Question 1

If the MPC is 0.5,then a $10 million increase in disposable income will increase consumption by

Accepted Answer

A) $2 million. 
B) $5 million. 
C) $15 million 
D) $50 million. 
A) $2 million. 
B) $5 million. 
C) $15 million 
D) $50 million.

Question 2

Table 12-3
  
-Refer to Table 12-3.Given the consumption schedule in the table above,the marginal propensity to save is

Accepted Answer

A) 0.1. 
B) 0.4. 
C) 0.7. 
D) 0.9. 
A) 0.1. 
B) 0.4. 
C) 0.7. 
D) 0.9.

Question 3

If firms find that consumers are purchasing less 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 rise. 
D) The economy will adjust to macroeconomic equilibrium as inventories fall,and production and employment rise. 
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 rise. 
D) The economy will adjust to macroeconomic equilibrium as inventories fall,and production and employment rise.

Question 4

Table 12-14
  
-Refer to Table 12-14.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 $4,000 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 5

Consumption spending will ________ when disposable income ________.

Accepted Answer

A) increase; increases 
B) increase; decreases 
C) decrease; increases 
D) change unpredictably; decreases 
A) increase; increases 
B) increase; decreases 
C) decrease; increases 
D) change unpredictably; decreases

Question 6

A general formula for the multiplier is

Accepted Answer

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

Question 7

Which of the following is true?

Accepted Answer

A) National income = Consumption + Savings - Taxes 
B) National income = Consumption - Savings - Taxes 
C) National income = Consumption + Savings + Taxes 
D) National income = Consumption - Savings + Taxes 
A) National income = Consumption + Savings - Taxes 
B) National income = Consumption - Savings - Taxes 
C) National income = Consumption + Savings + Taxes 
D) National income = Consumption - Savings + Taxes

Question 8

Autonomous expenditure times the multiplier equals

Accepted Answer

A) autonomous saving. 
B) autonomous consumption. 
C) equilibrium GDP. 
D) planned autonomous investment. 
A) autonomous saving. 
B) autonomous consumption. 
C) equilibrium GDP. 
D) planned autonomous investment.

Question 9

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 GDP?

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 10

Figure 12-2  
-Refer to Figure 12-2.Suppose that the level of GDP associated with point K is potential GDP.If the U.S.economy is currently at point N,

Accepted Answer

A) firms are operating below capacity. 
B) the economy is at full employment. 
C) the economy is in an expansion. 
D) the level of unemployment is above the natural rate. 
A) firms are operating below capacity. 
B) the economy is at full employment. 
C) the economy is in an expansion. 
D) the level of unemployment is above the natural rate.

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

All of the following are true statements about the multiplier except

Accepted Answer

A) the multiplier rises as the MPC rises. 
B) the smaller the MPS,the larger the multiplier. 
C) the multiplier is a value between zero and one. 
D) the multiplier effect occurs when autonomous expenditure changes. 
A) the multiplier rises as the MPC rises. 
B) the smaller the MPS,the larger the multiplier. 
C) the multiplier is a value between zero and one. 
D) the multiplier effect occurs when autonomous expenditure changes.

Question 13

C = 3,600 + (MPC)Y
I = 1,200
G = 1,400
NX = -200
If the equilibrium level of GDP is $30,000,using the equations for C,I,G,and NX shown above,find the value of the marginal propensity to consume.

Accepted Answer

Y = C + I + G + NX. 30,000 = 3

Question 14

Given the equations for C,I,G,and NX below,what is the marginal propensity to consume? C = 2,000 + 0.9Y
I = 2,500
G = 3,000
NX = 400

Accepted Answer

A) -0.1 
B) 0.1 
C) 0.9 
D) 2000 
A) -0.1 
B) 0.1 
C) 0.9 
D) 2000

Question 15

________ is defined as national income + transfers - taxes.

Accepted Answer

A) Gross private domestic investment 
B) GDP 
C) Personal income 
D) Disposable income 
A) Gross private domestic investment 
B) GDP 
C) Personal income 
D) Disposable income

Question 16

Which of the following correctly describes how an increase in the price level affects consumption spending?

Accepted Answer

A) An increase in the price level raises real wealth,which causes consumption to increase. 
B) An increase in the price level decreases the amount of money a household needs to buy goods and raises the interest rate,which causes consumption to increase. 
C) An increase in the price level increases the amount of money a household needs to buy goods and raises the interest rate,which causes consumption to increase. 
D) An increase in the price level lowers real wealth,which causes consumption to decrease. 
A) An increase in the price level raises real wealth,which causes consumption to increase. 
B) An increase in the price level decreases the amount of money a household needs to buy goods and raises the interest rate,which causes consumption to increase. 
C) An increase in the price level increases the amount of money a household needs to buy goods and raises the interest rate,which causes consumption to increase. 
D) An increase in the price level lowers real wealth,which causes consumption to decrease.

