Question 1

According to the Keynesian theory, the typical firm

Accepted Answer

A)  changes its prices frequently in response to fluctuations in aggregate demand. 
B)  lowers its prices when inventories are decreasing. 
C)  does not change its prices immediately when aggregate demand fluctuates. 
D)  lowers its prices if sales exceed production. 
A)  changes its prices frequently in response to fluctuations in aggregate demand. 
B)  lowers its prices when inventories are decreasing. 
C)  does not change its prices immediately when aggregate demand fluctuates. 
D)  lowers its prices if sales exceed production.

Question 2

-In the above figure, autonomous consumption equals

Accepted Answer

A)  0. 
B)  $4 trillion. 
C)  $12 trillion. 
D)  -$4 trillion. 
A)  0. 
B)  $4 trillion. 
C)  $12 trillion. 
D)  -$4 trillion.

Question 3

A movement along the saving function occurs when

Accepted Answer

A)  the real interest rate rises. 
B)  wealth increases. 
C)  disposable income decreases. 
D)  None of the above answers is correct. 
A)  the real interest rate rises. 
B)  wealth increases. 
C)  disposable income decreases. 
D)  None of the above answers is correct.

Question 4

In an article regarding Bangladesh's economy, the author suggests that the government ..."[g]ive double tax breaks on investment dollars. Give a tax break to R&D [research and development]. Give a tax break on donations to educational institutions."
www.groundreport.com, March 24, 2008
Suppose the multiplier in Bangladesh is 2. As a result of enacting the proposed policies, which of the following describe possible outcomes in the short run?
i.an $20 billion increase in investment will increase aggregate expenditure by $40 billion.
iI.the AE curve will shift upward.
iII.there will be an unplanned increase in inventories.

Accepted Answer

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

Question 5

The multiplier is greater than 1 because the change in autonomous expenditure leads to ________.

Accepted Answer

A)  more investment 
B)  more saving 
C)  less consumption expenditure 
D)  more induced expenditure 
A)  more investment 
B)  more saving 
C)  less consumption expenditure 
D)  more induced expenditure

Question 6

Does aggregate planned expenditure always equal real GDP?

Accepted Answer

No, aggregate planned expenditure does n

Question 7

The sum of the components of aggregate expenditure that vary with real GDP is called

Accepted Answer

A)  induced expenditures. 
B)  the MPC. 
C)  autonomous expenditures. 
D)  autonomous consumption. 
A)  induced expenditures. 
B)  the MPC. 
C)  autonomous expenditures. 
D)  autonomous consumption.

Question 8

Suppose the equilibrium level of expenditure is $13 trillion. If real GDP is $12 trillion, then inventories are ________ their target levels and real GDP will ________.

Accepted Answer

A)  above; increase 
B)  above; decrease 
C)  below; increase 
D)  below; decrease 
A)  above; increase 
B)  above; decrease 
C)  below; increase 
D)  below; decrease

Question 9

-In the above figure the economy is initially at point A on the aggregate expenditure curve AE?. Suppose firms expect profits to increase and decide to increase investment. As a result

Accepted Answer

A)  the AE curve shifts upward to a curve such as AE?. 
B)  the AE curve shifts downward to a curve such as AE?. 
C)  there is a movement along AE? to a point such as B. 
D)  there is a movement along AE? to a point such as C. 
A)  the AE curve shifts upward to a curve such as AE?. 
B)  the AE curve shifts downward to a curve such as AE?. 
C)  there is a movement along AE? to a point such as B. 
D)  there is a movement along AE? to a point such as C.

Question 10

Explain the basic idea of the expenditure multiplier and the role consumers play in determining its magnitude.

Accepted Answer

The basic idea of the multiplier is that

Question 11

Which of the following shifts the aggregate demand curve rightward?

Accepted Answer

A)  an increase in the price level 
B)  an increase in the income tax rate 
C)  an increase in government expenditure 
D)  a decrease in investment 
A)  an increase in the price level 
B)  an increase in the income tax rate 
C)  an increase in government expenditure 
D)  a decrease in investment

Question 12

Discuss the link between real GDP and imports.

Accepted Answer

Imports are one of two components that a

Question 13

In the country of Midland, autonomous consumption expenditure is $60 million, and the marginal propensity to consume is 0.6. Investment is $110 million, government expenditure is $70 million, and there are no income taxes. Investment and government expenditure are constant-they do not vary with income. The nation does not trade with the rest of the world.
a)Draw the aggregate expenditure curve.
b)What is the autonomous aggregate expenditure?
c)What is the size of the multiplier in Midland's economy?
d)What is aggregate planned expenditure and what is happening to inventories when real GDP is $800 million?
e)What is the economy's equilibrium aggregate expenditure?

Accepted Answer

@#IMG-DLM& 
a) See the figure above. Because the i

Question 14

The graph of the aggregate expenditure curve has ________ on the y-axis and ________ on the x-axis.

