Question 1

According to the aggregate expenditure model, when autonomous expenditure increases, equilibrium expenditure

Accepted Answer

A)  increases by a larger amount. 
B)  increases by an equal amount. 
C)  does not change because only induced expenditures increase equilibrium expenditure. 
D)  does not change because autonomous expenditures has no effect on equilibrium expenditure. 
E)  increases by a smaller amount. 
A)  increases by a larger amount. 
B)  increases by an equal amount. 
C)  does not change because only induced expenditures increase equilibrium expenditure. 
D)  does not change because autonomous expenditures has no effect on equilibrium expenditure. 
E)  increases by a smaller amount.

Question 2

When the AE line lies above the 45° line,

Accepted Answer

A)  there are unplanned decreases in inventories. 
B)  aggregate planned expenditure is less than real GDP. 
C)  there are unplanned increases in inventories. 
D)  real GDP exceeds aggregate planned expenditure. 
E)  the price level is rising. 
A)  there are unplanned decreases in inventories. 
B)  aggregate planned expenditure is less than real GDP. 
C)  there are unplanned increases in inventories. 
D)  real GDP exceeds aggregate planned expenditure. 
E)  the price level is rising.

Question 3

________ can trigger an expansion.

Accepted Answer

A)  An increase in autonomous expenditure 
B)  A decrease in autonomous expenditure 
C)  Equality between aggregate expenditure and real GDP 
D)  A decrease in induced expenditure 
E)  A downward shift of the AE line 
A)  An increase in autonomous expenditure 
B)  A decrease in autonomous expenditure 
C)  Equality between aggregate expenditure and real GDP 
D)  A decrease in induced expenditure 
E)  A downward shift of the AE line

Question 4

What effect does an increase in the MPC have on the slope of the AE curve?

Accepted Answer

An increase in the M

Question 5

\[\begin{array} { c c c c c c } 
\begin{array} { c } 
\text { Consumption } \
\text { Real GDP, } Y \
\text { (trillions of }
\end{array} & \begin{array} { c } 
\text { Government } \
\text { (trillions of }
\end{array} & \begin{array} { c } 
\text { Investment, I } \
\text { (trillions of }
\end{array} & \begin{array} { c } 
\text { expenditure, } G \
\text { (trillions of }
\end{array} & \begin{array} { c } 
\text { Exports, } X \
\text { (trillions of }
\end{array} & \begin{array} { c } 
\text { Imports, } M \
\text { (trillions of }
\end{array} \
2005 \text { dollars) } & \text { 2005 dollars) } & \text { 2005 dollars) } & \text { 2005 dollars) } & \text { 2005 dollars) } & 2005 \text { dollars) } \
\hline 0 & 1.00 & 2 & 1 & 1 & 0.50 \
1 & 1.75 & 2 & 1 & 1 & 0.75 \
2 & 2.50 & 2 & 1 & 1 & 1.00 \
3 & 3.25 & 2 & 1 & 1 & 1.25 \
4 & 4.00 & 2 & 1 & 1 & 1.50 \
5 & 4.75 & 2 & 1 & 1 & 1.75 \
6 & 5.50 & 2 & 1 & 1 & 2.00 \
7 & 6.25 & 2 & 1 & 1 & 2.25 \
8 & 7.00 & 2 & 1 & 1 & 2.50 \
9 & 7.75 & 2 & 1 & 1 & 2.75 \
10 & 8.50 & 2 & 1 & 1 & 3.00
\end{array}\]
-The table above gives data for the nation of Mosh.The amount of autonomous expenditure is

Accepted Answer

A)  not shown in this table. 
B)  $4 trillion. 
C)  $1.5 trillion. 
D)  $4.5 trillion. 
E)  $9.0 trillion. 
A)  not shown in this table. 
B)  $4 trillion. 
C)  $1.5 trillion. 
D)  $4.5 trillion. 
E)  $9.0 trillion.

Question 6

Who was Jean-Baptiste Say?
 How does his theory (or "law") compare with that of John Maynard Keynes?

Accepted Answer

Jean-Baptiste Say was a French economist

Question 7

An economy has no imports or income taxes.The MPC is 0.75 and real GDP is $120 billion.Businesses increase investment by $4 billion.The expenditure multiplier is ________ and the change in real GDP from the increase in investment is ________ billion.

