Question 1

The marginal propensity to import is the ________ that is spent on imports.

Accepted Answer

A)  fraction of an increase in real GDP 
B)  total amount of real GDP 
C)  total amount of potential GDP 
D)  fraction of an increase in potential GDP 
A)  fraction of an increase in real GDP 
B)  total amount of real GDP 
C)  total amount of potential GDP 
D)  fraction of an increase in potential GDP A

Question 2

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. B

Question 3

If the marginal propensity to save is 0.25 in an economy with no imports or taxes, the multiplier equals

Accepted Answer

A)  0.25. 
B)  0.75. 
C)  4. 
D)  1.33. 
A)  0.25. 
B)  0.75. 
C)  4. 
D)  1.33. C

Question 4

-In the above table, equilibrium expenditure is

Accepted Answer

A)  $0.3 trillion. 
B)  $3.0 trillion. 
C)  $4.8 trillion. 
D)  None of the above answers are correct. 
A)  $0.3 trillion. 
B)  $3.0 trillion. 
C)  $4.8 trillion. 
D)  None of the above answers are correct.

Question 5

Real GDP

Accepted Answer

A)  is always greater then aggregate income. 
B)  is always less than aggregate income. 
C)  might be less than or more than aggregate income depending on consumption. 
D)  is equal to aggregate income. 
A)  is always greater then aggregate income. 
B)  is always less than aggregate income. 
C)  might be less than or more than aggregate income depending on consumption. 
D)  is equal to aggregate income.

Question 6

-In the above figure, if real GDP is below $15 trillion, inventories will be

Accepted Answer

A)  below target levels, so firms will increase production. 
B)  below target levels, so firms will decrease production. 
C)  above target levels, so firms will increase production. 
D)  above target levels, so firms will decrease production. 
A)  below target levels, so firms will increase production. 
B)  below target levels, so firms will decrease production. 
C)  above target levels, so firms will increase production. 
D)  above target levels, so firms will decrease production.

Question 7

Because of changes in the ________, the long-run effect of a $10 increase in investment on real GDP equals ________.

Accepted Answer

A)  interest rate; zero 
B)  interest rate; $10 
C)  money wage rate and price level; zero 
D)  money wage rate and price level; $10 
A)  interest rate; zero 
B)  interest rate; $10 
C)  money wage rate and price level; zero 
D)  money wage rate and price level; $10

Question 8

An increase in disposable income

Accepted Answer

A)  shifts the saving function upward. 
B)  results in a movement upward along the saving function. 
C)  shifts the saving function downward. 
D)  results in a movement downward along the saving function. 
A)  shifts the saving function upward. 
B)  results in a movement upward along the saving function. 
C)  shifts the saving function downward. 
D)  results in a movement downward along the saving function.

Question 9

Consumption expenditure decreases when ________ decreases.

Accepted Answer

A)  the interest rate 
B)  the price level 
C)  disposable income 
D)  saving 
A)  the interest rate 
B)  the price level 
C)  disposable income 
D)  saving

Question 10

"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 short run and real GDP will ________ in the short run.

Accepted Answer

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

Question 11

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.

Question 12

An increase in real GDP leads to

Accepted Answer

A)  a decrease aggregate planned expenditure. 
B)  no change in aggregate planned expenditure. 
C)  an increase in aggregate planned expenditure. 
D)  a change in aggregate planned expenditure but whether the change is an increase or a decrease depends on whether nominal GDP increases or decreases. 
A)  a decrease aggregate planned expenditure. 
B)  no change in aggregate planned expenditure. 
C)  an increase in aggregate planned expenditure. 
D)  a change in aggregate planned expenditure but whether the change is an increase or a decrease depends on whether nominal GDP increases or decreases.

Question 13

Disposable income is equal to

Accepted Answer

A)  consumption expenditure minus taxes plus transfer payments. 
B)  aggregate income minus taxes plus government expenditures on goods and services. 
C)  aggregate income minus taxes plus transfer payments. 
D)  aggregate income plus transfer payments. 
A)  consumption expenditure minus taxes plus transfer payments. 
B)  aggregate income minus taxes plus government expenditures on goods and services. 
C)  aggregate income minus taxes plus transfer payments. 
D)  aggregate income plus transfer payments.

