Question 1

If the slope of the AE curve increases,the multiplier

Accepted Answer

A)  decreases. 
B)  increases. 
C)  stays the same. 
D)  can either increase or decrease depending on what happens to the MPC. 
A)  decreases. 
B)  increases. 
C)  stays the same. 
D)  can either increase or decrease depending on what happens to the MPC.

Question 2

What does the marginal propensity to consume measure and how is it related to the consumption function?

Accepted Answer

The marginal propensity to consume,or MP

Question 3

-In the above figure,if the level of real GDP is $11 trillion,

Accepted Answer

A)  inventories are above the levels planned by firms. 
B)  inventories are below the levels planned by firms. 
C)  inventories are equal to the levels planned by firms. 
D)  planned expenditures are zero. 
A)  inventories are above the levels planned by firms. 
B)  inventories are below the levels planned by firms. 
C)  inventories are equal to the levels planned by firms. 
D)  planned expenditures are zero.

Question 4

In 2013 the government increased Social Security income taxes by 2 percentage points and increased the income tax rate on Americans making more than $400,000 by 4.6 percentage points.These tax hikes

Accepted Answer

A)  decreased the size of the multiplier. 
B)  increased the size of the multiplier. 
C)  had no effect on the size of the multiplier. 
D)  None of the above answers are correct because the effect on the size of the multiplier is ambiguous. 
A)  decreased the size of the multiplier. 
B)  increased the size of the multiplier. 
C)  had no effect on the size of the multiplier. 
D)  None of the above answers are correct because the effect on the size of the multiplier is ambiguous.

Question 5

Equilibrium real GDP is $400 billion,the MPC = 0.9,and there are no income taxes or imports.Investment increases $40 billion.If the price level is constant,after the increase in investment,equilibrium real GDP will be

Accepted Answer

A)  $440 billion. 
B)  $360 billion. 
C)  $600 billion. 
D)  $800 billion. 
A)  $440 billion. 
B)  $360 billion. 
C)  $600 billion. 
D)  $800 billion.

Question 6

Which of the following does NOT occur as the economy moves from an expansion to a recession?

Accepted Answer

A)  An initial decrease in autonomous spending is the trigger that creates the business cycle turning point. 
B)  The change in planned spending exceeds the change in real GDP. 
C)  The multiplier process reinforces any decrease in spending and pushes the economy into recession. 
D)  Incomes fall during recessions as firms cut production in response to unplanned increases in inventories. 
A)  An initial decrease in autonomous spending is the trigger that creates the business cycle turning point. 
B)  The change in planned spending exceeds the change in real GDP. 
C)  The multiplier process reinforces any decrease in spending and pushes the economy into recession. 
D)  Incomes fall during recessions as firms cut production in response to unplanned increases in inventories.

Question 7

8 Numeric and Graphing Questions
 $$\begin{array} { | c | c | } 
\begin{array} { c } 
\text { Disposable } \
\text { income (trillions } \
\text { of 2005 dollars) }
\end{array} & \begin{array} { c } 
\text { Consumption } \
\text { expenditure } \
\text { (trillions of 2005 } \
\text { dollars) }
\end{array} \
\hline 0.0 & 0.8 \
\hline 1.0 & 1.6 \
\hline 2.0 & 2.4 \
\hline 3.0 & 3.2 \
\hline 4.0 & 4.0 \
\hline
\end{array}$$
-The above table has data on the consumption function in the nation of Mojo.
a) What is the amount of autonomous consumption expenditure?
b) What is the marginal propensity to consume?

Accepted Answer

a)Autonomous consumption expenditure equ

Question 8

The sum of the components of aggregate expenditure that vary with real GDP is called

Accepted Answer

A)  induced expenditures. 
B)  the MPC. 
C)  autonomous expenditures. 
D)  autonomous consumption. 
A)  induced expenditures. 
B)  the MPC. 
C)  autonomous expenditures. 
D)  autonomous consumption.

Question 9

At equilibrium expenditure

Accepted Answer

A)  consumers' expenditures on goods and services equal firms' purchases of investment goods. 
B)  firms hold no inventories of raw materials or final goods. 
C)  aggregate planned expenditure equals real GDP. 
D)  aggregate planned expenditure equals real GDP minus net exports. 
A)  consumers' expenditures on goods and services equal firms' purchases of investment goods. 
B)  firms hold no inventories of raw materials or final goods. 
C)  aggregate planned expenditure equals real GDP. 
D)  aggregate planned expenditure equals real GDP minus net exports.

