Question 1

If AE₀ is the aggregate planned expenditure curve,then equilibrium real GDP in the figure above is

Accepted Answer

A)  $3 trillion. 
B)  $6 trillion. 
C)  $12 trillion. 
D)  None of the above answers is correct. 
A)  $3 trillion. 
B)  $6 trillion. 
C)  $12 trillion. 
D)  None of the above answers is correct.

Question 2

A fall in the price level shifts the AE curve ________ and ________ equilibrium expenditure.

Accepted Answer

A)  upward; increases 
B)  upward; decreases 
C)  downward; increases 
D)  downward; decreases 
A)  upward; increases 
B)  upward; decreases 
C)  downward; increases 
D)  downward; decreases

Question 3

$$\begin{array} { | c | c | } 
\hline \begin{array} { c } 
\text { Disposable } \
\text { income } \
\text { (thousands of } \
\text { dollars) }
\end{array} & \begin{array} { c } 
\text { Consumption } \
\text { expenditure } \
\text { (thousands of dollars) }
\end{array} \
\hline 200 & 225 \
\hline 300 & 300 \
\hline 400 & 375 \
\hline 500 & 450 \
\hline
\end{array}$$
-According to the data in the above table,at what level of disposable income is savings negative?

Accepted Answer

A)  200 
B)  300 
C)  400 
D)  Never because saving cannot be negative. 
A)  200 
B)  300 
C)  400 
D)  Never because saving cannot be negative.

Question 4

A change in which of the following changes the slope of the aggregate expenditure curve?

Accepted Answer

A)  an increase in autonomous government expenditures 
B)  an increase in the marginal propensity to consume 
C)  a decrease in autonomous consumption expenditures 
D)  All of the above answers are correct because they all change the slope of the aggregate expenditure curve. 
A)  an increase in autonomous government expenditures 
B)  an increase in the marginal propensity to consume 
C)  a decrease in autonomous consumption expenditures 
D)  All of the above answers are correct because they all change the slope of the aggregate expenditure curve.

Question 5

If an increase in a household's disposable income from $10,000 to $12,000 boosts its consumption expenditure from $8,000 to $9,000,the

Accepted Answer

A)  household is dissaving. 
B)  slope of the consumption function is 0.2 
C)  slope of the consumption function is 0.5 
D)  slope of the consumption function is 1000. 
A)  household is dissaving. 
B)  slope of the consumption function is 0.2 
C)  slope of the consumption function is 0.5 
D)  slope of the consumption function is 1000.

Question 6

How does an increase in the price level affect the aggregate expenditure curve and the aggregate demand curve?

Accepted Answer

An increase in the price level

Question 7

If consumption expenditures for a household increase from $1000 to $1800 when disposable income rises from $1000 to $2000,the marginal propensity to consume is

Accepted Answer

A)  0.8. 
B)  0.18. 
C)  0.3. 
D)  0.2. 
A)  0.8. 
B)  0.18. 
C)  0.3. 
D)  0.2.

Question 8

If the price level increases,the AE curve shifts

Accepted Answer

A)  upward and the AD curve shifts leftward. 
B)  downward and the AD curve shifts rightward. 
C)  upward and we move along the AD curve. 
D)  downward and we move along the AD curve. 
A)  upward and the AD curve shifts leftward. 
B)  downward and the AD curve shifts rightward. 
C)  upward and we move along the AD curve. 
D)  downward and we move along the AD curve.

Question 9

With consumption expenditure on the vertical axis and disposable income on the horizontal axis,the consumption function intersects the 45-degree line at $8 trillion.This result indicates that

Accepted Answer

A)  autonomous consumption spending is $8 trillion. 
B)  consumption spending is $8 trillion when disposable income is $8 trillion. 
C)  consumption spending is less than $8 trillion because taxes must be paid. 
D)  consumption spending is more than $8 trillion because taxes have been paid. 
A)  autonomous consumption spending is $8 trillion. 
B)  consumption spending is $8 trillion when disposable income is $8 trillion. 
C)  consumption spending is less than $8 trillion because taxes must be paid. 
D)  consumption spending is more than $8 trillion because taxes have been paid.

Question 10

Real GDP equals $20 billion and aggregate planned expenditure is $30 billion.There is an unplanned ________ in inventories of ________ and real GDP will ________.