Accepted Answer

A)  5; $25 
B)  4; $16 
C)  5; $16 
D)  4; $25 
E)  0.75; $3 
A)  5; $25 
B)  4; $16 
C)  5; $16 
D)  4; $25 
E)  0.75; $3

Question 8

Compared to the magnitude of the expenditure multiplier in an economy without imports, the expenditure multiplier in an identical economy with imports is

Accepted Answer

A)  always smaller. 
B)  always larger. 
C)  smaller only if imports exceed exports. 
D)  larger only if exports exceed imports. 
E)  exactly the same. 
A)  always smaller. 
B)  always larger. 
C)  smaller only if imports exceed exports. 
D)  larger only if exports exceed imports. 
E)  exactly the same.

Question 9

If a $2 billion increase in investment brings about a $5 billion increase in equilibrium expenditure, we know that the expenditure multiplier equals

Accepted Answer

A)  3. 
B)  10. 
C)  2.5. 
D)  4. 
E)  5. 
A)  3. 
B)  10. 
C)  2.5. 
D)  4. 
E)  5.

Question 10

An economy has no imports or income taxes.An increase in autonomous expenditure of $40 billion increases equilibrium expenditure by $160 billion.The expenditure multiplier equals

Accepted Answer

A)  2. 
B)  4. 
C)  6. 
D)  8. 
E)  16. 
A)  2. 
B)  4. 
C)  6. 
D)  8. 
E)  16.

Question 11

If a firm accumulates unwanted inventories, then it

Accepted Answer

A)  will increase its production. 
B)  must hire more workers. 
C)  has actual investment that is less than its planned investment. 
D)  will decrease its production. 
E)  has actual investment equal to its planned investment. 
A)  will increase its production. 
B)  must hire more workers. 
C)  has actual investment that is less than its planned investment. 
D)  will decrease its production. 
E)  has actual investment equal to its planned investment.

Question 12

$$\begin{array} { c c } 
\begin{array} { c } 
\text { Real GDP } \
\text { (billions of 2005 dollars) }
\end{array} & \begin{array} { c } 
\text { Aggregate expenditure } \
\text { (billions of 2005 dollars) }
\end{array} \
\hline 10 & 10.50 \
11 & 11.25 \
12 & 12.00 \
13 & 12.75 \
14 & 13.50 \
15 & 14.25
\end{array}$$
-The above table gives real GDP and the aggregate expenditure schedule.Equilibrium real GDP is

Accepted Answer

A)  $11 billion. 
B)  $12 billion. 
C)  $13 billion. 
D)  $14 billion. 
E)  $10 billion. 
A)  $11 billion. 
B)  $12 billion. 
C)  $13 billion. 
D)  $14 billion. 
E)  $10 billion.

Question 13

During the start of an expansion, aggregate planned expenditure

Accepted Answer

A)  increases the magnitude of the expenditure multiplier. 
B)  decreases the magnitude of the expenditure multiplier. 
C)  exceeds real GDP. 
D)  is less than real GDP. 
E)  is slowly decreasing. 
A)  increases the magnitude of the expenditure multiplier. 
B)  decreases the magnitude of the expenditure multiplier. 
C)  exceeds real GDP. 
D)  is less than real GDP. 
E)  is slowly decreasing.

Question 14

$$\begin{array} { c c } 
\begin{array} { c } 
\text { Disposable income } \
\text { (trillions of 2005 dollars) }
\end{array} & \begin{array} { c } 
\text { Consumption expenditure } \
\text { (trillions of 2005 dollars) }
\end{array} \
\hline 0.0 & 1.8 \
1.0 & 2.6 \
2.0 & 3.2 \
3.0 & 4.0 \
4.0 & 5.8 \
\hline
\end{array}$$
-The above table has data from the nation of Atlantica.Based on these data, at what point does saving equal zero.

Accepted Answer

A)  none, dissavings is present at all of the above points 
B)  none, savings is present at all of the above points 
C)  Between disposable income of $0.0 and $1.8 trillion 
D)  Between disposable income of $4.0 trillion and $5.8 trillion. 
E)  Between disposable income of $2.0 trillion and $3.2 trillion. 
A)  none, dissavings is present at all of the above points 
B)  none, savings is present at all of the above points 
C)  Between disposable income of $0.0 and $1.8 trillion 
D)  Between disposable income of $4.0 trillion and $5.8 trillion. 
E)  Between disposable income of $2.0 trillion and $3.2 trillion.

