Exam 9: Aggregate Expenditure and Output in the Short Run

Refer to Figure 9.2 for the following questions. Figure 9.2 -If the economy is currently at point N in Figure 9.2, which of the following could cause it to move to point K?

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Question 1

Correct Answer:

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A

Explain how the aggregate demand curve is derived from the 45° aggregate expenditure diagram. _ _

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Question 2

Correct Answer:

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When the price level changes, this causes a shift in the aggregate expenditure (AE)line. An increase in the price level will shift the AE line downwards, corresponding with a lower level of equilibrium real GDP. A decrease in the price level will shift the AE line upwards, corresponding with a higher level of equilibrium real GDP. These different price levels and corresponding levels of real GDP can then be plotted on an aggregate demand curve, which represents the relationship between the price level and real GDP.

How will the following affect Australian net exports? a.Australia experiences a long period of inflation relative to other countries. b.Australia experiences a recession. _ _

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Question 3

Correct Answer:

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a.If inflation in Australia is higher than inflation in other countries, then prices of goods and services increase more rapidly than the prices of goods and services of other countries. This difference in the price levels decreases the demand for Australian goods and services relative to foreign goods and services, ceteris paribus. Australian exports decrease, imports increase and Australian net exports decline.
b.As GDP decreases in Australia due to a recession, the incomes of households fall. Households respond by lowering their purchases of goods and services. Some of the decline in purchases includes domestic goods and services and some of the decline includes foreign produced goods and services. This essentially lowers imports. Assuming that exports do not change, net exports will rise.

John Maynard Keynes argued that if many households decide at the same time to increase saving and reduce spending:

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Question 4

A decrease in the price level in Australia will shift the aggregate expenditure line downward.

(True/False)

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Question 5

Aggregate expenditure includes spending on:

(Multiple Choice)

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Question 6

consumption is consumption that depends upon the level of GDP and consumption is consumption that does not depend upon the level of GDP.

(Multiple Choice)

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Question 7

Real investment tends to follow a smooth upward path over time; however, consumption spending tends to fluctuate significantly according to consumer income levels and spending patterns.

(True/False)

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Question 8

An increase in the price level in Australia, ceteris paribus, will reduce imports and increase exports.

(True/False)

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Question 9

Consumption spending is $6 million, planned investment spending is $8 million, unplanned investment spending is -$2 million, government purchases are $10 million, and net export spending is $2 million. What is the GDP?

(Multiple Choice)

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Question 10

If aggregate expenditure is less than GDP, then inventories rise and real GDP falls.

(True/False)

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Question 11

Throughout most of the 2000s, including 2016, net exports in Australia:

(Multiple Choice)

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Question 12

Are savings and spending on imports included in aggregate expenditure? _ _

(Essay)

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Question 13

The ratio of the increase in to the increase in is called the 'multiplier'.

(Multiple Choice)

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Question 14

If economists forecast an increase in aggregate expenditure, real GDP will rise.

(True/False)

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Question 15

Household spending on goods and services is known as:

(Multiple Choice)

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Question 16

Consumption spending is $6 million, planned investment spending is $8 million, unplanned investment spending is $2 million, government purchases are $10 million, and net export spending is $2 million. What is the aggregate expenditure?

(Multiple Choice)

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Question 17

Household wealth is defined as the value of a household's:

(Multiple Choice)

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Question 18

When aggregate expenditure is more than GDP, which of the following is true?

(Multiple Choice)

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Question 19

Which of the following will raise consumer expenditure?

(Multiple Choice)

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Question 20

Refer to Figure 9.2 for the following questions. Figure 9.2 -If the economy is currently at point N in Figure 9.2, which of the following could cause it to move to point K?

Explain how the aggregate demand curve is derived from the 45° aggregate expenditure diagram. _ _

How will the following affect Australian net exports? a.Australia experiences a long period of inflation relative to other countries. b.Australia experiences a recession. _ _

John Maynard Keynes argued that if many households decide at the same time to increase saving and reduce spending:

A decrease in the price level in Australia will shift the aggregate expenditure line downward.

Aggregate expenditure includes spending on:

consumption is consumption that depends upon the level of GDP and consumption is consumption that does not depend upon the level of GDP.

