Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

A change in the real interest rate creates a movement along the consumption function.

Accepted Answer

A) True 
 B)False

Question 3

-The above figure shows the AE curve and 45° line for an economy.
a)If real GDP equals $8 trillion, how do firms' inventories compare to their planned inventories?
b)If real GDP equals $16 trillion, how do firms' inventories compare to their planned inventories?
c)What is the equilibrium level of expenditure? Why is this amount the equilibrium?

Accepted Answer

a)If real GDP equals $8 trillion, aggreg

Question 4

The presence of imports ________ the size of the U.S. multiplier because with an increase of U.S. real GDP, ________.

Accepted Answer

A)  increases; U.S. consumers buy goods from other countries 
B)  increases; U.S. firms can sell goods to other countries 
C)  decreases; U.S. consumers buy goods from other countries 
D)  decreases; U.S. firms can sell goods to other countries 
A)  increases; U.S. consumers buy goods from other countries 
B)  increases; U.S. firms can sell goods to other countries 
C)  decreases; U.S. consumers buy goods from other countries 
D)  decreases; U.S. firms can sell goods to other countries

Question 5

An increase in the price level decreases planned expenditures because

Accepted Answer

A)  real wealth increases, decreasing expenditure. 
B)  current prices rise relative to future prices, decreasing expenditure. 
C)  domestic prices rise relative to foreign prices, increasing net exports. 
D)  the real interest rate rises, increasing expenditure. 
A)  real wealth increases, decreasing expenditure. 
B)  current prices rise relative to future prices, decreasing expenditure. 
C)  domestic prices rise relative to foreign prices, increasing net exports. 
D)  the real interest rate rises, increasing expenditure.

Question 6

The marginal propensity to save is ________.

Accepted Answer

A)  always greater than the marginal propensity to consume 
B)  equal to the slope of the saving function 
C)  equal to 1 plus the slope of the consumption function 
D)  equal to the inverse of the marginal propensity to consume 
A)  always greater than the marginal propensity to consume 
B)  equal to the slope of the saving function 
C)  equal to 1 plus the slope of the consumption function 
D)  equal to the inverse of the marginal propensity to consume

Question 7

The multiplier effect exists because a change in autonomous expenditure

Accepted Answer

A)  leaves the economy in the form of imports. 
B)  leads to changes in income, which generate further spending. 
C)  prompts further exports. 
D)  will undergo its complete effect in one round. 
A)  leaves the economy in the form of imports. 
B)  leads to changes in income, which generate further spending. 
C)  prompts further exports. 
D)  will undergo its complete effect in one round.

Question 8

The size of the marginal propensity to consume

Accepted Answer

A)  is negative if dissaving is present. 
B)  is between 0 and 1. 
C)  equals 1. 
D)  exceeds 1. 
A)  is negative if dissaving is present. 
B)  is between 0 and 1. 
C)  equals 1. 
D)  exceeds 1.

Question 9

In 2007, investment in France increased by 7 billion euros. Which of following occurs?
I.an upward shift in the AE curve
II.a leftward shift in the AD curve
III.an increase in the price level and real GDP in the short run
IV.an increase in the price level and no change in real GDP in the long run

Accepted Answer

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

Question 10

When investment exceeds 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 11

Any change in the price level will result in a

Accepted Answer

A)  shift in the AE curve and a movement along the AD curve. 
B)  movement along the AE curve and a shift of the AD curve. 
C)  shift in the AE and AD curves in the same direction. 
D)  shift in the AE and AD curves in opposite directions. 
A)  shift in the AE curve and a movement along the AD curve. 
B)  movement along the AE curve and a shift of the AD curve. 
C)  shift in the AE and AD curves in the same direction. 
D)  shift in the AE and AD curves in opposite directions.

Question 12

Where the consumption function crosses the 45° line

Accepted Answer

A)  consumption expenditure equals saving. 
B)  saving is positive. 
C)  saving is negative. 
D)  consumption expenditure equals disposable income. 
A)  consumption expenditure equals saving. 
B)  saving is positive. 
C)  saving is negative. 
D)  consumption expenditure equals disposable income.

Question 13

If the price level is constant, a change in investment has a multiplied impact on real GDP.