Question 15

-In the figure above, what is the MPC?

Accepted Answer

A)  0.50 
B)  0.75 
C)  0.80 
D)  0.90 
E)  1.00 
A)  0.50 
B)  0.75 
C)  0.80 
D)  0.90 
E)  1.00

Question 16

\[\begin{array} { c c c c c c } 
\begin{array} { c } 
\text { Consumption } \
\text { Real GDP, } Y \
\text { (trillions of }
\end{array} & \begin{array} { c } 
\text { Government } \
\text { (trillions of }
\end{array} & \begin{array} { c } 
\text { Investment, I } \
\text { (trillions of }
\end{array} & \begin{array} { c } 
\text { expenditure, } G \
\text { (trillions of }
\end{array} & \begin{array} { c } 
\text { Exports, } X \
\text { (trillions of }
\end{array} & \begin{array} { c } 
\text { Imports, } M \
\text { (trillions of }
\end{array} \
2005 \text { dollars) } & \text { 2005 dollars) } & \text { 2005 dollars) } & \text { 2005 dollars) } & \text { 2005 dollars) } & 2005 \text { dollars) } \
\hline 0 & 1.00 & 2 & 1 & 1 & 0.50 \
1 & 1.75 & 2 & 1 & 1 & 0.75 \
2 & 2.50 & 2 & 1 & 1 & 1.00 \
3 & 3.25 & 2 & 1 & 1 & 1.25 \
4 & 4.00 & 2 & 1 & 1 & 1.50 \
5 & 4.75 & 2 & 1 & 1 & 1.75 \
6 & 5.50 & 2 & 1 & 1 & 2.00 \
7 & 6.25 & 2 & 1 & 1 & 2.25 \
8 & 7.00 & 2 & 1 & 1 & 2.50 \
9 & 7.75 & 2 & 1 & 1 & 2.75 \
10 & 8.50 & 2 & 1 & 1 & 3.00
\end{array}\]
-The table above gives data for the nation of Mosh.If we graphed these data, we would see that when GDP equals

Accepted Answer

A)  $6 trillion, the AE curve is below the 45° line. 
B)  $10 trillion, the 45° line is above the AE curve. 
C)  $9 trillion, the AE curve intersects the 45° line. 
D)  $4 trillion, the AE curve intersects the 45° line. 
E)  $10 trillion, the AE curve intersects the 45° line. 
A)  $6 trillion, the AE curve is below the 45° line. 
B)  $10 trillion, the 45° line is above the AE curve. 
C)  $9 trillion, the AE curve intersects the 45° line. 
D)  $4 trillion, the AE curve intersects the 45° line. 
E)  $10 trillion, the AE curve intersects the 45° line.

Question 17

Disposable income equals aggregate income

Accepted Answer

A)  minus net taxes. 
B)  minus saving. 
C)  minus saving and minus net taxes. 
D)  plus saving minus net taxes. 
E)  plus net taxes. 
A)  minus net taxes. 
B)  minus saving. 
C)  minus saving and minus net taxes. 
D)  plus saving minus net taxes. 
E)  plus net taxes.

Question 18

List the components of aggregate expenditure and describe how each of them change as real GDP increases.

Accepted Answer

The components of aggregate expenditure

Question 19

If the marginal propensity to import is ________, then a $2 trillion increase in disposable income would increase import expenditure by $0.2 trillion. If the marginal propensity to import is ________, then a $2 trillion increase in disposable income would increase import expenditure by $0.6 trillion.

Accepted Answer

A)  1.0; 3.0 
B)  0.1; 0.3 
C)  0.2; 0.6 
D)  0.6; 2.0 
E)  0.3; 0.1 
A)  1.0; 3.0 
B)  0.1; 0.3 
C)  0.2; 0.6 
D)  0.6; 2.0 
E)  0.3; 0.1

Question 20

What is the difference between induced and autonomous expenditure?
 Which components of aggregate expenditure fall under which category?

Accepted Answer

Induced expenditure is expenditure that

According to the aggregate expenditure model, when autonomous expenditure increases, equilibrium expenditure

When the AE line lies above the 45° line,

________ can trigger an expansion.

What effect does an increase in the MPC have on the slope of the AE curve?

Who was Jean-Baptiste Say? How does his theory (or "law") compare with that of John Maynard Keynes?

