Question 1

Figure 23-1  
-Refer to Figure 23-1.According to the figure above,at what point is aggregate expenditure greater 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 A

Question 2

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

Accepted Answer

A) True 
 B)False  True

Question 3

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. C

Question 4

If planned investment is greater than actual investment,then aggregate expenditure is less than GDP.

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

The passage of the Smoot-Hawley Tariff in 1930 sparked a trade war that caused net exports to ________ and real GDP to ________.

Accepted Answer

A)  increase; increase 
B)  decrease; increase 
C)  increase; decrease 
D)  decrease; decrease 
A)  increase; increase 
B)  decrease; increase 
C)  increase; decrease 
D)  decrease; decrease

Question 7

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 8

Disposable income is defined as

Accepted Answer

A)  national income - transfers + taxes. 
B)  national income + transfers + taxes. 
C)  national income - transfers - taxes. 
D)  national income + transfers - taxes. 
A)  national income - transfers + taxes. 
B)  national income + transfers + taxes. 
C)  national income - transfers - taxes. 
D)  national income + transfers - taxes.

Question 9

Figure 23-3  
-Refer to Figure 23-3.Suppose that government spending increases,shifting up the aggregate expenditure line.GDP increases from GDP1 to GDP2,and this amount is $400 billion.If the MPC is 0.75,then what is the distance between N and L or by how much did government spending change?

Accepted Answer

A)  $10 billion 
B)  $100 billion 
C)  $200 billion 
D)  $300 billion 
A)  $10 billion 
B)  $100 billion 
C)  $200 billion 
D)  $300 billion

Question 10

Increases in housing prices

Accepted Answer

A)  decrease consumption in direct proportion to the housing price increases. 
B)  directly increase consumption, as this increases household wealth. 
C)  have no independent effect on consumption. 
D)  decrease consumption only when the overall price level decreases in the economy. 
A)  decrease consumption in direct proportion to the housing price increases. 
B)  directly increase consumption, as this increases household wealth. 
C)  have no independent effect on consumption. 
D)  decrease consumption only when the overall price level decreases in the economy.

Question 11

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 12

Figure 23-1  
-Refer to Figure 23-1.If the economy is at point L,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 13

In the aggregate expenditure model,________ has both an autonomous component and an induced component.

Accepted Answer

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

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

C = 2,550 + (MPC)Y
I = 800
G = 1,100
NX = 50
If the equilibrium level of GDP is $11,250,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.
11,250 = 2

Question 16

Why do economists care about aggregate expenditures?

Accepted Answer

Increases and decreases in aggregate exp

Question 17

National income =

Accepted Answer

A)  Consumption + Saving - Taxes 
B)  Consumption - Saving - Taxes 
C)  Consumption - Saving +Taxes 
D)  Consumption + Saving + Taxes 
A)  Consumption + Saving - Taxes 
B)  Consumption - Saving - Taxes 
C)  Consumption - Saving +Taxes 
D)  Consumption + Saving + Taxes

Question 18

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 19

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 20

Equilibrium GDP is equal to

Accepted Answer

A)  autonomous expenditure times the marginal propensity to consume. 
B)  autonomous expenditure times the marginal propensity to save. 
C)  autonomous expenditure times the multiplier. 
D)  autonomous expenditure. 
A)  autonomous expenditure times the marginal propensity to consume. 
B)  autonomous expenditure times the marginal propensity to save. 
C)  autonomous expenditure times the multiplier. 
D)  autonomous expenditure.

Exam 23: Aggregate Expenditure and Output in the Short Run

Figure 23-1 -Refer to Figure 23-1.According to the figure above,at what point is aggregate expenditure greater than GDP?

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

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

If planned investment is greater than actual investment,then aggregate expenditure is less than GDP.

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

The passage of the Smoot-Hawley Tariff in 1930 sparked a trade war that caused net exports to ________ and real GDP to ________.

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

Disposable income is defined as

Figure 23-3 -Refer to Figure 23-3.Suppose that government spending increases,shifting up the aggregate expenditure line.GDP increases from GDP1 to GDP2,and this amount is $400 billion.If the MPC is 0.75,then what is the distance between N and L or by how much did government spending change?

Increases in housing prices

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

Figure 23-1 -Refer to Figure 23-1.If the economy is at point L,what will happen?

In the aggregate expenditure model,________ has both an autonomous component and an induced component.

The difference between GDP and net taxes is

C = 2,550 + (MPC)Y I = 800 G = 1,100 NX = 50 If the equilibrium level of GDP is $11,250,using the equations for C,I,G,and NX shown above,find the value of the marginal propensity to consume.

Why do economists care about aggregate expenditures?

National income =

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

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

Equilibrium GDP is equal to

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

Externalities, environmental Policy, and Public Goods

Elasticity: The Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: The Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, taxes, and the Distribution of Income

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

The passage of the Smoot-Hawley Tariff in 1930 sparked a trade war that caused net exports to and real GDP to .

Figure 23-3 -Refer to Figure 23-3.Suppose that government spending increases,shifting up the aggregate expenditure line.GDP increases from GDP₁ to GDP₂,and this amount is $400 billion.If the MPC is 0.75,then what is the distance between N and L or by how much did government spending change?