Question 1

There is a movement along the consumption function if there is ________.

Accepted Answer

A)  an increase in autonomous consumption 
B)  a decrease in the real interest rate 
C)  an increase in the expected future income 
D)  an increase in disposable income 
A)  an increase in autonomous consumption 
B)  a decrease in the real interest rate 
C)  an increase in the expected future income 
D)  an increase in disposable income

Question 2

-In the above figure, the marginal propensity to consume equals

Accepted Answer

A)  0.80. 
B)  0.90. 
C)  0.75. 
D)  0.85. 
A)  0.80. 
B)  0.90. 
C)  0.75. 
D)  0.85.

Question 3

A change in imports caused by rising U.S. incomes is

Accepted Answer

A)  an increase in autonomous expenditure. 
B)  a decrease in autonomous expenditure. 
C)  an increase in induced exports. 
D)  a change in induced expenditure. 
A)  an increase in autonomous expenditure. 
B)  a decrease in autonomous expenditure. 
C)  an increase in induced exports. 
D)  a change in induced expenditure.

Question 4

The aggregate demand curve slopes downward because of

Accepted Answer

A)  the multiplier. 
B)  the MPC. 
C)  wealth and substitution effects. 
D)  import and taxation effects. 
A)  the multiplier. 
B)  the MPC. 
C)  wealth and substitution effects. 
D)  import and taxation effects.

Question 5

In a simple economy with no income taxes or imports, prices are constant and the slope of the AE curve is 0.8. In order to increase real GDP by $500 billion, then

Accepted Answer

A)  consumption expenditure needs to increase by $500 billion. 
B)  saving needs to be reduced by $500 billion 
C)  investment needs to increase by $200 billion. 
D)  investment needs to increase by $100 billion 
A)  consumption expenditure needs to increase by $500 billion. 
B)  saving needs to be reduced by $500 billion 
C)  investment needs to increase by $200 billion. 
D)  investment needs to increase by $100 billion

Question 6

-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 marginal propensity to consume?

Accepted Answer

A)  0.20 
B)  0.25 
C)  0.75 
D)  0.80 
A)  0.20 
B)  0.25 
C)  0.75 
D)  0.80

Question 7

If the price level increases, the AE curve shifts

Accepted Answer

A)  upward and the AD curve shifts leftward. 
B)  downward and the AD curve shifts rightward. 
C)  upward and there is movement along the AD curve. 
D)  downward and there is movement along the AD curve. 
A)  upward and the AD curve shifts leftward. 
B)  downward and the AD curve shifts rightward. 
C)  upward and there is movement along the AD curve. 
D)  downward and there is movement along the AD curve.

Question 8

The MPC is the fraction of

Accepted Answer

A)  total disposable income that is consumed. 
B)  total disposable income that is not consumed. 
C)  a change in disposable income that is consumed. 
D)  a change in disposable income that is saved. 
A)  total disposable income that is consumed. 
B)  total disposable income that is not consumed. 
C)  a change in disposable income that is consumed. 
D)  a change in disposable income that is saved.

Question 9

-Real GDP equals $20 billion and aggregate planned expenditure is $30 billion. There is an unplanned ________ in inventories of ________ and real GDP will ________.

Accepted Answer

A)  increase; $10 billion; increase 
B)  increase; $50 billion; decrease 
C)  decrease; $10 billion; increase 
D)  decrease; $10 billion; decrease 
A)  increase; $10 billion; increase 
B)  increase; $50 billion; decrease 
C)  decrease; $10 billion; increase 
D)  decrease; $10 billion; decrease

Question 10

Suppose that the slope of the AE curve is 0.75. Then a $100 decrease in autonomous spending means equilibrium expenditure will

Accepted Answer

A)  decrease by $400. 
B)  increase by $400. 
C)  decrease by $750. 
D)  increase by $750. 
A)  decrease by $400. 
B)  increase by $400. 
C)  decrease by $750. 
D)  increase by $750.

