Question 1

If the marginal propensity to consume is 0.8 and there no income taxes or imports, the multiplier for a change in autonomous expenditure equals

Accepted Answer

A)  0.8. 
B)  1.0 
C)  4.0. 
D)  5.0. 
A)  0.8. 
B)  1.0 
C)  4.0. 
D)  5.0.

Question 2

As disposable income increases, there is a ________ the saving function.

Accepted Answer

A)  leftward shift of the 
B)  movement along 
C)  rightward shift of 
D)  change in the slope of 
A)  leftward shift of the 
B)  movement along 
C)  rightward shift of 
D)  change in the slope of

Question 3

When the consumption function lies above the 45-degree line, households

Accepted Answer

A)  spend on consumption an increasing percentage of any increase in income. 
B)  spend on consumption a decreasing percentage of any increase in income. 
C)  are dissaving. 
D)  save all of any increase in income. 
A)  spend on consumption an increasing percentage of any increase in income. 
B)  spend on consumption a decreasing percentage of any increase in income. 
C)  are dissaving. 
D)  save all of any increase in income.

Question 4

If aggregate planned expenditure is less than real GDP

Accepted Answer

A)  real GDP will increase. 
B)  real GDP remain unchanged. 
C)  real GDP will either decrease or increase, depending on the MPC. 
D)  inventories will increase above their target level and real GDP will decrease. 
A)  real GDP will increase. 
B)  real GDP remain unchanged. 
C)  real GDP will either decrease or increase, depending on the MPC. 
D)  inventories will increase above their target level and real GDP will decrease.

Question 5

-In the above figure, the MPC equals

Accepted Answer

A)  0.10. 
B)  0.17. 
C)  0.25. 
D)  0.50. 
A)  0.10. 
B)  0.17. 
C)  0.25. 
D)  0.50.

Question 6

Disposable income is divided into

Accepted Answer

A)  consumption and taxes. 
B)  saving and taxes. 
C)  consumption, saving, and taxes. 
D)  consumption and saving. 
A)  consumption and taxes. 
B)  saving and taxes. 
C)  consumption, saving, and taxes. 
D)  consumption and saving.

Question 7

-Using the data in above table, the marginal propensity to consume is

Accepted Answer

A)  increasing as disposable income increases. 
B)  equal to 1.0 when disposable income equals $600. 
C)  constant at 0.75. 
D)  constant at 0.25. 
A)  increasing as disposable income increases. 
B)  equal to 1.0 when disposable income equals $600. 
C)  constant at 0.75. 
D)  constant at 0.25.

Question 8

-In the figure above, if income taxes increase,

Accepted Answer

A)  the AE curve becomes steeper. 
B)  the AE curve becomes flatter. 
C)  there is a movement leftward along the unchanged AE curve. 
D)  there is a movement rightward along the unchanged AE curve. 
A)  the AE curve becomes steeper. 
B)  the AE curve becomes flatter. 
C)  there is a movement leftward along the unchanged AE curve. 
D)  there is a movement rightward along the unchanged AE curve.

Question 9

When the economy is at full employment and investment increases, in the long run the price level will ________ and, if potential GDP does not change, in the long run real GDP will ________.

Accepted Answer

A)  increase; increase 
B)  decrease; not change 
C)  decrease; decrease 
D)  increase; not change 
A)  increase; increase 
B)  decrease; not change 
C)  decrease; decrease 
D)  increase; not change

Question 10

-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. If investment increased by $26 to $51 then equilibrium expenditure will

Accepted Answer

A)  increase by $25. 
B)  decrease by $50. 
C)  increase by $100. 
D)  decrease by $100. 
A)  increase by $25. 
B)  decrease by $50. 
C)  increase by $100. 
D)  decrease by $100.

Question 11

An increase in the price level decreases planned expenditure because

Accepted Answer

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

Question 12

If the multiplier is 4 and there are no imports or income taxes, the marginal propensity to consume is

Accepted Answer

A)  0.25. 
B)  0.50. 
C)  0.75. 
D)  1.00. 
A)  0.25. 
B)  0.50. 
C)  0.75. 
D)  1.00.

Question 13

-In the above figure, autonomous expenditure is

Accepted Answer

A)  $5 trillion. 
B)  $10 trillion. 
C)  $15 trillion. 
D)  some amount not given in the above answers. 
A)  $5 trillion. 
B)  $10 trillion. 
C)  $15 trillion. 
D)  some amount not given in the above answers.

Question 14

The U.S. consumption function

Accepted Answer

A)  has shifted upward over time. 
B)  has a positive slope. 
C)  has a slope of about 0.9. 
D)  All of the above answers are correct. 
A)  has shifted upward over time. 
B)  has a positive slope. 
C)  has a slope of about 0.9. 
D)  All of the above answers are correct.

