Question 1

The smaller the slope of the AE curve, ________.

Accepted Answer

A)  the greater is the value of the multiplier 
B)  the smaller is slope of the saving function 
C)  the steeper is the consumption function 
D)  the smaller is the value of the multiplier 
A)  the greater is the value of the multiplier 
B)  the smaller is slope of the saving function 
C)  the steeper is the consumption function 
D)  the smaller is the value of the multiplier

Question 2

-Based upon the above table, saving equals $100 billion when disposable income equals

Accepted Answer

A)  $800 billion. 
B)  $1000 billion. 
C)  $1200 billion. 
D)  some amount but we need more information to calculate the amount. 
A)  $800 billion. 
B)  $1000 billion. 
C)  $1200 billion. 
D)  some amount but we need more information to calculate the amount.

Question 3

The government increases its expenditures. The steeper the SAS curve, the ________ will be the increase in the price level and the ________ will be the increase in real GDP.

Accepted Answer

A)  larger; larger 
B)  larger; smaller 
C)  smaller; larger 
D)  smaller; smaller 
A)  larger; larger 
B)  larger; smaller 
C)  smaller; larger 
D)  smaller; smaller

Question 4

In a simple economy in which prices are constant and there are no income taxes or imports, the marginal propensity to save is 0.2. If exports increase $50, what impact will that have on aggregate expenditure?

Accepted Answer

A)  increase by $250 
B)  increase by $100 
C)  decrease by $250 
D)  decrease by $100 
A)  increase by $250 
B)  increase by $100 
C)  decrease by $250 
D)  decrease by $100

Question 5

-According to the data in the above table, at what level of disposable income is savings negative?

Accepted Answer

A)  200 
B)  300 
C)  400 
D)  never because saving cannot be negative 
A)  200 
B)  300 
C)  400 
D)  never because saving cannot be negative

Question 6

Equilibrium expenditure is defined as the level of aggregate expenditure where

Accepted Answer

A)  actual aggregate expenditure equals real GDP. 
B)  total inventories equal zero. 
C)  aggregate planned expenditure equals real GDP. 
D)  spending equals output. 
A)  actual aggregate expenditure equals real GDP. 
B)  total inventories equal zero. 
C)  aggregate planned expenditure equals real GDP. 
D)  spending equals output.

Question 7

Between 2015 and 2016 the government reported that disposable income decreased by $400 billion and consumption expenditure decreased by $280 billion. Based on these data, the MPS equals

Accepted Answer

A)  1.42. 
B)  0.70. 
C)  0.30. 
D)  $120 billion. 
A)  1.42. 
B)  0.70. 
C)  0.30. 
D)  $120 billion.

Question 8

In the very short term, in the Keynesian model, which of the following is fixed and does not change when GDP changes?

Accepted Answer

A)  planned investment 
B)  planned consumption 
C)  planned imports 
D)  All of the above answers are correct. 
A)  planned investment 
B)  planned consumption 
C)  planned imports 
D)  All of the above answers are correct.

Question 9

An increase in the value of the multiplier can be caused by

Accepted Answer

A)  a decrease in the marginal propensity to consume. 
B)  an increase in the marginal propensity to import. 
C)  an increase in autonomous consumption expenditure. 
D)  an increase in the marginal propensity to consume. 
A)  a decrease in the marginal propensity to consume. 
B)  an increase in the marginal propensity to import. 
C)  an increase in autonomous consumption expenditure. 
D)  an increase in the marginal propensity to consume.

Question 10

The multiplier effect

Accepted Answer

A)  generates instability in autonomous expenditure. 
B)  promotes stability of the general price level. 
C)  magnifies small changes in spending into larger changes in real GDP. 
D)  increases the MPC. 
A)  generates instability in autonomous expenditure. 
B)  promotes stability of the general price level. 
C)  magnifies small changes in spending into larger changes in real GDP. 
D)  increases the MPC.

Question 11

In the economy of Keynesian Island, autonomous consumption expenditure is $50 million, and the marginal propensity to consume is 0.8. Investment is $160 million, government expenditure is $190 million, and net taxes are $250 million. Investment, government purchases, and taxes are constant-they do not vary with income. The island does not trade with the rest of the world.
a)Draw the aggregate expenditure curve.
b)What is equilibrium real GDP for Keynesian Island?
c)What is the size of the multiplier in Keynesian Island's economy?
d)If the government increases its purchases by $200 million, what will be the change in the economy's equilibrium real GDP?

Accepted Answer

@#IMG-DLM& 
a)See the figure above. The aggregate

Question 12

-In the above table, C is consumption expenditure, I is investment, G is government expenditure, X is exports, and M is imports. All entries are in dollars. What is the level of aggregate planned expenditure when real GDP is equal to $900 billion?