Real investment tends to follow a smooth upward path over time; however, consumption spending tends to fluctuate significantly according to consumer income levels and spending patterns.

An increase in the price level in Australia, ceteris paribus, will reduce imports and increase exports.

Consumption spending is $6 million, planned investment spending is $8 million, unplanned investment spending is -$2 million, government purchases are $10 million, and net export spending is $2 million. What is the GDP?

If aggregate expenditure is less than GDP, then inventories rise and real GDP falls.

Throughout most of the 2000s, including 2016, net exports in Australia:

Are savings and spending on imports included in aggregate expenditure? _ _

The ratio of the increase in to the increase in is called the 'multiplier'.

If economists forecast an increase in aggregate expenditure, real GDP will rise.

Household spending on goods and services is known as:

Consumption spending is $6 million, planned investment spending is $8 million, unplanned investment spending is $2 million, government purchases are $10 million, and net export spending is $2 million. What is the aggregate expenditure?

Household wealth is defined as the value of a household's:

When aggregate expenditure is more than GDP, which of the following is true?

Which of the following will raise consumer expenditure?

Economics: Foundations and Models

Choices and Trade Offs in the Market

Where Prices Come From: the Interaction of Demand and Supply

Gdp: Measuring Total Production, Income and Economic Growth

Economic Growth, the Financial System and Business Cycles

Long-Run Economic Growth: Sources and Policies

Unemployment

Inflation

Aggregate Demand and Aggregate Supply Analysis

Money, Banks and the Reserve Bank of Australia

Monetary Policy

Fiscal Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

Exam 9: Aggregate Expenditure and Output in the Short Run

Refer to Figure 9.2 for the following questions. Figure 9.2 -If the economy is currently at point N in Figure 9.2, which of the following could cause it to move to point K?

Explain how the aggregate demand curve is derived from the 45° aggregate expenditure diagram. _____________________________________________________________________________________________ _____________________________________________________________________________________________

John Maynard Keynes argued that if many households decide at the same time to increase saving and reduce spending:

A decrease in the price level in Australia will shift the aggregate expenditure line downward.

Aggregate expenditure includes spending on:

________ consumption is consumption that depends upon the level of GDP and ________ consumption is consumption that does not depend upon the level of GDP.

Real investment tends to follow a smooth upward path over time; however, consumption spending tends to fluctuate significantly according to consumer income levels and spending patterns.

An increase in the price level in Australia, ceteris paribus, will reduce imports and increase exports.

Consumption spending is $6 million, planned investment spending is $8 million, unplanned investment spending is -$2 million, government purchases are $10 million, and net export spending is $2 million. What is the GDP?

If aggregate expenditure is less than GDP, then inventories rise and real GDP falls.

Throughout most of the 2000s, including 2016, net exports in Australia:

Are savings and spending on imports included in aggregate expenditure? _____________________________________________________________________________________________ _____________________________________________________________________________________________

The ratio of the increase in ________ to the increase in ________ is called the 'multiplier'.

If economists forecast an increase in aggregate expenditure, real GDP will rise.

Household spending on goods and services is known as:

Consumption spending is $6 million, planned investment spending is $8 million, unplanned investment spending is $2 million, government purchases are $10 million, and net export spending is $2 million. What is the aggregate expenditure?

Household wealth is defined as the value of a household's:

When aggregate expenditure is more than GDP, which of the following is true?

Which of the following will raise consumer expenditure?

Economics: Foundations and Models

Choices and Trade Offs in the Market

Where Prices Come From: the Interaction of Demand and Supply

Gdp: Measuring Total Production, Income and Economic Growth

Economic Growth, the Financial System and Business Cycles

Long-Run Economic Growth: Sources and Policies

Unemployment

Inflation

Aggregate Demand and Aggregate Supply Analysis

Money, Banks and the Reserve Bank of Australia

Monetary Policy

Fiscal Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

Explain how the aggregate demand curve is derived from the 45° aggregate expenditure diagram. _ _

consumption is consumption that depends upon the level of GDP and consumption is consumption that does not depend upon the level of GDP.

Are savings and spending on imports included in aggregate expenditure? _ _

The ratio of the increase in to the increase in is called the 'multiplier'.