Question 1

The multiplier is the amount by which ________ is multiplied to determine ________.

Accepted Answer

A)  autonomous expenditure; real GDP 
B)  induced expenditure; real GDP 
C)  a change in autonomous expenditure; the change in equilibrium expenditure 
D)  a change in induced expenditure; the change in equilibrium expenditure 
A)  autonomous expenditure; real GDP 
B)  induced expenditure; real GDP 
C)  a change in autonomous expenditure; the change in equilibrium expenditure 
D)  a change in induced expenditure; the change in equilibrium expenditure

Question 2

Suppose the consumption function is given by the equation C = 100 + 0.8YD, where YD is disposable income. What is the multiplier in this economy?

Accepted Answer

A)  5 
B)  2 
C)  0.8 
D)  0.2 
A)  5 
B)  2 
C)  0.8 
D)  0.2

Question 3

-Based upon the above table, the MPC for the consumption function is

Accepted Answer

A)  increasing as income rises. 
B)  equal to 1.0 at $600 billion. 
C)  constant at 0.75. 
D)  constant at 0.25. 
A)  increasing as income rises. 
B)  equal to 1.0 at $600 billion. 
C)  constant at 0.75. 
D)  constant at 0.25.

Question 4

The marginal propensity to consume is found by

Accepted Answer

A)  dividing consumption expenditure by disposable income. 
B)  dividing disposable income by consumption expenditure. 
C)  dividing the change in disposable income by the change in consumption expenditure. 
D)  dividing the change in consumption expenditure by the change in disposable income. 
A)  dividing consumption expenditure by disposable income. 
B)  dividing disposable income by consumption expenditure. 
C)  dividing the change in disposable income by the change in consumption expenditure. 
D)  dividing the change in consumption expenditure by the change in disposable income.

Question 5

Suppose that firms find that their inventories are less than planned. In this case, what is the initial relationship between aggregate planned expenditure and real GDP? Using the aggregate expenditure model, what adjustments, if any, take place?

Accepted Answer

If inventories are less than planned, ag

Question 6

The presence of income taxes and imports make the multiplier

Accepted Answer

A)  fall in value but remain positive. 
B)  rise in value. 
C)  not change in value. 
D)  become negative. 
A)  fall in value but remain positive. 
B)  rise in value. 
C)  not change in value. 
D)  become negative.

Question 7

The multiplier measures the

Accepted Answer

A)  horizontal shift in the aggregate demand curve from an increase in autonomous spending. 
B)  vertical shift in the aggregate demand curve from an increase in autonomous spending. 
C)  horizontal difference between two points on the same aggregate demand curve. 
D)  vertical difference between two points on the same aggregate demand curve. 
A)  horizontal shift in the aggregate demand curve from an increase in autonomous spending. 
B)  vertical shift in the aggregate demand curve from an increase in autonomous spending. 
C)  horizontal difference between two points on the same aggregate demand curve. 
D)  vertical difference between two points on the same aggregate demand curve.

Question 8

-In the above table, savings equal zero when disposable income equals

Accepted Answer

A)  0. 
B)  $200. 
C)  $300. 
D)  $500. 
A)  0. 
B)  $200. 
C)  $300. 
D)  $500.

Question 9

What is the difference between induced and autonomous expenditure? Which components of aggregate expenditure fall under which category?

Accepted Answer

Induced expenditure is expenditure that

Question 10

Which of the following is INCORRECT?

Accepted Answer

A)  Expansions usually begin with an increase in autonomous spending. 
B)  Firms experience unplanned decreases in inventories as expansions begin. 
C)  Firms increase production in response to unplanned decreases in inventories. 
D)  The multiplier dampens the increase in income that occurs during expansions and brings the economy to a new equilibrium GDP. 
A)  Expansions usually begin with an increase in autonomous spending. 
B)  Firms experience unplanned decreases in inventories as expansions begin. 
C)  Firms increase production in response to unplanned decreases in inventories. 
D)  The multiplier dampens the increase in income that occurs during expansions and brings the economy to a new equilibrium GDP.

Question 11

-In the above figure, the shift from AE? to AE? might have been caused by

Accepted Answer

A)  an increase in government expenditures. 
B)  an increase in the real interest rate. 
C)  an increase in the price level. 
D)  All of the above answers are correct. 
A)  an increase in government expenditures. 
B)  an increase in the real interest rate. 
C)  an increase in the price level. 
D)  All of the above answers are correct.

Question 12

As real disposable income increases, consumption expenditure ________ and saving ________.

Accepted Answer

A)  increases; increases 
B)  increases; decreases 
C)  decreases; increases 
D)  decreases; decreases 
A)  increases; increases 
B)  increases; decreases 
C)  decreases; increases 
D)  decreases; decreases

Question 13

The marginal propensity to save (MPS)is equal to the

Accepted Answer

A)  slope of the savings function. 
B)  slope of the 45 degree. 
C)  reciprocal value of the MPC. 
D)  difference between consumption and income. 
A)  slope of the savings function. 
B)  slope of the 45 degree. 
C)  reciprocal value of the MPC. 
D)  difference between consumption and income.

Question 14

When disposable income equals $800 billion, planned consumption expenditure equals $600 billion, and when disposable income equals $1,000 billion, planned consumption expenditure equals $640 billion. What is planned saving when disposable income is $800 billion?