Accepted Answer

A)  $675 
B)  $796 
C)  $814 
D)  $1,714 
A)  $675 
B)  $796 
C)  $814 
D)  $1,714

Question 13

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 14

The slope of the aggregate expenditure curve equals the change in

Accepted Answer

A)  planned expenditure divided by the change in real GDP. 
B)  autonomous expenditure divided by the change in real GDP. 
C)  government expenditure divided by the change in real GDP. 
D)  real GDP divided by the change in planned expenditure. 
A)  planned expenditure divided by the change in real GDP. 
B)  autonomous expenditure divided by the change in real GDP. 
C)  government expenditure divided by the change in real GDP. 
D)  real GDP divided by the change in planned expenditure.

Question 15

Which of the following statements is CORRECT?

Accepted Answer

A)  Actual aggregate expenditures does not always equal real GDP. 
B)  Planned investment exceeds actual investment when real GDP is greater than aggregate planned expenditures. 
C)  Actual investment exceeds planned investment when real GDP is less than aggregate planned expenditures. 
D)  None of the above is correct. 
A)  Actual aggregate expenditures does not always equal real GDP. 
B)  Planned investment exceeds actual investment when real GDP is greater than aggregate planned expenditures. 
C)  Actual investment exceeds planned investment when real GDP is less than aggregate planned expenditures. 
D)  None of the above is correct.

Question 16

Define induced expenditure and autonomous expenditure. Which expenditure items are induced expenditure and which are autonomous expenditure?

Accepted Answer

Induced expenditure is aggregate expendi

Question 17

-If aggregate planned expenditure is less than real GDP, then in the short run

Accepted Answer

A)  aggregate planned expenditure will increase. 
B)  exports change to restore equilibrium. 
C)  the price level will fall. 
D)  real GDP will decrease. 
A)  aggregate planned expenditure will increase. 
B)  exports change to restore equilibrium. 
C)  the price level will fall. 
D)  real GDP will decrease.

Question 18

What is the relationship between the aggregate expenditure curve and the aggregate demand curve? Explain the relationship.

Accepted Answer

The aggregate demand curve is derived us

Question 19

The positive relationship between consumption expenditure and disposable income is shown by a movement along the consumption function.

Accepted Answer

A) True 
 B)False

Question 20

-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.

The smaller the slope of the AE curve, ________.

-Based upon the above table, saving equals $100 billion when disposable income equals

The government increases its expenditures. The steeper the SAS curve, the will be the increase in the price level and the will be the increase in real GDP.

In a simple economy in which prices are constant and there are no income taxes or imports, the marginal propensity to save is 0.2. If exports increase $50, what impact will that have on aggregate expenditure?

-According to the data in the above table, at what level of disposable income is savings negative?

Equilibrium expenditure is defined as the level of aggregate expenditure where

Between 2015 and 2016 the government reported that disposable income decreased by $400 billion and consumption expenditure decreased by $280 billion. Based on these data, the MPS equals

In the very short term, in the Keynesian model, which of the following is fixed and does not change when GDP changes?

An increase in the value of the multiplier can be caused by

The multiplier effect

-In the above table, C is consumption expenditure, I is investment, G is government expenditure, X is exports, and M is imports. All entries are in dollars. What is the level of aggregate planned expenditure when real GDP is equal to $900 billion?

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 slope of the aggregate expenditure curve equals the change in

Which of the following statements is CORRECT?

Define induced expenditure and autonomous expenditure. Which expenditure items are induced expenditure and which are autonomous expenditure?

-If aggregate planned expenditure is less than real GDP, then in the short run

What is the relationship between the aggregate expenditure curve and the aggregate demand curve? Explain the relationship.

The positive relationship between consumption expenditure and disposable income is shown by a movement along the consumption function.

-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

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 smaller the slope of the AE curve, ________.

-Based upon the above table, saving equals $100 billion when disposable income equals

The government increases its expenditures. The steeper the SAS curve, the ________ will be the increase in the price level and the ________ will be the increase in real GDP.

In a simple economy in which prices are constant and there are no income taxes or imports, the marginal propensity to save is 0.2. If exports increase $50, what impact will that have on aggregate expenditure?

-According to the data in the above table, at what level of disposable income is savings negative?

Equilibrium expenditure is defined as the level of aggregate expenditure where

Between 2015 and 2016 the government reported that disposable income decreased by $400 billion and consumption expenditure decreased by $280 billion. Based on these data, the MPS equals

In the very short term, in the Keynesian model, which of the following is fixed and does not change when GDP changes?

An increase in the value of the multiplier can be caused by

The multiplier effect

-In the above table, C is consumption expenditure, I is investment, G is government expenditure, X is exports, and M is imports. All entries are in dollars. What is the level of aggregate planned expenditure when real GDP is equal to $900 billion?

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 slope of the aggregate expenditure curve equals the change in

Which of the following statements is CORRECT?

Define induced expenditure and autonomous expenditure. Which expenditure items are induced expenditure and which are autonomous expenditure?

-If aggregate planned expenditure is less than real GDP, then in the short run

What is the relationship between the aggregate expenditure curve and the aggregate demand curve? Explain the relationship.

The positive relationship between consumption expenditure and disposable income is shown by a movement along the consumption function.

-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

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

The government increases its expenditures. The steeper the SAS curve, the will be the increase in the price level and the will be the increase in real GDP.