Question 1

Refer to Figure 9.1 for the following questions.
Figure 9.1
  
-In Figure 9.1, if the economy is at point L, what will happen?

Accepted Answer

A) Inventories have fallen below their desired level and firms decrease production. 
B) Inventories have fallen below their desired level and firms increase production. 
C) Inventories have risen above their desired level and firms decrease production. 
D) Inventories have risen above their desired level and firms increase production. 
A) Inventories have fallen below their desired level and firms decrease production. 
B) Inventories have fallen below their desired level and firms increase production. 
C) Inventories have risen above their desired level and firms decrease production. 
D) Inventories have risen above their desired level and firms increase production.

Question 2

The slope of the consumption function is equal to the change in:

Accepted Answer

A) consumption divided by the change in disposable income. 
B) consumption divided by the change in personal income. 
C) disposable income divided by the change in consumption. 
D) national income divided by the change in consumption. 
A) consumption divided by the change in disposable income. 
B) consumption divided by the change in personal income. 
C) disposable income divided by the change in consumption. 
D) national income divided by the change in consumption.

Question 3

A rising price level decreases consumption by decreasing the real value of household wealth.

Accepted Answer

A) True 
 B)False

Question 4

Refer to Figure 9.3 for the following questions.
Figure 9.3
  
-Suppose that in Figure 9.3, investment spending increases by $10 million, shifting up the aggregate expenditure line and GDP increases from GDP₁ to GDP₂. If the MPC is 0.9, then what is the change in GDP?

Accepted Answer

A) $90 million 
B) $9 million 
C) $10 million 
D) $100 million 
A) $90 million 
B) $9 million 
C) $10 million 
D) $100 million

Question 5

Refer to Figure 9.1 for the following questions.
Figure 9.1
  
-In Figure 9.1, if the economy is at point J, what will happen?

Accepted Answer

A) Inventories have fallen below their desired level and firms decrease production. 
B) Inventories have fallen below their desired level and firms increase production. 
C) Inventories have risen above their desired level and firms decrease production. 
D) Inventories have risen above their desired level and firms increase production. 
A) Inventories have fallen below their desired level and firms decrease production. 
B) Inventories have fallen below their desired level and firms increase production. 
C) Inventories have risen above their desired level and firms decrease production. 
D) Inventories have risen above their desired level and firms increase production.

Question 6

Refer to Figure 9.1 for the following questions.
Figure 9.1
  
-In Figure 9.1, if the economy is in equilibrium, it is at a level of aggregate expenditure given by point:

Accepted Answer

A) J) 
B) K) 
C) L) 
D) Points J, K and L all represent equilibrium. 
A) J) 
B) K) 
C) L) 
D) Points J, K and L all represent equilibrium.

Question 7

Which is the smallest component of 'aggregate expenditure' in Australia?

Accepted Answer

A) planned investment expenditures 
B) consumption expenditures 
C) government expenditures 
D) net export expenditures 
A) planned investment expenditures 
B) consumption expenditures 
C) government expenditures 
D) net export expenditures

Question 8

Which of the following is a true statement about the 'multiplier'?

Accepted Answer

A) The multiplier solely depends on the MPC. 
B) The smaller the MPC, the smaller the multiplier. 
C) The multiplier is a value between zero and one. 
D) The multiplier effect does not occur when autonomous expenditures decrease. 
A) The multiplier solely depends on the MPC. 
B) The smaller the MPC, the smaller the multiplier. 
C) The multiplier is a value between zero and one. 
D) The multiplier effect does not occur when autonomous expenditures decrease.

Question 9

If national income increases by $80 million and consumption increases by $20 million, the marginal propensity to consume is:

Accepted Answer

A) 5 
B) 0.25. 
C) 0.75. 
D) 0.15. 
A) 5 
B) 0.25. 
C) 0.75. 
D) 0.15.

Question 10

Using the following table, compute aggregate expenditure and identify the macroeconomic equilibrium. The numbers in the table are in billions of dollars.
   
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

The macroeconomic equilibrium is determi

Question 11

Australian net export spending falls when the:

Accepted Answer

A) price level in Australia rises relative to the price level in other countries. 
B) economic growth rate of Australian GDP is more rapid than the growth rate of GDP in other countries. 
C) value of Australian dollar increases relative to other currencies. 
D) inflation rate is higher in Australia relative to other countries. 
A) price level in Australia rises relative to the price level in other countries. 
B) economic growth rate of Australian GDP is more rapid than the growth rate of GDP in other countries. 
C) value of Australian dollar increases relative to other currencies. 
D) inflation rate is higher in Australia relative to other countries.

Question 12

During a(n)________ many firms experience reduced profits, which reduces ________ and investment spending.

Accepted Answer

A) expansion; business confidence 
B) recession; cash flow 
C) expansion; cash flow 
D) recession; inventories 
A) expansion; business confidence 
B) recession; cash flow 
C) expansion; cash flow 
D) recession; inventories

Question 13

If an increase in autonomous consumption spending of $15 million results in a $60 million increase in equilibrium real GDP, then the MPC is:

Accepted Answer

A) 0.5. 
B) 0.9. 
C) 0.8. 
D) 0.75. 
A) 0.5. 
B) 0.9. 
C) 0.8. 
D) 0.75.

Question 14

At each of the three points in the following graph, indicate whether planned aggregate expenditure is greater than, equal to, or less than GDP.
   
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

At point J, planned aggregate

Question 15

If the marginal propensity to consume is 0.80, the marginal propensity to save is:

Accepted Answer

A) 0.20. 
B) 0.15. 
C) 1.0. 
D) 1.18. 
A) 0.20. 
B) 0.15. 
C) 1.0. 
D) 1.18.