Accepted Answer

A)  real GDP; aggregate planned expenditure 
B)  aggregate actual expenditure; real GDP 
C)  household expenditures; real GDP 
D)  aggregate planned expenditure; real GDP 
A)  real GDP; aggregate planned expenditure 
B)  aggregate actual expenditure; real GDP 
C)  household expenditures; real GDP 
D)  aggregate planned expenditure; real GDP

Question 15

An increase in the price level shifts the aggregate expenditure curve downward and results in a movement along the aggregate demand curve. Why does an increase in the price level result in a shift in the aggregate expenditure curve rather than a movement along it?

Accepted Answer

The increase in the price level shifts t

Question 16

In the very short term, planned investment ________ when GDP changes and planned consumption expenditure ________ when GDP changes.

Accepted Answer

A)  changes; changes. 
B)  changes; does not change 
C)  does not change; changes 
D)  does not change; does not change 
A)  changes; changes. 
B)  changes; does not change 
C)  does not change; changes 
D)  does not change; does not change

Question 17

If the multiplier for a change in autonomous expenditure is 10 and there are no income taxes or imports, then the MPC is

Accepted Answer

A)  0.9. 
B)  0.1. 
C)  1.0. 
D)  9.0. 
A)  0.9. 
B)  0.1. 
C)  1.0. 
D)  9.0.

Question 18

When autonomous expenditure changes, the horizontal distance by which the aggregate demand curve shifts

Accepted Answer

A)  depends on the size of the multiplier. 
B)  depends on the size of the wealth effect. 
C)  is increased by the existence of automatic stabilizers. 
D)  is determined by the inverse of the multiplier. 
A)  depends on the size of the multiplier. 
B)  depends on the size of the wealth effect. 
C)  is increased by the existence of automatic stabilizers. 
D)  is determined by the inverse of the multiplier.

Question 19

How do imports and income taxes affect the multiplier? Why do they have this effect?

Accepted Answer

Income taxes and imports shrin

Question 20

If the slope of the AE curve is 0.80, the value of the multiplier is

Accepted Answer

A)  5. 
B)  1.25. 
C)  2. 
D)  indeterminate from the information given. 
A)  5. 
B)  1.25. 
C)  2. 
D)  indeterminate from the information given.

According to the Keynesian theory, the typical firm

-In the above figure, autonomous consumption equals

A movement along the saving function occurs when

The multiplier is greater than 1 because the change in autonomous expenditure leads to ________.

Does aggregate planned expenditure always equal real GDP?

The sum of the components of aggregate expenditure that vary with real GDP is called

Suppose the equilibrium level of expenditure is $13 trillion. If real GDP is $12 trillion, then inventories are their target levels and real GDP will .

-In the above figure the economy is initially at point A on the aggregate expenditure curve AE?. Suppose firms expect profits to increase and decide to increase investment. As a result

Explain the basic idea of the expenditure multiplier and the role consumers play in determining its magnitude.

Which of the following shifts the aggregate demand curve rightward?

Discuss the link between real GDP and imports.

The graph of the aggregate expenditure curve has on the y-axis and on the x-axis.

An increase in the price level shifts the aggregate expenditure curve downward and results in a movement along the aggregate demand curve. Why does an increase in the price level result in a shift in the aggregate expenditure curve rather than a movement along it?

In the very short term, planned investment when GDP changes and planned consumption expenditure when GDP changes.

If the multiplier for a change in autonomous expenditure is 10 and there are no income taxes or imports, then the MPC is

When autonomous expenditure changes, the horizontal distance by which the aggregate demand curve shifts

How do imports and income taxes affect the multiplier? Why do they have this effect?

If the slope of the AE curve is 0.80, the value of the multiplier 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

According to the Keynesian theory, the typical firm

-In the above figure, autonomous consumption equals

A movement along the saving function occurs when

The multiplier is greater than 1 because the change in autonomous expenditure leads to ________.

Does aggregate planned expenditure always equal real GDP?

The sum of the components of aggregate expenditure that vary with real GDP is called

Suppose the equilibrium level of expenditure is $13 trillion. If real GDP is $12 trillion, then inventories are ________ their target levels and real GDP will ________.

-In the above figure the economy is initially at point A on the aggregate expenditure curve AE?. Suppose firms expect profits to increase and decide to increase investment. As a result

Explain the basic idea of the expenditure multiplier and the role consumers play in determining its magnitude.

Which of the following shifts the aggregate demand curve rightward?

Discuss the link between real GDP and imports.

The graph of the aggregate expenditure curve has ________ on the y-axis and ________ on the x-axis.

An increase in the price level shifts the aggregate expenditure curve downward and results in a movement along the aggregate demand curve. Why does an increase in the price level result in a shift in the aggregate expenditure curve rather than a movement along it?

In the very short term, planned investment ________ when GDP changes and planned consumption expenditure ________ when GDP changes.

If the multiplier for a change in autonomous expenditure is 10 and there are no income taxes or imports, then the MPC is

When autonomous expenditure changes, the horizontal distance by which the aggregate demand curve shifts

How do imports and income taxes affect the multiplier? Why do they have this effect?

If the slope of the AE curve is 0.80, the value of the multiplier 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

Suppose the equilibrium level of expenditure is $13 trillion. If real GDP is $12 trillion, then inventories are their target levels and real GDP will .

The graph of the aggregate expenditure curve has on the y-axis and on the x-axis.

In the very short term, planned investment when GDP changes and planned consumption expenditure when GDP changes.