Question 1

Suppose the equilibrium level of expenditure is $13 trillion. If real GDP is $14 trillion, then planned expenditures

Accepted Answer

A)  exceed real GDP, and real GDP will increase. 
B)  are less than real GDP, and real GDP will decrease. 
C)  are equal to real GDP, and there will be no change in real GDP. 
D)  are less than real GDP, and real GDP will increase. 
A)  exceed real GDP, and real GDP will increase. 
B)  are less than real GDP, and real GDP will decrease. 
C)  are equal to real GDP, and there will be no change in real GDP. 
D)  are less than real GDP, and real GDP will increase.

Question 2

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

Accepted Answer

A)  an increase in the MPS. 
B)  an increase in the MPC. 
C)  a decrease in induced expenditures. 
D)  an increase in the marginal propensity to import. 
A)  an increase in the MPS. 
B)  an increase in the MPC. 
C)  a decrease in induced expenditures. 
D)  an increase in the marginal propensity to import.

Question 3

If the slope of the AE curve is 0.60, the value of the multiplier is

Accepted Answer

A)  2.5. 
B)  0.4. 
C)  1.67. 
D)  4.0. 
A)  2.5. 
B)  0.4. 
C)  1.67. 
D)  4.0.

Question 4

If the MPC increases from 0.75 to 0.80 and there are no income taxes or imports

Accepted Answer

A)  the multiplier becomes larger. 
B)  the multiplier becomes smaller. 
C)  the slope of the consumption function becomes smaller. 
D)  the slope of the savings function becomes larger. 
A)  the multiplier becomes larger. 
B)  the multiplier becomes smaller. 
C)  the slope of the consumption function becomes smaller. 
D)  the slope of the savings function becomes larger.

Question 5

The intertemporal substitution effect of a change in the price level results from a

Accepted Answer

A)  change in the price of current goods relative to future goods. 
B)  change in the purchasing power of wealth. 
C)  change in the price of foreign goods relative to domestic goods. 
D)  Both answers B and C are correct. 
A)  change in the price of current goods relative to future goods. 
B)  change in the purchasing power of wealth. 
C)  change in the price of foreign goods relative to domestic goods. 
D)  Both answers B and C are correct.

Question 6

If aggregate planned expenditure is less than real GDP then

Accepted Answer

A)  consumers increase their planned expenditure until aggregate planned expenditure increases to equal real GDP. 
B)  firms increase their planned expenditure until aggregate planned expenditure increases to equal real GDP. 
C)  firms' inventories will increase and real GDP will decrease as production falls. 
D)  firms' inventories will decrease and real GDP will decrease as production falls. 
A)  consumers increase their planned expenditure until aggregate planned expenditure increases to equal real GDP. 
B)  firms increase their planned expenditure until aggregate planned expenditure increases to equal real GDP. 
C)  firms' inventories will increase and real GDP will decrease as production falls. 
D)  firms' inventories will decrease and real GDP will decrease as production falls.

Question 7

Suppose that last year the slope of the AE curve is 0.67 and this year the slope of the AE curve changes to 0.8. Which of the following best describes what happens to the multiplier?

Accepted Answer

A)  It rises from 3 to 5. 
B)  It falls from 5 to 3. 
C)  It rises from 1.25 to 1.49. 
D)  It falls from 1.49 to 1.25. 
A)  It rises from 3 to 5. 
B)  It falls from 5 to 3. 
C)  It rises from 1.25 to 1.49. 
D)  It falls from 1.49 to 1.25.

Question 8

"Few if any economists anticipated the extent of the inventory adjustment... Production cutbacks have been much greater than expected. Those cuts have weakened the industrial sector considerably." As a result of these changes, the U.S. government lowered its estimate of fourth-quarter growth in real GDP.
Www)businessweek.com 3/12/2007
The article suggests that ________.

Accepted Answer

A)  planned expenditures exceeded real GDP in 2006. 
B)  real GDP exceeded planned expenditures in 2006. 
C)  the AE curve shifted upward in 2007. 
D)  the AD curve shifted rightward in 2007. 
A)  planned expenditures exceeded real GDP in 2006. 
B)  real GDP exceeded planned expenditures in 2006. 
C)  the AE curve shifted upward in 2007. 
D)  the AD curve shifted rightward in 2007.