Question 16

What is the main reason for changes in GDP in the short run?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

The main reason for changes in

Question 17

Increases in the price level will:

Accepted Answer

A) lower consumption because goods and services are less affordable. 
B) raise consumption because some goods and services are more affordable. 
C) raise consumption because real wealth increases. 
D) lower consumption because real wealth decreases. 
A) lower consumption because goods and services are less affordable. 
B) raise consumption because some goods and services are more affordable. 
C) raise consumption because real wealth increases. 
D) lower consumption because real wealth decreases.

Question 18

If the multiplier is 10, the marginal propensity to consume must be 0.1.

Accepted Answer

A) True 
 B)False

Question 19

Consumption spending will ________ when disposable income ________ and increase when disposable income increases.

Accepted Answer

A) increase; increases 
B) increase; decreases 
C) decrease; decreases 
D) remain the same; increases 
A) increase; increases 
B) increase; decreases 
C) decrease; decreases 
D) remain the same; increases

Question 20

Consumption is $6 million, planned investment spending is $7 million, government purchases are $10 million, and net exports are equal to $2 million. If GDP during that same time period is equal to $24 million, what unplanned changes in inventories occurred?

Accepted Answer

A) There was an unplanned decrease in inventories equal to $3 million. 
B) There was no unplanned change in inventories. 
C) There was an unplanned increase in inventories equal to $3 million. 
D) There was an unplanned decrease in inventories equal to $19 million. 
A) There was an unplanned decrease in inventories equal to $3 million. 
B) There was no unplanned change in inventories. 
C) There was an unplanned increase in inventories equal to $3 million. 
D) There was an unplanned decrease in inventories equal to $19 million.

Refer to Figure 9.1 for the following questions. Figure 9.1 -In Figure 9.1, if the economy is at point L, what will happen?

The slope of the consumption function is equal to the change in:

A rising price level decreases consumption by decreasing the real value of household wealth.

Refer to Figure 9.3 for the following questions. Figure 9.3 -Suppose that in Figure 9.3, investment spending increases by $10 million, shifting up the aggregate expenditure line and GDP increases from GDP₁ to GDP₂. If the MPC is 0.9, then what is the change in GDP?

Refer to Figure 9.1 for the following questions. Figure 9.1 -In Figure 9.1, if the economy is at point J, what will happen?

Refer to Figure 9.1 for the following questions. Figure 9.1 -In Figure 9.1, if the economy is in equilibrium, it is at a level of aggregate expenditure given by point:

Which is the smallest component of 'aggregate expenditure' in Australia?

Which of the following is a true statement about the 'multiplier'?

If national income increases by $80 million and consumption increases by $20 million, the marginal propensity to consume is:

Using the following table, compute aggregate expenditure and identify the macroeconomic equilibrium. The numbers in the table are in billions of dollars. _ _

Australian net export spending falls when the:

During a(n) many firms experience reduced profits, which reduces and investment spending.

If an increase in autonomous consumption spending of $15 million results in a $60 million increase in equilibrium real GDP, then the MPC is:

At each of the three points in the following graph, indicate whether planned aggregate expenditure is greater than, equal to, or less than GDP. _ _

If the marginal propensity to consume is 0.80, the marginal propensity to save is:

What is the main reason for changes in GDP in the short run? _ _

Increases in the price level will:

If the multiplier is 10, the marginal propensity to consume must be 0.1.

Consumption spending will when disposable income and increase when disposable income increases.

Consumption is $6 million, planned investment spending is $7 million, government purchases are $10 million, and net exports are equal to $2 million. If GDP during that same time period is equal to $24 million, what unplanned changes in inventories occurred?

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 9.1 for the following questions. Figure 9.1 -In Figure 9.1, if the economy is at point L, what will happen?

The slope of the consumption function is equal to the change in:

A rising price level decreases consumption by decreasing the real value of household wealth.

Refer to Figure 9.3 for the following questions. Figure 9.3 -Suppose that in Figure 9.3, investment spending increases by $10 million, shifting up the aggregate expenditure line and GDP increases from GDP₁ to GDP₂. If the MPC is 0.9, then what is the change in GDP?

Refer to Figure 9.1 for the following questions. Figure 9.1 -In Figure 9.1, if the economy is at point J, what will happen?

Refer to Figure 9.1 for the following questions. Figure 9.1 -In Figure 9.1, if the economy is in equilibrium, it is at a level of aggregate expenditure given by point:

Which is the smallest component of 'aggregate expenditure' in Australia?

Which of the following is a true statement about the 'multiplier'?

If national income increases by $80 million and consumption increases by $20 million, the marginal propensity to consume is:

Australian net export spending falls when the:

During a(n)________ many firms experience reduced profits, which reduces ________ and investment spending.

If an increase in autonomous consumption spending of $15 million results in a $60 million increase in equilibrium real GDP, then the MPC is:

If the marginal propensity to consume is 0.80, the marginal propensity to save is:

What is the main reason for changes in GDP in the short run? _____________________________________________________________________________________________ _____________________________________________________________________________________________

Increases in the price level will:

If the multiplier is 10, the marginal propensity to consume must be 0.1.

Consumption spending will ________ when disposable income ________ and increase when disposable income increases.

Consumption is $6 million, planned investment spending is $7 million, government purchases are $10 million, and net exports are equal to $2 million. If GDP during that same time period is equal to $24 million, what unplanned changes in inventories occurred?

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

During a(n) many firms experience reduced profits, which reduces and investment spending.

What is the main reason for changes in GDP in the short run? _ _

Consumption spending will when disposable income and increase when disposable income increases.