Question 1

In the Keynesian model of aggregate expenditure, real GDP is determined by the

Accepted Answer

A)  price level. 
B)  level of aggregate demand. 
C)  level of aggregate supply. 
D)  level of taxes. 
A)  price level. 
B)  level of aggregate demand. 
C)  level of aggregate supply. 
D)  level of taxes.

Question 2

Mauritius, an island off the coast of Africa, competes with other countries producing goods with low-skilled labor. In 2006, it was reported that its "... factories have been exposed to ... competition from China, India and other Asian mass producers." As a result, "the main export industry has seen a 30 per cent reduction in volume ..."
Www)ft.com, 3/13/2006
The story describes

Accepted Answer

A)  a decrease in autonomous expenditure. 
B)  a decrease in induced expenditure. 
C)  an unplanned decrease in inventories. 
D)  an increase in equilibrium expenditure. 
A)  a decrease in autonomous expenditure. 
B)  a decrease in induced expenditure. 
C)  an unplanned decrease in inventories. 
D)  an increase in equilibrium expenditure.

Question 3

Components of aggregate expenditure include saving, consumption expenditure, investment and government expenditure.

Accepted Answer

A) True 
 B)False

Question 4

Between 2015 and 2016 the government reported that disposable income decreased by $400 billion. If the MPC equals 0.8, then consumption expenditure

Accepted Answer

A)  decreases by $400 billion. 
B)  decreases by $3,200 billion. 
C)  decreases by $320 billion. 
D)  decreases by $32 billion. 
A)  decreases by $400 billion. 
B)  decreases by $3,200 billion. 
C)  decreases by $320 billion. 
D)  decreases by $32 billion.

Question 5

Given an MPC of 0.80, if there are no income taxes or imports and prices are constant, then when investment increases by $50 million and prices are fixed, equilibrium GDP would

Accepted Answer

A)  increase by $50 million. 
B)  increase by $250 million. 
C)  increase by $400 million. 
D)  To answer the question more information on income is needed. 
A)  increase by $50 million. 
B)  increase by $250 million. 
C)  increase by $400 million. 
D)  To answer the question more information on income is needed.

Question 6

Suppose that the slope of the AE curve is 0.67. Then a $100 increase 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 7

What is the relationship between U.S. real GDP and U.S. imports?

Accepted Answer

When U.S. real GDP increases,

Question 8

If the marginal propensity to consume is 0.8, every $10 increase in disposable income increases

Accepted Answer

A)  consumption expenditure by $0.80. 
B)  consumption expenditure by $80.00. 
C)  saving by $0.20. 
D)  consumption expenditure by $8.00. 
A)  consumption expenditure by $0.80. 
B)  consumption expenditure by $80.00. 
C)  saving by $0.20. 
D)  consumption expenditure by $8.00.

Question 9

-In the above figure, if real GDP equals $15 trillion, there would be

Accepted Answer

A)  an increase in autonomous consumption expenditure. 
B)  an increase in autonomous inventories. 
C)  no change in GDP. 
D)  an unplanned increase in firms' inventories. 
A)  an increase in autonomous consumption expenditure. 
B)  an increase in autonomous inventories. 
C)  no change in GDP. 
D)  an unplanned increase in firms' inventories.

Question 10

In 2013 the government increased Social Security income taxes by 2 percentage points and increased the income tax rate on Americans making more than $400,000 by 4.6 percentage points. These tax hikes

Accepted Answer

A)  decreased the size of the multiplier. 
B)  increased the size of the multiplier. 
C)  had no effect on the size of the multiplier. 
D)  None of the above answers are correct because the effect on the size of the multiplier is ambiguous. 
A)  decreased the size of the multiplier. 
B)  increased the size of the multiplier. 
C)  had no effect on the size of the multiplier. 
D)  None of the above answers are correct because the effect on the size of the multiplier is ambiguous.

Question 11

At the equilibrium level of aggregate expenditure, what does aggregate planned expenditure equal? What happens at other levels of real GDP to bring about an equilibrium?

Accepted Answer

At the equilibrium level of aggregate ex

Question 12

The marginal propensity to save equals the

Accepted Answer

A)  change in savings resulting from a one dollar change in disposable income. 
B)  change in savings from a change in consumption expenditure. 
C)  average amount of income saved. 
D)  ability to save the same percentage of income each month. 
A)  change in savings resulting from a one dollar change in disposable income. 
B)  change in savings from a change in consumption expenditure. 
C)  average amount of income saved. 
D)  ability to save the same percentage of income each month.

Question 13

An increase in disposable income shifts

Accepted Answer

A)  both the consumption and savings functions upward. 
B)  the consumption function upward and leads to a movement along the savings function. 
C)  both the consumption and savings functions downward. 
D)  neither the consumption function or the savings function because it leads to a movement along both the consumption and savings function. 
A)  both the consumption and savings functions upward. 
B)  the consumption function upward and leads to a movement along the savings function. 
C)  both the consumption and savings functions downward. 
D)  neither the consumption function or the savings function because it leads to a movement along both the consumption and savings function.

Question 14

When real GDP exceeds aggregate planned expenditure

Accepted Answer

A)  actual inventories decrease below their target. 
B)  the circular flow will increase. 
C)  GDP will decrease. 
D)  a higher level of equilibrium income will prevail. 
A)  actual inventories decrease below their target. 
B)  the circular flow will increase. 
C)  GDP will decrease. 
D)  a higher level of equilibrium income will prevail.

