Question 1

Figure 12-1  
-Refer to Figure 12-1.At point L in the figure above,which of the following is true?

Accepted Answer

A) Aggregate expenditure is greater than GDP. 
B) The economy has achieved macroeconomic equilibrium. 
C) Actual inventories are greater than planned inventories. 
D) GDP will be increasing. 
A) Aggregate expenditure is greater than GDP. 
B) The economy has achieved macroeconomic equilibrium. 
C) Actual inventories are greater than planned inventories. 
D) GDP will be increasing.

Question 2

The marginal propensity to consume is defined as

Accepted Answer

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

Question 3

Given Table 12-8 below,fill in the values for saving.Assume there are no taxes.
Table 12-8

Accepted Answer

When taxes are zero,saving is

Question 4

On the 45-degree line diagram,the 45-degree line shows points where real aggregate expenditure equals

Accepted Answer

A) unplanned investment. 
B) planned investment. 
C) real GDP. 
D) nominal GDP. 
A) unplanned investment. 
B) planned investment. 
C) real GDP. 
D) nominal GDP.

Question 5

________ in taxes will decrease consumption spending,and ________ in transfer payments will increase consumption spending.

Accepted Answer

A) An increase; an increase 
B) A decrease; an increase 
C) An increase; a decrease 
D) A decrease; a decrease 
A) An increase; an increase 
B) A decrease; an increase 
C) An increase; a decrease 
D) A decrease; a decrease

Question 6

John Maynard Keynes argued that if many households decide at the same time to increase saving and reduce spending,

Accepted Answer

A) this will increase investment spending in the short run and expand the economy in the long run. 
B) the economy will benefit in the short run but the effect will not last into the long run. 
C) this will have a major negative impact on the economy in both the short run and in the long run. 
D) they may make themselves worse off by causing aggregate expenditure to fall,thereby pushing the economy into a recession. 
A) this will increase investment spending in the short run and expand the economy in the long run. 
B) the economy will benefit in the short run but the effect will not last into the long run. 
C) this will have a major negative impact on the economy in both the short run and in the long run. 
D) they may make themselves worse off by causing aggregate expenditure to fall,thereby pushing the economy into a recession.

Question 7

If firms sell exactly what they expected to sell,all of the following will be true except

Accepted Answer

A) aggregate expenditure will be greater than GDP. 
B) there is no unplanned change in inventories. 
C) inventories will not change,and GDP and employment will remain stable. 
D) aggregate expenditure will be equal to GDP. 
A) aggregate expenditure will be greater than GDP. 
B) there is no unplanned change in inventories. 
C) inventories will not change,and GDP and employment will remain stable. 
D) aggregate expenditure will be equal to GDP.

Question 8

Equations for C,I,G,and NX are given below.If the equilibrium level of GDP is $32,000,what is the marginal propensity to consume? C = 5,000 + (MPC)Y
I = 1,500
G = 2,000
NX = -500

Accepted Answer

A) 0.67 
B) 0.75 
C) 0.8 
D) 0.9 
A) 0.67 
B) 0.75 
C) 0.8 
D) 0.9

Question 9

If aggregate expenditure is less than GDP,then inventories rise and GDP falls.

Accepted Answer

A) True 
 B)False

Question 10

Consumption spending is $5 million,planned investment spending is $8 million,actual investment spending is $8 million,government purchases are $10 million,and net export spending is $2 million.Based on this information,which of the following is true?

Accepted Answer

A) There was an unplanned change in inventories. 
B) Aggregate expenditure is equal to GDP. 
C) Aggregate expenditure is greater than GDP. 
D) Aggregate expenditure is less than GDP. 
A) There was an unplanned change in inventories. 
B) Aggregate expenditure is equal to GDP. 
C) Aggregate expenditure is greater than GDP. 
D) Aggregate expenditure is less than GDP.