Question 17

Given Table 12-5 below,fill in the values for saving.Assume there are no taxes.
Table 12-5

Accepted Answer

When taxes are zero,saving is

Question 18

The aggregate expenditure model focuses on the relationship between ________ and ________ in the short run,assuming ________ is constant.

Accepted Answer

A) total production; total income; real GDP 
B) total spending; real GDP; total income 
C) total spending; real GDP; the price level 
D) total income; real GDP; the price level 
A) total production; total income; real GDP 
B) total spending; real GDP; total income 
C) total spending; real GDP; the price level 
D) total income; real GDP; the price level

Question 19

________ consumption is consumption that does not depend upon the level of GDP.

Accepted Answer

A) Autonomous 
B) Induced 
C) Voluntary 
D) Disposable 
A) Autonomous 
B) Induced 
C) Voluntary 
D) Disposable

Question 20

On the 45-degree line diagram,for points that lie above the 45-degree line,

Accepted Answer

A) planned aggregate expenditure is greater than GDP. 
B) planned aggregate expenditure is less than GDP. 
C) planned aggregate expenditure is equal to GDP. 
D) planned aggregate expenditure is less than aggregate income. 
A) planned aggregate expenditure is greater than GDP. 
B) planned aggregate expenditure is less than GDP. 
C) planned aggregate expenditure is equal to GDP. 
D) planned aggregate expenditure is less than aggregate income.

If the MPC is 0.5,then a $10 million increase in disposable income will increase consumption by

Table 12-3 -Refer to Table 12-3.Given the consumption schedule in the table above,the marginal propensity to save is

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

Consumption spending will when disposable income .

A general formula for the multiplier is

Which of the following is true?

Autonomous expenditure times the multiplier equals

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 GDP?

Figure 12-2 -Refer to Figure 12-2.Suppose that the level of GDP associated with point K is potential GDP.If the U.S.economy is currently at point N,

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

All of the following are true statements about the multiplier except

C = 3,600 + (MPC)Y I = 1,200 G = 1,400 NX = -200 If the equilibrium level of GDP is $30,000,using the equations for C,I,G,and NX shown above,find the value of the marginal propensity to consume.

Given the equations for C,I,G,and NX below,what is the marginal propensity to consume? C = 2,000 + 0.9Y I = 2,500 G = 3,000 NX = 400

________ is defined as national income + transfers - taxes.

Which of the following correctly describes how an increase in the price level affects consumption spending?

Given Table 12-5 below,fill in the values for saving.Assume there are no taxes. Table 12-5

The aggregate expenditure model focuses on the relationship between and in the short run,assuming is constant.

________ consumption is consumption that does not depend upon the level of GDP.

On the 45-degree line diagram,for points that lie above the 45-degree line,

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

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Exam 12: Aggregate Expenditure and Output in the Short Run

If the MPC is 0.5,then a $10 million increase in disposable income will increase consumption by

Table 12-3 -Refer to Table 12-3.Given the consumption schedule in the table above,the marginal propensity to save is

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

Consumption spending will ________ when disposable income ________.

A general formula for the multiplier is

Which of the following is true?

Autonomous expenditure times the multiplier equals

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 GDP?

Figure 12-2 -Refer to Figure 12-2.Suppose that the level of GDP associated with point K is potential GDP.If the U.S.economy is currently at point N,

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

All of the following are true statements about the multiplier except

C = 3,600 + (MPC)Y I = 1,200 G = 1,400 NX = -200 If the equilibrium level of GDP is $30,000,using the equations for C,I,G,and NX shown above,find the value of the marginal propensity to consume.

Given the equations for C,I,G,and NX below,what is the marginal propensity to consume? C = 2,000 + 0.9Y I = 2,500 G = 3,000 NX = 400

________ is defined as national income + transfers - taxes.

Which of the following correctly describes how an increase in the price level affects consumption spending?

Given Table 12-5 below,fill in the values for saving.Assume there are no taxes. Table 12-5

The aggregate expenditure model focuses on the relationship between ________ and ________ in the short run,assuming ________ is constant.

________ consumption is consumption that does not depend upon the level of GDP.

On the 45-degree line diagram,for points that lie above the 45-degree line,

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

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Consumption spending will when disposable income .

The aggregate expenditure model focuses on the relationship between and in the short run,assuming is constant.