. 
C)  During a recession, investment is constant while consumption increases. 
D)  Annual variations in investment are larger than annual variations in consumption. 
E)  Annual variations in investment are smaller than annual variations in consumption.

Question 8

Table 9.1
 $$\begin{array}{l}
\text { Table } 9.1\
\begin{array} { c c } 
\begin{array} { c } 
\text { Disposable } \
\text { Income } ( \$ )
\end{array} & \text { Consumption } ( \$ ) \
\hline 1,000 & 800 \
1,100 & 880 \
1,200 & 960 \
1,300 & 1,040 \
1,400 & 1,120
\end{array}
\end{array}$$
-Refer to Table 9.1, which shows the disposable income and consumption of a household. The level of saving at a disposable income of $1,200 is _____

Accepted Answer

A)  $80 
B)  $240 
C)  $950 
D)  $1,200 
E)  $1,300 
A)  $80 
B)  $240 
C)  $950 
D)  $1,200 
E)  $1,300

Question 9

Table 9.2
  
-Refer to Table 9.2, which shows the values of different components of aggregate expenditure of an economy. At the equilibrium level of gross domestic product (GDP), saving equals _____

Accepted Answer

A)  $0.4 trillion. 
B)  $0.1 trillion. 
C)  $0.5 trillion. 
D)  $0.2 trillion. 
E)  $0.3 trillion. 
A)  $0.4 trillion. 
B)  $0.1 trillion. 
C)  $0.5 trillion. 
D)  $0.2 trillion. 
E)  $0.3 trillion.

Question 10

If households save $40 billion less at each level of income and the marginal propensity to consume (MPC) is 0.8, the aggregate expenditure line will _____

Accepted Answer

A)  intersect the 45-degree line at a real GDP of $40 billion. 
B)  shift upward by $40 billion. 
C)  shift downward by $40 billion. 
D)  shift upward by $200 billion because of the multiplier mechanism. 
E)  shift downward by $200 billion because of the multiplier mechanism. 
A)  intersect the 45-degree line at a real GDP of $40 billion. 
B)  shift upward by $40 billion. 
C)  shift downward by $40 billion. 
D)  shift upward by $200 billion because of the multiplier mechanism. 
E)  shift downward by $200 billion because of the multiplier mechanism.

Question 11

The aggregate expenditure line shows total planned spending at each _____

Accepted Answer

A)  consumption level. 
B)  investment level. 
C)  income level, holding the price level constant. 
D)  price level, holding the level of income constant. 
E)  interest rate, holding the price level constant. 
A)  consumption level. 
B)  investment level. 
C)  income level, holding the price level constant. 
D)  price level, holding the level of income constant. 
E)  interest rate, holding the price level constant.

Question 12

Which of the following is not an example of a government purchase?

Accepted Answer

A)  salaries of teachers in public schools 
B)  Chinese toys to be sold in stores 
C)  purchase of military aircrafts 
D)  construction of an interstate highway 
E)  building a public school 
A)  salaries of teachers in public schools 
B)  Chinese toys to be sold in stores 
C)  purchase of military aircrafts 
D)  construction of an interstate highway 
E)  building a public school

Question 13

If the spending multiplier is greater than 1.0, a $200 billion increase in autonomous investment will cause _____

Accepted Answer

A)  equilibrium investment to increase by less than $200 billion. 
B)  equilibrium investment to decrease by more than $200 billion. 
C)  equilibrium real GDP demanded to increase by more than $200 billion. 
D)  equilibrium real GDP demanded to decrease by less than $200 billion. 
E)  equilibrium saving to decrease by more than $200 billion. 
A)  equilibrium investment to increase by less than $200 billion. 
B)  equilibrium investment to decrease by more than $200 billion. 
C)  equilibrium real GDP demanded to increase by more than $200 billion. 
D)  equilibrium real GDP demanded to decrease by less than $200 billion. 
E)  equilibrium saving to decrease by more than $200 billion.

Question 14

Which of the following will shift the consumption function upward?

