Question 1

Why is the aggregate demand curve downward sloping while the aggregate expenditure line is upward sloping?

Accepted Answer

A downward sloping aggregate demand curv

Question 2

The larger the MPC,the smaller the value of the multiplier.

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

A) The price level in the United States rises relative to the price level in other countries. 
B) Congress passes investment tax incentives. 
C) The interest rate rises. 
D) Household wealth declines. 
A) The price level in the United States rises relative to the price level in other countries. 
B) Congress passes investment tax incentives. 
C) The interest rate rises. 
D) Household wealth declines.

Question 4

If aggregate expenditure is more than GDP,then inventories fall and GDP rises.

Accepted Answer

A) True 
 B)False

Question 5

If aggregate expenditure is less than GDP,how will the economy reach macroeconomic equilibrium?

Accepted Answer

A) Inventories will decline,and GDP and employment will decline. 
B) Inventories will rise,and GDP and employment will decline. 
C) Inventories will decline,and GDP and employment will rise. 
D) Inventories will rise,and GDP and employment will rise. 
A) Inventories will decline,and GDP and employment will decline. 
B) Inventories will rise,and GDP and employment will decline. 
C) Inventories will decline,and GDP and employment will rise. 
D) Inventories will rise,and GDP and employment will rise.

Question 6

Investment spending will increase when

Accepted Answer

A) the interest rate rises. 
B) the corporate income tax increases. 
C) business cash flow increases. 
D) firms become more pessimistic about earning future profits. 
A) the interest rate rises. 
B) the corporate income tax increases. 
C) business cash flow increases. 
D) firms become more pessimistic about earning future profits.

Question 7

The formula for aggregate expenditure is

Accepted Answer

A) AE = C + I + G. 
B) AE = C + I + G - NX. 
C) AE = C + I + G + NX. 
D) AE = C + I + depreciation - NX. 
A) AE = C + I + G. 
B) AE = C + I + G - NX. 
C) AE = C + I + G + NX. 
D) AE = C + I + depreciation - NX.

Question 8

Household spending on goods and services is known as

Accepted Answer

A) consumption spending. 
B) planned investment spending. 
C) government purchases. 
D) net exports. 
A) consumption spending. 
B) planned investment spending. 
C) government purchases. 
D) net exports.

Question 9

If the marginal propensity to consume is 0.75,the marginal propensity to save is

Accepted Answer

A) 0.25. 
B) 0.5. 
C) 1. 
D) 3. 
A) 0.25. 
B) 0.5. 
C) 1. 
D) 3.

Question 10

Explain,in detail,how the adjustment to macroeconomic equilibrium occurs when spending is less than production.Be sure to discuss how inventories play a crucial role in the adjustment process.State what happens to GDP and employment during the adjustment process.

Accepted Answer

If spending is less than production,then

Question 11

If an increase in autonomous consumption spending of $25 million results in a $100 million increase in equilibrium real GDP,then

Accepted Answer

A) the MPC is 0.25. 
B) the MPC is 0.75. 
C) the MPC is 0.8. 
D) the MPC is 2.5. 
A) the MPC is 0.25. 
B) the MPC is 0.75. 
C) the MPC is 0.8. 
D) the MPC is 2.5.

Question 12

The formula for the multiplier is (1 - MPC).

Accepted Answer

A) True 
 B)False

Question 13

Article Summary
Although growing at only half the average rate following the seven previous recessions, consumer spending has increased 9 percent since the end of the 2007-2009 recession, and consumer confidence has been on the rise as household finances, the job market, and the housing market continue to improve. The Federal Reserve projects a 3% - 3.5% growth rate for the economy in 2014, up from the recent average of 2%. Debt payments have fallen to an average of 15.69% of after-tax income for households, the lowest level in 30 years, and lower debt payments leave households with more to spend on consumer goods.
Source: Neil Shah, "Pocketbooks Begin to Open As Household Wealth Grows," Wall Street Journal, June 25, 2013.

-Refer to the Article Summary.The increase in consumer spending discussed in the article summary was due in part to an improving housing market.This reason for the increase in consumer spending is most closely related to which of the following variables that determine the level of consumption?

Accepted Answer

A) the interest rate 
B) current disposable income 
C) household wealth 
D) the price level 
A) the interest rate 
B) current disposable income 
C) household wealth 
D) the price level

Question 14

Which of the following is not one of the four main categories of spending identified by John Maynard Keynes?

Accepted Answer

A) consumption 
B) planned investment 
C) government purchases 
D) transfer payments 
A) consumption 
B) planned investment 
C) government purchases 
D) transfer payments

Question 15

Intel is the world's largest semiconductor manufacturer and a major supplier of the microprocessors and memory chips found in most personal computers.During the recession of 2007-2009,Intel's revenues ________ and it ________ the size of its workforce.

