Question 1

Figure 12-1  
-Refer to Figure 12-1.According to the figure above,at what point is aggregate expenditure less than GDP?

Accepted Answer

A) J 
B) K 
C) L 
D) none of the above 
A) J 
B) K 
C) L 
D) none of the above

Question 2

If the consumption function is defined as C = 7,250 + 0.8Y,what is the marginal propensity to save?

Accepted Answer

A) 0.2 
B) 0.8 
C) 5.8 
D) 9.1 
A) 0.2 
B) 0.8 
C) 5.8 
D) 9.1

Question 3

MPC + MPS =

Accepted Answer

A) 0. 
B) 0.5. 
C) 1. 
D) 100. 
A) 0. 
B) 0.5. 
C) 1. 
D) 100.

Question 4

Consumption spending is $22 million,planned investment spending is $7 million,actual investment spending is $7 million,government purchases are $9 million,and net export spending is $3 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 5

Investment spending increases during ________,and decreases during ________.

Accepted Answer

A) an expansion; a recession 
B) a recession; an expansion 
C) a recession; a depression 
D) a deflation; an inflation 
A) an expansion; a recession 
B) a recession; an expansion 
C) a recession; a depression 
D) a deflation; an inflation

Question 6

Aggregate expenditure includes consumption spending,unplanned investment spending,government purchases,and net exports.

Accepted Answer

A) True 
 B)False

Question 7

If the marginal propensity to save is 0.4,the multiplier is 2.5.

Accepted Answer

A) True 
 B)False

Question 8

If the multiplier is 5,the marginal propensity to consume must be 0.8.

Accepted Answer

A) True 
 B)False

Question 9

An increase in the price level in the United States will shift the aggregate expenditure line upward.

Accepted Answer

A) True 
 B)False

Question 10

Consumption spending is $5 million,planned investment spending is $8 million,unplanned investment spending is $2 million,government purchases are $10 million,and net export spending is $2 million.What is aggregate expenditure?

Accepted Answer

A) $15 million 
B) $23 million 
C) $25 million 
D) $27 million 
A) $15 million 
B) $23 million 
C) $25 million 
D) $27 million

Question 11

Table 12-12
  
-Refer to Table 12-12.Using the table above,answer the following questions.The numbers in the table are in billions of dollars.
a.What is the equilibrium level of real GDP?
b.What is the MPC?
c.If potential GDP is $7,000 billion,is the economy at full employment? If not,what is the condition of the economy?
d.If the economy is not at full employment,by how much should government spending increase so that the economy can move to the full employment level of GDP?

Accepted Answer

a.Equilibrium real GDP is determined whe

Question 12

The aggregate expenditure model focuses on the short-run relationship between ________ and ________.

Accepted Answer

A) real spending; real GDP 
B) unemployment; inflation 
C) nominal spending; nominal GDP 
D) planned inventories; unplanned inventories 
A) real spending; real GDP 
B) unemployment; inflation 
C) nominal spending; nominal GDP 
D) planned inventories; unplanned inventories

Question 13

Discuss the leading causes of the Great Depression.Use the 45-degree line diagram to show how they caused a decline in GDP.

Accepted Answer

Several events lowered aggregate expendi

Question 14

Figure 12-4  
-Refer to Figure 12-4.Potential GDP equals $100 billion.The economy is currently producing GDP1 which is equal to $90 billion.If the MPC is 0.8,then how much must autonomous spending change for the economy to move to potential GDP?

Accepted Answer

A) -$18 billion 
B) -$2 billion 
C) $2 billion 
D) $18 billion 
A) -$18 billion 
B) -$2 billion 
C) $2 billion 
D) $18 billion

Question 15

If the economy is currently in equilibrium at a level of GDP that is below potential GDP,which of the following would move the economy back to potential GDP?

Accepted Answer

A) an increase in wealth 
B) an increase in interest rates 
C) a decrease in business confidence 
D) an increase in the value of the dollar relative to other currencies 
A) an increase in wealth 
B) an increase in interest rates 
C) a decrease in business confidence 
D) an increase in the value of the dollar relative to other currencies

Question 16

A decrease in Social Security payments will

Accepted Answer

A) decrease consumption spending. 
B) decrease investment spending. 
C) decrease government spending. 
D) decrease export spending. 
A) decrease consumption spending. 
B) decrease investment spending. 
C) decrease government spending. 
D) decrease export spending.

Question 17

A decrease in the price level in the United States will have what effect on the aggregate expenditure line?

Accepted Answer

A) Aggregate expenditure will shift downward. 
B) Aggregate expenditure will become steeper. 
C) Aggregate expenditure will shift upward. 
D) Aggregate expenditure will not be affected by an increase in the price level in the United States. 
A) Aggregate expenditure will shift downward. 
B) Aggregate expenditure will become steeper. 
C) Aggregate expenditure will shift upward. 
D) Aggregate expenditure will not be affected by an increase in the price level in the United States.