Accepted Answer

A)  a lower interest rate 
B)  an increase in the interest rate 
C)  an increase in disposable income 
D)  a decrease in disposable income 
E)  expectations of lower prices in the future 
A)  a lower interest rate 
B)  an increase in the interest rate 
C)  an increase in disposable income 
D)  a decrease in disposable income 
E)  expectations of lower prices in the future

Question 15

In an economy without a government and without international transactions, aggregate expenditure at each level of income is equal to _____

Accepted Answer

A)  consumption plus saving. 
B)  planned investment plus saving. 
C)  disposable income plus the price level. 
D)  consumption plus planned investment. 
E)  planned investment minus saving. 
A)  consumption plus saving. 
B)  planned investment plus saving. 
C)  disposable income plus the price level. 
D)  consumption plus planned investment. 
E)  planned investment minus saving.

Question 16

Assume an economy is in equilibrium at a real GDP of $5 trillion. If aggregate expenditure (AE) increases by $1 trillion, the economy's equilibrium real GDP is likely to _____

Accepted Answer

A)  increase by $1 trillion. 
B)  increase by more than $1 trillion. 
C)  increase by less than $1 trillion. 
D)  decrease by $1 trillion. 
E)  decrease by more than $1 trillion. 
A)  increase by $1 trillion. 
B)  increase by more than $1 trillion. 
C)  increase by less than $1 trillion. 
D)  decrease by $1 trillion. 
E)  decrease by more than $1 trillion.

Question 17

The consumption function assumes that _____

Accepted Answer

A)  only disposable income affects consumption. 
B)  only the price level affects consumption. 
C)  many factors other than disposable income affect consumption, and each is allowed to vary along the consumption function. 
D)  factors other than disposable income affect consumption, but those are held constant along the consumption function. 
E)  only consumer expectations affect consumption. 
A)  only disposable income affects consumption. 
B)  only the price level affects consumption. 
C)  many factors other than disposable income affect consumption, and each is allowed to vary along the consumption function. 
D)  factors other than disposable income affect consumption, but those are held constant along the consumption function. 
E)  only consumer expectations affect consumption.

Question 18

Assuming that there is no capital depreciation and no business saving, what is the relationship between GDP and aggregate income in an economy?

Accepted Answer

A)  GDP is greater than aggregate income. 
B)  GDP is less than aggregate income. 
C)  GDP is equal to aggregate income. 
D)  GDP is equal to aggregate income plus investment. 
E)  GDP is unrelated to aggregate income. 
A)  GDP is greater than aggregate income. 
B)  GDP is less than aggregate income. 
C)  GDP is equal to aggregate income. 
D)  GDP is equal to aggregate income plus investment. 
E)  GDP is unrelated to aggregate income.

Question 19

The aggregate demand curve of an economy _____

Accepted Answer

A)  is downward sloping. 
B)  first declines and then becomes positively sloped. 
C)  is horizontal. 
D)  is vertical. 
E)  first rises and then becomes negatively sloped. 
A)  is downward sloping. 
B)  first declines and then becomes positively sloped. 
C)  is horizontal. 
D)  is vertical. 
E)  first rises and then becomes negatively sloped.

Question 20

If a household's income falls from $26,000 to $24,000 and its savings fall from $1,000 to $500, then its _____

Accepted Answer

A)  marginal propensity to consume is 0.98. 
B)  marginal propensity to consume is 1.33. 
C)  marginal propensity to consume is 0.25. 
D)  marginal propensity to save is 0.02. 
E)  marginal propensity to save is 0.25. 
A)  marginal propensity to consume is 0.98. 
B)  marginal propensity to consume is 1.33. 
C)  marginal propensity to consume is 0.25. 
D)  marginal propensity to save is 0.02. 
E)  marginal propensity to save is 0.25.

A decrease in the price level in an economy implies that _____

Along the consumption function, an increase in disposable income will _____

Which of the following will shift the consumption function upward?

If in the income-expenditure model, firms increase their investments by $100 billion, how do they respond to this increased investment spending initially?

If the marginal propensity to consume (MPC) is 0, the simple multiplier is _____

If planned spending exceeds planned output in an economy, the result is a(n) _____

Identify the correct statement.