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

An increase in investment by U.S. firms that is intended to maintain U.S. competitiveness in world markets represents ________ in the United States.

Accepted Answer

A)  an increase in autonomous expenditure 
B)  a decrease in autonomous expenditure 
C)  an increase in induced expenditure 
D)  a decrease in induced expenditure 
A)  an increase in autonomous expenditure 
B)  a decrease in autonomous expenditure 
C)  an increase in induced expenditure 
D)  a decrease in induced expenditure

Question 16

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 17

If the marginal propensity to import increases, then the

Accepted Answer

A)  multiplier will decrease in value. 
B)  multiplier will increase in value. 
C)  multiplier will not change in value. 
D)  effect on the multiplier will depend on what happens to exports. 
A)  multiplier will decrease in value. 
B)  multiplier will increase in value. 
C)  multiplier will not change in value. 
D)  effect on the multiplier will depend on what happens to exports.

Question 18

-In the above figure, when disposable income is greater than $12 trillion, then

Accepted Answer

A)  savings are negative. 
B)  the MPC is greater than 1. 
C)  savings are positive. 
D)  the MPS is negative. 
A)  savings are negative. 
B)  the MPC is greater than 1. 
C)  savings are positive. 
D)  the MPS is negative.

Question 19

Actual expenditure might differ from planned expenditure because

Accepted Answer

A)  actual consumption expenditure differs from planned consumption expenditure. 
B)  actual investment differs from planned investment. 
C)  actual government expenditure differ from planned government expenditure. 
D)  actual net exports differ from planned net exports. 
A)  actual consumption expenditure differs from planned consumption expenditure. 
B)  actual investment differs from planned investment. 
C)  actual government expenditure differ from planned government expenditure. 
D)  actual net exports differ from planned net exports.

Question 20

The slope of the saving function is equal to

Accepted Answer

A)  the MPS. 
B)  the MPC. 
C)  1- MPS. 
D)  None of the above answers is correct. 
A)  the MPS. 
B)  the MPC. 
C)  1- MPS. 
D)  None of the above answers is correct.

The marginal propensity to import is the ________ that is spent on imports.

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

If the marginal propensity to save is 0.25 in an economy with no imports or taxes, the multiplier equals

-In the above table, equilibrium expenditure is

Real GDP

-In the above figure, if real GDP is below $15 trillion, inventories will be

Because of changes in the , the long-run effect of a $10 increase in investment on real GDP equals .

An increase in disposable income

Consumption expenditure decreases when ________ decreases.

Expenditure that does NOT depend on real GDP is called

An increase in real GDP leads to

Disposable income is equal to

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

An increase in investment by U.S. firms that is intended to maintain U.S. competitiveness in world markets represents ________ in the United States.

The multiplier effect on real GDP occurs because

If the marginal propensity to import increases, then the

-In the above figure, when disposable income is greater than $12 trillion, then

Actual expenditure might differ from planned expenditure because

The slope of the saving function is equal to

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

The Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

Exam 11: Expenditure Multipliers

The marginal propensity to import is the ________ that is spent on imports.

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

If the marginal propensity to save is 0.25 in an economy with no imports or taxes, the multiplier equals

-In the above table, equilibrium expenditure is

Real GDP

-In the above figure, if real GDP is below $15 trillion, inventories will be

Because of changes in the ________, the long-run effect of a $10 increase in investment on real GDP equals ________.

An increase in disposable income

Consumption expenditure decreases when ________ decreases.

Expenditure that does NOT depend on real GDP is called

An increase in real GDP leads to

Disposable income is equal to

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

An increase in investment by U.S. firms that is intended to maintain U.S. competitiveness in world markets represents ________ in the United States.

The multiplier effect on real GDP occurs because

If the marginal propensity to import increases, then the

-In the above figure, when disposable income is greater than $12 trillion, then

Actual expenditure might differ from planned expenditure because

The slope of the saving function is equal to

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

The Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

Because of changes in the , the long-run effect of a $10 increase in investment on real GDP equals .