Question 1

If the marginal propensity to consume equals 0.9,the multiplier is

Accepted Answer

A) 1 
B) 2 
C) 5 
D) 10 
E) 12 
A) 1 
B) 2 
C) 5 
D) 10 
E) 12

Question 2

Exhibit 9-9  
-The larger the marginal propensity to save,other things constant,

Accepted Answer

A) the larger the marginal propensity to consume 
B) the larger the multiplier 
C) the steeper the consumption function 
D) the steeper the saving function 
E) the flatter the saving function 
A) the larger the marginal propensity to consume 
B) the larger the multiplier 
C) the steeper the consumption function 
D) the steeper the saving function 
E) the flatter the saving function

Question 3

Exhibit 9-11  
-In Exhibit 9-11,which of the following best describes the situation at GDP2?

Accepted Answer

A) Equilibrium GDP 
B) Aggregate expenditure exceeds aggregate output and real GDP will increase 
C) Aggregate expenditure exceeds aggregate output and real GDP will decrease 
D) Aggregate expenditure is less than aggregate output and real GDP will increase 
E) Aggregate expenditure is less than aggregate output and real GDP will decrease 
A) Equilibrium GDP 
B) Aggregate expenditure exceeds aggregate output and real GDP will increase 
C) Aggregate expenditure exceeds aggregate output and real GDP will decrease 
D) Aggregate expenditure is less than aggregate output and real GDP will increase 
E) Aggregate expenditure is less than aggregate output and real GDP will decrease

Question 4

An increase in the price level will

Accepted Answer

A) shift the aggregate expenditure line upward 
B) shift the aggregate expenditure line downward 
C) cause a movement up along the aggregate expenditure line 
D) cause a movement down along the aggregate expenditure line 
E) have no effect on the aggregate expenditure line or the equilibrium level of real GDP 
A) shift the aggregate expenditure line upward 
B) shift the aggregate expenditure line downward 
C) cause a movement up along the aggregate expenditure line 
D) cause a movement down along the aggregate expenditure line 
E) have no effect on the aggregate expenditure line or the equilibrium level of real GDP

Question 5

Movement along the aggregate expenditure curve is caused by a change in the level of income.

Accepted Answer

A) True 
 B)False

Question 6

If the full employment level of income is $1200 billion and the present level of income is $1000 billion

Accepted Answer

A) an inflationary gap exists 
B) autonomous expenditure is too low for a full employment equilibrium 
C) autonomous expenditure is too high for a full employment equilibrium 
D) a decrease in autonomous expenditure is required 
E) government purchases of goods and services should be reduced 
A) an inflationary gap exists 
B) autonomous expenditure is too low for a full employment equilibrium 
C) autonomous expenditure is too high for a full employment equilibrium 
D) a decrease in autonomous expenditure is required 
E) government purchases of goods and services should be reduced

Question 7

The equilibrium quantity of aggregate output occurs when

Accepted Answer

A) the economy reaches the full employment of labor 
B) planned aggregate expenditure equals income generated from production 
C) actual aggregate expenditures equal real GDP 
D) inventories of goods and services are increasing 
E) inventories of goods and services are decreasing 
A) the economy reaches the full employment of labor 
B) planned aggregate expenditure equals income generated from production 
C) actual aggregate expenditures equal real GDP 
D) inventories of goods and services are increasing 
E) inventories of goods and services are decreasing

Question 8

The larger the MPC,the greater the multiplier effect.

Accepted Answer

A) True 
 B)False

Question 9

Aggregate expenditure means total or combined spending.

Accepted Answer

A) True 
 B)False

Question 10

If planned spending exceeds planned output,the result is

Accepted Answer

A) unintended inventory increases 
B) a reduction in GDP 
C) a decrease in imports 
D) an increase in government purchases 
E) unintended inventory reductions 
A) unintended inventory increases 
B) a reduction in GDP 
C) a decrease in imports 
D) an increase in government purchases 
E) unintended inventory reductions

Question 11

What is the effect of an increase in the price level?

Accepted Answer

A) The real value of dollar-denominated assets will rise. 
B) The aggregate expenditure line will shift upward. 
C) The equilibrium level of output demanded will rise. 
D) There will be upward movement along a particular aggregate demand curve. 
E) The aggregate demand curve will shift rightward. 
A) The real value of dollar-denominated assets will rise. 
B) The aggregate expenditure line will shift upward. 
C) The equilibrium level of output demanded will rise. 
D) There will be upward movement along a particular aggregate demand curve. 
E) The aggregate demand curve will shift rightward.

Question 12

The aggregate expenditure model is

Accepted Answer

A) most useful in explaining situations where changes in aggregate expenditures cause the price level to change 
B) not useful in situations where changes in aggregate expenditures cause the price level to change 
C) helpful in explaining situations where the economy is plagued by inflationary pressures 
D) the reciprocal of the aggregate demand model 
E) most useful when we are dealing with an economy dominated by a foreign sector 
A) most useful in explaining situations where changes in aggregate expenditures cause the price level to change 
B) not useful in situations where changes in aggregate expenditures cause the price level to change 
C) helpful in explaining situations where the economy is plagued by inflationary pressures 
D) the reciprocal of the aggregate demand model 
E) most useful when we are dealing with an economy dominated by a foreign sector

Question 13

Which of the following would cause a leftward shift of the aggregate demand curve?