Question 11

Investment spending will decrease when

Accepted Answer

A) the interest rate falls. 
B) the corporate income tax decreases. 
C) business cash flow decreases. 
D) firms become more optimistic about earning future profits. 
A) the interest rate falls. 
B) the corporate income tax decreases. 
C) business cash flow decreases. 
D) firms become more optimistic about earning future profits.

Question 12

Ceteris paribus,how does a recession in the United States affect U.S.net exports?

Accepted Answer

As GDP decreases in the United States du

Question 13

Figure 12-2  
-Refer to Figure 12-2.If the U.S.economy is currently at point N,which of the following could cause it to move to point K?

Accepted Answer

A) Households expect future income to rise. 
B) Household wealth falls. 
C) The firm's cash flow rises as profits rise. 
D) Government expenditures increase. 
A) Households expect future income to rise. 
B) Household wealth falls. 
C) The firm's cash flow rises as profits rise. 
D) Government expenditures increase.

Question 14

The difference between GDP and net taxes is

Accepted Answer

A) personal income. 
B) actual investment spending. 
C) disposable income. 
D) unplanned investment spending. 
A) personal income. 
B) actual investment spending. 
C) disposable income. 
D) unplanned investment spending.

Question 15

Consumption spending is $16 million,planned investment spending is $4 million,unplanned investment spending is $2 million,government purchases are $6 million,and net export spending is $1 million.What is aggregate expenditure?

Accepted Answer

A) $22 million 
B) $26 million 
C) $27 million 
D) $29 million 
A) $22 million 
B) $26 million 
C) $27 million 
D) $29 million

Question 16

Table 12-11
  
-Refer to Figure 12-3.Suppose that investment spending increases by $10 million,shifting up the aggregate expenditure line and GDP increases from GDP1 to GDP2.If the MPC is 0.9,then what is the change in GDP?

Accepted Answer

A) $9 million 
B) $10 million 
C) $90 million 
D) $100 million 
A) $9 million 
B) $10 million 
C) $90 million 
D) $100 million

Question 17

An increase in the real interest rate will

Accepted Answer

A) cause consumers to spend more and save less. 
B) most likely lower consumers' purchases of durable goods. 
C) most likely lower the reward to savings. 
D) most likely lower the cost of borrowing. 
A) cause consumers to spend more and save less. 
B) most likely lower consumers' purchases of durable goods. 
C) most likely lower the reward to savings. 
D) most likely lower the cost of borrowing.

Question 18

If consumption is defined as C = 2,000 + 0.8Y,then the marginal propensity to save is 0.8.

Accepted Answer

A) True 
 B)False

Question 19

If firms sell what they expected to sell,which of the following will be true?

Accepted Answer

A) Aggregate expenditure will be greater than GDP. 
B) There is no unplanned change in inventories. 
C) Inventories will rise,and GDP and employment will fall. 
D) Aggregate expenditure will be less than GDP. 
A) Aggregate expenditure will be greater than GDP. 
B) There is no unplanned change in inventories. 
C) Inventories will rise,and GDP and employment will fall. 
D) Aggregate expenditure will be less than GDP.

Question 20

What are the four categories of aggregate expenditure?

Accepted Answer

The four categories are consum

Figure 12-1 -Refer to Figure 12-1.At point L in the figure above,which of the following is true?

The marginal propensity to consume is defined as

Given Table 12-8 below,fill in the values for saving.Assume there are no taxes. Table 12-8

On the 45-degree line diagram,the 45-degree line shows points where real aggregate expenditure equals

in taxes will decrease consumption spending,and in transfer payments will increase consumption spending.

John Maynard Keynes argued that if many households decide at the same time to increase saving and reduce spending,

If firms sell exactly what they expected to sell,all of the following will be true except

Equations for C,I,G,and NX are given below.If the equilibrium level of GDP is $32,000,what is the marginal propensity to consume? C = 5,000 + (MPC)Y I = 1,500 G = 2,000 NX = -500

If aggregate expenditure is less than GDP,then inventories rise and GDP falls.

