Question 1

Saving rather than dissaving occurs at any level of disposable income at which

Accepted Answer

A)  the consumption function is above the 45-degree line. 
B)  the consumption function intersects the saving/income curve. 
C)  the consumption function is below the 45-degree line. 
D)  autonomous consumption is positive. 
A)  the consumption function is above the 45-degree line. 
B)  the consumption function intersects the saving/income curve. 
C)  the consumption function is below the 45-degree line. 
D)  autonomous consumption is positive.

Question 2

List and explain factors that determine the size of the multiplier in the aggregate expenditure model when prices are constant.

Accepted Answer

The size of the multiplier depends on th

Question 3

Which of the following is true?

Accepted Answer

A)  MPS = MPC 
B)  MPS + MPC = 1 
C)  MPS + MPC = 0 
D)  MPS - MPC = 1 
A)  MPS = MPC 
B)  MPS + MPC = 1 
C)  MPS + MPC = 0 
D)  MPS - MPC = 1

Question 4

-In the above figure,equilibrium expenditure is

Accepted Answer

A)  less than $12 trillion. 
B)  $12 trillion. 
C)  more than $12 trillion. 
D)  some amount that cannot be determined without more information. 
A)  less than $12 trillion. 
B)  $12 trillion. 
C)  more than $12 trillion. 
D)  some amount that cannot be determined without more information.

Question 5

The marginal propensity to consume must increase as disposable income increases.

Accepted Answer

A) True 
 B)False

Question 6

A decrease in autonomous consumption will

Accepted Answer

A)  shift the aggregate expenditure function downward. 
B)  decrease the marginal propensity to save. 
C)  decrease the marginal propensity to consume. 
D)  change the slope of the aggregate expenditure curve 
A)  shift the aggregate expenditure function downward. 
B)  decrease the marginal propensity to save. 
C)  decrease the marginal propensity to consume. 
D)  change the slope of the aggregate expenditure curve

Question 7

The marginal propensity to consume is found by

Accepted Answer

A)  dividing consumption expenditure by disposable income. 
B)  dividing disposable income by consumption expenditure. 
C)  dividing the change in disposable income by the change in consumption expenditure. 
D)  dividing the change in consumption expenditure by the change in disposable income. 
A)  dividing consumption expenditure by disposable income. 
B)  dividing disposable income by consumption expenditure. 
C)  dividing the change in disposable income by the change in consumption expenditure. 
D)  dividing the change in consumption expenditure by the change in disposable income.

Question 8

-In the above figure the economy is initially at point A on aggregate expenditure curve AE₀.Suppose investment decreases.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 9

The slope of the saving function is equal to

Accepted Answer

A)  the MPS. 
B)  the MPC. 
C)  1- MPS. 
D)  None of the above answers is correct. 
A)  the MPS. 
B)  the MPC. 
C)  1- MPS. 
D)  None of the above answers is correct.

Question 10

List the four components of aggregate expenditure.Explain the two-way link with real GDP.

Accepted Answer

The four components of aggregate expendi

Question 11

In the economy of St.Maynard Island,autonomous consumption expenditure is $185 million,and the marginal propensity to consume is 0.75.Investment is $150 million,government expenditure is $100 million,and net taxes are $80 million.Investment,government expenditure,and taxes are constant-they do not vary with income.The island does not trade with the rest of the world.
a) Draw the aggregate expenditure curve.
b) What is the island's autonomous aggregate expenditure?
c) What is the size of the multiplier in St.Maynard Island's economy?
d) What is the island's aggregate planned expenditure and what is happening to inventories when real GDP is $1,100 million?
e) What is the economy's equilibrium aggregate expenditure?

Accepted Answer

@#IMG-DLM& 
 a) See the figure above. Because the

Question 12

-In the above figure,the line AB is called

Accepted Answer

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

Question 13

If real disposable income increases by $1500,consumption expenditures will

Accepted Answer

A)  stay constant. 
B)  decrease by less than $1500. 
C)  increase by less than $1500. 
D)  increase by more than $1500. 
A)  stay constant. 
B)  decrease by less than $1500. 
C)  increase by less than $1500. 
D)  increase by more than $1500.

Question 14

How do imports and income taxes affect the multiplier?
Why do they have this effect?

Accepted Answer

Income taxes and imports shrin

Question 15

When U.S.real GDP increases,then quantity of U.S.imports

Accepted Answer

A)  decreases. 
B)  increases. 
C)  remains constant. 
D)  at first decreases and then increases. 
A)  decreases. 
B)  increases. 
C)  remains constant. 
D)  at first decreases and then increases.

