Question 1

The size of the marginal propensity to consume

Accepted Answer

A)  is negative if dissaving is present. 
B)  is between 0 and 1. 
C)  equals 1. 
D)  exceeds 1. 
A)  is negative if dissaving is present. 
B)  is between 0 and 1. 
C)  equals 1. 
D)  exceeds 1.

Question 2

If the MPC equals 0.75,then

Accepted Answer

A)  for every $100 increase in consumption expenditure, disposable income increases by $75. 
B)  consumption expenditure is always more than disposable income. 
C)  for every $100 increase in disposable income, saving increases by $75. 
D)  for every $100 increase in disposable income, saving increases by $25. 
A)  for every $100 increase in consumption expenditure, disposable income increases by $75. 
B)  consumption expenditure is always more than disposable income. 
C)  for every $100 increase in disposable income, saving increases by $75. 
D)  for every $100 increase in disposable income, saving increases by $25.

Question 3

If investment increases by $300 and,in response,equilibrium aggregate expenditure increases by $600,the multiplier is

Accepted Answer

A)  0.2. 
B)  0.5. 
C)  2. 
D)  5. 
A)  0.2. 
B)  0.5. 
C)  2. 
D)  5.

Question 4

Suppose that the slope of the AE curve is 0.67. Then a $100 decrease in autonomous spending means equilibrium expenditure will

Accepted Answer

A)  decrease by $200. 
B)  increase by $200. 
C)  decrease by $300. 
D)  increase by $300. 
A)  decrease by $200. 
B)  increase by $200. 
C)  decrease by $300. 
D)  increase by $300.

Question 5

When investment is less than planned investment,aggregate planned expenditure is ________ than actual aggregate expenditure and inventories are ________ than planned.

Accepted Answer

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

Question 6

$$\begin{array} { | c | c | c | c | } 
\hline \begin{array} { c } 
\text { Real GDP } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Consumption } \
\text { expenditure } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Investment } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Government } \
\text { expenditure } \
\text { (dollars) }
\end{array} \
\hline 3,000 & 2,500 & 500 & 500 \
\hline 4,000 & 3,250 & 500 & 500 \
\hline 5,000 & 4,000 & 500 & 500 \
\hline 6,000 & 4,750 & 500 & 500 \
\hline 7,000 & 5,500 & 500 & 500 \
\hline 8,000 & 6,250 & 500 & 500 \
\hline
\end{array}$$
-In the above table,there are no taxes and no imports or exports.If current real GDP is equal to $7,000,then firms will

Accepted Answer

A)  not change production because $7,000 is the equilibrium level of real GDP. 
B)  increase production to rebuild inventories to their target level. 
C)  decrease production to restore inventories to their target level. 
D)  None of the above answers is correct. 
A)  not change production because $7,000 is the equilibrium level of real GDP. 
B)  increase production to rebuild inventories to their target level. 
C)  decrease production to restore inventories to their target level. 
D)  None of the above answers is correct.

Question 7

The software and related services sector has a multiplier effect on the Indian economy with every one-rupee input spent by the" information technology sector" producing an increase in real GDP by two rupees. www.ft.com,2/28/2008
According to the story,if ________ in the software and related services sector increases by $15 billion,real GDP will increase by ________.

Accepted Answer

A)  investment; $30 billion. 
B)  consumption; $30 billion. 
C)  consumption; $2 billion. 
D)  investment; $2 billion. 
A)  investment; $30 billion. 
B)  consumption; $30 billion. 
C)  consumption; $2 billion. 
D)  investment; $2 billion.

Question 8

In the very short term,planned investment,planned government expenditure,planned exports,planned consumption,and planned imports are all fixed and do not change when GDP changes.

Accepted Answer

A) True 
 B)False

Question 9

When the consumption function lies above the 45-degree line,households

Accepted Answer

A)  spend on consumption an increasing percentage of any increase in income. 
B)  spend on consumption a decreasing percentage of any increase in income. 
C)  are dissaving. 
D)  save all of any increase in income. 
A)  spend on consumption an increasing percentage of any increase in income. 
B)  spend on consumption a decreasing percentage of any increase in income. 
C)  are dissaving. 
D)  save all of any increase in income.

Question 10

Autonomous consumption is that portion of consumption expenditure that is not influenced by

Accepted Answer

A)  income. 
B)  preferences. 
C)  prices. 
D)  the legal authorities. 
A)  income. 
B)  preferences. 
C)  prices. 
D)  the legal authorities.

Question 11

When aggregate planned expenditure is greater than real GDP,inventories decrease.

Accepted Answer

A) True 
 B)False

Question 12

The slope of the consumption function is

Accepted Answer

A)  perfectly horizontal at the equilibrium level. 
B)  equal to 1. 
C)  equal to the MPC. 
D)  vertical at the full employment level of income. 
A)  perfectly horizontal at the equilibrium level. 
B)  equal to 1. 
C)  equal to the MPC. 
D)  vertical at the full employment level of income.

Question 13

What is unplanned investment?
How does it occur?

