Question 1

If the marginal propensity to consume is 0.8,every $10 increase in disposable income increases

Accepted Answer

A)  consumption expenditure by $0.80. 
B)  consumption expenditure by $18.00. 
C)  saving by $0.20. 
D)  consumption expenditure by $8.00. 
A)  consumption expenditure by $0.80. 
B)  consumption expenditure by $18.00. 
C)  saving by $0.20. 
D)  consumption expenditure by $8.00.

Question 2

Given an MPC of 0.80,if there are no income taxes or imports and prices are constant,then when investment increases by $50 million,when prices are fixed equilibrium GDP would

Accepted Answer

A)  increase by $50 million. 
B)  increase by $250 million. 
C)  increase by $400 million. 
D)  To answer the question more information on income is needed. 
A)  increase by $50 million. 
B)  increase by $250 million. 
C)  increase by $400 million. 
D)  To answer the question more information on income is needed.

Question 3

If the MPC is .9 and there are no income taxes or imports,the multiplier for a change in autonomous expenditure equals

Accepted Answer

A)  0.1. 
B)  9.0. 
C)  10.0. 
D)  100.0. 
A)  0.1. 
B)  9.0. 
C)  10.0. 
D)  100.0.

Question 4

Which of the following will NOT shift the consumption function upward?

Accepted Answer

A)  an increase in disposable income 
B)  a fall in the real interest rate 
C)  an increase in wealth 
D)  None of the above shift the consumption function upward. 
A)  an increase in disposable income 
B)  a fall in the real interest rate 
C)  an increase in wealth 
D)  None of the above shift the consumption function upward.

Question 5

The size of the marginal propensity to save

Accepted Answer

A)  is negative if dissaving is present. 
B)  is between 0 and 1. 
C)  equals 1. 
D)  exceeds 1. 
A)  is negative if dissaving is present. 
B)  is between 0 and 1. 
C)  equals 1. 
D)  exceeds 1.

Question 6

What is the relationship between the aggregate expenditure curve and the aggregate demand curve?
Explain the relationship.

Accepted Answer

The aggregate demand curve is derived us

Question 7

Aggregate planned expenditure

Accepted Answer

A)  always equals actual aggregate expenditure. 
B)  is always less than actual aggregate expenditure. 
C)  is always greater than actual aggregate expenditure. 
D)  equals actual aggregate expenditure at the equilibrium level of real GDP. 
A)  always equals actual aggregate expenditure. 
B)  is always less than actual aggregate expenditure. 
C)  is always greater than actual aggregate expenditure. 
D)  equals actual aggregate expenditure at the equilibrium level of real GDP.

Question 8

Imports

Accepted Answer

A)  increase the size of the multiplier because imports make disposable income less than real GDP. 
B)  decrease the size of the multiplier because spending on imports does not increase real GDP in the domestic nation. 
C)  increase the size of the multiplier because imports are paid for by exports. 
D)  decrease the size of the multiplier because imports lead to an increase in taxes and government purchases. 
A)  increase the size of the multiplier because imports make disposable income less than real GDP. 
B)  decrease the size of the multiplier because spending on imports does not increase real GDP in the domestic nation. 
C)  increase the size of the multiplier because imports are paid for by exports. 
D)  decrease the size of the multiplier because imports lead to an increase in taxes and government purchases.

Question 9

What is the relationship between the MPC and the slope of the AE curve?

Accepted Answer

If there are no imports or income taxes,

Question 10

The slope of the AE curve is .80.What is the multiplier?
Everything else the same,by how much does equilibrium aggregate expenditure increase if
a) exports increase from $1.75 trillion to $2.25 trillion.
b) government expenditure on goods and services decrease from $2.0 trillion to $1.8 trillion.
c) investment increases from $1.2 trillion to $2.3 trillion.

Accepted Answer

a)The change in equilibrium aggregate ex

Question 11

Suppose that in 2013,firms discover that their inventories are falling below their planned levels.Which of the following statements is correct?

Accepted Answer

A)  The level of aggregate savings must equal the level of desired investment. 
B)  Even though firms are trying, they are unable to maximize profits. 
C)  Aggregate demand is less than aggregate supply. 
D)  Real GDP is less than equilibrium expenditure. 
A)  The level of aggregate savings must equal the level of desired investment. 
B)  Even though firms are trying, they are unable to maximize profits. 
C)  Aggregate demand is less than aggregate supply. 
D)  Real GDP is less than equilibrium expenditure.

Question 12

The larger the multiplier,the ________ the AE curve and the ________ the AD curve from an increase in investment.

Accepted Answer

A)  steeper; smaller the shift in 
B)  steeper; larger the shift in 
C)  flatter; larger the movement along 
D)  flatter; smaller the movement along 
A)  steeper; smaller the shift in 
B)  steeper; larger the shift in 
C)  flatter; larger the movement along 
D)  flatter; smaller the movement along

Question 13

Which of the following statements is FALSE?

Accepted Answer

A)  Disposable income - saving = consumption expenditure. 
B)  Consumption expenditure + saving = disposable income. 
C)  Saving = disposable income - consumption expenditure. 
D)  Consumption expenditure = saving - disposable income. 
A)  Disposable income - saving = consumption expenditure. 
B)  Consumption expenditure + saving = disposable income. 
C)  Saving = disposable income - consumption expenditure. 
D)  Consumption expenditure = saving - disposable income.

