Question 1

The equation for the spending multiplier is

Accepted Answer

A)  1 / (Cy(1-t) - IMy). 
B)  1 / (1-(Cy(1-t) - IMy)) 
C)  1 / (1-(Cy(1-t) - IMy)). 
D)  1-Cy(1-t) - IMy. 
A)  1 / (Cy(1-t) - IMy). 
B)  1 / (1-(Cy(1-t) - IMy)) 
C)  1 / (1-(Cy(1-t) - IMy)). 
D)  1-Cy(1-t) - IMy.

Question 2

The planned total expenditure equation is equal to

Accepted Answer

A)  A + (MP
E) (r) 
B)  A + (MP
E) (Y) 
C)  A - (MP
E) (Y) 
D)  A - (MP
E) (r) 
A)  A + (MP
E) (r) 
B)  A + (MP
E) (Y) 
C)  A - (MP
E) (Y) 
D)  A - (MP
E) (r)

Question 3

The slope of the planned expenditure line is

Accepted Answer

A)  C0+I+G+GX. 
B)  (C0 + I + G +GX) + (Cy(1-t) - IMy)Y. 
C)  (Cy(1-t) - IMy)Y. 
D)  Cy(1-t) - IMy. 
A)  C0+I+G+GX. 
B)  (C0 + I + G +GX) + (Cy(1-t) - IMy)Y. 
C)  (Cy(1-t) - IMy)Y. 
D)  Cy(1-t) - IMy.

Question 4

If the level of autonomous expenditures is equal to $6000 billion and the marginal propensity to expend is equal to .6, the equilibrium level of national income (Y) is equal to

Accepted Answer

A)  $15000 billion. 
B)  $10000 billion. 
C)  $3600 billion. 
D)  $2400 billion. 
A)  $15000 billion. 
B)  $10000 billion. 
C)  $3600 billion. 
D)  $2400 billion.

Question 5

The level of consumption spending (C) is equal to

Accepted Answer

A)  C0Y + Cy 
B)  C0 + CyY 
C)  C0 + Cy (1-t)Y 
D)  Cy(1-t)Y 
A)  C0Y + Cy 
B)  C0 + CyY 
C)  C0 + Cy (1-t)Y 
D)  Cy(1-t)Y

Question 6

If the marginal propensity to consume increases and the tax rate decreases, the marginal propensity to expend will _______ and the value of the multiplier will ________.

Accepted Answer

A)  increase; increase 
B)  increase; decrease 
C)  decrease; increase 
D)  decrease; decrease 
A)  increase; increase 
B)  increase; decrease 
C)  decrease; increase 
D)  decrease; decrease

Question 7

The automatic working of the government's tax system (and, to a lesser extent, its social welfare programs) functions

Accepted Answer

A)  as an automatic destabilizer. 
B)  as an automatic stabilizer. 
C)  as an automatic change in the money supply. 
D)  as an automatic change in private saving. 
A)  as an automatic destabilizer. 
B)  as an automatic stabilizer. 
C)  as an automatic change in the money supply. 
D)  as an automatic change in private saving.

Question 8

The intercept of the planned expenditure line is

Accepted Answer

A)  the level of autonomous spending. 
B)  the level of autonomous spending plus the marginal propensity to expend. 
C)  the marginal propensity to expend. 
D)  the inverse of the marginal propensity to expend. 
A)  the level of autonomous spending. 
B)  the level of autonomous spending plus the marginal propensity to expend. 
C)  the marginal propensity to expend. 
D)  the inverse of the marginal propensity to expend.

Question 9

In the multiplier process, a decrease in spending

Accepted Answer

A)  causes an increase in production and incomes, which leads to a further increase in spending. 
B)  causes a decrease in production and incomes, which leads to a further decrease in spending. 
C)  causes a decrease in prices and wages, which causes a further decrease in spending. 
D)  causes a decrease in production and incomes, which leads to an increase in spending. 
A)  causes an increase in production and incomes, which leads to a further increase in spending. 
B)  causes a decrease in production and incomes, which leads to a further decrease in spending. 
C)  causes a decrease in prices and wages, which causes a further decrease in spending. 
D)  causes a decrease in production and incomes, which leads to an increase in spending.