Question 15

If real disposable income increases by $1500, consumption expenditures will

Accepted Answer

A)  stay constant. 
B)  decrease by less than $1500. 
C)  increase by less than $1500. 
D)  increase by more than $1500. 
A)  stay constant. 
B)  decrease by less than $1500. 
C)  increase by less than $1500. 
D)  increase by more than $1500.

Question 16

In 2007, investment in France increased by 7 billion euros. Assume the price level was constant, the multiplier was 5 and the economy was at full employment. As a result, equilibrium expenditure

Accepted Answer

A)  increased by 35 billion euros. 
B)  increased by 1.4 billion euros. 
C)  decreased by 35 billion euros. 
D)  decreased by .71 billion euros. 
A)  increased by 35 billion euros. 
B)  increased by 1.4 billion euros. 
C)  decreased by 35 billion euros. 
D)  decreased by .71 billion euros.

Question 17

If planned expenditures equal $16 trillion when real GDP is $16.5 trillion, then

Accepted Answer

A)  inventories will decrease by $0.5 trillion. 
B)  actual investment will exceed planned investment. 
C)  there will be excess demand for most goods. 
D)  the economy must have a trade surplus to sell the excess goods and services. 
A)  inventories will decrease by $0.5 trillion. 
B)  actual investment will exceed planned investment. 
C)  there will be excess demand for most goods. 
D)  the economy must have a trade surplus to sell the excess goods and services.

Question 18

Explain why the multiplier is greater than 1.

Accepted Answer

The multiplier is greater than 1 because

Question 19

If disposable income increases

Accepted Answer

A)  the consumption function shifts upward. 
B)  there is a movement upward along the consumption function. 
C)  the consumption function shifts downward. 
D)  there is movement downward along the consumption function. 
A)  the consumption function shifts upward. 
B)  there is a movement upward along the consumption function. 
C)  the consumption function shifts downward. 
D)  there is movement downward along the consumption function.

Question 20

Disposable income is

Accepted Answer

A)  income minus saving. 
B)  income minus taxes plus transfer payments. 
C)  income plus transfer payments minus consumption expenditure. 
D)  total income divided by the price level. 
A)  income minus saving. 
B)  income minus taxes plus transfer payments. 
C)  income plus transfer payments minus consumption expenditure. 
D)  total income divided by the price level.

In the Keynesian model of aggregate expenditure, real GDP is determined by the

Components of aggregate expenditure include saving, consumption expenditure, investment and government expenditure.

Between 2015 and 2016 the government reported that disposable income decreased by $400 billion. If the MPC equals 0.8, then consumption expenditure

Given an MPC of 0.80, if there are no income taxes or imports and prices are constant, then when investment increases by $50 million and prices are fixed, equilibrium GDP would

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

What is the relationship between U.S. real GDP and U.S. imports?

If the marginal propensity to consume is 0.8, every $10 increase in disposable income increases

-In the above figure, if real GDP equals $15 trillion, there would be

In 2013 the government increased Social Security income taxes by 2 percentage points and increased the income tax rate on Americans making more than $400,000 by 4.6 percentage points. These tax hikes

At the equilibrium level of aggregate expenditure, what does aggregate planned expenditure equal? What happens at other levels of real GDP to bring about an equilibrium?

The marginal propensity to save equals the

An increase in disposable income shifts

When real GDP exceeds aggregate planned expenditure

If real disposable income increases by $1500, consumption expenditures will

In 2007, investment in France increased by 7 billion euros. Assume the price level was constant, the multiplier was 5 and the economy was at full employment. As a result, equilibrium expenditure

If planned expenditures equal $16 trillion when real GDP is $16.5 trillion, then

Explain why the multiplier is greater than 1.

If disposable income increases

Disposable income is

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

In the Keynesian model of aggregate expenditure, real GDP is determined by the

Components of aggregate expenditure include saving, consumption expenditure, investment and government expenditure.

Between 2015 and 2016 the government reported that disposable income decreased by $400 billion. If the MPC equals 0.8, then consumption expenditure

Given an MPC of 0.80, if there are no income taxes or imports and prices are constant, then when investment increases by $50 million and prices are fixed, equilibrium GDP would

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

What is the relationship between U.S. real GDP and U.S. imports?

If the marginal propensity to consume is 0.8, every $10 increase in disposable income increases

-In the above figure, if real GDP equals $15 trillion, there would be

In 2013 the government increased Social Security income taxes by 2 percentage points and increased the income tax rate on Americans making more than $400,000 by 4.6 percentage points. These tax hikes

At the equilibrium level of aggregate expenditure, what does aggregate planned expenditure equal? What happens at other levels of real GDP to bring about an equilibrium?

The marginal propensity to save equals the

An increase in disposable income shifts

When real GDP exceeds aggregate planned expenditure

If real disposable income increases by $1500, consumption expenditures will

In 2007, investment in France increased by 7 billion euros. Assume the price level was constant, the multiplier was 5 and the economy was at full employment. As a result, equilibrium expenditure

If planned expenditures equal $16 trillion when real GDP is $16.5 trillion, then

Explain why the multiplier is greater than 1.

If disposable income increases

Disposable income is

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