Accepted Answer

A)  increase; $10 billion; increase 
B)  increase; $50 billion; decrease 
C)  decrease; $10 billion; increase 
D)  decrease; $10 billion; decrease 
A)  increase; $10 billion; increase 
B)  increase; $50 billion; decrease 
C)  decrease; $10 billion; increase 
D)  decrease; $10 billion; decrease

Question 11

The Keynesian model of aggregate expenditure assumes that

Accepted Answer

A)  individual firms' prices are flexible but the price level is fixed. 
B)  both individual firms' prices and the price level are flexible. 
C)  both individual firms' prices and the price level are fixed. 
D)  individual firms' prices are fixed but the price level is flexible. 
A)  individual firms' prices are flexible but the price level is fixed. 
B)  both individual firms' prices and the price level are flexible. 
C)  both individual firms' prices and the price level are fixed. 
D)  individual firms' prices are fixed but the price level is flexible.

Question 12

As disposable income increases,saving increases.

Accepted Answer

A) True 
 B)False

Question 13

________ consumption expenditure is greater than disposable income.

Accepted Answer

A)  It is always the case that 
B)  Saving is positive whenever 
C)  Dissaving occurs whenever 
D)  None of the above answers is correct because it is impossible for consumption expenditure to be greater than disposable income. 
A)  It is always the case that 
B)  Saving is positive whenever 
C)  Dissaving occurs whenever 
D)  None of the above answers is correct because it is impossible for consumption expenditure to be greater than disposable income.

Question 14

In the very short run,the components of aggregate planned expenditure that depend on the level of real GDP are

Accepted Answer

A)  planned consumption expenditure and planned imports. 
B)  planned investment and planned imports. 
C)  planned investment and planned exports. 
D)  planned government expenditure on goods and services and planned imports. 
A)  planned consumption expenditure and planned imports. 
B)  planned investment and planned imports. 
C)  planned investment and planned exports. 
D)  planned government expenditure on goods and services and planned imports.

Question 15

As a nation's GDP increases,that nation's

Accepted Answer

A)  autonomous consumption increases. 
B)  autonomous consumption decreases. 
C)  exports increase. 
D)  imports increase. 
A)  autonomous consumption increases. 
B)  autonomous consumption decreases. 
C)  exports increase. 
D)  imports increase.

Question 16

In an article regarding Bangladesh's economy,the author suggests that the government ..."[g]ive double tax breaks on investment dollars.Give tax break to R&D [research and development].Give tax break on donations to educational institutions." www.groundreport.com,March 24,2008
As a result of enacting the policies,the AE curve will shift ________ and the AD curve will shift ________.

Accepted Answer

A)  upward; leftward 
B)  upward; rightward 
C)  downward; rightward 
D)  downward; leftward 
A)  upward; leftward 
B)  upward; rightward 
C)  downward; rightward 
D)  downward; leftward

Question 17

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

Accepted Answer

A)  falling as disposable income is rising. 
B)  0 when disposable income is $600. 
C)  constant at 0.25. 
D)  constant at 0.75. 
A)  falling as disposable income is rising. 
B)  0 when disposable income is $600. 
C)  constant at 0.25. 
D)  constant at 0.75.

Question 18

Taking into account the upward-sloping short-run aggregate supply curve,the short-run effect of an increase in government expenditure on real GDP is that

Accepted Answer

A)  real GDP increases by more in the short run than in the long run. 
B)  real GDP increases by the same amount in the short run as in the long run. 
C)  real GDP increases by less in the short run than in the long run. 
D)  real GDP does not change in the short run because the price level increases. 
A)  real GDP increases by more in the short run than in the long run. 
B)  real GDP increases by the same amount in the short run as in the long run. 
C)  real GDP increases by less in the short run than in the long run. 
D)  real GDP does not change in the short run because the price level increases.

Question 19

Consumption expenditures equal disposable income

Accepted Answer

A)  at every point on the consumption function. 
B)  at every point on the saving function. 
C)  at every point on the 45-degree line. 
D)  when saving equals disposable income. 
A)  at every point on the consumption function. 
B)  at every point on the saving function. 
C)  at every point on the 45-degree line. 
D)  when saving equals disposable income.

Question 20

Because the short-run aggregate expenditure model assumes that the price level is ________,its predicted effect of changes in autonomous expenditure on equilibrium output is ________ than the prediction of the AD/SAS model.