Question 16

A fall in the price level

Accepted Answer

A)  shifts the aggregate expenditure curve upward and increases the quantity of real GDP demanded. 
B)  shifts the aggregate demand curve rightward and increases equilibrium GDP. 
C)  decreases aggregate planned expenditures and shifts the aggregate demand curve leftward. 
D)  shifts both the aggregate expenditures curve and aggregate demand curve upward. 
A)  shifts the aggregate expenditure curve upward and increases the quantity of real GDP demanded. 
B)  shifts the aggregate demand curve rightward and increases equilibrium GDP. 
C)  decreases aggregate planned expenditures and shifts the aggregate demand curve leftward. 
D)  shifts both the aggregate expenditures curve and aggregate demand curve upward.

Question 17

Suppose the MPC = 0.90 and there are no taxes or imports.What dos the multiplier equal?
If the initial equilibrium aggregate expenditure is $12 trillion,what will be the effect on aggregate expenditure of a $100 billion increase in investment?

Accepted Answer

The multiplier equals 1/(1 - MPC),so the

Question 18

The sum of the components of aggregate expenditure that are not influenced by 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 19

The consumption function shows how much

Accepted Answer

A)  all households plan to consume at each level of real disposable income. 
B)  all households plan to consume at each possible real interest rate. 
C)  real disposable income people will earn at each income tax bracket. 
D)  all households plan to consume at each level of savings. 
A)  all households plan to consume at each level of real disposable income. 
B)  all households plan to consume at each possible real interest rate. 
C)  real disposable income people will earn at each income tax bracket. 
D)  all households plan to consume at each level of savings.

Question 20

The aggregate demand curve slopes downward because of

Accepted Answer

A)  the multiplier. 
B)  the MPC. 
C)  wealth and substitution effects. 
D)  import and taxation effects. 
A)  the multiplier. 
B)  the MPC. 
C)  wealth and substitution effects. 
D)  import and taxation effects.

Saving rather than dissaving occurs at any level of disposable income at which

List and explain factors that determine the size of the multiplier in the aggregate expenditure model when prices are constant.

Which of the following is true?

-In the above figure,equilibrium expenditure is

The marginal propensity to consume must increase as disposable income increases.

A decrease in autonomous consumption will

The marginal propensity to consume is found by

-In the above figure the economy is initially at point A on aggregate expenditure curve AE₀.Suppose investment decreases.As a result

The slope of the saving function is equal to

List the four components of aggregate expenditure.Explain the two-way link with real GDP.

-In the above figure,the line AB is called

If real disposable income increases by $1500,consumption expenditures will

How do imports and income taxes affect the multiplier? Why do they have this effect?

When U.S.real GDP increases,then quantity of U.S.imports

A fall in the price level

Suppose the MPC = 0.90 and there are no taxes or imports.What dos the multiplier equal? If the initial equilibrium aggregate expenditure is $12 trillion,what will be the effect on aggregate expenditure of a $100 billion increase in investment?

The sum of the components of aggregate expenditure that are not influenced by real GDP is called

The consumption function shows how much

The aggregate demand curve slopes downward because of

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

Saving rather than dissaving occurs at any level of disposable income at which

List and explain factors that determine the size of the multiplier in the aggregate expenditure model when prices are constant.

Which of the following is true?

-In the above figure,equilibrium expenditure is

The marginal propensity to consume must increase as disposable income increases.

A decrease in autonomous consumption will

The marginal propensity to consume is found by

-In the above figure the economy is initially at point A on aggregate expenditure curve AE₀.Suppose investment decreases.As a result

The slope of the saving function is equal to

List the four components of aggregate expenditure.Explain the two-way link with real GDP.

-In the above figure,the line AB is called

If real disposable income increases by $1500,consumption expenditures will

How do imports and income taxes affect the multiplier? Why do they have this effect?

When U.S.real GDP increases,then quantity of U.S.imports

A fall in the price level

Suppose the MPC = 0.90 and there are no taxes or imports.What dos the multiplier equal? If the initial equilibrium aggregate expenditure is $12 trillion,what will be the effect on aggregate expenditure of a $100 billion increase in investment?

The sum of the components of aggregate expenditure that are not influenced by real GDP is called

The consumption function shows how much

The aggregate demand curve slopes downward because of

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