Question 1

-In the figure above, the multiplier equals

Accepted Answer

A)  0.5. 
B)  2.5. 
C)  10.0. 
D)  some amount that cannot be calculated without additional information. 
A)  0.5. 
B)  2.5. 
C)  10.0. 
D)  some amount that cannot be calculated without additional information.

Question 2

The larger the slope of the AE curve, the

Accepted Answer

A)  larger the value of the multiplier. 
B)  smaller the value of the multiplier. 
C)  less likely that the multiplier will be affected. 
D)  more likely that the multiplier will be inconsequential. 
A)  larger the value of the multiplier. 
B)  smaller the value of the multiplier. 
C)  less likely that the multiplier will be affected. 
D)  more likely that the multiplier will be inconsequential.

Question 3

Autonomous consumption

Accepted Answer

A)  increases with income. 
B)  is independent of income. 
C)  is independent of income and must be equal to zero. 
D)  decreases with income. 
A)  increases with income. 
B)  is independent of income. 
C)  is independent of income and must be equal to zero. 
D)  decreases with income.

Question 4

If the marginal propensity to save is 0.6, then the marginal propensity to consume is

Accepted Answer

A)  0.6. 
B)  0.4. 
C)  1.0. 
D)  More information is needed in order to calculate the correct answer. 
A)  0.6. 
B)  0.4. 
C)  1.0. 
D)  More information is needed in order to calculate the correct answer.

Question 5

When disposable income increases from $6 trillion to $6.5 trillion, consumption expenditure increase from $5.5 trillion to $5.9 trillion. The MPC equals

Accepted Answer

A)  0.75. 
B)  0.76. 
C)  0.8. 
D)  0.2. 
A)  0.75. 
B)  0.76. 
C)  0.8. 
D)  0.2.

Question 6

-In the above table, there are no taxes (so that that real GDP equals disposable income)and no imports or exports. If real GDP decreases from $6,000 to $5,000, the marginal propensity to consume is

Accepted Answer

A)  -750. 
B)  -0.75. 
C)  0.75. 
D)  0.80. 
A)  -750. 
B)  -0.75. 
C)  0.75. 
D)  0.80.

Question 7

In general, an increase in autonomous expenditure that is NOT created by a change in the price level results in a

Accepted Answer

A)  rightward shift of the AD curve. 
B)  movement upward along the AD curve. 
C)  movement downward along the AD curve. 
D)  leftward shift of the AD curve. 
A)  rightward shift of the AD curve. 
B)  movement upward along the AD curve. 
C)  movement downward along the AD curve. 
D)  leftward shift of the AD curve.

Question 8

-Using the above table, if disposable income is $400, saving is

Accepted Answer

A)  -$50. 
B)  $0. 
C)  $50. 
D)  $100. 
A)  -$50. 
B)  $0. 
C)  $50. 
D)  $100.

Question 9

________ consumption expenditure is greater than disposable income.

Accepted Answer

A)  It is always the case that 
B)  Saving is positive whenever 
C)  Dissaving occurs whenever 
D)  None of the above answers is correct because it is impossible for consumption expenditure to be greater than disposable income. 
A)  It is always the case that 
B)  Saving is positive whenever 
C)  Dissaving occurs whenever 
D)  None of the above answers is correct because it is impossible for consumption expenditure to be greater than disposable income.

Question 10

As disposable income increases, saving increases.

Accepted Answer

A) True 
 B)False

Question 11

After an increase in autonomous spending, in the long run changes in the price level

Accepted Answer

A)  will make the AE curve steeper. 
B)  will make the AE curve flatter. 
C)  will reduce the effect of the multiplier. 
D)  will not affect the multiplier. 
A)  will make the AE curve steeper. 
B)  will make the AE curve flatter. 
C)  will reduce the effect of the multiplier. 
D)  will not affect the multiplier.

Question 12

If aggregate planned expenditure exceeds real GDP

Accepted Answer

A)  firms are not maximizing their profits. 
B)  planned investment is greater than planned saving. 
C)  actual inventories decrease below their target. 
D)  planned consumption expenditure is less than actual consumption expenditure. 
A)  firms are not maximizing their profits. 
B)  planned investment is greater than planned saving. 
C)  actual inventories decrease below their target. 
D)  planned consumption expenditure is less than actual consumption expenditure.

Question 13

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
The increase in investment is considered ________ and will generate a larger increase in ________.

Accepted Answer

A)  equilibrium spending; autonomous expenditure 
B)  autonomous expenditure; induced expenditure 
C)  induced expenditure; autonomous expenditure 
D)  autonomous expenditure; multiplier spending. 
A)  equilibrium spending; autonomous expenditure 
B)  autonomous expenditure; induced expenditure 
C)  induced expenditure; autonomous expenditure 
D)  autonomous expenditure; multiplier spending.

Question 14

What is the marginal propensity to consume? Why it is an important concept?

