Question 1

The government estimates that the fiscal policy multiplier is 2.0.If this estimate is accurate,then the slope of the AE curve is ________.

Accepted Answer

A)  0.20 
B)  0.80 
C)  2.00 
D)  0.50 
A)  0.20 
B)  0.80 
C)  2.00 
D)  0.50

Question 2

In 2007,investment in France increased by 7 billion euros,consumption increased by 4 billion euros and government spending increased by 1.5 billion euros. Assume the price level was constant and the economy was at full employment. As a result,suppose that equilibrium expenditure increased by 21 billion euros.In this example,________ is the induced expenditure and ________ is autonomous expenditure.

Accepted Answer

A)  consumption; government spending 
B)  investment; consumption 
C)  investment; government spending 
D)  government spending; equilibrium expenditure 
A)  consumption; government spending 
B)  investment; consumption 
C)  investment; government spending 
D)  government spending; equilibrium expenditure

Question 3

Suppose real GDP increases from $13 trillion to $14 trillion.Consequently,consumption expenditure increases from $13 trillion to $13.75 trillion.This result implies the MPS equals

Accepted Answer

A)  0.75. 
B)  0.25. 
C)  0. 
D)  some amount that cannot be determined without more information. 
A)  0.75. 
B)  0.25. 
C)  0. 
D)  some amount that cannot be determined without more information.

Question 4

The marginal propensity to import reflects the relationship between changes in imports and changes in

Accepted Answer

A)  consumption expenditure. 
B)  investment spending. 
C)  exports. 
D)  real GDP. 
A)  consumption expenditure. 
B)  investment spending. 
C)  exports. 
D)  real GDP.

Question 5

If there are no taxes or imports and MPC = 0.67,the multiplier is

Accepted Answer

A)  1.5. 
B)  3. 
C)  6. 
D)  0.33. 
A)  1.5. 
B)  3. 
C)  6. 
D)  0.33.

Question 6

"Dissaving" occurs when

Accepted Answer

A)  income exceeds consumption expenditure. 
B)  saving is negative. 
C)  the consumption function is below the 45-degree line drawn from the origin. 
D)  saving is positive. 
A)  income exceeds consumption expenditure. 
B)  saving is negative. 
C)  the consumption function is below the 45-degree line drawn from the origin. 
D)  saving is positive.

Question 7

-In the above figure,the increase in autonomous expenditure moves the economy from point E to

Accepted Answer

A)  point F. 
B)  point G. 
C)  point H. 
D)  point I. 
A)  point F. 
B)  point G. 
C)  point H. 
D)  point I.

Question 8

The multiplier is 5.0 and autonomous expenditure increases by $30 billion.If potential real GDP is unaffected,in the long run,equilibrium real GDP will

Accepted Answer

A)  increase by $50 billion. 
B)  increase by more than $50 billion. 
C)  increase by less than $50 billion. 
D)  not change. 
A)  increase by $50 billion. 
B)  increase by more than $50 billion. 
C)  increase by less than $50 billion. 
D)  not change.

Question 9

-In the above figure,autonomous expenditure is

Accepted Answer

A)  $4 trillion. 
B)  $8 trillion. 
C)  $12 trillion. 
D)  some amount not given in the above answers. 
A)  $4 trillion. 
B)  $8 trillion. 
C)  $12 trillion. 
D)  some amount not given in the above answers.

Question 10

In the long run,the multiplier

Accepted Answer

A)  is greater than 1 because of the position and slope of the SAS curve. 
B)  is twice the short-run multiplier. 
C)  is 0. 
D)  depends on the slope of the AD curve. 
A)  is greater than 1 because of the position and slope of the SAS curve. 
B)  is twice the short-run multiplier. 
C)  is 0. 
D)  depends on the slope of the AD curve.

Question 11

Discuss how the marginal propensity to consume,imports,and income tax rates influence the multiplier.

Accepted Answer

The simple multiplier,in an economy with

Question 12

Business cycle turning points are

Accepted Answer

A)  unaffected by, and unrelated to the multiplier. 
B)  easy to predict. 
C)  brought about by changes in autonomous expenditures that are then subject to the multiplier effect. 
D)  None of the above is correct. 
A)  unaffected by, and unrelated to the multiplier. 
B)  easy to predict. 
C)  brought about by changes in autonomous expenditures that are then subject to the multiplier effect. 
D)  None of the above is correct.

Question 13

Autonomous expenditure is not influenced by

Accepted Answer

A)  the price level. 
B)  the interest rate. 
C)  real GDP. 
D)  any other variable. 
A)  the price level. 
B)  the interest rate. 
C)  real GDP. 
D)  any other variable.

