Question 1

The multiplier is the amount by which ________ is multiplied to determine ________.

Accepted Answer

A)  autonomous expenditure; real GDP 
B)  induced expenditure; real GDP 
C)  a change in autonomous expenditure; the change in equilibrium expenditure 
D)  a change in induced expenditure; the change in equilibrium expenditure 
A)  autonomous expenditure; real GDP 
B)  induced expenditure; real GDP 
C)  a change in autonomous expenditure; the change in equilibrium expenditure 
D)  a change in induced expenditure; the change in equilibrium expenditure

Question 2

Between 2008 and 2009 the government reported that disposable income decreased by $300 billion and consumption expenditure decreased by $180 billion.Based on these data,the MPS equals

Accepted Answer

A)  2.5. 
B)  0.40. 
C)  0.60. 
D)  $120 billion. 
A)  2.5. 
B)  0.40. 
C)  0.60. 
D)  $120 billion.

Question 3

Where the consumption function crosses the 45° line

Accepted Answer

A)  consumption expenditure equals saving. 
B)  saving is positive. 
C)  saving is negative. 
D)  consumption expenditure equals disposable income. 
A)  consumption expenditure equals saving. 
B)  saving is positive. 
C)  saving is negative. 
D)  consumption expenditure equals disposable income.

Question 4

When disposable income is 0,consumption is $2000.Then

Accepted Answer

A)  saving = $0. 
B)  saving = -$2000. 
C)  saving = $2000. 
D)  the MPC = 0.2. 
A)  saving = $0. 
B)  saving = -$2000. 
C)  saving = $2000. 
D)  the MPC = 0.2.

Question 5

Which of the following statements is correct?

Accepted Answer

A)  Actual aggregate expenditures does not always equal real GDP. 
B)  Planned investment exceeds actual investment when real GDP is greater than aggregate planned expenditures. 
C)  Actual investment exceeds planned investment when real GDP is less than aggregate planned expenditures. 
D)  None of the above is correct. 
A)  Actual aggregate expenditures does not always equal real GDP. 
B)  Planned investment exceeds actual investment when real GDP is greater than aggregate planned expenditures. 
C)  Actual investment exceeds planned investment when real GDP is less than aggregate planned expenditures. 
D)  None of the above is correct.

Question 6

In the above table,suppose investment decreases by $0.1 trillion.The multiplier equals

Accepted Answer

A)  5.0. 
B)  9.0. 
C)  10.0. 
D)  None of the above answers are correct. 
A)  5.0. 
B)  9.0. 
C)  10.0. 
D)  None of the above answers are correct.

Question 7

The marginal propensity to save is

Accepted Answer

A)  total saving divided by total disposable income. 
B)  total saving divided by the change in disposable income. 
C)  the change in saving divided by the change in consumption expenditure. 
D)  the change in saving divided by the change in disposable income. 
A)  total saving divided by total disposable income. 
B)  total saving divided by the change in disposable income. 
C)  the change in saving divided by the change in consumption expenditure. 
D)  the change in saving divided by the change in disposable income.

Question 8

"The global financial crisis has had a considerable impact on China's export growth,which will continue to show weakness with recession in the U.S.and Europe," said a report by JP Morgan & Co. www.money.cnn.com,11/11/2008
If Chinese exports continue to decline,the AE curve will shift ________,the price level will ________ in the long run and real GDP will ________ in the long run.

Accepted Answer

A)  downward; decrease; not change 
B)  downward; decrease; decrease 
C)  decrease; not change; not change 
D)  upward; decrease; not change 
A)  downward; decrease; not change 
B)  downward; decrease; decrease 
C)  decrease; not change; not change 
D)  upward; decrease; not change

Question 9

The larger the slope of the AE curve,the

Accepted Answer

A)  larger the value of the multiplier. 
B)  smaller the value of the multiplier. 
C)  less likely that the multiplier will be affected. 
D)  more likely that the multiplier will be inconsequential. 
A)  larger the value of the multiplier. 
B)  smaller the value of the multiplier. 
C)  less likely that the multiplier will be affected. 
D)  more likely that the multiplier will be inconsequential.

Question 10

$$\begin{array} { | c | c | c | c | } 
\hline \begin{array} { c } 
\text { Real GDP } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Consumption } \
\text { expenditure } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Investment } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Government } \
\text { expenditure } \
\text { (dollars) }
\end{array} \
\hline 3,000 & 2,500 & 500 & 500 \
\hline 4,000 & 3,250 & 500 & 500 \
\hline 5,000 & 4,000 & 500 & 500 \
\hline 6,000 & 4,750 & 500 & 500 \
\hline 7,000 & 5,500 & 500 & 500 \
\hline 8,000 & 6,250 & 500 & 500 \
\hline
\end{array}$$
-In the above table,there are no taxes and no imports or exports.The value of the multiplier for this economy is

Accepted Answer

A)  0.75. 
B)  1.33. 
C)  4.0. 
D)  0.25. 
A)  0.75. 
B)  1.33. 
C)  4.0. 
D)  0.25.

Question 11

You observe that unplanned inventories are increasing.You predict that there will be ________.

Accepted Answer

A)  a business cycle 
B)  an expansion 
C)  a trough 
D)  a recession 
A)  a business cycle 
B)  an expansion 
C)  a trough 
D)  a recession

Question 12

The marginal propensity to consume is

Accepted Answer

A)  the slope of the savings function. 
B)  never greater than 1. 
C)  the percentage or fraction of income that is consumed. 
D)  the percentage change in disposable income. 
A)  the slope of the savings function. 
B)  never greater than 1. 
C)  the percentage or fraction of income that is consumed. 
D)  the percentage change in disposable income.