Question 10

Each of the following drive a wedge between GDP and consumption spending except

Accepted Answer

A)  depreciation: goods produced that merely replaces obsolete and worn-out capital. 
B)  the tax system. 
C)  government transfer payments. 
D)  private savings. 
A)  depreciation: goods produced that merely replaces obsolete and worn-out capital. 
B)  the tax system. 
C)  government transfer payments. 
D)  private savings.

Question 11

If the tax rate decreases, the marginal propensity to expend will _______ and the value of the multiplier will ________.

Accepted Answer

A)  increase; increase 
B)  increase; decrease 
C)  decrease; increase 
D)  decrease; decrease 
A)  increase; increase 
B)  increase; decrease 
C)  decrease; increase 
D)  decrease; decrease

Question 12

In the flexible-price model, the consequences of a decrease in the marginal propensity to consume include each of the following except

Accepted Answer

A)  an increase in savings. 
B)  a decrease in the price level. 
C)  a decrease in the nominal wage rate. 
D)  an increase in real GDP. 
A)  an increase in savings. 
B)  a decrease in the price level. 
C)  a decrease in the nominal wage rate. 
D)  an increase in real GDP.

Question 13

The largest component of GDP is

Accepted Answer

A)  consumption spending. 
B)  investment spending. 
C)  government purchases. 
D)  net exports. 
A)  consumption spending. 
B)  investment spending. 
C)  government purchases. 
D)  net exports.

Question 14

Economists call the costs associated with changing prices

Accepted Answer

A)  "unnecessary costs." 
B)  "irrelevant costs." 
C)  "menu costs." 
D)  "unlikely costs." 
A)  "unnecessary costs." 
B)  "irrelevant costs." 
C)  "menu costs." 
D)  "unlikely costs."

Question 15

A change in the value of any determinant of any component of the marginal propensity to expend will

Accepted Answer

A)  change the slope of the planned expenditure line. 
B)  change the intercept of the planned expenditure line. 
C)  change the intercept and the slope of the planned expenditure line. 
D)  change the level of potential output. 
A)  change the slope of the planned expenditure line. 
B)  change the intercept of the planned expenditure line. 
C)  change the intercept and the slope of the planned expenditure line. 
D)  change the level of potential output.

Question 16

In the recession or depression phase of the business cycle,

Accepted Answer

A)  production and employment increase while the inflation rate decreases. 
B)  production, employment, and the inflation rate increase. 
C)  production, unemployment, and the inflation rate increase. 
D)  production, employment, and the inflation rate decrease. 
A)  production and employment increase while the inflation rate decreases. 
B)  production, employment, and the inflation rate increase. 
C)  production, unemployment, and the inflation rate increase. 
D)  production, employment, and the inflation rate decrease.

Question 17

The economy will be in equilibrium when

Accepted Answer

A)  planned total expenditure equals real GDP. 
B)  national income equals real GDP. 
C)  planned total expenditure equals planned private savings. 
D)  government purchases equal tax revenue. 
A)  planned total expenditure equals real GDP. 
B)  national income equals real GDP. 
C)  planned total expenditure equals planned private savings. 
D)  government purchases equal tax revenue.

Question 18

If Cy = .8, t = .2, IMy = .1, the value of the multiplier would be

Accepted Answer

A)  .54. 
B)  .46. 
C)  2.174. 
D)  1.852. 
A)  .54. 
B)  .46. 
C)  2.174. 
D)  1.852.

Question 19

In the recession or depression phase of the business cycle, each of the following generally occurs except

Accepted Answer

A)  real GDP decreases. 
B)  the investment spending share of real GDP increases. 
C)  unemployment increases. 
D)  inflation decreases. 
A)  real GDP decreases. 
B)  the investment spending share of real GDP increases. 
C)  unemployment increases. 
D)  inflation decreases.

Question 20

If the autonomous level of spending is equal to $5000 billion, and the marginal propensity to expend decreases from .5 to .4, the equilibrium level of national income will

Accepted Answer

A)  increase from $10000 billion to $12500 billion. 
B)  decrease from $10000 billion to $8333 billion. 
C)  decrease from $2500 billion to $2000 billion. 
D)  increase from $2500 billion to $3000 billion. 
A)  increase from $10000 billion to $12500 billion. 
B)  decrease from $10000 billion to $8333 billion. 
C)  decrease from $2500 billion to $2000 billion. 
D)  increase from $2500 billion to $3000 billion.

