Question 1

When disposable income increases from $7 trillion to $7.5 trillion,consumption expenditure increase from $6.5 trillion to $6.9 trillion.The MPS is equal to

Accepted Answer

A)  0.75. 
B)  0.76. 
C)  0.8. 
D)  0.2. 
A)  0.75. 
B)  0.76. 
C)  0.8. 
D)  0.2.

Question 2

When disposable income equals consumption expenditure,then

Accepted Answer

A)  saving is zero. 
B)  the MPC = zero. 
C)  the MPS = zero. 
D)  None of the above is correct. 
A)  saving is zero. 
B)  the MPC = zero. 
C)  the MPS = zero. 
D)  None of the above is correct.

Question 3

-In the above figure,at a disposable income level of $2 trillion,saving equals

Accepted Answer

A)  disposable income. 
B)  zero. 
C)  $4 trillion. 
D)  consumption expenditures. 
A)  disposable income. 
B)  zero. 
C)  $4 trillion. 
D)  consumption expenditures.

Question 4

Suppose that the slope of the AE curve is 0.67. Then a $100 increase in autonomous spending means equilibrium expenditure will

Accepted Answer

A)  decrease by $200. 
B)  increase by $200. 
C)  decrease by $300. 
D)  increase by $300. 
A)  decrease by $200. 
B)  increase by $200. 
C)  decrease by $300. 
D)  increase by $300.

Question 5

Suppose a country has no income taxes or imports.If the MPC is 0.75,what does the multiplier equal?

Accepted Answer

The multiplier equal

Question 6

The smaller the slope of the AE curve,________.

Accepted Answer

A)  the greater is the value of the multiplier 
B)  the smaller is slope of the saving function 
C)  the steeper is the consumption function 
D)  the smaller is the value of the multiplier 
A)  the greater is the value of the multiplier 
B)  the smaller is slope of the saving function 
C)  the steeper is the consumption function 
D)  the smaller is the value of the multiplier

Question 7

A movement along the consumption function to higher levels of consumption expenditure arises because

Accepted Answer

A)  the level of disposable income decreases. 
B)  household wealth rises. 
C)  the level of disposable income increases. 
D)  the level of desired saving rises. 
A)  the level of disposable income decreases. 
B)  household wealth rises. 
C)  the level of disposable income increases. 
D)  the level of desired saving rises.

Question 8

Disposable income is

Accepted Answer

A)  income minus saving. 
B)  income minus taxes plus transfer payments. 
C)  income plus transfer payments minus consumption expenditure. 
D)  total income divided by the price level. 
A)  income minus saving. 
B)  income minus taxes plus transfer payments. 
C)  income plus transfer payments minus consumption expenditure. 
D)  total income divided by the price level.

Question 9

In the third quarter of 2008,investment in the U.S.totalled $1.4 trillion and in 2007,investment was $1.3 trillion. In addition,third quarter real GDP was $11 trillion.Suppose the MPC in the U.S.is 0.80. Ignoring the effects of imports and taxes,the multiplier is ________ and the change in investment will decrease equilibrium expenditure by ________.

Accepted Answer

A)  2; $1 trillion. 
B)  5; $1 trillion. 
C)  2; $200 million. 
D)  5; $500 million. 
A)  2; $1 trillion. 
B)  5; $1 trillion. 
C)  2; $200 million. 
D)  5; $500 million.

Question 10

Between 2008 and 2009 the government reports that investment decreased by $ 530 billion.The government also estimates that the multiplier is 2.0.If the entire decrease in investment is autonomous,then real GDP

Accepted Answer

A)  decreases by $1,060 billion. 
B)  increases by $265 billion. 
C)  decreases by $265 billion. 
D)  None of the above answers are correct. 
A)  decreases by $1,060 billion. 
B)  increases by $265 billion. 
C)  decreases by $265 billion. 
D)  None of the above answers are correct.

Question 11

In an economy,the multiplier is 3.If government expenditure increases by $1 million,then in the short run,the price level ________ and real GDP ________ $3 million.