Accepted Answer

The marginal propensity to consume, MPC,

Question 15

The relationship between net exports and GDP makes the slope of the aggregate expenditure curve

Accepted Answer

A)  flatter than it would be otherwise. 
B)  steeper than it would be otherwise. 
C)  neither flatter nor steeper than it would be otherwise. 
D)  steeper at low levels of GDP and flatter at high levels of GDP. 
A)  flatter than it would be otherwise. 
B)  steeper than it would be otherwise. 
C)  neither flatter nor steeper than it would be otherwise. 
D)  steeper at low levels of GDP and flatter at high levels of GDP.

Question 16

Because of the multiplier, a one-time change in expenditure will

Accepted Answer

A)  have little secondary effect on real GDP. 
B)  expand real GDP by an infinite amount. 
C)  generate more additional real GDP than the initial change in expenditure. 
D)  decrease saving and investment activity and thereby decrease future real GDP. 
A)  have little secondary effect on real GDP. 
B)  expand real GDP by an infinite amount. 
C)  generate more additional real GDP than the initial change in expenditure. 
D)  decrease saving and investment activity and thereby decrease future real GDP.

Question 17

-The figure above illustrates an economy's consumption function. What is the marginal propensity to consume in this economy?

Accepted Answer

A)  0.67 
B)  1.00 
C)  0.75 
D)  0.33 
A)  0.67 
B)  1.00 
C)  0.75 
D)  0.33

Question 18

If a $75 billion increase in autonomous expenditure increases equilibrium expenditure by $150 billion, then the multiplier must be ________.

Accepted Answer

A)  $225 billion 
B)  0.5 
C)  $75 billion 
D)  2 
A)  $225 billion 
B)  0.5 
C)  $75 billion 
D)  2

Question 19

The graph of the consumption function has consumption expenditure on the vertical axis and

Accepted Answer

A)  the interest rate on the horizontal axis. 
B)  time on the horizontal axis. 
C)  disposable income on the horizontal axis. 
D)  the Consumer Price Index on the horizontal axis. 
A)  the interest rate on the horizontal axis. 
B)  time on the horizontal axis. 
C)  disposable income on the horizontal axis. 
D)  the Consumer Price Index on the horizontal axis.

Question 20

-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. What is the equilibrium expenditure?

Accepted Answer

A)  $200 
B)  $500 
C)  $700 
D)  $1,000 
A)  $200 
B)  $500 
C)  $700 
D)  $1,000

-In the figure above, the multiplier equals

The larger the slope of the AE curve, the

Autonomous consumption

If the marginal propensity to save is 0.6, then the marginal propensity to consume is

When disposable income increases from $6 trillion to $6.5 trillion, consumption expenditure increase from $5.5 trillion to $5.9 trillion. The MPC equals

-In the above table, there are no taxes (so that that real GDP equals disposable income)and no imports or exports. If real GDP decreases from $6,000 to $5,000, the marginal propensity to consume is

In general, an increase in autonomous expenditure that is NOT created by a change in the price level results in a

-Using the above table, if disposable income is $400, saving is

________ consumption expenditure is greater than disposable income.

As disposable income increases, saving increases.

After an increase in autonomous spending, in the long run changes in the price level

If aggregate planned expenditure exceeds real GDP

What is the marginal propensity to consume? Why it is an important concept?

The relationship between net exports and GDP makes the slope of the aggregate expenditure curve

Because of the multiplier, a one-time change in expenditure will

-The figure above illustrates an economy's consumption function. What is the marginal propensity to consume in this economy?

If a $75 billion increase in autonomous expenditure increases equilibrium expenditure by $150 billion, then the multiplier must be ________.

The graph of the consumption function has consumption expenditure on the vertical axis and

-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. What is the equilibrium expenditure?

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 figure above, the multiplier equals

The larger the slope of the AE curve, the

Autonomous consumption

If the marginal propensity to save is 0.6, then the marginal propensity to consume is

When disposable income increases from $6 trillion to $6.5 trillion, consumption expenditure increase from $5.5 trillion to $5.9 trillion. The MPC equals

-In the above table, there are no taxes (so that that real GDP equals disposable income)and no imports or exports. If real GDP decreases from $6,000 to $5,000, the marginal propensity to consume is

In general, an increase in autonomous expenditure that is NOT created by a change in the price level results in a

-Using the above table, if disposable income is $400, saving is

________ consumption expenditure is greater than disposable income.

As disposable income increases, saving increases.

After an increase in autonomous spending, in the long run changes in the price level

If aggregate planned expenditure exceeds real GDP

What is the marginal propensity to consume? Why it is an important concept?

The relationship between net exports and GDP makes the slope of the aggregate expenditure curve

Because of the multiplier, a one-time change in expenditure will

-The figure above illustrates an economy's consumption function. What is the marginal propensity to consume in this economy?

If a $75 billion increase in autonomous expenditure increases equilibrium expenditure by $150 billion, then the multiplier must be ________.

The graph of the consumption function has consumption expenditure on the vertical axis and

-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. What is the equilibrium expenditure?

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