Question 15

-Based upon the above table, the MPS is equal to

Accepted Answer

A)  1 
B)  0.75 
C)  0.25 
D)  cannot be determined from the information given 
A)  1 
B)  0.75 
C)  0.25 
D)  cannot be determined from the information given

Question 16

In the very short run, the components of aggregate planned expenditure that depend on the level of real GDP are

Accepted Answer

A)  planned consumption expenditure and planned imports. 
B)  planned investment and planned imports. 
C)  planned investment and planned exports. 
D)  planned government expenditure on goods and services and planned imports. 
A)  planned consumption expenditure and planned imports. 
B)  planned investment and planned imports. 
C)  planned investment and planned exports. 
D)  planned government expenditure on goods and services and planned imports.

Question 17

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. If the government enacts the proposed policies and ________, aggregate expenditure ________ in the short run.

Accepted Answer

A)  induced expenditure increases by $5 billion; increases by $10 billion. 
B)  autonomous expenditure decreases by $10; decreases by $5 billion. 
C)  equilibrium expenditure increases by $8 billion; increases by $16 billion. 
D)  autonomous expenditure increases by $10 billion; increases by $20 billion. 
A)  induced expenditure increases by $5 billion; increases by $10 billion. 
B)  autonomous expenditure decreases by $10; decreases by $5 billion. 
C)  equilibrium expenditure increases by $8 billion; increases by $16 billion. 
D)  autonomous expenditure increases by $10 billion; increases by $20 billion.

Question 18

The slope of the aggregate expenditure curve is

Accepted Answer

A)  0. 
B)  greater than 0 and less than 1. 
C)  1. 
D)  greater than 1. 
A)  0. 
B)  greater than 0 and less than 1. 
C)  1. 
D)  greater than 1.

Question 19

Mauritius, an island off the coast of Africa, competes with other countries producing goods with low-skilled labor. In 2006, it was reported that ..."its clothing factories have been exposed to frontal competition from China, India and other Asian mass producers." As a result, "the main export industry has seen a 30 per cent reduction in volume ..."
Www)ft.com, 3/13/2006
Suppose real GDP is $14 billion, exports total $2 billion and the multiplier is 4. If exports decline by $600,000,000, real GDP in Mauritius will

Accepted Answer

A)  increase by $2.4 billion 
B)  decrease by $2.4 billion. 
C)  decrease by $8 billion. 
D)  increase by $4 billion. 
A)  increase by $2.4 billion 
B)  decrease by $2.4 billion. 
C)  decrease by $8 billion. 
D)  increase by $4 billion.

Question 20

For a household, the marginal propensity to save plus the marginal propensity to consume

Accepted Answer

A)  equals 1. 
B)  equals 0. 
C)  equals a number that is larger the larger the household's disposable income. 
D)  equals a number that is smaller the larger the household's disposable income. 
A)  equals 1. 
B)  equals 0. 
C)  equals a number that is larger the larger the household's disposable income. 
D)  equals a number that is smaller the larger the household's disposable income.

If the marginal propensity to consume is 0.8 and there no income taxes or imports, the multiplier for a change in autonomous expenditure equals

As disposable income increases, there is a ________ the saving function.

When the consumption function lies above the 45-degree line, households

If aggregate planned expenditure is less than real GDP

-In the above figure, the MPC equals

Disposable income is divided into

-Using the data in above table, the marginal propensity to consume is

-In the figure above, if income taxes increase,

When the economy is at full employment and investment increases, in the long run the price level will and, if potential GDP does not change, in the long run real GDP will .

-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. If investment increased by $26 to $51 then equilibrium expenditure will

An increase in the price level decreases planned expenditure because

If the multiplier is 4 and there are no imports or income taxes, the marginal propensity to consume is

-In the above figure, autonomous expenditure is

The U.S. consumption function

-Based upon the above table, the MPS is equal to

In the very short run, the components of aggregate planned expenditure that depend on the level of real GDP are

The slope of the aggregate expenditure curve is

For a household, the marginal propensity to save plus the marginal propensity to consume

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

If the marginal propensity to consume is 0.8 and there no income taxes or imports, the multiplier for a change in autonomous expenditure equals

As disposable income increases, there is a ________ the saving function.

When the consumption function lies above the 45-degree line, households

If aggregate planned expenditure is less than real GDP

-In the above figure, the MPC equals

Disposable income is divided into

-Using the data in above table, the marginal propensity to consume is

-In the figure above, if income taxes increase,

When the economy is at full employment and investment increases, in the long run the price level will ________ and, if potential GDP does not change, in the long run real GDP will ________.

-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. If investment increased by $26 to $51 then equilibrium expenditure will

An increase in the price level decreases planned expenditure because

If the multiplier is 4 and there are no imports or income taxes, the marginal propensity to consume is

-In the above figure, autonomous expenditure is

The U.S. consumption function

-Based upon the above table, the MPS is equal to

In the very short run, the components of aggregate planned expenditure that depend on the level of real GDP are

The slope of the aggregate expenditure curve is

For a household, the marginal propensity to save plus the marginal propensity to consume

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 the economy is at full employment and investment increases, in the long run the price level will and, if potential GDP does not change, in the long run real GDP will .