Question 1

If there are no income taxes or imports,the multiplier equals

Accepted Answer

A)  1/(1 - marginal propensity to consume). 
B)  1/(1 - marginal propensity to save). 
C)  1/(1 - marginal propensity to import). 
D)  1/(1 - marginal propensity to invest). 
A)  1/(1 - marginal propensity to consume). 
B)  1/(1 - marginal propensity to save). 
C)  1/(1 - marginal propensity to import). 
D)  1/(1 - marginal propensity to invest).

Question 2

Suppose disposable income increases from $7 trillion to $8 trillion.At the same time,consumption expenditure increases from $6.8 trillion to ________.Thus the MPC must equal ________.

Accepted Answer

A)  $7.8 trillion; 0.80 
B)  $7.6 trillion; 0.80 
C)  $7.4 trillion; 0.40 
D)  $8 trillion; 1.00 
A)  $7.8 trillion; 0.80 
B)  $7.6 trillion; 0.80 
C)  $7.4 trillion; 0.40 
D)  $8 trillion; 1.00

Question 3

$$\begin{array} { | c | c | c | c | c | } 
\hline \begin{array} { c } 
\text { Real } \
\text { GDP }
\end{array} & C & I & G & X - M \
\hline 2500 & 1430 & 540 & 400 & 90 \
\hline 2400 & 1360 & 540 & 400 & 100 \
\hline 2300 & 1290 & 540 & 400 & 110 \
\hline 2200 & 1220 & 540 & 400 & 120 \
\hline 2100 & 1150 & 540 & 400 & 130 \
\hline
\end{array}$$
-In the above table,C is consumption expenditure,I is investment,G is government expenditure,and X - M is net exports.All entries are in dollars.The slope of the aggregate expenditure function is

Accepted Answer

A)  -0.10. 
B)  0.10. 
C)  0.60. 
D)  0.70. 
A)  -0.10. 
B)  0.10. 
C)  0.60. 
D)  0.70.

Question 4

$$\begin{array} { | c | c | } 
\hline \begin{array} { c } 
\text { Disposable income } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Consumption } \
\text { expenditure (dollars) }
\end{array} \
\hline 0 & 100 \
\hline 100 & 180 \
\hline 300 & 340 \
\hline 500 & 500 \
\hline 700 & 660 \
\hline 900 & 820 \
\hline
\end{array}$$
-In the above table,the marginal propensity to consume equals

Accepted Answer

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

Question 5

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

Accepted Answer

A)  any level because investment always equals government expenditures. 
B)  no level because consumption expenditure is always less than real GDP. 
C)  $3,000. 
D)  $5,000. 
A)  any level because investment always equals government expenditures. 
B)  no level because consumption expenditure is always less than real GDP. 
C)  $3,000. 
D)  $5,000.

Question 6

The marginal propensity to save is ________.

Accepted Answer

A)  always greater than the marginal propensity to consume 
B)  equal to the slope of the saving function 
C)  equal to 1 plus the slope of the consumption function 
D)  equal to the inverse of the marginal propensity to consume 
A)  always greater than the marginal propensity to consume 
B)  equal to the slope of the saving function 
C)  equal to 1 plus the slope of the consumption function 
D)  equal to the inverse of the marginal propensity to consume

Question 7

Which of the following shifts the aggregate expenditure curve AND shifts the aggregate demand curve?
I. a decrease in investment
II. a change in the price level
III. an increase in exports

Accepted Answer

A)  I and II 
B)  I and III 
C)  II and III 
D)  III only 
A)  I and II 
B)  I and III 
C)  II and III 
D)  III only

Question 8

The presence of income taxes and imports make the slope of the aggregate expenditure curve

Accepted Answer

A)  the same as it would be without income taxes and exports. 
B)  steeper than it would be without income taxes and exports. 
C)  flatter than it would be without income taxes and exports. 
D)  probably different than it would be without income taxes and exports but income taxes make it steeper while imports make it flatter. 
A)  the same as it would be without income taxes and exports. 
B)  steeper than it would be without income taxes and exports. 
C)  flatter than it would be without income taxes and exports. 
D)  probably different than it would be without income taxes and exports but income taxes make it steeper while imports make it flatter.

Question 9

At a level of disposable income of $0,consumption expenditure is $3500.Therefore when disposable income is $0,

Accepted Answer

A)  saving and dissaving equal $0. 
B)  saving equals -$3500. 
C)  saving equals $3500. 
D)  the MPC = zero. 
A)  saving and dissaving equal $0. 
B)  saving equals -$3500. 
C)  saving equals $3500. 
D)  the MPC = zero.

Question 10

If the change in autonomous investment equals $1 trillion and the change in real GDP equals $4 trillion,the multiplier equals 1/4.

Accepted Answer

A) True 
 B)False

Question 11

The marginal propensity to consume measures

Accepted Answer

A)  how much of a given level of disposable income is consumed. 
B)  what percentage of disposable income goes to saving. 
C)  how much consumption expenditure occurs at the equilibrium level of income. 
D)  the fraction of a change in disposable income that is spent on consumption expenditure. 
A)  how much of a given level of disposable income is consumed. 
B)  what percentage of disposable income goes to saving. 
C)  how much consumption expenditure occurs at the equilibrium level of income. 
D)  the fraction of a change in disposable income that is spent on consumption expenditure.

Question 12

Disposable income is divided into

Accepted Answer

A)  consumption and taxes. 
B)  saving and taxes. 
C)  consumption, saving, and taxes. 
D)  consumption and saving. 
A)  consumption and taxes. 
B)  saving and taxes. 
C)  consumption, saving, and taxes. 
D)  consumption and saving.

