Question 1

-In the above figure, equilibrium expenditure along AE? is

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 2

The consumption function relates consumption expenditure to

Accepted Answer

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

Question 3

With a steep short-run aggregate supply curve

Accepted Answer

A)  an increase in government expenditure will not have an impact on the price level. 
B)  fiscal policy will be an effective tool to reduce unemployment without raising prices too much. 
C)  an increase in taxes that does not change potential GDP will not decrease real GDP by much. 
D)  there is a large change in real GDP whenever the price level rises. 
A)  an increase in government expenditure will not have an impact on the price level. 
B)  fiscal policy will be an effective tool to reduce unemployment without raising prices too much. 
C)  an increase in taxes that does not change potential GDP will not decrease real GDP by much. 
D)  there is a large change in real GDP whenever the price level rises.

Question 4

The MPC and MPS

Accepted Answer

A)  sum to 1. 
B)  can sum to anything greater than 0. 
C)  sum to 100. 
D)  each are usually less than .5. 
A)  sum to 1. 
B)  can sum to anything greater than 0. 
C)  sum to 100. 
D)  each are usually less than .5.

Question 5

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 6

If the price level rises, the purchasing power of wealth

Accepted Answer

A)  increases. 
B)  does not change. 
C)  decreases. 
D)  increases at first but in the long run decreases. 
A)  increases. 
B)  does not change. 
C)  decreases. 
D)  increases at first but in the long run decreases.

Question 7

List and explain factors that influence consumption expenditure.

Accepted Answer

Disposable income is an important factor

Question 8

In the Keynesian model of aggregate expenditure, we assume that firms will

Accepted Answer

A)  not change prices. 
B)  change prices only when inventory levels rise. 
C)  raise prices when inventory levels fall. 
D)  change prices immediately after a fluctuation in aggregate demand, to maintain profits. 
A)  not change prices. 
B)  change prices only when inventory levels rise. 
C)  raise prices when inventory levels fall. 
D)  change prices immediately after a fluctuation in aggregate demand, to maintain profits.

Question 9

The multiplier is larger if the

Accepted Answer

A)  marginal propensity to consume is larger. 
B)  marginal propensity to save is larger. 
C)  income tax rate is higher. 
D)  marginal propensity to import is larger. 
A)  marginal propensity to consume is larger. 
B)  marginal propensity to save is larger. 
C)  income tax rate is higher. 
D)  marginal propensity to import is larger.

Question 10

-If AE? is the aggregate planned expenditure curve, then equilibrium real GDP in the figure above is

Accepted Answer

A)  $3 trillion. 
B)  $6 trillion. 
C)  $12 trillion. 
D)  None of the above answers is correct. 
A)  $3 trillion. 
B)  $6 trillion. 
C)  $12 trillion. 
D)  None of the above answers is correct.

Question 11

-In the above figure, if the level of real GDP is $15 trillion

Accepted Answer

A)  inventories are above the levels planned by firms. 
B)  inventories are below the levels planned by firms. 
C)  inventories are equal to the levels planned by firms. 
D)  planned expenditures are zero. 
A)  inventories are above the levels planned by firms. 
B)  inventories are below the levels planned by firms. 
C)  inventories are equal to the levels planned by firms. 
D)  planned expenditures are zero.

Question 12

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 13

The components of aggregate expenditure include
I.imports.
II.consumption.
III.government transfer payments.

Accepted Answer

A)  I and II 
B)  II only 
C)  II and III 
D)  I, II and III 
A)  I and II 
B)  II only 
C)  II and III 
D)  I, II and III

Question 14

The size of the multiplier

Accepted Answer

A)  is unaffected by the amount of time that elapses. 
B)  increases in the long run. 
C)  decreases in the long run. 
D)  is constant in the long run. 
A)  is unaffected by the amount of time that elapses. 
B)  increases in the long run. 
C)  decreases in the long run. 
D)  is constant in the long run.

Question 15

What is the marginal propensity to consume? Can the marginal propensity to consume be greater than 1?

Accepted Answer

The marginal propensity to consume is th

Question 16

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 17

A consumption function shows a

Accepted Answer

A)  negative (inverse) relationship between consumption expenditure and saving. 
B)  positive (direct) relationship between consumption expenditure and the price level. 
C)  negative (inverse) relationship between consumption expenditure and disposable income. 
D)  positive (direct) relationship between consumption expenditure and disposable income. 
A)  negative (inverse) relationship between consumption expenditure and saving. 
B)  positive (direct) relationship between consumption expenditure and the price level. 
C)  negative (inverse) relationship between consumption expenditure and disposable income. 
D)  positive (direct) relationship between consumption expenditure and disposable income.

Question 18

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

Accepted Answer

If unplanned inventory changes

Question 19

Intertemporal substitution means changes in purchases

Accepted Answer

A)  through time. 
B)  between imports and exports. 
C)  across different stores. 
D)  across different goods and services. 
A)  through time. 
B)  between imports and exports. 
C)  across different stores. 
D)  across different goods and services.

Question 20

A shift in the aggregate expenditure curve as a result of an increase in the price level results in a

Accepted Answer

A)  leftward shift in the aggregate demand curve. 
B)  movement down along the aggregate demand curve. 
C)  rightward shift in the aggregate demand curve. 
D)  movement up along the aggregate demand curve. 
A)  leftward shift in the aggregate demand curve. 
B)  movement down along the aggregate demand curve. 
C)  rightward shift in the aggregate demand curve. 
D)  movement up along the aggregate demand curve.

-In the above figure, equilibrium expenditure along AE? is

The consumption function relates consumption expenditure to

With a steep short-run aggregate supply curve

The MPC and MPS

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

If the price level rises, the purchasing power of wealth

List and explain factors that influence consumption expenditure.

In the Keynesian model of aggregate expenditure, we assume that firms will

The multiplier is larger if the

-If AE? is the aggregate planned expenditure curve, then equilibrium real GDP in the figure above is

-In the above figure, if the level of real GDP is $15 trillion

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

The components of aggregate expenditure include I.imports. II.consumption. III.government transfer payments.

The size of the multiplier

What is the marginal propensity to consume? Can the marginal propensity to consume be greater than 1?

If the MPC equals 0.75, then

A consumption function shows a

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

Intertemporal substitution means changes in purchases

A shift in the aggregate expenditure curve as a result of an increase in the price level results in a

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 above figure, equilibrium expenditure along AE? is

The consumption function relates consumption expenditure to

With a steep short-run aggregate supply curve

The MPC and MPS

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

If the price level rises, the purchasing power of wealth

List and explain factors that influence consumption expenditure.

In the Keynesian model of aggregate expenditure, we assume that firms will

The multiplier is larger if the

-If AE? is the aggregate planned expenditure curve, then equilibrium real GDP in the figure above is

-In the above figure, if the level of real GDP is $15 trillion

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

The components of aggregate expenditure include I.imports. II.consumption. III.government transfer payments.

The size of the multiplier

What is the marginal propensity to consume? Can the marginal propensity to consume be greater than 1?

If the MPC equals 0.75, then

A consumption function shows a

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

Intertemporal substitution means changes in purchases

A shift in the aggregate expenditure curve as a result of an increase in the price level results in a

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

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