Question 1

Please explain the relationship between consumption,disposable income and saving.

Accepted Answer

In general,the greater the level of disp

Question 2

The U.S.consumption function

Accepted Answer

A)  has shifted upward over time. 
B)  has a positive slope. 
C)  has a slope of about 0.9. 
D)  All of the above answers are correct. 
A)  has shifted upward over time. 
B)  has a positive slope. 
C)  has a slope of about 0.9. 
D)  All of the above answers are correct.

Question 3

If the marginal propensity to import increases,then the

Accepted Answer

A)  multiplier will decrease in value. 
B)  multiplier will increase in value. 
C)  multiplier will not change in value. 
D)  effect on the multiplier will depend on what happens to exports. 
A)  multiplier will decrease in value. 
B)  multiplier will increase in value. 
C)  multiplier will not change in value. 
D)  effect on the multiplier will depend on what happens to exports.

Question 4

$$\begin{array} { | c | c | c | c | c | c | } 
\hline \begin{array} { r } 
\text { Real } \
\text { GDP }
\end{array} & C & I & G & X & M \
\hline 100 & 75 & 25 & 95 & 10 & 1 \
\hline 200 & 150 & 25 & 95 & 10 & 2 \
\hline 300 & 225 & 25 & 95 & 10 & 3 \
\hline 400 & 300 & 25 & 95 & 10 & 4 \
\hline 500 & 375 & 25 & 95 & 10 & 5 \
\hline 600 & 450 & 25 & 95 & 10 & 6 \
\hline 700 & 525 & 25 & 95 & 10 & 7 \
\hline 800 & 600 & 25 & 95 & 10 & 8 \
\hline 900 & 675 & 25 & 95 & 10 & 9 \
\hline 1000 & 750 & 25 & 95 & 10 & 10 \
\hline
\end{array}$$
-In the above table,C is consumption expenditure,I is investment,G is government expenditure,X is exports,and M is imports.All entries are in dollars.What is the unplanned inventory change when GDP is equal to $400?

Accepted Answer

A)  $26 
B)  -$26 
C)  $5 
D)  -$5 
A)  $26 
B)  -$26 
C)  $5 
D)  -$5

Question 5

Consumption expenditure decreases when ________ decreases.

Accepted Answer

A)  the interest rate 
B)  the price level 
C)  disposable income 
D)  saving 
A)  the interest rate 
B)  the price level 
C)  disposable income 
D)  saving

Question 6

In an article regarding Bangladesh's economy,the author suggests that the government ..."[g]ive double tax breaks on investment dollars.Give a tax break to R&D [research and development].Give a tax break on donations to educational institutions." www.groundreport.com,March 24,2008
Suppose the multiplier in Bangladesh is 2.If the government enacts the proposed policies and ________,aggregate expenditure ________ in the short run.

Accepted Answer

A)  induced expenditure increases by $5 billion; increases by $10 billion. 
B)  autonomous expenditure decreases by $10; decreases by $5 billion. 
C)  equilibrium expenditure increases by $8 billion; increases by $16 billion. 
D)  autonomous expenditure increases by $10 billion; increases by $20 billion. 
A)  induced expenditure increases by $5 billion; increases by $10 billion. 
B)  autonomous expenditure decreases by $10; decreases by $5 billion. 
C)  equilibrium expenditure increases by $8 billion; increases by $16 billion. 
D)  autonomous expenditure increases by $10 billion; increases by $20 billion.

Question 7

If the consumption function lies below the 45-degree line,then saving at these levels of disposable income will

Accepted Answer

A)  be positive. 
B)  be negative. 
C)  equal zero. 
D)  be some amount that cannot be determined without additional information. 
A)  be positive. 
B)  be negative. 
C)  equal zero. 
D)  be some amount that cannot be determined without additional information.

Question 8

An increase in the price level shifts the aggregate expenditure curve downward and results in a movement along the aggregate demand curve.Why does an increase in the price level result in a shift in the aggregate expenditure curve rather than a movement along it?