Question 9

A decrease in autonomous expenditure shifts the AE curve

Accepted Answer

A)  downward and leaves its slope unchanged. 
B)  downward and makes it steeper. 
C)  downward and makes it flatter. 
D)  upward and makes it steeper. 
A)  downward and leaves its slope unchanged. 
B)  downward and makes it steeper. 
C)  downward and makes it flatter. 
D)  upward and makes it steeper.

Question 10

The consumption function shows how much

Accepted Answer

A)  all households plan to consume at each level of real disposable income. 
B)  all households plan to consume at each possible real interest rate. 
C)  real disposable income people will earn at each income tax bracket. 
D)  all households plan to consume at each level of savings. 
A)  all households plan to consume at each level of real disposable income. 
B)  all households plan to consume at each possible real interest rate. 
C)  real disposable income people will earn at each income tax bracket. 
D)  all households plan to consume at each level of savings.

Question 11

At a level of disposable income of $0, consumption expenditure is $3500. Therefore when disposable income is $0

Accepted Answer

A)  saving and dissaving equal $0. 
B)  saving equals -$3500. 
C)  saving equals $3500. 
D)  the MPC = zero. 
A)  saving and dissaving equal $0. 
B)  saving equals -$3500. 
C)  saving equals $3500. 
D)  the MPC = zero.

Question 12

If prices are fixed, an increase in aggregate expenditures results in an increase in equilibrium GDP that

Accepted Answer

A)  is greater than the change in aggregate expenditure. 
B)  is equal to the change in aggregate expenditure. 
C)  is less than the change in aggregate expenditure. 
D)  has no necessary relationship to the size of the change in aggregate expenditure. 
A)  is greater than the change in aggregate expenditure. 
B)  is equal to the change in aggregate expenditure. 
C)  is less than the change in aggregate expenditure. 
D)  has no necessary relationship to the size of the change in aggregate expenditure.

Question 13

Aggregate expenditure equals

Accepted Answer

A)  C + I + G + X - M. 
B)  G + X - M. 
C)  C + I + G. 
D)  C + I + G + X. 
A)  C + I + G + X - M. 
B)  G + X - M. 
C)  C + I + G. 
D)  C + I + G + X.

Question 14

-In the above table, there are no taxes and no imports or exports. The value of the multiplier for this economy is

Accepted Answer

A)  0.75. 
B)  1.33. 
C)  4.0. 
D)  0.25. 
A)  0.75. 
B)  1.33. 
C)  4.0. 
D)  0.25.

Question 15

In an economy with no income taxes or imports, the multiplier equals

Accepted Answer

A)  1/MPC. 
B)  1/MPS. 
C)  1/(1 - MPS). 
D)  1/(MPC + MPS). 
A)  1/MPC. 
B)  1/MPS. 
C)  1/(1 - MPS). 
D)  1/(MPC + MPS).

Question 16

The vertical distance between the 45-degree line and the consumption line represents

Accepted Answer

A)  investment. 
B)  total consumption expenditure. 
C)  the difference between consumption expenditure and investment. 
D)  saving or dissaving. 
A)  investment. 
B)  total consumption expenditure. 
C)  the difference between consumption expenditure and investment. 
D)  saving or dissaving.

Question 17

A country reports that it has an unplanned inventory increase of $1.0 trillion. Discuss how the economy adjusts until it reaches an unplanned inventory change of $0.0 trillion.

Accepted Answer

When unplanned inventory changes are pos

Question 18

The multiplier is 2.5 and the SAS curve is upward sloping. Investment increases by $20 billion. In the short run, equilibrium real GDP will

Accepted Answer

A)  increase by $50 billion. 
B)  increase by less than $50 billion. 
C)  decrease by $50 billion. 
D)  decrease by less than $50 billion. 
A)  increase by $50 billion. 
B)  increase by less than $50 billion. 
C)  decrease by $50 billion. 
D)  decrease by less than $50 billion.