Question 11

-Suppose the price level is fixed. If investment increases by $1 trillion and the aggregate expenditure curve is shown in the figure above, in response equilibrium expenditure increases by ________.

Accepted Answer

A)  $1 trillion 
B)  $3 trillion 
C)  less than $1 trillion 
D)  indeterminate from the information given 
A)  $1 trillion 
B)  $3 trillion 
C)  less than $1 trillion 
D)  indeterminate from the information given

Question 12

Suppose the consumption function is given by the equation C = 100 + 0.8YD, where YD is disposable income. What is the marginal propensity to consume?

Accepted Answer

A)  0.2 
B)  0.8 
C)  2.0 
D)  100 
A)  0.2 
B)  0.8 
C)  2.0 
D)  100

Question 13

You observe that unplanned inventories are increasing. You predict that there will be ________.

Accepted Answer

A)  a business cycle 
B)  an expansion 
C)  a trough 
D)  a recession 
A)  a business cycle 
B)  an expansion 
C)  a trough 
D)  a recession

Question 14

When aggregate planned expenditure is less than real GDP, unplanned

Accepted Answer

A)  consumption expenditure occurs. 
B)  investment occurs. 
C)  government expenditures are made. 
D)  exports are made. 
A)  consumption expenditure occurs. 
B)  investment occurs. 
C)  government expenditures are made. 
D)  exports are made.

Question 15

Which of the following concerning the marginal propensity to consume and the consumption function is TRUE?
I.The larger the marginal propensity to consume, the greater the amount of autonomous consumption.
II.The larger the marginal propensity to consume, the steeper the consumption function.

Accepted Answer

A)  I is true. 
B)  II is true. 
C)  I and II are true. 
D)  Neither I nor II is true. 
A)  I is true. 
B)  II is true. 
C)  I and II are true. 
D)  Neither I nor II is true.

Question 16

An increase in expected future income ________.

Accepted Answer

A)  decreases consumption expenditure 
B)  increases saving 
C)  shifts the consumption function upward 
D)  shifts the saving function upward 
A)  decreases consumption expenditure 
B)  increases saving 
C)  shifts the consumption function upward 
D)  shifts the saving function upward

Question 17

Suppose disposable income increases from $5 trillion to $6 trillion. As a result, consumption expenditure increases from $4 trillion to ________. This result means the MPC equals ________.

Accepted Answer

A)  $4.5 trillion; 4.50 
B)  $5 trillion; 0.80 
C)  $4.8 trillion; 0.80 
D)  $6 trillion; 1.00 
A)  $4.5 trillion; 4.50 
B)  $5 trillion; 0.80 
C)  $4.8 trillion; 0.80 
D)  $6 trillion; 1.00

Question 18

A fall in the price level

Accepted Answer

A)  shifts the aggregate expenditure curve upward and increases the quantity of real GDP demanded. 
B)  shifts the aggregate demand curve rightward and increases equilibrium GDP. 
C)  decreases aggregate planned expenditures and shifts the aggregate demand curve leftward. 
D)  shifts both the aggregate expenditures curve and aggregate demand curve upward. 
A)  shifts the aggregate expenditure curve upward and increases the quantity of real GDP demanded. 
B)  shifts the aggregate demand curve rightward and increases equilibrium GDP. 
C)  decreases aggregate planned expenditures and shifts the aggregate demand curve leftward. 
D)  shifts both the aggregate expenditures curve and aggregate demand curve upward.

Question 19

A fall in the price level shifts the AE curve ________ and ________ equilibrium expenditure.

Accepted Answer

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

Question 20

Because the short-run aggregate expenditure model assumes that the price level is ________, its predicted effect of changes in autonomous expenditure on equilibrium output is ________ than the prediction of the AD/SAS model.

Accepted Answer

A)  fixed; greater 
B)  fixed; less 
C)  flexible; greater 
D)  flexible; less 
A)  fixed; greater 
B)  fixed; less 
C)  flexible; greater 
D)  flexible; less

There is a movement along the consumption function if there is ________.