Question 18

If planned aggregate expenditure is below potential GDP and planned aggregate expenditure equals GDP,then

Accepted Answer

A) actual inventory investment will be less than planned inventory investment. 
B) actual inventory investment will be greater than planned inventory investment. 
C) the economy is in a recession. 
D) the economy is at full employment. 
A) actual inventory investment will be less than planned inventory investment. 
B) actual inventory investment will be greater than planned inventory investment. 
C) the economy is in a recession. 
D) the economy is at full employment.

Question 19

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

Question 20

If planned investment is equal to actual investment,then aggregate expenditure is equal to GDP.

Accepted Answer

A) True 
 B)False

Figure 12-1 -Refer to Figure 12-1.According to the figure above,at what point is aggregate expenditure less than GDP?

If the consumption function is defined as C = 7,250 + 0.8Y,what is the marginal propensity to save?

MPC + MPS =

Consumption spending is $22 million,planned investment spending is $7 million,actual investment spending is $7 million,government purchases are $9 million,and net export spending is $3 million.Based on this information,which of the following is true?

Investment spending increases during ,and decreases during .

Aggregate expenditure includes consumption spending,unplanned investment spending,government purchases,and net exports.

If the marginal propensity to save is 0.4,the multiplier is 2.5.

If the multiplier is 5,the marginal propensity to consume must be 0.8.

An increase in the price level in the United States will shift the aggregate expenditure line upward.

Consumption spending is $5 million,planned investment spending is $8 million,unplanned investment spending is $2 million,government purchases are $10 million,and net export spending is $2 million.What is aggregate expenditure?

The aggregate expenditure model focuses on the short-run relationship between and .

Discuss the leading causes of the Great Depression.Use the 45-degree line diagram to show how they caused a decline in GDP.

Figure 12-4 -Refer to Figure 12-4.Potential GDP equals $100 billion.The economy is currently producing GDP₁ which is equal to $90 billion.If the MPC is 0.8,then how much must autonomous spending change for the economy to move to potential GDP?

If the economy is currently in equilibrium at a level of GDP that is below potential GDP,which of the following would move the economy back to potential GDP?

A decrease in Social Security payments will

A decrease in the price level in the United States will have what effect on the aggregate expenditure line?

If planned aggregate expenditure is below potential GDP and planned aggregate expenditure equals GDP,then

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?

If planned investment is equal to actual investment,then aggregate expenditure is equal to GDP.

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.According to the figure above,at what point is aggregate expenditure less than GDP?

If the consumption function is defined as C = 7,250 + 0.8Y,what is the marginal propensity to save?

MPC + MPS =

Consumption spending is $22 million,planned investment spending is $7 million,actual investment spending is $7 million,government purchases are $9 million,and net export spending is $3 million.Based on this information,which of the following is true?

Investment spending increases during ________,and decreases during ________.

Aggregate expenditure includes consumption spending,unplanned investment spending,government purchases,and net exports.

If the marginal propensity to save is 0.4,the multiplier is 2.5.

If the multiplier is 5,the marginal propensity to consume must be 0.8.

An increase in the price level in the United States will shift the aggregate expenditure line upward.

Consumption spending is $5 million,planned investment spending is $8 million,unplanned investment spending is $2 million,government purchases are $10 million,and net export spending is $2 million.What is aggregate expenditure?

The aggregate expenditure model focuses on the short-run relationship between ________ and ________.

Discuss the leading causes of the Great Depression.Use the 45-degree line diagram to show how they caused a decline in GDP.

Figure 12-4 -Refer to Figure 12-4.Potential GDP equals $100 billion.The economy is currently producing GDP1 which is equal to $90 billion.If the MPC is 0.8,then how much must autonomous spending change for the economy to move to potential GDP?

If the economy is currently in equilibrium at a level of GDP that is below potential GDP,which of the following would move the economy back to potential GDP?

A decrease in Social Security payments will

A decrease in the price level in the United States will have what effect on the aggregate expenditure line?

If planned aggregate expenditure is below potential GDP and planned aggregate expenditure equals GDP,then

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?

If planned investment is equal to actual investment,then aggregate expenditure is equal to GDP.

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

Investment spending increases during ,and decreases during .

The aggregate expenditure model focuses on the short-run relationship between and .

Figure 12-4 -Refer to Figure 12-4.Potential GDP equals $100 billion.The economy is currently producing GDP₁ which is equal to $90 billion.If the MPC is 0.8,then how much must autonomous spending change for the economy to move to potential GDP?