Question 1

If investment increases by $300 and, in response, equilibrium aggregate expenditure increases by $600, then the multiplier must be

Accepted Answer

A)  0.2. 
B)  0.5. 
C)  2. 
D)  5. 
A)  0.2. 
B)  0.5. 
C)  2. 
D)  5.

Question 2

When autonomous expenditure decreases, ________.

Accepted Answer

A)  the AE curve shifts downward 
B)  there is a movement down along the AE curve 
C)  the AE curve becomes less steep 
D)  the AE curve shifts upward 
A)  the AE curve shifts downward 
B)  there is a movement down along the AE curve 
C)  the AE curve becomes less steep 
D)  the AE curve shifts upward

Question 3

If there are no taxes or imports and MPC = 0.5, the multiplier equals

Accepted Answer

A)  0.5. 
B)  5.0. 
C)  6.0. 
D)  2.0. 
A)  0.5. 
B)  5.0. 
C)  6.0. 
D)  2.0.

Question 4

In 2007, investment in France increased by 7 billion euros, consumption increased by 4 billion euros and government spending increased by 1.5 billion euros. Assume the price level was constant and the economy was at full employment. As a result, suppose that equilibrium expenditure increased by 21 billion euros. In this example, ________ is the induced expenditure and ________ is autonomous expenditure.

Accepted Answer

A)  consumption; government spending 
B)  investment; consumption 
C)  investment; government spending 
D)  government spending; equilibrium expenditure 
A)  consumption; government spending 
B)  investment; consumption 
C)  investment; government spending 
D)  government spending; equilibrium expenditure

Question 5

If prices are fixed, when aggregate planned expenditure exceeds real GDP, then

Accepted Answer

A)  inventories decrease, signaling firms to increase production and increase real GDP. 
B)  inventories increase, signaling firms to decrease production and decrease real GDP. 
C)  profits fall, signaling firms to decrease production and decrease real GDP. 
D)  None of the above answers are correct. 
A)  inventories decrease, signaling firms to increase production and increase real GDP. 
B)  inventories increase, signaling firms to decrease production and decrease real GDP. 
C)  profits fall, signaling firms to decrease production and decrease real GDP. 
D)  None of the above answers are correct.

Question 6

-In the above table, C is consumption expenditure, I is investment, G is government expenditure, and X - M is net exports. All entries are in dollars. The equilibrium level of real GDP is

Accepted Answer

A)  $2,500. 
B)  $2,400. 
C)  $2,300. 
D)  $2,200. 
A)  $2,500. 
B)  $2,400. 
C)  $2,300. 
D)  $2,200.

Question 7

An increase in investment spending results in a ________ the aggregate expenditure curve and ________ the aggregate demand curve.

Accepted Answer

A)  movement along; a shift in 
B)  shift in; a movement along 
C)  shift in; has no effect on 
D)  shift in; a shift in 
A)  movement along; a shift in 
B)  shift in; a movement along 
C)  shift in; has no effect on 
D)  shift in; a shift in

Question 8

Suppose that the slope of the AE curve is 0.67. Then a $100 decrease in autonomous spending means equilibrium expenditure will

Accepted Answer

A)  decrease by $200. 
B)  increase by $200. 
C)  decrease by $300. 
D)  increase by $300. 
A)  decrease by $200. 
B)  increase by $200. 
C)  decrease by $300. 
D)  increase by $300.

Question 9

How does an increase in the price level affect the aggregate expenditure curve and the aggregate demand curve?

Accepted Answer

An increase in the price level

Question 10

An increase in the price level results in a

Accepted Answer

A)  downward shift in the AE curve and a movement up along the AD curve. 
B)  downward shift in both the AE and AD curves. 
C)  downward shift in the AD curve and a movement down along the AE curve. 
D)  leftward movement along both the AE and AD curves. 
A)  downward shift in the AE curve and a movement up along the AD curve. 
B)  downward shift in both the AE and AD curves. 
C)  downward shift in the AD curve and a movement down along the AE curve. 
D)  leftward movement along both the AE and AD curves.

