Question 1

Imports and income taxes make the multiplier larger than it would otherwise be.

Accepted Answer

A) True 
 B)False

Question 2

-In the figure above, the induced consumption when real GDP is $15 trillion is

Accepted Answer

A)  zero. 
B)  $5 trillion. 
C)  $10 trillion. 
D)  $15 trillion. 
A)  zero. 
B)  $5 trillion. 
C)  $10 trillion. 
D)  $15 trillion.

Question 3

If there are no income taxes or imports, the multiplier equals 1/(1 - marginal propensity to consume).

Accepted Answer

A) True 
 B)False

Question 4

In the third quarter of 2008, investment in the U.S. totaled $1.4 trillion and in 2007, investment was $1.3 trillion. The change in investment

Accepted Answer

A)  is a change in autonomous expenditure. 
B)  is a change in equilibrium expenditure. 
C)  is a change in induced expenditure. 
D)  will increase the multiplier. 
A)  is a change in autonomous expenditure. 
B)  is a change in equilibrium expenditure. 
C)  is a change in induced expenditure. 
D)  will increase the multiplier.

Question 5

The software and related services sector has a multiplier effect on the Indian economy with every one-rupee input spent by the" information technology sector" producing an increase in real GDP by two rupees.
Www)ft.com, 2/28/2008
According to the story, if ________ in the software and related services sector increases by $15 billion, real GDP will increase by ________.

Accepted Answer

A)  investment; $30 billion. 
B)  consumption; $30 billion. 
C)  consumption; $2 billion. 
D)  investment; $2 billion. 
A)  investment; $30 billion. 
B)  consumption; $30 billion. 
C)  consumption; $2 billion. 
D)  investment; $2 billion.

Question 6

The marginal propensity to consume refers to

Accepted Answer

A)  the additional saving that occurs out of an additional dollar of disposable income. 
B)  the additional consumption expenditure that occurs out of an additional dollar of disposable income. 
C)  the additional consumption expenditure that occurs out of an additional dollar of investment. 
D)  the ratio of total consumption expenditure to total disposable income. 
A)  the additional saving that occurs out of an additional dollar of disposable income. 
B)  the additional consumption expenditure that occurs out of an additional dollar of disposable income. 
C)  the additional consumption expenditure that occurs out of an additional dollar of investment. 
D)  the ratio of total consumption expenditure to total disposable income.

Question 7

-In the above table, there are no taxes and no imports or exports. The total level of expenditure in the economy when real GDP is $7,000 is

Accepted Answer

A)  $7,000. 
B)  $6,500. 
C)  $13,500. 
D)  0.75. 
A)  $7,000. 
B)  $6,500. 
C)  $13,500. 
D)  0.75.

Question 8

If wealth increases, the consumption function shifts upward.

Accepted Answer

A) True 
 B)False

Question 9

Suppose that the slope of the AE curve is 0.80. If prices remain constant and government expenditure increases by $10 billion, what will be the value of the change in real GDP?

Accepted Answer

A)  $8 billion 
B)  $2 billion 
C)  $10 billion 
D)  $50 billion 
A)  $8 billion 
B)  $2 billion 
C)  $10 billion 
D)  $50 billion

Question 10

-The above table gives information for the nation of North Hampton. There are no imports to or exports from North Hampton.
a)Find aggregate planned expenditure for each level of real GDP.
b)What is the equilibrium level of real GDP?

Accepted Answer

@#IMG-DLM& 
a)To calculate aggregate expenditure,

Question 11

-The data in the above table indicate that the slope of the AE curve is

Accepted Answer

A)  0.30. 
B)  0.50. 
C)  0.90. 
D)  indeterminate from the information given. 
A)  0.30. 
B)  0.50. 
C)  0.90. 
D)  indeterminate from the information given.

Question 12

"The global financial crisis has had a considerable impact on China's export growth, which will continue to show weakness with recession in the U.S. and Europe," said a report by JP Morgan & Co.
Www)money.cnn.com, 11/11/2008
If Chinese exports continue to decline, the AE curve will shift ________, the price level will ________ in the long run and real GDP will ________ in the long run.

Accepted Answer

A)  downward; decrease; not change 
B)  downward; decrease; decrease 
C)  decrease; not change; not change 
D)  upward; decrease; not change 
A)  downward; decrease; not change 
B)  downward; decrease; decrease 
C)  decrease; not change; not change 
D)  upward; decrease; not change

Question 13

In the short run, the multiplier typically is less than 1.

Accepted Answer

A) True 
 B)False

Question 14

Autonomous expenditure is not influenced by

Accepted Answer

A)  the price level. 
B)  the interest rate. 
C)  real GDP. 
D)  any other variable. 
A)  the price level. 
B)  the interest rate. 
C)  real GDP. 
D)  any other variable.