The equation for the spending multiplier is

The planned total expenditure equation is equal to

The slope of the planned expenditure line is

If the level of autonomous expenditures is equal to $6000 billion and the marginal propensity to expend is equal to .6, the equilibrium level of national income (Y) is equal to

The level of consumption spending (C) is equal to

If the marginal propensity to consume increases and the tax rate decreases, the marginal propensity to expend will _ and the value of the multiplier will __.

The automatic working of the government's tax system (and, to a lesser extent, its social welfare programs) functions

The intercept of the planned expenditure line is

In the multiplier process, a decrease in spending

Each of the following drive a wedge between GDP and consumption spending except

If the tax rate decreases, the marginal propensity to expend will _ and the value of the multiplier will __.

In the flexible-price model, the consequences of a decrease in the marginal propensity to consume include each of the following except

The largest component of GDP is

Economists call the costs associated with changing prices

A change in the value of any determinant of any component of the marginal propensity to expend will

In the recession or depression phase of the business cycle,

The economy will be in equilibrium when

If C_y = .8, t = .2, IM_y = .1, the value of the multiplier would be

In the recession or depression phase of the business cycle, each of the following generally occurs except

If the autonomous level of spending is equal to $5000 billion, and the marginal propensity to expend decreases from .5 to .4, the equilibrium level of national income will

Introduction to Macroeconomics

Measuring the Macroeconomy

Thinking Like an Economist

The Theory of Economic Growth

The Reality of Economic Growth: History and Prospect

Building Blocks of the Flexible-Price Model

Equilibrium in the Flexible-Price M Odel

Money, Prices, and Inflation

Investment, Net Exports, and Interest Rates: The Is Curve

The Money Market and the LM Curve

The Phillips Curve, Expectations, and Monetary Policy

Stabilization Policy

Budget Balance, National Debt, and Investment

International Economic Policy

Changes in the Macroeconomy and Changes in Macroeconomic Policy

The Future of Macroeconomics

Epilogue

Filters

Exam 9: The Sticky-Price Income-Expenditure Framework: Consumption and the Multiplier

The equation for the spending multiplier is

The planned total expenditure equation is equal to

The slope of the planned expenditure line is

If the level of autonomous expenditures is equal to $6000 billion and the marginal propensity to expend is equal to .6, the equilibrium level of national income (Y) is equal to

The level of consumption spending (C) is equal to

If the marginal propensity to consume increases and the tax rate decreases, the marginal propensity to expend will _______ and the value of the multiplier will ________.

The automatic working of the government's tax system (and, to a lesser extent, its social welfare programs) functions

The intercept of the planned expenditure line is

In the multiplier process, a decrease in spending

Each of the following drive a wedge between GDP and consumption spending except

If the tax rate decreases, the marginal propensity to expend will _______ and the value of the multiplier will ________.

In the flexible-price model, the consequences of a decrease in the marginal propensity to consume include each of the following except

The largest component of GDP is

Economists call the costs associated with changing prices

A change in the value of any determinant of any component of the marginal propensity to expend will

In the recession or depression phase of the business cycle,

The economy will be in equilibrium when

If Cy = .8, t = .2, IMy = .1, the value of the multiplier would be

In the recession or depression phase of the business cycle, each of the following generally occurs except

If the autonomous level of spending is equal to $5000 billion, and the marginal propensity to expend decreases from .5 to .4, the equilibrium level of national income will

Introduction to Macroeconomics

Measuring the Macroeconomy

Thinking Like an Economist

The Theory of Economic Growth

The Reality of Economic Growth: History and Prospect

Building Blocks of the Flexible-Price Model

Equilibrium in the Flexible-Price M Odel

Money, Prices, and Inflation

Investment, Net Exports, and Interest Rates: The Is Curve

The Money Market and the LM Curve

The Phillips Curve, Expectations, and Monetary Policy

Stabilization Policy

Budget Balance, National Debt, and Investment

International Economic Policy

Changes in the Macroeconomy and Changes in Macroeconomic Policy

The Future of Macroeconomics

Epilogue

Filters

If the marginal propensity to consume increases and the tax rate decreases, the marginal propensity to expend will _ and the value of the multiplier will __.

If the tax rate decreases, the marginal propensity to expend will _ and the value of the multiplier will __.

If C_y = .8, t = .2, IM_y = .1, the value of the multiplier would be