Accepted Answer

A)  $200 billion 
B)  $360 billion 
C)  $560 billion 
D)  $1,400 billion 
A)  $200 billion 
B)  $360 billion 
C)  $560 billion 
D)  $1,400 billion

Question 15

The short-run multiplier is equal to 3, real GDP equals potential GDP of $8,000, and the price level is equal to 100. Suppose that government expenditure decreases by $200. The long-run effect of the decrease in government expenditure changes real GDP by

Accepted Answer

A)  a decrease of 600. 
B)  an increase of 600. 
C)  nothing; that is, in the long run real GDP equals $8,000. 
D)  a decrease of $200 because in the long-run, the multiplier is 1. 
A)  a decrease of 600. 
B)  an increase of 600. 
C)  nothing; that is, in the long run real GDP equals $8,000. 
D)  a decrease of $200 because in the long-run, the multiplier is 1.

Question 16

Consumption expenditures equal disposable income

Accepted Answer

A)  at every point on the consumption function. 
B)  at every point on the saving function. 
C)  at every point on the 45-degree line. 
D)  when saving equals disposable income. 
A)  at every point on the consumption function. 
B)  at every point on the saving function. 
C)  at every point on the 45-degree line. 
D)  when saving equals disposable income.

Question 17

-Based on the figure above, the marginal propensity to consume is

Accepted Answer

A)  3.00. 
B)  1.00. 
C)  0.67. 
D)  0.25. 
A)  3.00. 
B)  1.00. 
C)  0.67. 
D)  0.25.

Question 18

-Suppose the economy has no income taxes or imports. The MPC equals 0.8. What does the expenditure model predict will be the change in real GDP if investment increases by $200 billion?

Accepted Answer

The multiplier equals 1/(1-MPC), so for

Question 19

The marginal propensity to consume measures

Accepted Answer

A)  how much of a given level of disposable income is consumed. 
B)  what percentage of disposable income goes to saving. 
C)  how much consumption expenditure occurs at the equilibrium level of income. 
D)  the fraction of a change in disposable income that is spent on consumption expenditure. 
A)  how much of a given level of disposable income is consumed. 
B)  what percentage of disposable income goes to saving. 
C)  how much consumption expenditure occurs at the equilibrium level of income. 
D)  the fraction of a change in disposable income that is spent on consumption expenditure.

Question 20

The aggregate expenditure curve shows

Accepted Answer

A)  how consumption changes in response to a change in disposable income. 
B)  how planned aggregate expenditure and real GDP are related. 
C)  a negative relationship between the price level and real GDP. 
D)  Both answers B and C are correct. 
A)  how consumption changes in response to a change in disposable income. 
B)  how planned aggregate expenditure and real GDP are related. 
C)  a negative relationship between the price level and real GDP. 
D)  Both answers B and C are correct.

The multiplier is the amount by which is multiplied to determine .

Suppose the consumption function is given by the equation C = 100 + 0.8YD, where YD is disposable income. What is the multiplier in this economy?

-Based upon the above table, the MPC for the consumption function is

The marginal propensity to consume is found by

Suppose that firms find that their inventories are less than planned. In this case, what is the initial relationship between aggregate planned expenditure and real GDP? Using the aggregate expenditure model, what adjustments, if any, take place?

The presence of income taxes and imports make the multiplier

The multiplier measures the

-In the above table, savings equal zero when disposable income equals

What is the difference between induced and autonomous expenditure? Which components of aggregate expenditure fall under which category?

Which of the following is INCORRECT?

-In the above figure, the shift from AE? to AE? might have been caused by

As real disposable income increases, consumption expenditure and saving .

The marginal propensity to save (MPS)is equal to the

When disposable income equals $800 billion, planned consumption expenditure equals $600 billion, and when disposable income equals $1,000 billion, planned consumption expenditure equals $640 billion. What is planned saving when disposable income is $800 billion?

The short-run multiplier is equal to 3, real GDP equals potential GDP of $8,000, and the price level is equal to 100. Suppose that government expenditure decreases by $200. The long-run effect of the decrease in government expenditure changes real GDP by

Consumption expenditures equal disposable income

-Based on the figure above, the marginal propensity to consume is

-Suppose the economy has no income taxes or imports. The MPC equals 0.8. What does the expenditure model predict will be the change in real GDP if investment increases by $200 billion?

The marginal propensity to consume measures

The aggregate expenditure curve shows

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

The multiplier is the amount by which ________ is multiplied to determine ________.

Suppose the consumption function is given by the equation C = 100 + 0.8YD, where YD is disposable income. What is the multiplier in this economy?

-Based upon the above table, the MPC for the consumption function is

The marginal propensity to consume is found by

Suppose that firms find that their inventories are less than planned. In this case, what is the initial relationship between aggregate planned expenditure and real GDP? Using the aggregate expenditure model, what adjustments, if any, take place?

The presence of income taxes and imports make the multiplier

The multiplier measures the

-In the above table, savings equal zero when disposable income equals

What is the difference between induced and autonomous expenditure? Which components of aggregate expenditure fall under which category?

Which of the following is INCORRECT?

-In the above figure, the shift from AE? to AE? might have been caused by

As real disposable income increases, consumption expenditure ________ and saving ________.

The marginal propensity to save (MPS)is equal to the

When disposable income equals $800 billion, planned consumption expenditure equals $600 billion, and when disposable income equals $1,000 billion, planned consumption expenditure equals $640 billion. What is planned saving when disposable income is $800 billion?

The short-run multiplier is equal to 3, real GDP equals potential GDP of $8,000, and the price level is equal to 100. Suppose that government expenditure decreases by $200. The long-run effect of the decrease in government expenditure changes real GDP by

Consumption expenditures equal disposable income

-Based on the figure above, the marginal propensity to consume is

-Suppose the economy has no income taxes or imports. The MPC equals 0.8. What does the expenditure model predict will be the change in real GDP if investment increases by $200 billion?

The marginal propensity to consume measures

The aggregate expenditure curve shows

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 multiplier is the amount by which is multiplied to determine .

As real disposable income increases, consumption expenditure and saving .