Accepted Answer

A)  falls; decreases by less than 
B)  rises; equals 
C)  rises; increases by less than 
D)  rises; decreases by less than 
A)  falls; decreases by less than 
B)  rises; equals 
C)  rises; increases by less than 
D)  rises; decreases by less than

Question 12

If prices are fixed,when aggregate planned expenditure exceeds real GDP,then

Accepted Answer

A)  inventories decrease, signaling firms to increase production and increase real GDP. 
B)  inventories increase, signaling firms to decrease production and decrease real GDP. 
C)  profits fall, signaling firms to decrease production and decrease real GDP. 
D)  None of the above answers are correct. 
A)  inventories decrease, signaling firms to increase production and increase real GDP. 
B)  inventories increase, signaling firms to decrease production and decrease real GDP. 
C)  profits fall, signaling firms to decrease production and decrease real GDP. 
D)  None of the above answers are correct.

Question 13

The short-run multiplier is equal to 3,real GDP equals potential GDP of $8,000,and the price level is equal to 100.Suppose that government expenditure decreases by $200.The long-run effect of the decrease in government expenditure changes real GDP by

Accepted Answer

A)  a decrease of 600. 
B)  an increase of 600. 
C)  nothing; that is, in the long run real GDP equals $8,000. 
D)  a decrease of $200 because the long-run multiplier is 1. 
A)  a decrease of 600. 
B)  an increase of 600. 
C)  nothing; that is, in the long run real GDP equals $8,000. 
D)  a decrease of $200 because the long-run multiplier is 1.

Question 14

If real GDP exceeds aggregate planned expenditure,what happens to firm's unplanned inventories?

Accepted Answer

If real GDP exceeds aggregate planned ex

Question 15

________ consumption is consumption that will occur ________ the level of GDP and disposable income.

Accepted Answer

A)  Autonomous; independent of 
B)  Autonomous; depending on 
C)  Induced; independent of 
D)  None of the above answers is correct. 
A)  Autonomous; independent of 
B)  Autonomous; depending on 
C)  Induced; independent of 
D)  None of the above answers is correct.

Question 16

If aggregate planned expenditure is less than real GDP then

Accepted Answer

A)  consumers increase their planned expenditure until aggregate planned expenditure increases to equal real GDP. 
B)  firms increase their planned expenditure until aggregate planned expenditure increases to equal real GDP. 
C)  firms' inventories will increase and real GDP will decrease as production falls. 
D)  firms' inventories will decrease and real GDP will decrease as production falls. 
A)  consumers increase their planned expenditure until aggregate planned expenditure increases to equal real GDP. 
B)  firms increase their planned expenditure until aggregate planned expenditure increases to equal real GDP. 
C)  firms' inventories will increase and real GDP will decrease as production falls. 
D)  firms' inventories will decrease and real GDP will decrease as production falls.

Question 17

The components of aggregate expenditure include I. imports.
II) consumption.
III) government transfer payments.

Accepted Answer

A)  I and II 
B)  II only 
C)  II and III 
D)  I, II and III 
A)  I and II 
B)  II only 
C)  II and III 
D)  I, II and III

Question 18

"When the price level increases,aggregate planned expenditure increases and equilibrium expenditure increases." Is the preceding statement correct or incorrect?
Briefly explain your answer.

Accepted Answer

The statement is incorrect.An increase i

Question 19

-In the above figure,line ABC is called

Accepted Answer

A)  the 45-degree line. 
B)  the consumption function. 
C)  the saving function. 
D)  aggregate supply. 
A)  the 45-degree line. 
B)  the consumption function. 
C)  the saving function. 
D)  aggregate supply.

Question 20

Autonomous expenditure refers to

Accepted Answer

A)  aggregate expenditure solely prompted by policy. 
B)  changes in short-run aggregate supply. 
C)  aggregate expenditure that does not change when real GDP changes. 
D)  aggregate expenditure that varies because of changes in real GDP. 
A)  aggregate expenditure solely prompted by policy. 
B)  changes in short-run aggregate supply. 
C)  aggregate expenditure that does not change when real GDP changes. 
D)  aggregate expenditure that varies because of changes in real GDP.