Accepted Answer

A) True 
 B)False

Question 14

Imports

Accepted Answer

A)  increase the size of the multiplier because imports make disposable income less than real GDP. 
B)  decrease the size of the multiplier because spending on imports does not increase real GDP in the domestic nation. 
C)  increase the size of the multiplier because imports are paid for by exports. 
D)  decrease the size of the multiplier because imports lead to an increase in taxes and government purchases. 
A)  increase the size of the multiplier because imports make disposable income less than real GDP. 
B)  decrease the size of the multiplier because spending on imports does not increase real GDP in the domestic nation. 
C)  increase the size of the multiplier because imports are paid for by exports. 
D)  decrease the size of the multiplier because imports lead to an increase in taxes and government purchases.

Question 15

Actual aggregate expenditure does not always equal real GDP.

Accepted Answer

A) True 
 B)False

Question 16

-The presence of income taxes and imports make the slope of the aggregate expenditure curve

Accepted Answer

A)  the same as it would be without income taxes and exports. 
B)  steeper than it would be without income taxes and exports. 
C)  flatter than it would be without income taxes and exports. 
D)  probably different than it would be without income taxes and exports but income taxes make it steeper while imports make it flatter. 
A)  the same as it would be without income taxes and exports. 
B)  steeper than it would be without income taxes and exports. 
C)  flatter than it would be without income taxes and exports. 
D)  probably different than it would be without income taxes and exports but income taxes make it steeper while imports make it flatter.

Question 17

All else being constant, autonomous expenditure

Accepted Answer

A)  increases as real GDP increases. 
B)  increases as real GDP decreases. 
C)  does not change with changes in real GDP. 
D)  is assumed to be zero. 
A)  increases as real GDP increases. 
B)  increases as real GDP decreases. 
C)  does not change with changes in real GDP. 
D)  is assumed to be zero.

Question 18

-According to the data in the above table, what is the marginal propensity to consume?

Accepted Answer

A)  75. 
B)  100. 
C)  0.75. 
D)  1. 
A)  75. 
B)  100. 
C)  0.75. 
D)  1.

Question 19

The difference between planned and unplanned spending is ________.

Accepted Answer

A)  always negative 
B)  inventories 
C)  unplanned changes in inventories 
D)  always positive 
A)  always negative 
B)  inventories 
C)  unplanned changes in inventories 
D)  always positive

Question 20

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.

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

A change in the real interest rate creates a movement along the consumption function.

The presence of imports the size of the U.S. multiplier because with an increase of U.S. real GDP, .

An increase in the price level decreases planned expenditures because

The marginal propensity to save is ________.

The multiplier effect exists because a change in autonomous expenditure

The size of the marginal propensity to consume

In 2007, investment in France increased by 7 billion euros. Which of following occurs? I.an upward shift in the AE curve II.a leftward shift in the AD curve III.an increase in the price level and real GDP in the short run IV.an increase in the price level and no change in real GDP in the long run

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

Any change in the price level will result in a

Where the consumption function crosses the 45° line

If the price level is constant, a change in investment has a multiplied impact on real GDP.

Imports

Actual aggregate expenditure does not always equal real GDP.

-The presence of income taxes and imports make the slope of the aggregate expenditure curve

All else being constant, autonomous expenditure

-According to the data in the above table, what is the marginal propensity to consume?

The difference between planned and unplanned spending is ________.

The marginal propensity to consume is the

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

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

A change in the real interest rate creates a movement along the consumption function.

The presence of imports ________ the size of the U.S. multiplier because with an increase of U.S. real GDP, ________.

An increase in the price level decreases planned expenditures because

The marginal propensity to save is ________.

The multiplier effect exists because a change in autonomous expenditure

The size of the marginal propensity to consume

In 2007, investment in France increased by 7 billion euros. Which of following occurs? I.an upward shift in the AE curve II.a leftward shift in the AD curve III.an increase in the price level and real GDP in the short run IV.an increase in the price level and no change in real GDP in the long run

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

Any change in the price level will result in a

Where the consumption function crosses the 45° line

If the price level is constant, a change in investment has a multiplied impact on real GDP.

Imports

Actual aggregate expenditure does not always equal real GDP.

-The presence of income taxes and imports make the slope of the aggregate expenditure curve

All else being constant, autonomous expenditure

-According to the data in the above table, what is the marginal propensity to consume?

The difference between planned and unplanned spending is ________.

The marginal propensity to consume is the

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 presence of imports the size of the U.S. multiplier because with an increase of U.S. real GDP, .

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