Question 13

If wealth increases,the consumption function shifts upward.

Accepted Answer

A) True 
 B)False

Question 14

-In the above figure,the marginal propensity to consume equals

Accepted Answer

A)  0.80. 
B)  0.90. 
C)  0.75. 
D)  0.85. 
A)  0.80. 
B)  0.90. 
C)  0.75. 
D)  0.85.

Question 15

The graph of the consumption function has consumption expenditure on the vertical axis and

Accepted Answer

A)  the interest rate on the horizontal axis. 
B)  time on the horizontal axis. 
C)  disposable income on the horizontal axis. 
D)  the Consumer Price Index on the horizontal axis. 
A)  the interest rate on the horizontal axis. 
B)  time on the horizontal axis. 
C)  disposable income on the horizontal axis. 
D)  the Consumer Price Index on the horizontal axis.

Question 16

An increase in the price level decreases planned expenditure because

Accepted Answer

A)  real wealth decreases, thus decreasing expenditure. 
B)  current prices rise relative to future prices, increasing expenditure. 
C)  domestic prices rise relative to foreign prices, increasing net exports. 
D)  the real interest rate rises, increasing consumption expenditure. 
A)  real wealth decreases, thus decreasing expenditure. 
B)  current prices rise relative to future prices, increasing expenditure. 
C)  domestic prices rise relative to foreign prices, increasing net exports. 
D)  the real interest rate rises, increasing consumption expenditure.

Question 17

Suppose that last year the slope of the AE curve is 0.67 and this year the slope of the AE curve changes to 0.8.Which of the following best describes what happens to the multiplier?

Accepted Answer

A)  It rises from 3 to 5. 
B)  It falls from 5 to 3. 
C)  It rises from 1.25 to 1.49. 
D)  It falls from 1.49 to 1.25. 
A)  It rises from 3 to 5. 
B)  It falls from 5 to 3. 
C)  It rises from 1.25 to 1.49. 
D)  It falls from 1.49 to 1.25.

Question 18

If the marginal propensity to consume is 0.8 and there no income taxes or imports,the multiplier for a change in autonomous expenditure equals

Accepted Answer

A)  0.8. 
B)  1.0 
C)  4.0. 
D)  5.0. 
A)  0.8. 
B)  1.0 
C)  4.0. 
D)  5.0.

Question 19

If the price level rises,the purchasing power of wealth

Accepted Answer

A)  increases. 
B)  does not change. 
C)  decreases. 
D)  increases at first but in the long run decreases. 
A)  increases. 
B)  does not change. 
C)  decreases. 
D)  increases at first but in the long run decreases.

Question 20

A movement along the consumption function is the result of changes in

Accepted Answer

A)  the real interest rate. 
B)  disposable income. 
C)  expected future income. 
D)  All of the above answers are correct. 
A)  the real interest rate. 
B)  disposable income. 
C)  expected future income. 
D)  All of the above answers are correct.

The multiplier is the amount by which is multiplied to determine .

Between 2008 and 2009 the government reported that disposable income decreased by $300 billion and consumption expenditure decreased by $180 billion.Based on these data,the MPS equals

Where the consumption function crosses the 45° line

When disposable income is 0,consumption is $2000.Then

Which of the following statements is correct?

In the above table,suppose investment decreases by $0.1 trillion.The multiplier equals

The marginal propensity to save is

The larger the slope of the AE curve,the

You observe that unplanned inventories are increasing.You predict that there will be ________.

The marginal propensity to consume is

If wealth increases,the consumption function shifts upward.

-In the above figure,the marginal propensity to consume equals

The graph of the consumption function has consumption expenditure on the vertical axis and

An increase in the price level decreases planned expenditure because

Suppose that last year the slope of the AE curve is 0.67 and this year the slope of the AE curve changes to 0.8.Which of the following best describes what happens to the multiplier?

If the marginal propensity to consume is 0.8 and there no income taxes or imports,the multiplier for a change in autonomous expenditure equals

If the price level rises,the purchasing power of wealth

A movement along the consumption function is the result of changes in

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

The multiplier is the amount by which ________ is multiplied to determine ________.

Between 2008 and 2009 the government reported that disposable income decreased by $300 billion and consumption expenditure decreased by $180 billion.Based on these data,the MPS equals

Where the consumption function crosses the 45° line

When disposable income is 0,consumption is $2000.Then

Which of the following statements is correct?

In the above table,suppose investment decreases by $0.1 trillion.The multiplier equals

The marginal propensity to save is

The larger the slope of the AE curve,the

You observe that unplanned inventories are increasing.You predict that there will be ________.

The marginal propensity to consume is

If wealth increases,the consumption function shifts upward.

-In the above figure,the marginal propensity to consume equals

The graph of the consumption function has consumption expenditure on the vertical axis and

An increase in the price level decreases planned expenditure because

Suppose that last year the slope of the AE curve is 0.67 and this year the slope of the AE curve changes to 0.8.Which of the following best describes what happens to the multiplier?

If the marginal propensity to consume is 0.8 and there no income taxes or imports,the multiplier for a change in autonomous expenditure equals

If the price level rises,the purchasing power of wealth

A movement along the consumption function is the result of changes in

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 multiplier is the amount by which is multiplied to determine .