When disposable income increases from $7 trillion to $7.5 trillion,consumption expenditure increase from $6.5 trillion to $6.9 trillion.The MPS is equal to

When disposable income equals consumption expenditure,then

-In the above figure,at a disposable income level of $2 trillion,saving equals

Suppose that the slope of the AE curve is 0.67. Then a $100 increase in autonomous spending means equilibrium expenditure will

Suppose a country has no income taxes or imports.If the MPC is 0.75,what does the multiplier equal?

The smaller the slope of the AE curve,________.

A movement along the consumption function to higher levels of consumption expenditure arises because

Disposable income is

Between 2008 and 2009 the government reports that investment decreased by $ 530 billion.The government also estimates that the multiplier is 2.0.If the entire decrease in investment is autonomous,then real GDP

In an economy,the multiplier is 3.If government expenditure increases by $1 million,then in the short run,the price level and real GDP $3 million.

If prices are fixed,when aggregate planned expenditure exceeds real GDP,then

The short-run multiplier is equal to 3,real GDP equals potential GDP of $8,000,and the price level is equal to 100.Suppose that government expenditure decreases by $200.The long-run effect of the decrease in government expenditure changes real GDP by

If real GDP exceeds aggregate planned expenditure,what happens to firm's unplanned inventories?

consumption is consumption that will occur the level of GDP and disposable income.

If aggregate planned expenditure is less than real GDP then

The components of aggregate expenditure include I. imports. II) consumption. III) government transfer payments.

"When the price level increases,aggregate planned expenditure increases and equilibrium expenditure increases." Is the preceding statement correct or incorrect? Briefly explain your answer.

-In the above figure,line ABC is called

Autonomous expenditure refers to

What Is Economics

The Economic Problem

Demand and Supply

Measuring GDP and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, The Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Inflation, Jobs, and the Business Cycle

Fiscal Policy

Monetary Policy

International Trade Policy

Introduction

Monitoring Macroeconomic Performance

Macroeconomic Trends

Macroeconomic Fluctuations

Macroeconomic Policy

Filters

Exam 11: Expenditure Multipliers

When disposable income increases from $7 trillion to $7.5 trillion,consumption expenditure increase from $6.5 trillion to $6.9 trillion.The MPS is equal to

When disposable income equals consumption expenditure,then

-In the above figure,at a disposable income level of $2 trillion,saving equals

Suppose that the slope of the AE curve is 0.67. Then a $100 increase in autonomous spending means equilibrium expenditure will

Suppose a country has no income taxes or imports.If the MPC is 0.75,what does the multiplier equal?

The smaller the slope of the AE curve,________.

A movement along the consumption function to higher levels of consumption expenditure arises because

Disposable income is

Between 2008 and 2009 the government reports that investment decreased by $ 530 billion.The government also estimates that the multiplier is 2.0.If the entire decrease in investment is autonomous,then real GDP

In an economy,the multiplier is 3.If government expenditure increases by $1 million,then in the short run,the price level ________ and real GDP ________ $3 million.

If prices are fixed,when aggregate planned expenditure exceeds real GDP,then

The short-run multiplier is equal to 3,real GDP equals potential GDP of $8,000,and the price level is equal to 100.Suppose that government expenditure decreases by $200.The long-run effect of the decrease in government expenditure changes real GDP by

If real GDP exceeds aggregate planned expenditure,what happens to firm's unplanned inventories?

________ consumption is consumption that will occur ________ the level of GDP and disposable income.

If aggregate planned expenditure is less than real GDP then

The components of aggregate expenditure include I. imports. II) consumption. III) government transfer payments.

"When the price level increases,aggregate planned expenditure increases and equilibrium expenditure increases." Is the preceding statement correct or incorrect? Briefly explain your answer.

-In the above figure,line ABC is called

Autonomous expenditure refers to

What Is Economics

The Economic Problem

Demand and Supply

Measuring GDP and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, The Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Inflation, Jobs, and the Business Cycle

Fiscal Policy

Monetary Policy

International Trade Policy

Introduction

Monitoring Macroeconomic Performance

Macroeconomic Trends

Macroeconomic Fluctuations

Macroeconomic Policy

Filters

In an economy,the multiplier is 3.If government expenditure increases by $1 million,then in the short run,the price level and real GDP $3 million.

consumption is consumption that will occur the level of GDP and disposable income.