Question 15

In the economy of St. Maynard Island, autonomous consumption expenditure is $185 million, and the marginal propensity to consume is 0.75. Investment is $150 million, government expenditure is $100 million, and net taxes are $80 million. Investment, government expenditure, and taxes are constant-they do not vary with income. The island does not trade with the rest of the world.
a)Draw the aggregate expenditure curve.
b)What is the island's autonomous aggregate expenditure?
c)What is the size of the multiplier in St. Maynard Island's economy?
d)What is the island's aggregate planned expenditure and what is happening to inventories when real GDP is $1,100 million?
e)What is the economy's equilibrium aggregate expenditure?

Accepted Answer

@#IMG-DLM& 
a)See the figure above. Because the is

Question 16

Explain what happens to equilibrium expenditure if autonomous expenditure increases by $100 million.

Accepted Answer

Equilibrium expenditure will increase by

Question 17

The slope of the aggregate expenditure curve increases when the marginal propensity to consume ________ or the marginal propensity to import ________.

Accepted Answer

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

Question 18

List the four components of aggregate expenditure. Explain the two-way link with real GDP.

Accepted Answer

The four components of aggregate expendi

Question 19

When autonomous expenditure increases, equilibrium aggregate expenditure

Accepted Answer

A)  decreases by an equal amount to offset the unplanned portion. 
B)  increases by an equal amount. 
C)  decreases by a greater amount due to the multiplier. 
D)  increases by a greater amount due to the multiplier. 
A)  decreases by an equal amount to offset the unplanned portion. 
B)  increases by an equal amount. 
C)  decreases by a greater amount due to the multiplier. 
D)  increases by a greater amount due to the multiplier.

Question 20

How do firms respond to unplanned inventory changes? What is the effect on their production and GDP?

Accepted Answer

If inventories are above their target le

Imports and income taxes make the multiplier larger than it would otherwise be.

-In the figure above, the induced consumption when real GDP is $15 trillion is

If there are no income taxes or imports, the multiplier equals 1/(1 - marginal propensity to consume).

In the third quarter of 2008, investment in the U.S. totaled $1.4 trillion and in 2007, investment was $1.3 trillion. The change in investment

The marginal propensity to consume refers to

-In the above table, there are no taxes and no imports or exports. The total level of expenditure in the economy when real GDP is $7,000 is

If wealth increases, the consumption function shifts upward.

Suppose that the slope of the AE curve is 0.80. If prices remain constant and government expenditure increases by $10 billion, what will be the value of the change in real GDP?

-The above table gives information for the nation of North Hampton. There are no imports to or exports from North Hampton. a)Find aggregate planned expenditure for each level of real GDP. b)What is the equilibrium level of real GDP?

-The data in the above table indicate that the slope of the AE curve is

In the short run, the multiplier typically is less than 1.

Autonomous expenditure is not influenced by

Explain what happens to equilibrium expenditure if autonomous expenditure increases by $100 million.

The slope of the aggregate expenditure curve increases when the marginal propensity to consume or the marginal propensity to import .

List the four components of aggregate expenditure. Explain the two-way link with real GDP.

When autonomous expenditure increases, equilibrium aggregate expenditure

How do firms respond to unplanned inventory changes? What is the effect on their production and GDP?

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

Imports and income taxes make the multiplier larger than it would otherwise be.

-In the figure above, the induced consumption when real GDP is $15 trillion is

If there are no income taxes or imports, the multiplier equals 1/(1 - marginal propensity to consume).

In the third quarter of 2008, investment in the U.S. totaled $1.4 trillion and in 2007, investment was $1.3 trillion. The change in investment

The marginal propensity to consume refers to

-In the above table, there are no taxes and no imports or exports. The total level of expenditure in the economy when real GDP is $7,000 is

If wealth increases, the consumption function shifts upward.

Suppose that the slope of the AE curve is 0.80. If prices remain constant and government expenditure increases by $10 billion, what will be the value of the change in real GDP?

-The above table gives information for the nation of North Hampton. There are no imports to or exports from North Hampton. a)Find aggregate planned expenditure for each level of real GDP. b)What is the equilibrium level of real GDP?

-The data in the above table indicate that the slope of the AE curve is

In the short run, the multiplier typically is less than 1.

Autonomous expenditure is not influenced by

Explain what happens to equilibrium expenditure if autonomous expenditure increases by $100 million.

The slope of the aggregate expenditure curve increases when the marginal propensity to consume ________ or the marginal propensity to import ________.

List the four components of aggregate expenditure. Explain the two-way link with real GDP.

When autonomous expenditure increases, equilibrium aggregate expenditure

How do firms respond to unplanned inventory changes? What is the effect on their production and GDP?

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 slope of the aggregate expenditure curve increases when the marginal propensity to consume or the marginal propensity to import .