Table 9.1 Table 9.1 Disposable Income (\ ) Consumption (\ ) 1,000 800 1,100 880 1,200 960 1,300 1,040 1,400 1,120 -Refer to Table 9.1, which shows the disposable income and consumption of a household. The level of saving at a disposable income of $1,200 is _____

Table 9.2 -Refer to Table 9.2, which shows the values of different components of aggregate expenditure of an economy. At the equilibrium level of gross domestic product (GDP), saving equals _____

If households save $40 billion less at each level of income and the marginal propensity to consume (MPC) is 0.8, the aggregate expenditure line will _____

The aggregate expenditure line shows total planned spending at each _____

Which of the following is not an example of a government purchase?

If the spending multiplier is greater than 1.0, a $200 billion increase in autonomous investment will cause _____

Which of the following will shift the consumption function upward?

In an economy without a government and without international transactions, aggregate expenditure at each level of income is equal to _____

Assume an economy is in equilibrium at a real GDP of $5 trillion. If aggregate expenditure (AE) increases by $1 trillion, the economy's equilibrium real GDP is likely to _____

The consumption function assumes that _____

Assuming that there is no capital depreciation and no business saving, what is the relationship between GDP and aggregate income in an economy?

The aggregate demand curve of an economy _____

If a household's income falls from $26,000 to $24,000 and its savings fall from $1,000 to $500, then its _____

The Art and Science of Economic Analysis.

Economic Tools and Economic Systems.

Economic Decision Makers.

Demand, Supply, and Markets.

Introduction to Macroeconomics.

Tracking the U. S. Economy.

Unemployment and Inflation.

Productivity and Growth.

Aggregate Supply.

Fiscal Policy.

Federal Budgets and Public Policy.

Money and the Financial System.

Banking and the Money Supply.

Monetary Theory and Policy.

Macro Policy Debate: Active or Passive?

International Trade.

International Finance.

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Exam 9: Aggregate Demand.

A decrease in the price level in an economy implies that _____

Along the consumption function, an increase in disposable income will _____

Which of the following will shift the consumption function upward?

If in the income-expenditure model, firms increase their investments by $100 billion, how do they respond to this increased investment spending initially?

If the marginal propensity to consume (MPC) is 0, the simple multiplier is _____

If planned spending exceeds planned output in an economy, the result is a(n) _____

Identify the correct statement.

Table 9.1 Table 9.1 Disposable Income (\ ) Consumption (\ ) 1,000 800 1,100 880 1,200 960 1,300 1,040 1,400 1,120 -Refer to Table 9.1, which shows the disposable income and consumption of a household. The level of saving at a disposable income of $1,200 is _____

Table 9.2 -Refer to Table 9.2, which shows the values of different components of aggregate expenditure of an economy. At the equilibrium level of gross domestic product (GDP), saving equals _____

If households save $40 billion less at each level of income and the marginal propensity to consume (MPC) is 0.8, the aggregate expenditure line will _____

The aggregate expenditure line shows total planned spending at each _____

Which of the following is not an example of a government purchase?

If the spending multiplier is greater than 1.0, a $200 billion increase in autonomous investment will cause _____

Which of the following will shift the consumption function upward?

In an economy without a government and without international transactions, aggregate expenditure at each level of income is equal to _____

Assume an economy is in equilibrium at a real GDP of $5 trillion. If aggregate expenditure (AE) increases by $1 trillion, the economy's equilibrium real GDP is likely to _____

The consumption function assumes that _____

Assuming that there is no capital depreciation and no business saving, what is the relationship between GDP and aggregate income in an economy?

The aggregate demand curve of an economy _____

If a household's income falls from $26,000 to $24,000 and its savings fall from $1,000 to $500, then its _____

The Art and Science of Economic Analysis.

Economic Tools and Economic Systems.

Economic Decision Makers.

Demand, Supply, and Markets.

Introduction to Macroeconomics.

Tracking the U. S. Economy.

Unemployment and Inflation.

Productivity and Growth.

Aggregate Supply.

Fiscal Policy.

Federal Budgets and Public Policy.

Money and the Financial System.

Banking and the Money Supply.

Monetary Theory and Policy.

Macro Policy Debate: Active or Passive?

International Trade.

International Finance.

Economic Development.

Filters