Question 14

"Few if any economists anticipated the extent of the inventory adjustment...Production cutbacks have been much greater than expected.Those cuts have weakened the industrial sector considerably." As a result of these changes,the U.S.government lowered its estimate of fourth-quarter growth in real GDP. www.businessweek.com 3/12/2007
The article suggests that ________.

Accepted Answer

A)  planned expenditures exceeded real GDP in 2006. 
B)  real GDP exceeded planned expenditures in 2006. 
C)  the AE curve shifted upward in 2007. 
D)  the AD curve shifted rightward in 2007. 
A)  planned expenditures exceeded real GDP in 2006. 
B)  real GDP exceeded planned expenditures in 2006. 
C)  the AE curve shifted upward in 2007. 
D)  the AD curve shifted rightward in 2007.

Question 15

If the multiplier is 3,a $750,000 increase in autonomous expenditure increases equilibrium expenditure by $2.25 million.

Accepted Answer

A) True 
 B)False

Question 16

The slope of the saving function is equal to the

Accepted Answer

A)  marginal propensity to save. 
B)  marginal propensity to consume. 
C)  marginal propensity to consume divided by the marginal propensity to save. 
D)  marginal propensity to save divided by the marginal propensity to consume. 
A)  marginal propensity to save. 
B)  marginal propensity to consume. 
C)  marginal propensity to consume divided by the marginal propensity to save. 
D)  marginal propensity to save divided by the marginal propensity to consume.

Question 17

After an increase in autonomous spending,in the long run,changes in the price level

Accepted Answer

A)  will make the AE curve steeper. 
B)  will make the AE curve flatter. 
C)  will reduce the effect of the multiplier. 
D)  will not affect the multiplier. 
A)  will make the AE curve steeper. 
B)  will make the AE curve flatter. 
C)  will reduce the effect of the multiplier. 
D)  will not affect the multiplier.

Question 18

In the short run,the multiplier typically is less than 1.

Accepted Answer

A) True 
 B)False

Question 19

When the economy is in equilibrium,

Accepted Answer

A)  planned investment equals actual investment. 
B)  planned savings will equal zero. 
C)  there can be no unemployment. 
D)  changes in autonomous spending will have no impact on real GDP. 
A)  planned investment equals actual investment. 
B)  planned savings will equal zero. 
C)  there can be no unemployment. 
D)  changes in autonomous spending will have no impact on real GDP.

Question 20

When autonomous expenditure changes,the horizontal distance by which the aggregate demand curve shifts

Accepted Answer

A)  depends on the size of the multiplier. 
B)  depends on the size of the wealth effect. 
C)  is increased by the existence of automatic stabilizers. 
D)  is determined by the inverse of the multiplier. 
A)  depends on the size of the multiplier. 
B)  depends on the size of the wealth effect. 
C)  is increased by the existence of automatic stabilizers. 
D)  is determined by the inverse of the multiplier.

If the marginal propensity to consume is 0.8,every $10 increase in disposable income increases

Given an MPC of 0.80,if there are no income taxes or imports and prices are constant,then when investment increases by $50 million,when prices are fixed equilibrium GDP would

If the MPC is .9 and there are no income taxes or imports,the multiplier for a change in autonomous expenditure equals

Which of the following will NOT shift the consumption function upward?

The size of the marginal propensity to save

What is the relationship between the aggregate expenditure curve and the aggregate demand curve? Explain the relationship.

Aggregate planned expenditure

Imports

What is the relationship between the MPC and the slope of the AE curve?

Suppose that in 2013,firms discover that their inventories are falling below their planned levels.Which of the following statements is correct?

The larger the multiplier,the the AE curve and the the AD curve from an increase in investment.

Which of the following statements is FALSE?

If the multiplier is 3,a $750,000 increase in autonomous expenditure increases equilibrium expenditure by $2.25 million.

The slope of the saving function is equal to the

After an increase in autonomous spending,in the long run,changes in the price level

In the short run,the multiplier typically is less than 1.

When the economy is in equilibrium,

When autonomous expenditure changes,the horizontal distance by which the aggregate demand curve shifts

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

If the marginal propensity to consume is 0.8,every $10 increase in disposable income increases

Given an MPC of 0.80,if there are no income taxes or imports and prices are constant,then when investment increases by $50 million,when prices are fixed equilibrium GDP would

If the MPC is .9 and there are no income taxes or imports,the multiplier for a change in autonomous expenditure equals

Which of the following will NOT shift the consumption function upward?

The size of the marginal propensity to save

What is the relationship between the aggregate expenditure curve and the aggregate demand curve? Explain the relationship.

Aggregate planned expenditure

Imports

What is the relationship between the MPC and the slope of the AE curve?

Suppose that in 2013,firms discover that their inventories are falling below their planned levels.Which of the following statements is correct?

The larger the multiplier,the ________ the AE curve and the ________ the AD curve from an increase in investment.

Which of the following statements is FALSE?

If the multiplier is 3,a $750,000 increase in autonomous expenditure increases equilibrium expenditure by $2.25 million.

The slope of the saving function is equal to the

After an increase in autonomous spending,in the long run,changes in the price level

In the short run,the multiplier typically is less than 1.

When the economy is in equilibrium,

When autonomous expenditure changes,the horizontal distance by which the aggregate demand curve shifts

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

The larger the multiplier,the the AE curve and the the AD curve from an increase in investment.