Accepted Answer

Unplanned investment occurs when invento

Question 14

If firms set prices and then keep them fixed for a period of time,their fixed prices imply that

Accepted Answer

A)  the aggregate price level is fixed and that aggregate demand determines the quantity of goods and services sold. 
B)  prices are set by aggregate demand and supply. 
C)  the aggregate price level adjusts continuously. 
D)  the aggregate price level is fixed and that aggregate supply determines the quantity of goods and services sold. 
A)  the aggregate price level is fixed and that aggregate demand determines the quantity of goods and services sold. 
B)  prices are set by aggregate demand and supply. 
C)  the aggregate price level adjusts continuously. 
D)  the aggregate price level is fixed and that aggregate supply determines the quantity of goods and services sold.

Question 15

Explain what happens to equilibrium expenditure if autonomous expenditure increases by $100 million.

Accepted Answer

Equilibrium expenditure will increase by

Question 16

Actual aggregate expenditure does not always equal real GDP.

Accepted Answer

A) True 
 B)False

Question 17

The difference between planned and unplanned spending is ________.

Accepted Answer

A)  always negative 
B)  inventories 
C)  unplanned changes in inventories 
D)  always positive 
A)  always negative 
B)  inventories 
C)  unplanned changes in inventories 
D)  always positive

Question 18

The value of the marginal propensity to consume is

Accepted Answer

A)  between 0 and 1. 
B)  between 1 and 10. 
C)  between -1 and +1. 
D)  between 1 percent and 10 percent. 
A)  between 0 and 1. 
B)  between 1 and 10. 
C)  between -1 and +1. 
D)  between 1 percent and 10 percent.

Question 19

The multiplier effect on real GDP occurs because

Accepted Answer

A)  changes in price levels affect our willingness to invest, consume, import and export. 
B)  an autonomous change in expenditure causes an induced change in consumption expenditure. 
C)  of government stabilization policies. 
D)  of income taxes. 
A)  changes in price levels affect our willingness to invest, consume, import and export. 
B)  an autonomous change in expenditure causes an induced change in consumption expenditure. 
C)  of government stabilization policies. 
D)  of income taxes.

Question 20

-The figure shows Tropical Isle's aggregate planned expenditure curve.When aggregate planned expenditure is $2 trillion,aggregate planned expenditure is ________ than real GDP,firms' inventories ________,and firms ________ their production.

Accepted Answer

A)  greater; increase; decrease 
B)  less; decrease; increase 
C)  less; increase; decrease 
D)  greater; decrease; increase 
A)  greater; increase; decrease 
B)  less; decrease; increase 
C)  less; increase; decrease 
D)  greater; decrease; increase

The size of the marginal propensity to consume

If the MPC equals 0.75,then

If investment increases by $300 and,in response,equilibrium aggregate expenditure increases by $600,the multiplier is

Suppose that the slope of the AE curve is 0.67. Then a $100 decrease in autonomous spending means equilibrium expenditure will

When investment is less than planned investment,aggregate planned expenditure is than actual aggregate expenditure and inventories are than planned.

In the very short term,planned investment,planned government expenditure,planned exports,planned consumption,and planned imports are all fixed and do not change when GDP changes.

When the consumption function lies above the 45-degree line,households

Autonomous consumption is that portion of consumption expenditure that is not influenced by

When aggregate planned expenditure is greater than real GDP,inventories decrease.

The slope of the consumption function is

What is unplanned investment? How does it occur?

If firms set prices and then keep them fixed for a period of time,their fixed prices imply that

Explain what happens to equilibrium expenditure if autonomous expenditure increases by $100 million.

Actual aggregate expenditure does not always equal real GDP.

The difference between planned and unplanned spending is ________.

The value of the marginal propensity to consume is

The multiplier effect on real GDP occurs because

-The figure shows Tropical Isle's aggregate planned expenditure curve.When aggregate planned expenditure is $2 trillion,aggregate planned expenditure is than real GDP,firms' inventories ,and firms their production.

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 size of the marginal propensity to consume

If the MPC equals 0.75,then

If investment increases by $300 and,in response,equilibrium aggregate expenditure increases by $600,the multiplier is

Suppose that the slope of the AE curve is 0.67. Then a $100 decrease in autonomous spending means equilibrium expenditure will

When investment is less than planned investment,aggregate planned expenditure is ________ than actual aggregate expenditure and inventories are ________ than planned.

In the very short term,planned investment,planned government expenditure,planned exports,planned consumption,and planned imports are all fixed and do not change when GDP changes.

When the consumption function lies above the 45-degree line,households

Autonomous consumption is that portion of consumption expenditure that is not influenced by

When aggregate planned expenditure is greater than real GDP,inventories decrease.

The slope of the consumption function is

What is unplanned investment? How does it occur?

If firms set prices and then keep them fixed for a period of time,their fixed prices imply that

Explain what happens to equilibrium expenditure if autonomous expenditure increases by $100 million.

Actual aggregate expenditure does not always equal real GDP.

The difference between planned and unplanned spending is ________.

The value of the marginal propensity to consume is

The multiplier effect on real GDP occurs because

-The figure shows Tropical Isle's aggregate planned expenditure curve.When aggregate planned expenditure is $2 trillion,aggregate planned expenditure is ________ than real GDP,firms' inventories ________,and firms ________ their production.

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

When investment is less than planned investment,aggregate planned expenditure is than actual aggregate expenditure and inventories are than planned.

-The figure shows Tropical Isle's aggregate planned expenditure curve.When aggregate planned expenditure is $2 trillion,aggregate planned expenditure is than real GDP,firms' inventories ,and firms their production.