Question 19

In the short run, a factor that leads to changes in U.S. imports is

Accepted Answer

A)  the level of income in foreign nations. 
B)  the real interest rate. 
C)  the U.S. real GDP. 
D)  U.S. exports. 
A)  the level of income in foreign nations. 
B)  the real interest rate. 
C)  the U.S. real GDP. 
D)  U.S. exports.

Question 20

Read the two statements below and indicate if they are true or false.
I.Autonomous expenditures change when GDP changes.
II.Aggregate planned expenditure is the sum of planned consumption expenditure, investment, government expenditure, and net exports.

Accepted Answer

A)  I and II are both true. 
B)  I and II are both false. 
C)  I is true and II is false 
D)  I is false and II is true. 
A)  I and II are both true. 
B)  I and II are both false. 
C)  I is true and II is false 
D)  I is false and II is true.

Suppose the equilibrium level of expenditure is $13 trillion. If real GDP is $14 trillion, then planned expenditures

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

If the slope of the AE curve is 0.60, the value of the multiplier is

If the MPC increases from 0.75 to 0.80 and there are no income taxes or imports

The intertemporal substitution effect of a change in the price level results from a

If aggregate planned expenditure is less than real GDP then

Suppose that last year the slope of the AE curve is 0.67 and this year the slope of the AE curve changes to 0.8. Which of the following best describes what happens to the multiplier?

A decrease in autonomous expenditure shifts the AE curve

The consumption function shows how much

At a level of disposable income of $0, consumption expenditure is $3500. Therefore when disposable income is $0

If prices are fixed, an increase in aggregate expenditures results in an increase in equilibrium GDP that

Aggregate expenditure equals

-In the above table, there are no taxes and no imports or exports. The value of the multiplier for this economy is

In an economy with no income taxes or imports, the multiplier equals

The vertical distance between the 45-degree line and the consumption line represents

A country reports that it has an unplanned inventory increase of $1.0 trillion. Discuss how the economy adjusts until it reaches an unplanned inventory change of $0.0 trillion.

The multiplier is 2.5 and the SAS curve is upward sloping. Investment increases by $20 billion. In the short run, equilibrium real GDP will

In the short run, a factor that leads to changes in U.S. imports is

Read the two statements below and indicate if they are true or false. I.Autonomous expenditures change when GDP changes. II.Aggregate planned expenditure is the sum of planned consumption expenditure, investment, government expenditure, and net exports.

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

Suppose the equilibrium level of expenditure is $13 trillion. If real GDP is $14 trillion, then planned expenditures

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

If the slope of the AE curve is 0.60, the value of the multiplier is

If the MPC increases from 0.75 to 0.80 and there are no income taxes or imports

The intertemporal substitution effect of a change in the price level results from a

If aggregate planned expenditure is less than real GDP then

Suppose that last year the slope of the AE curve is 0.67 and this year the slope of the AE curve changes to 0.8. Which of the following best describes what happens to the multiplier?

A decrease in autonomous expenditure shifts the AE curve

The consumption function shows how much

At a level of disposable income of $0, consumption expenditure is $3500. Therefore when disposable income is $0

If prices are fixed, an increase in aggregate expenditures results in an increase in equilibrium GDP that

Aggregate expenditure equals

-In the above table, there are no taxes and no imports or exports. The value of the multiplier for this economy is

In an economy with no income taxes or imports, the multiplier equals

The vertical distance between the 45-degree line and the consumption line represents

A country reports that it has an unplanned inventory increase of $1.0 trillion. Discuss how the economy adjusts until it reaches an unplanned inventory change of $0.0 trillion.

The multiplier is 2.5 and the SAS curve is upward sloping. Investment increases by $20 billion. In the short run, equilibrium real GDP will

In the short run, a factor that leads to changes in U.S. imports is

Read the two statements below and indicate if they are true or false. I.Autonomous expenditures change when GDP changes. II.Aggregate planned expenditure is the sum of planned consumption expenditure, investment, government expenditure, and net exports.

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