Accepted Answer

A) an increase in planned investment 
B) a drop in the price level 
C) a rise in the price level 
D) an increase in autonomous consumption 
E) anything that causes an upward shift in the saving function 
A) an increase in planned investment 
B) a drop in the price level 
C) a rise in the price level 
D) an increase in autonomous consumption 
E) anything that causes an upward shift in the saving function

Question 14

A rise in the price level will shift the aggregate expenditure curve

Accepted Answer

A) upward and shift the aggregate demand curve to the right 
B) upward and shift the aggregate demand curve to the left 
C) downward and shift the aggregate demand curve to the left 
D) downward and shift the aggregate demand curve to the right 
E) downward and cause a movement along the aggregate demand curve 
A) upward and shift the aggregate demand curve to the right 
B) upward and shift the aggregate demand curve to the left 
C) downward and shift the aggregate demand curve to the left 
D) downward and shift the aggregate demand curve to the right 
E) downward and cause a movement along the aggregate demand curve

Question 15

A decrease in the price level will

Accepted Answer

A) shift the aggregate expenditure line upward 
B) shift the aggregate expenditure line downward 
C) cause a movement up along the aggregate expenditure line 
D) cause a movement down along the aggregate expenditure line 
E) have no effect on the aggregate expenditure or the equilibrium level of real GDP 
A) shift the aggregate expenditure line upward 
B) shift the aggregate expenditure line downward 
C) cause a movement up along the aggregate expenditure line 
D) cause a movement down along the aggregate expenditure line 
E) have no effect on the aggregate expenditure or the equilibrium level of real GDP

Question 16

Exhibit 9-11  
-In Exhibit 9-11,which of the following best describes the situation at GDP1?

Accepted Answer

A) Equilibrium GDP 
B) Aggregate expenditure exceeds aggregate output and real GDP will increase 
C) Aggregate expenditure exceeds aggregate output and real GDP will decrease 
D) Aggregate expenditure is less than aggregate output and real GDP will increase 
E) Aggregate expenditure is less than aggregate output and real GDP will decrease 
A) Equilibrium GDP 
B) Aggregate expenditure exceeds aggregate output and real GDP will increase 
C) Aggregate expenditure exceeds aggregate output and real GDP will decrease 
D) Aggregate expenditure is less than aggregate output and real GDP will increase 
E) Aggregate expenditure is less than aggregate output and real GDP will decrease

Question 17

Exhibit 9-9  
-The larger the marginal propensity to save,other things constant,

Accepted Answer

A) the larger the marginal propensity to consume 
B) the larger the multiplier 
C) the steeper the consumption function 
D) the flatter the consumption function 
E) the flatter the saving function 
A) the larger the marginal propensity to consume 
B) the larger the multiplier 
C) the steeper the consumption function 
D) the flatter the consumption function 
E) the flatter the saving function

Question 18

Other things being equal,a decrease in an economy's exports will

Accepted Answer

A) increase domestic aggregate expenditures and the equilibrium level of output 
B) decrease domestic aggregate expenditures and the equilibrium level of output 
C) have no impact on domestic aggregate expenditures or output 
D) decrease the marginal propensity to import 
E) change autonomous consumption 
A) increase domestic aggregate expenditures and the equilibrium level of output 
B) decrease domestic aggregate expenditures and the equilibrium level of output 
C) have no impact on domestic aggregate expenditures or output 
D) decrease the marginal propensity to import 
E) change autonomous consumption

Question 19

A decrease in the price level will have which of the following effects?

Accepted Answer

A) The real value of dollar-denominated assets will fall. 
B) The aggregate expenditure line will shift downward. 
C) The equilibrium level of output demanded will rise. 
D) There will be upward movement along a particular aggregate demand curve. 
E) The aggregate demand curve will shift leftward. 
A) The real value of dollar-denominated assets will fall. 
B) The aggregate expenditure line will shift downward. 
C) The equilibrium level of output demanded will rise. 
D) There will be upward movement along a particular aggregate demand curve. 
E) The aggregate demand curve will shift leftward.

Question 20

In an economy without a government and without international transactions,aggregate expenditure at each level of income is equal to

Accepted Answer

A) consumption plus saving 
B) planned investment plus saving 
C) disposable income plus the price level 
D) consumption plus planned investment 
E) planned investment minus saving 
A) consumption plus saving 
B) planned investment plus saving 
C) disposable income plus the price level 
D) consumption plus planned investment 
E) planned investment minus saving

Exam 10: Baggregate Expenditure and Aggregate Demand

If the marginal propensity to consume equals 0.9,the multiplier is

Exhibit 9-9 -The larger the marginal propensity to save,other things constant,

Exhibit 9-11 -In Exhibit 9-11,which of the following best describes the situation at GDP2?

An increase in the price level will

Movement along the aggregate expenditure curve is caused by a change in the level of income.

If the full employment level of income is $1200 billion and the present level of income is $1000 billion

The equilibrium quantity of aggregate output occurs when

The larger the MPC,the greater the multiplier effect.

Aggregate expenditure means total or combined spending.

If planned spending exceeds planned output,the result is

What is the effect of an increase in the price level?

The aggregate expenditure model is

Which of the following would cause a leftward shift of the aggregate demand curve?

A rise in the price level will shift the aggregate expenditure curve

A decrease in the price level will

Exhibit 9-11 -In Exhibit 9-11,which of the following best describes the situation at GDP1?

Exhibit 9-9 -The larger the marginal propensity to save,other things constant,

Other things being equal,a decrease in an economy's exports will

A decrease in the price level will have which of the following effects?

In an economy without a government and without international transactions,aggregate expenditure at each level of income is equal to

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Introduction to Macroeconomics

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Exhibit 9-11 -In Exhibit 9-11,which of the following best describes the situation at GDP₂?

Exhibit 9-11 -In Exhibit 9-11,which of the following best describes the situation at GDP₁?