Accepted Answer

A) fell; increased 
B) fell; decreased 
C) rose; increased 
D) rose; decreased 
A) fell; increased 
B) fell; decreased 
C) rose; increased 
D) rose; decreased

Question 16

If the consumption function is defined as C = 7,250 + 0.8Y,what is the value of the multiplier?

Accepted Answer

A) 0.2 
B) 0.8 
C) 1.25 
D) 5 
A) 0.2 
B) 0.8 
C) 1.25 
D) 5

Question 17

Which of the following will cause a direct increase in consumption spending?

Accepted Answer

A) an increase in planned investment 
B) an increase in government spending 
C) an increase in disposable income 
D) a decrease in net export spending 
A) an increase in planned investment 
B) an increase in government spending 
C) an increase in disposable income 
D) a decrease in net export spending

Question 18

For all points below the 45-degree line,planned aggregate expenditure will be less than GDP.

Accepted Answer

A) True 
 B)False

Question 19

Firms in a small economy planned that inventories would grow over the past year by $500,000.Over that year,inventories did grow by exactly $500,000.This implies that

Accepted Answer

A) aggregate expenditure that year was equal to GDP that year. 
B) there was an unplanned increase in inventories that year. 
C) there was an unplanned decrease in inventories that year. 
D) aggregate expenditure that year was greater than GDP that year. 
A) aggregate expenditure that year was equal to GDP that year. 
B) there was an unplanned increase in inventories that year. 
C) there was an unplanned decrease in inventories that year. 
D) aggregate expenditure that year was greater than GDP that year.

Question 20

If the multiplier is 10,the marginal propensity to consume must be 0.1.

Accepted Answer

A) True 
 B)False

Why is the aggregate demand curve downward sloping while the aggregate expenditure line is upward sloping?

The larger the MPC,the smaller the value of the multiplier.

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

If aggregate expenditure is more than GDP,then inventories fall and GDP rises.

If aggregate expenditure is less than GDP,how will the economy reach macroeconomic equilibrium?

Investment spending will increase when

The formula for aggregate expenditure is

Household spending on goods and services is known as

If the marginal propensity to consume is 0.75,the marginal propensity to save is

Explain,in detail,how the adjustment to macroeconomic equilibrium occurs when spending is less than production.Be sure to discuss how inventories play a crucial role in the adjustment process.State what happens to GDP and employment during the adjustment process.

If an increase in autonomous consumption spending of $25 million results in a $100 million increase in equilibrium real GDP,then

The formula for the multiplier is (1 - MPC).

Which of the following is not one of the four main categories of spending identified by John Maynard Keynes?

Intel is the world's largest semiconductor manufacturer and a major supplier of the microprocessors and memory chips found in most personal computers.During the recession of 2007-2009,Intel's revenues and it the size of its workforce.

If the consumption function is defined as C = 7,250 + 0.8Y,what is the value of the multiplier?

Which of the following will cause a direct increase in consumption spending?

For all points below the 45-degree line,planned aggregate expenditure will be less than GDP.

Firms in a small economy planned that inventories would grow over the past year by $500,000.Over that year,inventories did grow by exactly $500,000.This implies that

If the multiplier is 10,the marginal propensity to consume must be 0.1.

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

Why is the aggregate demand curve downward sloping while the aggregate expenditure line is upward sloping?

The larger the MPC,the smaller the value of the multiplier.

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

If aggregate expenditure is more than GDP,then inventories fall and GDP rises.

If aggregate expenditure is less than GDP,how will the economy reach macroeconomic equilibrium?

Investment spending will increase when

The formula for aggregate expenditure is

Household spending on goods and services is known as

If the marginal propensity to consume is 0.75,the marginal propensity to save is

Explain,in detail,how the adjustment to macroeconomic equilibrium occurs when spending is less than production.Be sure to discuss how inventories play a crucial role in the adjustment process.State what happens to GDP and employment during the adjustment process.

If an increase in autonomous consumption spending of $25 million results in a $100 million increase in equilibrium real GDP,then

The formula for the multiplier is (1 - MPC).

Which of the following is not one of the four main categories of spending identified by John Maynard Keynes?

Intel is the world's largest semiconductor manufacturer and a major supplier of the microprocessors and memory chips found in most personal computers.During the recession of 2007-2009,Intel's revenues ________ and it ________ the size of its workforce.

If the consumption function is defined as C = 7,250 + 0.8Y,what is the value of the multiplier?

Which of the following will cause a direct increase in consumption spending?

For all points below the 45-degree line,planned aggregate expenditure will be less than GDP.

Firms in a small economy planned that inventories would grow over the past year by $500,000.Over that year,inventories did grow by exactly $500,000.This implies that

If the multiplier is 10,the marginal propensity to consume must be 0.1.

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

Intel is the world's largest semiconductor manufacturer and a major supplier of the microprocessors and memory chips found in most personal computers.During the recession of 2007-2009,Intel's revenues and it the size of its workforce.