Question 10

Which of the following is NOT an autonomous expenditure in the aggregate expenditures model?

Accepted Answer

A)  investment 
B)  government expenditures 
C)  imports 
D)  exports 
A)  investment 
B)  government expenditures 
C)  imports 
D)  exports

Question 11

Suppose that the slope of the AE curve is 0.80.If prices remain constant and government expenditure increases by $10 billion,what will be the change in real GDP?

Accepted Answer

A)  $8 billion 
B)  $2 billion 
C)  $10 billion 
D)  $50 billion 
A)  $8 billion 
B)  $2 billion 
C)  $10 billion 
D)  $50 billion

Question 12

The positive slope of the consumption function indicates that

Accepted Answer

A)  consumers spend less out of each extra dollar of income. 
B)  the amount of household wealth is subject to change. 
C)  when prices fall consumers spend more. 
D)  consumers increase their total consumption expenditure when disposable income increases. 
A)  consumers spend less out of each extra dollar of income. 
B)  the amount of household wealth is subject to change. 
C)  when prices fall consumers spend more. 
D)  consumers increase their total consumption expenditure when disposable income increases.

Question 13

If the slope of the saving function is 0.27,then the marginal propensity to ________.

Accepted Answer

A)  import is less than 0.27 
B)  save is 0.73 
C)  consume is 0.73 
D)  consume is 0.27 
A)  import is less than 0.27 
B)  save is 0.73 
C)  consume is 0.73 
D)  consume is 0.27

Question 14

Dissaving

Accepted Answer

A)  is equal to consumption expenditure when disposable income is greater than zero. 
B)  is equal to the amount of saving when consumption is less than disposable income. 
C)  is equal to taxation when disposable income is zero. 
D)  occurs when consumption is greater than disposable income. 
A)  is equal to consumption expenditure when disposable income is greater than zero. 
B)  is equal to the amount of saving when consumption is less than disposable income. 
C)  is equal to taxation when disposable income is zero. 
D)  occurs when consumption is greater than disposable income.

Question 15

$$\begin{array} { | c | c | } 
\hline \begin{array} { c } 
\text { Disposable } \
\text { income } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Consumption } \
\text { expenditure (dollars) }
\end{array} \
\hline 100 & 225 \
\hline 200 & 300 \
\hline 300 & 375 \
\hline 400 & 450 \
\hline 500 & 525 \
\hline 600 & 600 \
\hline
\end{array}$$
-Using the above table,if disposable income is $400,saving is

Accepted Answer

A)  -$50. 
B)  $0. 
C)  $50. 
D)  $100. 
A)  -$50. 
B)  $0. 
C)  $50. 
D)  $100.

Question 16

If the marginal propensity to save is 0.6,then the marginal propensity to consume is

Accepted Answer

A)  0.6. 
B)  0.4. 
C)  1.0. 
D)  not determinable. 
A)  0.6. 
B)  0.4. 
C)  1.0. 
D)  not determinable.

Question 17

In a simple economy in which prices are constant and with no income taxes or imports,the marginal propensity to save is 0.2.If exports increase $50,what impact will that have on aggregate expenditure?

Accepted Answer

A)  increase by $250 
B)  increase by $100 
C)  decrease by $250 
D)  decrease by $100 
A)  increase by $250 
B)  increase by $100 
C)  decrease by $250 
D)  decrease by $100

Question 18

Suppose the equilibrium level of expenditure is $13 trillion.If real GDP is $14 trillion,then planned expenditures

Accepted Answer

A)  exceed real GDP, and real GDP will increase. 
B)  are less than real GDP, and real GDP will decrease. 
C)  are equal to real GDP, and there will be no change in real GDP. 
D)  are less than real GDP, and real GDP will increase. 
A)  exceed real GDP, and real GDP will increase. 
B)  are less than real GDP, and real GDP will decrease. 
C)  are equal to real GDP, and there will be no change in real GDP. 
D)  are less than real GDP, and real GDP will increase.