Question 11

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 "... factories have been exposed to ... 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
The decrease in exports represents a change in ________ expenditure and will cause ________.

Accepted Answer

A)  induced; a downward shift in the AE curve and a leftward shift in the AD curve 
B)  autonomous; a downward shift in the AE curve and a leftward shift in the AD curve 
C)  induced; an upward shift in the AE curve and a leftward shift in the AD curve 
D)  autonomous; a downward shift in the AE curve and a rightward shift in the AD curve 
A)  induced; a downward shift in the AE curve and a leftward shift in the AD curve 
B)  autonomous; a downward shift in the AE curve and a leftward shift in the AD curve 
C)  induced; an upward shift in the AE curve and a leftward shift in the AD curve 
D)  autonomous; a downward shift in the AE curve and a rightward shift in the AD curve

Question 12

Suppose the MPC = 0.90 and there are no taxes or imports. What dos the multiplier equal? If the initial equilibrium aggregate expenditure is $12 trillion, what will be the effect on aggregate expenditure of a $100 billion increase in investment?

Accepted Answer

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

Question 13

Equilibrium real GDP is $400 billion, the MPC = 0.9, and there are no income taxes or imports. Investment increases $40 billion. If the price level is constant, after the increase in investment, equilibrium real GDP will be

Accepted Answer

A)  $440 billion. 
B)  $360 billion. 
C)  $600 billion. 
D)  $800 billion. 
A)  $440 billion. 
B)  $360 billion. 
C)  $600 billion. 
D)  $800 billion.

Question 14

Suppose real GDP increases from $13 trillion to $14 trillion. Consequently, consumption expenditure increases from $13 trillion to $13.75 trillion. This result implies the MPS equals

Accepted Answer

A)  0.75. 
B)  0.25. 
C)  0. 
D)  some amount that cannot be determined without more information. 
A)  0.75. 
B)  0.25. 
C)  0. 
D)  some amount that cannot be determined without more information.

Question 15

List the components of aggregate expenditure and describe how each of them change as real GDP increases.

Accepted Answer

The components of aggregate expenditure

Question 16

Suppose disposable income increases from $7 trillion to $8 trillion. At the same time, consumption expenditure increases from $6.8 trillion to ________. Thus the MPC must equal ________.

Accepted Answer

A)  $7.8 trillion; 0.80 
B)  $7.6 trillion; 0.80 
C)  $7.4 trillion; 0.40 
D)  $8 trillion; 1.00 
A)  $7.8 trillion; 0.80 
B)  $7.6 trillion; 0.80 
C)  $7.4 trillion; 0.40 
D)  $8 trillion; 1.00

Question 17

Which of the following makes the multiplier larger?

Accepted Answer

A)  an increase in the marginal propensity to import 
B)  an increase in the tax rate 
C)  an increase in the marginal propensity to consume 
D)  an increase in the marginal propensity to save 
A)  an increase in the marginal propensity to import 
B)  an increase in the tax rate 
C)  an increase in the marginal propensity to consume 
D)  an increase in the marginal propensity to save

Question 18

-In the above figure, point d represents the point where planned expenditures are ________ real GDP.

Accepted Answer

A)  greater than 
B)  equal to 
C)  less than 
D)  There is not enough information to answer the question. 
A)  greater than 
B)  equal to 
C)  less than 
D)  There is not enough information to answer the question.

Question 19

-Based upon the above table, if disposable income is $400 billion, saving equals

Accepted Answer

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

Question 20

The multiplier effect is smallest

Accepted Answer

A)  in the long run. 
B)  in the short run. 
C)  when the price level is fixed. 
D)  when the economy is in a recession. 
A)  in the long run. 
B)  in the short run. 
C)  when the price level is fixed. 
D)  when the economy is in a recession.

