Question 1

During a(n)________ many firms experience increased profits,which increases ________ and investment spending.

Accepted Answer

A) expansion; government spending 
B) recession; cash flow 
C) expansion; cash flow 
D) recession; business confidence 
A) expansion; government spending 
B) recession; cash flow 
C) expansion; cash flow 
D) recession; business confidence

Question 2

All of the following are true statements about the multiplier except

Accepted Answer

A) The formula for the multiplier overstates the real world multiplier when we take into account the impact of changes in GDP on imports,inflation and the interest rate. 
B) The larger the MPC,the larger the multiplier. 
C) The multiplier is the ratio of the change in real GDP to the change in autonomous expenditure. 
D) The multiplier makes the economy less sensitive to changes in autonomous expenditure. 
A) The formula for the multiplier overstates the real world multiplier when we take into account the impact of changes in GDP on imports,inflation and the interest rate. 
B) The larger the MPC,the larger the multiplier. 
C) The multiplier is the ratio of the change in real GDP to the change in autonomous expenditure. 
D) The multiplier makes the economy less sensitive to changes in autonomous expenditure.

Question 3

Would a larger multiplier lead to longer and more severe recessions or shorter and less severe recessions? Briefly explain.

Accepted Answer

A larger multiplier would be l

Question 4

Table 12-2
  
-Refer to Table 12-2.Using the table above,compute aggregate expenditure and identify the macroeconomic equilibrium.

Accepted Answer

The macroeconomic equilibrium is determi

Question 5

If disposable income increases by $500 million,and consumption increases by $400 million,then the marginal propensity to consume is

Accepted Answer

A) 1.25. 
B) 0.8. 
C) 0.6. 
D) 0.4. 
A) 1.25. 
B) 0.8. 
C) 0.6. 
D) 0.4.

Question 6

Figure 12-1  
-Refer to Figure 12-1.If the economy is at point J,what will happen?

Accepted Answer

A) Inventories have fallen below their desired level,and firms decrease production. 
B) Inventories have fallen below their desired level,and firms increase production. 
C) Inventories have risen above their desired level,and firms decrease production. 
D) Inventories have risen above their desired level,and firms increase production. 
A) Inventories have fallen below their desired level,and firms decrease production. 
B) Inventories have fallen below their desired level,and firms increase production. 
C) Inventories have risen above their desired level,and firms decrease production. 
D) Inventories have risen above their desired level,and firms increase production.

Question 7

If the consumption function is defined as C = 5,500 + 0.9Y,what is the autonomous level of consumption expenditure?

Accepted Answer

A) $4,950 
B) $5,500 
C) $6,050 
D) $6,111 
A) $4,950 
B) $5,500 
C) $6,050 
D) $6,111

Question 8

The aggregate expenditure model focuses on the ________ relationship between real spending and ________.

Accepted Answer

A) short-run; real GDP 
B) short-run; inflation 
C) long-run; real GDP 
D) long-run; inflation 
A) short-run; real GDP 
B) short-run; inflation 
C) long-run; real GDP 
D) long-run; inflation

Question 9

What is the main reason for changes in GDP in the short run?

Accepted Answer

The main reason for changes in

Question 10

If disposable income increases by $100 million,and consumption increases by $90 million,then the marginal propensity to consume is

Accepted Answer

A) 0.9. 
B) 0.8. 
C) 0.75. 
D) 0.6. 
A) 0.9. 
B) 0.8. 
C) 0.75. 
D) 0.6.

Question 11

When Javier's income increases by $5,000,he spends an additional $3,750 dollars.This implies that his marginal propensity to consume is 0.75.

Accepted Answer

A) True 
 B)False

Question 12

Equations for C,I,G,and NX are given below.If the equilibrium level of GDP is $21,500,what is the marginal propensity to consume? C = 1,500 + (MPC)Y
I = 1,000
G = 2,000
NX = -200

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 13

If firms find that consumers are purchasing more than expected,which of the following would you expect?

Accepted Answer

A) Aggregate expenditure will likely be greater than GDP. 
B) Aggregate expenditure will likely be less than GDP. 
C) The economy will adjust to macroeconomic equilibrium as inventories rise,and production and employment fall. 
D) The economy will adjust to macroeconomic equilibrium as inventories fall,and production and employment fall. 
A) Aggregate expenditure will likely be greater than GDP. 
B) Aggregate expenditure will likely be less than GDP. 
C) The economy will adjust to macroeconomic equilibrium as inventories rise,and production and employment fall. 
D) The economy will adjust to macroeconomic equilibrium as inventories fall,and production and employment fall.

Question 14

A general formula for the multiplier is

Accepted Answer

A)    . 
B)    . 
C)    . 
D)    . 
A)    . 
B)    . 
C)    . 
D)    .

Question 15

An increase in the price level in the United States will reduce imports and increase exports.

Accepted Answer

A) True 
 B)False

Question 16

Given Table 12-7 below,fill in the values of the marginal propensity to save (MPS)and the marginal propensity to consume (MPC).Show that MPC + MPS = 1.
Table 12-7

Accepted Answer

The MPC is defined as: MPC = @#IMG-DLM& = @#IMG-DLM& = @#IMG-DLM& = 0.

Question 17

Which of the following is a reason why decreases in the price level result in a rise in aggregate expenditure?