Question 13

The relationship between the multiplier and the MPC is

Accepted Answer

A)  that as the MPC increases, so does the value of the multiplier. 
B)  that as the MPC increases, the value of the multiplier decreases. 
C)  unrelated because the multiplier relates to the MPS not the MPC. 
D)  converging at higher incomes. 
A)  that as the MPC increases, so does the value of the multiplier. 
B)  that as the MPC increases, the value of the multiplier decreases. 
C)  unrelated because the multiplier relates to the MPS not the MPC. 
D)  converging at higher incomes.

Question 14

As disposable income increases,there is a ________ the saving function.

Accepted Answer

A)  leftward shift of the 
B)  movement along 
C)  rightward shift of 
D)  change in the slope of 
A)  leftward shift of the 
B)  movement along 
C)  rightward shift of 
D)  change in the slope of

Question 15

An increase in the price level decreases planned expenditures because

Accepted Answer

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

Question 16

Any change in the price level will result in a

Accepted Answer

A)  shift in the AE curve and a movement along the AD curve. 
B)  movement along the AE curve and a shift of the AD curve. 
C)  shift in the AE and AD curves in the same direction. 
D)  shift in the AE and AD curves in opposite directions. 
A)  shift in the AE curve and a movement along the AD curve. 
B)  movement along the AE curve and a shift of the AD curve. 
C)  shift in the AE and AD curves in the same direction. 
D)  shift in the AE and AD curves in opposite directions.

Question 17

Since 1970,U.S.consumption function has generally shifted ________ because of ________.

Accepted Answer

A)  upward; higher expected future income and rising wealth 
B)  upward; higher real interest rates 
C)  downward; higher real interest rates 
D)  downward; falling wealth 
A)  upward; higher expected future income and rising wealth 
B)  upward; higher real interest rates 
C)  downward; higher real interest rates 
D)  downward; falling wealth

Question 18

Actual aggregate expenditure is

Accepted Answer

A)  always equal to real GDP. 
B)  only equal to real GDP at the equilibrium level of aggregate planned expenditure. 
C)  never greater than real GDP but can be less than real GDP. 
D)  never less than real GDP but can be greater than real GDP. 
A)  always equal to real GDP. 
B)  only equal to real GDP at the equilibrium level of aggregate planned expenditure. 
C)  never greater than real GDP but can be less than real GDP. 
D)  never less than real GDP but can be greater than real GDP.

Question 19

-In the above figure,if real GDP equals $11 trillion,

Accepted Answer

A)  actual and planned investment will both increase. 
B)  unplanned inventories will increase. 
C)  actual investment will decrease but planned investment will increase. 
D)  unplanned inventories will decrease. 
A)  actual and planned investment will both increase. 
B)  unplanned inventories will increase. 
C)  actual investment will decrease but planned investment will increase. 
D)  unplanned inventories will decrease.

Question 20

Expenditure that does NOT depend on 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.

If there are no income taxes or imports,the multiplier equals

Suppose disposable income increases from $7 trillion to $8 trillion.At the same time,consumption expenditure increases from $6.8 trillion to .Thus the MPC must equal .

Disposable income (dollars) Consumption expenditure (dollars) 0 100 100 180 300 340 500 500 700 660 900 820 -In the above table,the marginal propensity to consume equals

The marginal propensity to save is ________.

Which of the following shifts the aggregate expenditure curve AND shifts the aggregate demand curve? I. a decrease in investment II. a change in the price level III. an increase in exports

The presence of income taxes and imports make the slope of the aggregate expenditure curve

At a level of disposable income of $0,consumption expenditure is $3500.Therefore when disposable income is $0,

If the change in autonomous investment equals $1 trillion and the change in real GDP equals $4 trillion,the multiplier equals 1/4.

The marginal propensity to consume measures

Disposable income is divided into

The relationship between the multiplier and the MPC is

As disposable income increases,there is a ________ the saving function.

An increase in the price level decreases planned expenditures because

Any change in the price level will result in a

Since 1970,U.S.consumption function has generally shifted because of .

Actual aggregate expenditure is

-In the above figure,if real GDP equals $11 trillion,

Expenditure that does NOT depend on 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

If there are no income taxes or imports,the multiplier equals

Suppose disposable income increases from $7 trillion to $8 trillion.At the same time,consumption expenditure increases from $6.8 trillion to ________.Thus the MPC must equal ________.

Disposable income (dollars) Consumption expenditure (dollars) 0 100 100 180 300 340 500 500 700 660 900 820 -In the above table,the marginal propensity to consume equals

The marginal propensity to save is ________.

Which of the following shifts the aggregate expenditure curve AND shifts the aggregate demand curve? I. a decrease in investment II. a change in the price level III. an increase in exports

The presence of income taxes and imports make the slope of the aggregate expenditure curve

At a level of disposable income of $0,consumption expenditure is $3500.Therefore when disposable income is $0,

If the change in autonomous investment equals $1 trillion and the change in real GDP equals $4 trillion,the multiplier equals 1/4.

The marginal propensity to consume measures

Disposable income is divided into

The relationship between the multiplier and the MPC is

As disposable income increases,there is a ________ the saving function.

An increase in the price level decreases planned expenditures because

Any change in the price level will result in a

Since 1970,U.S.consumption function has generally shifted ________ because of ________.

Actual aggregate expenditure is

-In the above figure,if real GDP equals $11 trillion,

Expenditure that does NOT depend on 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

Suppose disposable income increases from $7 trillion to $8 trillion.At the same time,consumption expenditure increases from $6.8 trillion to .Thus the MPC must equal .

Since 1970,U.S.consumption function has generally shifted because of .