Question 14

$$\begin{array} { | c | c | c | c | } 
\hline \begin{array} { c } 
\text { Real GDP } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Consumption } \
\text { expenditure } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Investment } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Government } \
\text { expenditure } \
\text { (dollars) }
\end{array} \
\hline 3,000 & 2,500 & 500 & 500 \
\hline 4,000 & 3,250 & 500 & 500 \
\hline 5,000 & 4,000 & 500 & 500 \
\hline 6,000 & 4,750 & 500 & 500 \
\hline 7,000 & 5,500 & 500 & 500 \
\hline 8,000 & 6,250 & 500 & 500 \
\hline
\end{array}$$
-In the above table,there are no taxes and no imports or exports.Investment increases from $500 to $750.After the increase in investment,the new equilibrium level of output is

Accepted Answer

A)  $5,000. 
B)  $7,000. 
C)  $6,000. 
D)  $5,750. 
A)  $5,000. 
B)  $7,000. 
C)  $6,000. 
D)  $5,750.

Question 15

The marginal propensity to consume is the

Accepted Answer

A)  fraction of a change in disposable income spent on consumption expenditure. 
B)  amount saving increases when consumption expenditure decreases. 
C)  fraction of a change in saving spent on consumption expenditure. 
D)  fraction of a change in consumption expenditure that is not saved. 
A)  fraction of a change in disposable income spent on consumption expenditure. 
B)  amount saving increases when consumption expenditure decreases. 
C)  fraction of a change in saving spent on consumption expenditure. 
D)  fraction of a change in consumption expenditure that is not saved.

Question 16

Which of the following concerning the marginal propensity to consume and the consumption function is true?
I. The larger the marginal propensity to consume,the greater the amount of autonomous consumption.
II. The larger the marginal propensity to consume,the steeper the consumption function.

Accepted Answer

A)  I is true. 
B)  II is true. 
C)  I and II are true. 
D)  Neither I nor II is true. 
A)  I is true. 
B)  II is true. 
C)  I and II are true. 
D)  Neither I nor II is true.

Question 17

If unplanned inventory changes are positive,what is the relationship between aggregate planned expenditure and real GDP?

Accepted Answer

If unplanned inventory changes

Question 18

Income taxes reduce the size of the multiplier.

Accepted Answer

A) True 
 B)False

Question 19

-In the above figure,autonomous expenditure along AE₁ equals

Accepted Answer

A)  $3 trillion. 
B)  $6 trillion. 
C)  $12 trillion. 
D)  an amount not given in the above answers. 
A)  $3 trillion. 
B)  $6 trillion. 
C)  $12 trillion. 
D)  an amount not given in the above answers.

Question 20

List the components of aggregate expenditure and describe how each of them change as real GDP increases.

Accepted Answer

The components of aggregate expenditure

The government estimates that the fiscal policy multiplier is 2.0.If this estimate is accurate,then the slope of the AE curve is ________.

Suppose real GDP increases from $13 trillion to $14 trillion.Consequently,consumption expenditure increases from $13 trillion to $13.75 trillion.This result implies the MPS equals

The marginal propensity to import reflects the relationship between changes in imports and changes in

If there are no taxes or imports and MPC = 0.67,the multiplier is

"Dissaving" occurs when

-In the above figure,the increase in autonomous expenditure moves the economy from point E to

The multiplier is 5.0 and autonomous expenditure increases by $30 billion.If potential real GDP is unaffected,in the long run,equilibrium real GDP will

-In the above figure,autonomous expenditure is

In the long run,the multiplier

Discuss how the marginal propensity to consume,imports,and income tax rates influence the multiplier.

Business cycle turning points are

Autonomous expenditure is not influenced by

The marginal propensity to consume is the

Which of the following concerning the marginal propensity to consume and the consumption function is true? I. The larger the marginal propensity to consume,the greater the amount of autonomous consumption. II. The larger the marginal propensity to consume,the steeper the consumption function.

If unplanned inventory changes are positive,what is the relationship between aggregate planned expenditure and real GDP?

Income taxes reduce the size of the multiplier.

-In the above figure,autonomous expenditure along AE₁ equals

List the components of aggregate expenditure and describe how each of them change as real GDP increases.

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 government estimates that the fiscal policy multiplier is 2.0.If this estimate is accurate,then the slope of the AE curve is ________.

Suppose real GDP increases from $13 trillion to $14 trillion.Consequently,consumption expenditure increases from $13 trillion to $13.75 trillion.This result implies the MPS equals

The marginal propensity to import reflects the relationship between changes in imports and changes in

If there are no taxes or imports and MPC = 0.67,the multiplier is

"Dissaving" occurs when

-In the above figure,the increase in autonomous expenditure moves the economy from point E to

The multiplier is 5.0 and autonomous expenditure increases by $30 billion.If potential real GDP is unaffected,in the long run,equilibrium real GDP will

-In the above figure,autonomous expenditure is

In the long run,the multiplier

Discuss how the marginal propensity to consume,imports,and income tax rates influence the multiplier.

Business cycle turning points are

Autonomous expenditure is not influenced by

The marginal propensity to consume is the

Which of the following concerning the marginal propensity to consume and the consumption function is true? I. The larger the marginal propensity to consume,the greater the amount of autonomous consumption. II. The larger the marginal propensity to consume,the steeper the consumption function.

If unplanned inventory changes are positive,what is the relationship between aggregate planned expenditure and real GDP?

Income taxes reduce the size of the multiplier.

-In the above figure,autonomous expenditure along AE₁ equals

List the components of aggregate expenditure and describe how each of them change as real GDP increases.

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