Accepted Answer

A) Price level decreases cause firms and consumers to hold less money,which lowers the interest rate.Lower interest rates raise consumption and planned investment expenditures,which raises aggregate expenditure. 
B) Price level decreases reduce real wealth,which causes consumption spending and aggregate expenditure to rise. 
C) As the price level falls,government spending rises,which raises aggregate expenditure. 
D) Price level decreases in the United States relative to other countries' lower net exports,which raises aggregate expenditure. 
A) Price level decreases cause firms and consumers to hold less money,which lowers the interest rate.Lower interest rates raise consumption and planned investment expenditures,which raises aggregate expenditure. 
B) Price level decreases reduce real wealth,which causes consumption spending and aggregate expenditure to rise. 
C) As the price level falls,government spending rises,which raises aggregate expenditure. 
D) Price level decreases in the United States relative to other countries' lower net exports,which raises aggregate expenditure.

Question 18

Household wealth is defined as the value of a household's

Accepted Answer

A) assets minus the value of its liabilities. 
B) assets plus the value of its liabilities. 
C) assets. 
D) liabilities. 
A) assets minus the value of its liabilities. 
B) assets plus the value of its liabilities. 
C) assets. 
D) liabilities.

Question 19

Which is the smallest component of aggregate expenditure?

Accepted Answer

A) planned investment expenditures 
B) consumption expenditures 
C) government expenditures 
D) net export expenditures 
A) planned investment expenditures 
B) consumption expenditures 
C) government expenditures 
D) net export expenditures

Question 20

C = 2,800 + 0.9Y
I = 750
G= 1,200
NX = 150
Given the equations for C,I,G,and NX above,what is the equilibrium level of GDP (Y)?

Accepted Answer

Y = C + I + G + NX. Y = 2,800

During a(n) many firms experience increased profits,which increases and investment spending.

All of the following are true statements about the multiplier except

Would a larger multiplier lead to longer and more severe recessions or shorter and less severe recessions? Briefly explain.

Table 12-2 -Refer to Table 12-2.Using the table above,compute aggregate expenditure and identify the macroeconomic equilibrium.

If disposable income increases by $500 million,and consumption increases by $400 million,then the marginal propensity to consume is

Figure 12-1 -Refer to Figure 12-1.If the economy is at point J,what will happen?

If the consumption function is defined as C = 5,500 + 0.9Y,what is the autonomous level of consumption expenditure?

The aggregate expenditure model focuses on the relationship between real spending and .

What is the main reason for changes in GDP in the short run?

If disposable income increases by $100 million,and consumption increases by $90 million,then the marginal propensity to consume is

When Javier's income increases by $5,000,he spends an additional $3,750 dollars.This implies that his marginal propensity to consume is 0.75.

Equations for C,I,G,and NX are given below.If the equilibrium level of GDP is $21,500,what is the marginal propensity to consume? C = 1,500 + (MPC)Y I = 1,000 G = 2,000 NX = -200

If firms find that consumers are purchasing more than expected,which of the following would you expect?

A general formula for the multiplier is

An increase in the price level in the United States will reduce imports and increase exports.

Given Table 12-7 below,fill in the values of the marginal propensity to save (MPS)and the marginal propensity to consume (MPC).Show that MPC + MPS = 1. Table 12-7

Which of the following is a reason why decreases in the price level result in a rise in aggregate expenditure?

Household wealth is defined as the value of a household's

Which is the smallest component of aggregate expenditure?

C = 2,800 + 0.9Y I = 750 G= 1,200 NX = 150 Given the equations for C,I,G,and NX above,what is the equilibrium level of GDP (Y)?

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

During a(n)________ many firms experience increased profits,which increases ________ and investment spending.

All of the following are true statements about the multiplier except

Would a larger multiplier lead to longer and more severe recessions or shorter and less severe recessions? Briefly explain.

Table 12-2 -Refer to Table 12-2.Using the table above,compute aggregate expenditure and identify the macroeconomic equilibrium.

If disposable income increases by $500 million,and consumption increases by $400 million,then the marginal propensity to consume is

Figure 12-1 -Refer to Figure 12-1.If the economy is at point J,what will happen?

If the consumption function is defined as C = 5,500 + 0.9Y,what is the autonomous level of consumption expenditure?

The aggregate expenditure model focuses on the ________ relationship between real spending and ________.

What is the main reason for changes in GDP in the short run?

If disposable income increases by $100 million,and consumption increases by $90 million,then the marginal propensity to consume is

When Javier's income increases by $5,000,he spends an additional $3,750 dollars.This implies that his marginal propensity to consume is 0.75.

Equations for C,I,G,and NX are given below.If the equilibrium level of GDP is $21,500,what is the marginal propensity to consume? C = 1,500 + (MPC)Y I = 1,000 G = 2,000 NX = -200

If firms find that consumers are purchasing more than expected,which of the following would you expect?

A general formula for the multiplier is

An increase in the price level in the United States will reduce imports and increase exports.

Given Table 12-7 below,fill in the values of the marginal propensity to save (MPS)and the marginal propensity to consume (MPC).Show that MPC + MPS = 1. Table 12-7

Which of the following is a reason why decreases in the price level result in a rise in aggregate expenditure?

Household wealth is defined as the value of a household's

Which is the smallest component of aggregate expenditure?

C = 2,800 + 0.9Y I = 750 G= 1,200 NX = 150 Given the equations for C,I,G,and NX above,what is the equilibrium level of GDP (Y)?

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

During a(n) many firms experience increased profits,which increases and investment spending.

The aggregate expenditure model focuses on the relationship between real spending and .