Question 19

Define induced expenditure and autonomous expenditure.Which expenditure items are induced expenditure and which are autonomous expenditure?

Accepted Answer

Induced expenditure is aggregate expendi

Question 20

The multiplier measures the

Accepted Answer

A)  horizontal shift in the aggregate demand curve from an increase in autonomous spending. 
B)  vertical shift in the aggregate demand curve from an increase in autonomous spending. 
C)  horizontal difference between two points on the same aggregate demand curve. 
D)  vertical difference between two points on the same aggregate demand curve. 
A)  horizontal shift in the aggregate demand curve from an increase in autonomous spending. 
B)  vertical shift in the aggregate demand curve from an increase in autonomous spending. 
C)  horizontal difference between two points on the same aggregate demand curve. 
D)  vertical difference between two points on the same aggregate demand curve.

If the slope of the AE curve increases,the multiplier

What does the marginal propensity to consume measure and how is it related to the consumption function?

-In the above figure,if the level of real GDP is $11 trillion,

In 2013 the government increased Social Security income taxes by 2 percentage points and increased the income tax rate on Americans making more than $400,000 by 4.6 percentage points.These tax hikes

Equilibrium real GDP is $400 billion,the MPC = 0.9,and there are no income taxes or imports.Investment increases $40 billion.If the price level is constant,after the increase in investment,equilibrium real GDP will be

Which of the following does NOT occur as the economy moves from an expansion to a recession?

The sum of the components of aggregate expenditure that vary with real GDP is called

At equilibrium expenditure

Which of the following is NOT an autonomous expenditure in the aggregate expenditures model?

Suppose that the slope of the AE curve is 0.80.If prices remain constant and government expenditure increases by $10 billion,what will be the change in real GDP?

The positive slope of the consumption function indicates that

If the slope of the saving function is 0.27,then the marginal propensity to ________.

Dissaving

Disposable income (dollars) Consumption expenditure (dollars) 100 225 200 300 300 375 400 450 500 525 600 600 -Using the above table,if disposable income is $400,saving is

If the marginal propensity to save is 0.6,then the marginal propensity to consume is

In a simple economy in which prices are constant and with no income taxes or imports,the marginal propensity to save is 0.2.If exports increase $50,what impact will that have on aggregate expenditure?

Suppose the equilibrium level of expenditure is $13 trillion.If real GDP is $14 trillion,then planned expenditures

Define induced expenditure and autonomous expenditure.Which expenditure items are induced expenditure and which are autonomous expenditure?

The multiplier measures the

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

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Exam 11: Expenditure Multipliers

If the slope of the AE curve increases,the multiplier

What does the marginal propensity to consume measure and how is it related to the consumption function?

-In the above figure,if the level of real GDP is $11 trillion,

In 2013 the government increased Social Security income taxes by 2 percentage points and increased the income tax rate on Americans making more than $400,000 by 4.6 percentage points.These tax hikes

Equilibrium real GDP is $400 billion,the MPC = 0.9,and there are no income taxes or imports.Investment increases $40 billion.If the price level is constant,after the increase in investment,equilibrium real GDP will be

Which of the following does NOT occur as the economy moves from an expansion to a recession?

The sum of the components of aggregate expenditure that vary with real GDP is called

At equilibrium expenditure

Which of the following is NOT an autonomous expenditure in the aggregate expenditures model?

Suppose that the slope of the AE curve is 0.80.If prices remain constant and government expenditure increases by $10 billion,what will be the change in real GDP?

The positive slope of the consumption function indicates that

If the slope of the saving function is 0.27,then the marginal propensity to ________.

Dissaving

Disposable income (dollars) Consumption expenditure (dollars) 100 225 200 300 300 375 400 450 500 525 600 600 -Using the above table,if disposable income is $400,saving is

If the marginal propensity to save is 0.6,then the marginal propensity to consume is

In a simple economy in which prices are constant and with no income taxes or imports,the marginal propensity to save is 0.2.If exports increase $50,what impact will that have on aggregate expenditure?

Suppose the equilibrium level of expenditure is $13 trillion.If real GDP is $14 trillion,then planned expenditures

Define induced expenditure and autonomous expenditure.Which expenditure items are induced expenditure and which are autonomous expenditure?

The multiplier measures the

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