Consumption spending is $5 million,planned investment spending is $8 million,actual investment spending is $8 million,government purchases are $10 million,and net export spending is $2 million.Based on this information,which of the following is true?

Investment spending will decrease when

Ceteris paribus,how does a recession in the United States affect U.S.net exports?

Figure 12-2 -Refer to Figure 12-2.If the U.S.economy is currently at point N,which of the following could cause it to move to point K?

The difference between GDP and net taxes is

Consumption spending is $16 million,planned investment spending is $4 million,unplanned investment spending is $2 million,government purchases are $6 million,and net export spending is $1 million.What is aggregate expenditure?

Table 12-11 -Refer to Figure 12-3.Suppose that investment spending increases by $10 million,shifting up the aggregate expenditure line and GDP increases from GDP₁ to GDP₂.If the MPC is 0.9,then what is the change in GDP?

An increase in the real interest rate will

If consumption is defined as C = 2,000 + 0.8Y,then the marginal propensity to save is 0.8.

If firms sell what they expected to sell,which of the following will be true?

What are the four categories of aggregate expenditure?

Economics: Foundations and Models

Trade-Offs,comparative Advantage,and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

The Economics of Health Care

Firms,the Stock Market,and Corporate Governance

Comparative Advantage and the Gains From International Trade

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

Exam 12: Aggregate Expenditure and Output in the Short Run

Figure 12-1 -Refer to Figure 12-1.At point L in the figure above,which of the following is true?

The marginal propensity to consume is defined as

Given Table 12-8 below,fill in the values for saving.Assume there are no taxes. Table 12-8

On the 45-degree line diagram,the 45-degree line shows points where real aggregate expenditure equals

________ in taxes will decrease consumption spending,and ________ in transfer payments will increase consumption spending.

John Maynard Keynes argued that if many households decide at the same time to increase saving and reduce spending,

If firms sell exactly what they expected to sell,all of the following will be true except

Equations for C,I,G,and NX are given below.If the equilibrium level of GDP is $32,000,what is the marginal propensity to consume? C = 5,000 + (MPC)Y I = 1,500 G = 2,000 NX = -500

If aggregate expenditure is less than GDP,then inventories rise and GDP falls.

Consumption spending is $5 million,planned investment spending is $8 million,actual investment spending is $8 million,government purchases are $10 million,and net export spending is $2 million.Based on this information,which of the following is true?

Investment spending will decrease when

Ceteris paribus,how does a recession in the United States affect U.S.net exports?

Figure 12-2 -Refer to Figure 12-2.If the U.S.economy is currently at point N,which of the following could cause it to move to point K?

The difference between GDP and net taxes is

Consumption spending is $16 million,planned investment spending is $4 million,unplanned investment spending is $2 million,government purchases are $6 million,and net export spending is $1 million.What is aggregate expenditure?

Table 12-11 -Refer to Figure 12-3.Suppose that investment spending increases by $10 million,shifting up the aggregate expenditure line and GDP increases from GDP1 to GDP2.If the MPC is 0.9,then what is the change in GDP?

An increase in the real interest rate will

If consumption is defined as C = 2,000 + 0.8Y,then the marginal propensity to save is 0.8.

If firms sell what they expected to sell,which of the following will be true?

What are the four categories of aggregate expenditure?

Economics: Foundations and Models

Trade-Offs,comparative Advantage,and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

The Economics of Health Care

Firms,the Stock Market,and Corporate Governance

Comparative Advantage and the Gains From International Trade

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

in taxes will decrease consumption spending,and in transfer payments will increase consumption spending.

Table 12-11 -Refer to Figure 12-3.Suppose that investment spending increases by $10 million,shifting up the aggregate expenditure line and GDP increases from GDP₁ to GDP₂.If the MPC is 0.9,then what is the change in GDP?