Accepted Answer

A)  fixed; greater 
B)  fixed; less 
C)  flexible; greater 
D)  flexible; less 
A)  fixed; greater 
B)  fixed; less 
C)  flexible; greater 
D)  flexible; less

If AE₀ is the aggregate planned expenditure curve,then equilibrium real GDP in the figure above is

A fall in the price level shifts the AE curve and equilibrium expenditure.

Disposable income (thousands of dollars) Consumption expenditure (thousands of dollars) 200 225 300 300 400 375 500 450 -According to the data in the above table,at what level of disposable income is savings negative?

A change in which of the following changes the slope of the aggregate expenditure curve?

If an increase in a household's disposable income from $10,000 to $12,000 boosts its consumption expenditure from $8,000 to $9,000,the

How does an increase in the price level affect the aggregate expenditure curve and the aggregate demand curve?

If consumption expenditures for a household increase from $1000 to $1800 when disposable income rises from $1000 to $2000,the marginal propensity to consume is

If the price level increases,the AE curve shifts

With consumption expenditure on the vertical axis and disposable income on the horizontal axis,the consumption function intersects the 45-degree line at $8 trillion.This result indicates that

Real GDP equals $20 billion and aggregate planned expenditure is $30 billion.There is an unplanned in inventories of and real GDP will .

The Keynesian model of aggregate expenditure assumes that

As disposable income increases,saving increases.

________ consumption expenditure is greater than disposable income.

In the very short run,the components of aggregate planned expenditure that depend on the level of real GDP are

As a nation's GDP increases,that nation's

Disposable income (dollars) Consumption expenditure (dollars) 100 225 200 300 300 375 400 450 500 525 600 600 -Using the data from the above table,the marginal propensity to save is

Taking into account the upward-sloping short-run aggregate supply curve,the short-run effect of an increase in government expenditure on real GDP is that

Consumption expenditures equal disposable income

Because the short-run aggregate expenditure model assumes that the price level is ,its predicted effect of changes in autonomous expenditure on equilibrium output is than the prediction of the AD/SAS model.

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 AE₀ is the aggregate planned expenditure curve,then equilibrium real GDP in the figure above is

A fall in the price level shifts the AE curve ________ and ________ equilibrium expenditure.

Disposable income (thousands of dollars) Consumption expenditure (thousands of dollars) 200 225 300 300 400 375 500 450 -According to the data in the above table,at what level of disposable income is savings negative?

A change in which of the following changes the slope of the aggregate expenditure curve?

If an increase in a household's disposable income from $10,000 to $12,000 boosts its consumption expenditure from $8,000 to $9,000,the

How does an increase in the price level affect the aggregate expenditure curve and the aggregate demand curve?

If consumption expenditures for a household increase from $1000 to $1800 when disposable income rises from $1000 to $2000,the marginal propensity to consume is

If the price level increases,the AE curve shifts

With consumption expenditure on the vertical axis and disposable income on the horizontal axis,the consumption function intersects the 45-degree line at $8 trillion.This result indicates that

Real GDP equals $20 billion and aggregate planned expenditure is $30 billion.There is an unplanned ________ in inventories of ________ and real GDP will ________.

The Keynesian model of aggregate expenditure assumes that

As disposable income increases,saving increases.

________ consumption expenditure is greater than disposable income.

In the very short run,the components of aggregate planned expenditure that depend on the level of real GDP are

As a nation's GDP increases,that nation's

Disposable income (dollars) Consumption expenditure (dollars) 100 225 200 300 300 375 400 450 500 525 600 600 -Using the data from the above table,the marginal propensity to save is

Taking into account the upward-sloping short-run aggregate supply curve,the short-run effect of an increase in government expenditure on real GDP is that

Consumption expenditures equal disposable income

Because the short-run aggregate expenditure model assumes that the price level is ________,its predicted effect of changes in autonomous expenditure on equilibrium output is ________ than the prediction of the AD/SAS model.

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

A fall in the price level shifts the AE curve and equilibrium expenditure.

Real GDP equals $20 billion and aggregate planned expenditure is $30 billion.There is an unplanned in inventories of and real GDP will .

Because the short-run aggregate expenditure model assumes that the price level is ,its predicted effect of changes in autonomous expenditure on equilibrium output is than the prediction of the AD/SAS model.