Accepted Answer

The increase in the price level shifts t

Question 9

The expenditure multiplier equals

Accepted Answer

A)  APC - APS where APC is the average propensity to consume and APS is the average propensity to save. 
B)  1/(1 - slope of AE curve). 
C)  MPC - MPS where MPC is the marginal propensity to consume and MPS is the marginal propensity to consume. 
D)  1/(slope of AE curve). 
A)  APC - APS where APC is the average propensity to consume and APS is the average propensity to save. 
B)  1/(1 - slope of AE curve). 
C)  MPC - MPS where MPC is the marginal propensity to consume and MPS is the marginal propensity to consume. 
D)  1/(slope of AE curve).

Question 10

-In the above figure the economy is initially at point A on aggregate expenditure curve AE₀.Suppose firms expect profits to increase and decide to increase investment.As a result

Accepted Answer

A)  the AE curve shifts upward to a curve such as AE₂. 
B)  the AE curve shifts downward to a curve such as AE₁. 
C)  there is a movement along AE₁ to a point such as B. 
D)  there is a movement along AE₁ to a point such as C. 
A)  the AE curve shifts upward to a curve such as AE₂. 
B)  the AE curve shifts downward to a curve such as AE₁. 
C)  there is a movement along AE₁ to a point such as B. 
D)  there is a movement along AE₁ to a point such as C.

Question 11

Which of the following is INCORRECT?

Accepted Answer

A)  Expansions usually begin with an increase in autonomous spending. 
B)  Firms experience unplanned decreases in inventories as expansions begin. 
C)  Firms increase production in response to unplanned decreases in inventories. 
D)  The multiplier dampens the increase in income that occurs during expansions and brings the economy to a new equilibrium GDP. 
A)  Expansions usually begin with an increase in autonomous spending. 
B)  Firms experience unplanned decreases in inventories as expansions begin. 
C)  Firms increase production in response to unplanned decreases in inventories. 
D)  The multiplier dampens the increase in income that occurs during expansions and brings the economy to a new equilibrium GDP.

Question 12

An increase in disposable income

Accepted Answer

A)  shifts the saving function upward. 
B)  results in a movement upward along the saving function. 
C)  shifts the saving function downward. 
D)  results in a movement downward along the saving function. 
A)  shifts the saving function upward. 
B)  results in a movement upward along the saving function. 
C)  shifts the saving function downward. 
D)  results in a movement downward along the saving function.

Question 13

The multiplier effect is smallest

Accepted Answer

A)  in the long run. 
B)  in the short run. 
C)  when the price level is fixed. 
D)  when the economy is in a recession. 
A)  in the long run. 
B)  in the short run. 
C)  when the price level is fixed. 
D)  when the economy is in a recession.

Question 14

Any expenditure component that depends on the level of real GDP is called

Accepted Answer

A)  spurious expenditure. 
B)  equilibrium expenditure. 
C)  induced expenditure. 
D)  autonomous expenditure. 
A)  spurious expenditure. 
B)  equilibrium expenditure. 
C)  induced expenditure. 
D)  autonomous expenditure.

Please explain the relationship between consumption,disposable income and saving.

The U.S.consumption function

If the marginal propensity to import increases,then the

Consumption expenditure decreases when ________ decreases.

If the consumption function lies below the 45-degree line,then saving at these levels of disposable income will

An increase in the price level shifts the aggregate expenditure curve downward and results in a movement along the aggregate demand curve.Why does an increase in the price level result in a shift in the aggregate expenditure curve rather than a movement along it?

The expenditure multiplier equals

-In the above figure the economy is initially at point A on aggregate expenditure curve AE₀.Suppose firms expect profits to increase and decide to increase investment.As a result

Which of the following is INCORRECT?

An increase in disposable income

The multiplier effect is smallest

Any expenditure component that depends on the level of real GDP is called

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

Please explain the relationship between consumption,disposable income and saving.

The U.S.consumption function

If the marginal propensity to import increases,then the

Consumption expenditure decreases when ________ decreases.

If the consumption function lies below the 45-degree line,then saving at these levels of disposable income will

An increase in the price level shifts the aggregate expenditure curve downward and results in a movement along the aggregate demand curve.Why does an increase in the price level result in a shift in the aggregate expenditure curve rather than a movement along it?

The expenditure multiplier equals

-In the above figure the economy is initially at point A on aggregate expenditure curve AE₀.Suppose firms expect profits to increase and decide to increase investment.As a result

Which of the following is INCORRECT?

An increase in disposable income

The multiplier effect is smallest

Any expenditure component that depends on the level of real GDP is called

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