-In the above figure, the marginal propensity to consume equals

A change in imports caused by rising U.S. incomes is

The aggregate demand curve slopes downward because of

In a simple economy with no income taxes or imports, prices are constant and the slope of the AE curve is 0.8. In order to increase real GDP by $500 billion, then

-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 marginal propensity to consume?

If the price level increases, the AE curve shifts

The MPC is the fraction of

-Real GDP equals $20 billion and aggregate planned expenditure is $30 billion. There is an unplanned in inventories of and real GDP will .

Suppose that the slope of the AE curve is 0.75. Then a $100 decrease in autonomous spending means equilibrium expenditure will

-Suppose the price level is fixed. If investment increases by $1 trillion and the aggregate expenditure curve is shown in the figure above, in response equilibrium expenditure increases by ________.

Suppose the consumption function is given by the equation C = 100 + 0.8YD, where YD is disposable income. What is the marginal propensity to consume?

You observe that unplanned inventories are increasing. You predict that there will be ________.

When aggregate planned expenditure is less than real GDP, unplanned

Which of the following concerning the marginal propensity to consume and the consumption function is TRUE? I.The larger the marginal propensity to consume, the greater the amount of autonomous consumption. II.The larger the marginal propensity to consume, the steeper the consumption function.

An increase in expected future income ________.

Suppose disposable income increases from $5 trillion to $6 trillion. As a result, consumption expenditure increases from $4 trillion to . This result means the MPC equals .

A fall in the price level

A fall in the price level shifts the AE curve and equilibrium expenditure.

Because the short-run aggregate expenditure model assumes that the price level is , its predicted effect of changes in autonomous expenditure on equilibrium output is than the prediction of the AD/SAS model.

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

There is a movement along the consumption function if there is ________.

-In the above figure, the marginal propensity to consume equals

A change in imports caused by rising U.S. incomes is

The aggregate demand curve slopes downward because of

In a simple economy with no income taxes or imports, prices are constant and the slope of the AE curve is 0.8. In order to increase real GDP by $500 billion, then

-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 marginal propensity to consume?

If the price level increases, the AE curve shifts

The MPC is the fraction of

-Real GDP equals $20 billion and aggregate planned expenditure is $30 billion. There is an unplanned ________ in inventories of ________ and real GDP will ________.

Suppose that the slope of the AE curve is 0.75. Then a $100 decrease in autonomous spending means equilibrium expenditure will

-Suppose the price level is fixed. If investment increases by $1 trillion and the aggregate expenditure curve is shown in the figure above, in response equilibrium expenditure increases by ________.

Suppose the consumption function is given by the equation C = 100 + 0.8YD, where YD is disposable income. What is the marginal propensity to consume?

You observe that unplanned inventories are increasing. You predict that there will be ________.

When aggregate planned expenditure is less than real GDP, unplanned

Which of the following concerning the marginal propensity to consume and the consumption function is TRUE? I.The larger the marginal propensity to consume, the greater the amount of autonomous consumption. II.The larger the marginal propensity to consume, the steeper the consumption function.

An increase in expected future income ________.

Suppose disposable income increases from $5 trillion to $6 trillion. As a result, consumption expenditure increases from $4 trillion to ________. This result means the MPC equals ________.

A fall in the price level

A fall in the price level shifts the AE curve ________ and ________ equilibrium expenditure.

Because the short-run aggregate expenditure model assumes that the price level is ________, its predicted effect of changes in autonomous expenditure on equilibrium output is ________ than the prediction of the AD/SAS model.

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

-Real GDP equals $20 billion and aggregate planned expenditure is $30 billion. There is an unplanned in inventories of and real GDP will .

Suppose disposable income increases from $5 trillion to $6 trillion. As a result, consumption expenditure increases from $4 trillion to . This result means the MPC equals .

A fall in the price level shifts the AE curve and equilibrium expenditure.

Because the short-run aggregate expenditure model assumes that the price level is , its predicted effect of changes in autonomous expenditure on equilibrium output is than the prediction of the AD/SAS model.