An economy has no imports or income taxes.The MPC is 0.75 and real GDP is $120 billion.Businesses increase investment by $4 billion.The expenditure multiplier is and the change in real GDP from the increase in investment is billion.

Compared to the magnitude of the expenditure multiplier in an economy without imports, the expenditure multiplier in an identical economy with imports is

If a $2 billion increase in investment brings about a $5 billion increase in equilibrium expenditure, we know that the expenditure multiplier equals

An economy has no imports or income taxes.An increase in autonomous expenditure of $40 billion increases equilibrium expenditure by $160 billion.The expenditure multiplier equals

If a firm accumulates unwanted inventories, then it

Real GDP (billions of 2005 dollars) Aggregate expenditure (billions of 2005 dollars) 10 10.50 11 11.25 12 12.00 13 12.75 14 13.50 15 14.25 -The above table gives real GDP and the aggregate expenditure schedule.Equilibrium real GDP is

During the start of an expansion, aggregate planned expenditure

Disposable income (trillions of 2005 dollars) Consumption expenditure (trillions of 2005 dollars) 0.0 1.8 1.0 2.6 2.0 3.2 3.0 4.0 4.0 5.8 -The above table has data from the nation of Atlantica.Based on these data, at what point does saving equal zero.

-In the figure above, what is the MPC?

Disposable income equals aggregate income

List the components of aggregate expenditure and describe how each of them change as real GDP increases.

If the marginal propensity to import is , then a $2 trillion increase in disposable income would increase import expenditure by $0.2 trillion. If the marginal propensity to import is , then a $2 trillion increase in disposable income would increase import expenditure by $0.6 trillion.

What is the difference between induced and autonomous expenditure? Which components of aggregate expenditure fall under which category?

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and the Natural Unemployment Rate

Economic Growth

Finance, Saving, and Investment

The Monetary System

Money, Interest, and Inflation

Aggregate Supply and Aggregate Demand

The Short-Run Policy Tradeoff

Fiscal Policy

Monetary Policy

International Trade Policy

International Finance

Filters

Exam 14: Aggregate Expenditure Multiplier

According to the aggregate expenditure model, when autonomous expenditure increases, equilibrium expenditure

When the AE line lies above the 45° line,

________ can trigger an expansion.

What effect does an increase in the MPC have on the slope of the AE curve?

Who was Jean-Baptiste Say? How does his theory (or "law") compare with that of John Maynard Keynes?

An economy has no imports or income taxes.The MPC is 0.75 and real GDP is $120 billion.Businesses increase investment by $4 billion.The expenditure multiplier is ________ and the change in real GDP from the increase in investment is ________ billion.

Compared to the magnitude of the expenditure multiplier in an economy without imports, the expenditure multiplier in an identical economy with imports is

If a $2 billion increase in investment brings about a $5 billion increase in equilibrium expenditure, we know that the expenditure multiplier equals

An economy has no imports or income taxes.An increase in autonomous expenditure of $40 billion increases equilibrium expenditure by $160 billion.The expenditure multiplier equals

If a firm accumulates unwanted inventories, then it

Real GDP (billions of 2005 dollars) Aggregate expenditure (billions of 2005 dollars) 10 10.50 11 11.25 12 12.00 13 12.75 14 13.50 15 14.25 -The above table gives real GDP and the aggregate expenditure schedule.Equilibrium real GDP is

During the start of an expansion, aggregate planned expenditure

Disposable income (trillions of 2005 dollars) Consumption expenditure (trillions of 2005 dollars) 0.0 1.8 1.0 2.6 2.0 3.2 3.0 4.0 4.0 5.8 -The above table has data from the nation of Atlantica.Based on these data, at what point does saving equal zero.

-In the figure above, what is the MPC?

Disposable income equals aggregate income

List the components of aggregate expenditure and describe how each of them change as real GDP increases.

What is the difference between induced and autonomous expenditure? Which components of aggregate expenditure fall under which category?

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and the Natural Unemployment Rate

Economic Growth

Finance, Saving, and Investment

The Monetary System

Money, Interest, and Inflation

Aggregate Supply and Aggregate Demand

The Short-Run Policy Tradeoff

Fiscal Policy

Monetary Policy

International Trade Policy

International Finance

Filters

An economy has no imports or income taxes.The MPC is 0.75 and real GDP is $120 billion.Businesses increase investment by $4 billion.The expenditure multiplier is and the change in real GDP from the increase in investment is billion.