If investment increases by $300 and, in response, equilibrium aggregate expenditure increases by $600, then the multiplier must be

When autonomous expenditure decreases, ________.

If there are no taxes or imports and MPC = 0.5, the multiplier equals

If prices are fixed, when aggregate planned expenditure exceeds real GDP, then

-In the above table, C is consumption expenditure, I is investment, G is government expenditure, and X - M is net exports. All entries are in dollars. The equilibrium level of real GDP is

An increase in investment spending results in a the aggregate expenditure curve and the aggregate demand curve.

Suppose that the slope of the AE curve is 0.67. Then a $100 decrease in autonomous spending means equilibrium expenditure will

How does an increase in the price level affect the aggregate expenditure curve and the aggregate demand curve?

An increase in the price level results in a

Suppose the MPC = 0.90 and there are no taxes or imports. What dos the multiplier equal? If the initial equilibrium aggregate expenditure is $12 trillion, what will be the effect on aggregate expenditure of a $100 billion increase in investment?

Equilibrium real GDP is $400 billion, the MPC = 0.9, and there are no income taxes or imports. Investment increases $40 billion. If the price level is constant, after the increase in investment, equilibrium real GDP will be

Suppose real GDP increases from $13 trillion to $14 trillion. Consequently, consumption expenditure increases from $13 trillion to $13.75 trillion. This result implies the MPS equals

List the components of aggregate expenditure and describe how each of them change as real GDP increases.

Suppose disposable income increases from $7 trillion to $8 trillion. At the same time, consumption expenditure increases from $6.8 trillion to . Thus the MPC must equal .

Which of the following makes the multiplier larger?

-In the above figure, point d represents the point where planned expenditures are ________ real GDP.

-Based upon the above table, if disposable income is $400 billion, saving equals

The multiplier effect is smallest

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 investment increases by $300 and, in response, equilibrium aggregate expenditure increases by $600, then the multiplier must be

When autonomous expenditure decreases, ________.

If there are no taxes or imports and MPC = 0.5, the multiplier equals

If prices are fixed, when aggregate planned expenditure exceeds real GDP, then

-In the above table, C is consumption expenditure, I is investment, G is government expenditure, and X - M is net exports. All entries are in dollars. The equilibrium level of real GDP is

An increase in investment spending results in a ________ the aggregate expenditure curve and ________ the aggregate demand curve.

Suppose that the slope of the AE curve is 0.67. Then a $100 decrease in autonomous spending means equilibrium expenditure will

How does an increase in the price level affect the aggregate expenditure curve and the aggregate demand curve?

An increase in the price level results in a

Suppose the MPC = 0.90 and there are no taxes or imports. What dos the multiplier equal? If the initial equilibrium aggregate expenditure is $12 trillion, what will be the effect on aggregate expenditure of a $100 billion increase in investment?

Equilibrium real GDP is $400 billion, the MPC = 0.9, and there are no income taxes or imports. Investment increases $40 billion. If the price level is constant, after the increase in investment, equilibrium real GDP will be

Suppose real GDP increases from $13 trillion to $14 trillion. Consequently, consumption expenditure increases from $13 trillion to $13.75 trillion. This result implies the MPS equals

List the components of aggregate expenditure and describe how each of them change as real GDP increases.

Suppose disposable income increases from $7 trillion to $8 trillion. At the same time, consumption expenditure increases from $6.8 trillion to ________. Thus the MPC must equal ________.

Which of the following makes the multiplier larger?

-In the above figure, point d represents the point where planned expenditures are ________ real GDP.

-Based upon the above table, if disposable income is $400 billion, saving equals

The multiplier effect is smallest

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

An increase in investment spending results in a the aggregate expenditure curve and the aggregate demand curve.

Suppose disposable income increases from $7 trillion to $8 trillion. At the same time, consumption expenditure increases from $6.8 trillion to . Thus the MPC must equal .