Question 1

A decrease in aggregate expenditure has what result on equilibrium GDP?

Accepted Answer

A) Equilibrium GDP rises. 
B) Equilibrium GDP is not affected by a decrease in aggregate expenditure. 
C) Equilibrium GDP falls. 
D) Equilibrium GDP may rise or fall depending on the size of the decrease in aggregate expenditure relative to the initial level of GDP. 
A) Equilibrium GDP rises. 
B) Equilibrium GDP is not affected by a decrease in aggregate expenditure. 
C) Equilibrium GDP falls. 
D) Equilibrium GDP may rise or fall depending on the size of the decrease in aggregate expenditure relative to the initial level of GDP.

Question 2

What impact does an increase in the price level in the United States have on net exports and why?

Accepted Answer

A) An increase in the price level decreases net exports because higher prices decrease the value of the dollar. 
B) An increase in the price level decreases net exports by increasing the relative cost of American goods. 
C) An increase in the price level increases net exports because higher prices lower the value of the dollar. 
D) An increase in the price level increases net exports because higher prices decrease American spending on imports. 
A) An increase in the price level decreases net exports because higher prices decrease the value of the dollar. 
B) An increase in the price level decreases net exports by increasing the relative cost of American goods. 
C) An increase in the price level increases net exports because higher prices lower the value of the dollar. 
D) An increase in the price level increases net exports because higher prices decrease American spending on imports.

Question 3

What is the difference between aggregate expenditure and aggregate demand?

Accepted Answer

Aggregate expenditure is the t

Question 4

When aggregate expenditure is less than GDP,which of the following is true?

Accepted Answer

A) There was an unplanned increase in inventories. 
B) Firms spent more on capital goods than they anticipated. 
C) Households bought more new homes than they anticipated. 
D) All of the above must be true when aggregate expenditure is less than GDP. 
A) There was an unplanned increase in inventories. 
B) Firms spent more on capital goods than they anticipated. 
C) Households bought more new homes than they anticipated. 
D) All of the above must be true when aggregate expenditure is less than GDP.

Question 5

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 6

A decrease in the price level results in a(n)________ in household consumption spending and a(n)________ in investment spending.

Accepted Answer

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

Question 7

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 8

The aggregate demand curve shows the relationship between the price level and the level of planned aggregate expenditure in the economy.

Accepted Answer

A) True 
 B)False

Question 9

Figure 12-3  
-Refer to Figure 12-3.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

The marginal propensity to consume is the slope of the consumption function.

Accepted Answer

A) True 
 B)False

Question 11

Consumption is $5 million,planned investment spending is $8 million,government purchases are $10 million,and net exports are equal to $2 million.If GDP during that same time period is equal to $23 million,what unplanned changes in inventories occurred?

Accepted Answer

A) There was an unplanned increase in inventories equal to $2 million. 
B) There was no unplanned change in inventories. 
C) There was an unplanned decrease in inventories equal to $2 million. 
D) There was an unplanned decrease in inventories equal to $19 million. 
A) There was an unplanned increase in inventories equal to $2 million. 
B) There was no unplanned change in inventories. 
C) There was an unplanned decrease in inventories equal to $2 million. 
D) There was an unplanned decrease in inventories equal to $19 million.

Question 12

Figure 12-3  
-Refer to Figure 12-3.Suppose that investment spending increases by $10 million,shifting up the aggregate expenditure line and GDP increases from GDP1 to GDP2.If the MPC is 0.9,then what is the change in GDP?

Accepted Answer

A) $9 million 
B) $10 million 
C) $90 million 
D) $100 million 
A) $9 million 
B) $10 million 
C) $90 million 
D) $100 million

Question 13

The ________ model focuses on the relationship between total spending and real GDP in the short run,assuming the price level is constant.

Accepted Answer

A) supply and demand 
B) national income 
C) aggregate expenditure 
D) business cycle 
A) supply and demand 
B) national income 
C) aggregate expenditure 
D) business cycle

Question 14

If the consumption function is defined as C = 7,250 + 0.8Y,what is the autonomous level of consumption expenditure?

Accepted Answer

A) $5,800 
B) $7,250 
C) $9,062.50 
D) $9,700 
A) $5,800 
B) $7,250 
C) $9,062.50 
D) $9,700

Question 15

The key idea of the aggregate expenditure model is that in any particular year,the level of GDP is determined mainly by

Accepted Answer

A) investment spending. 
B) export spending. 
C) government spending. 
D) the level of aggregate expenditure. 
A) investment spending. 
B) export spending. 
C) government spending. 
D) the level of aggregate expenditure.

Question 16

The key idea of the aggregate expenditure model is that in any particular year,the level of ________ is determined mainly by the level of aggregate expenditure.

Accepted Answer

A) frictional unemployment 
B) export spending 
C) government spending 
D) GDP 
A) frictional unemployment 
B) export spending 
C) government spending 
D) GDP

Question 17

The five most important variables that determine the level of consumption are

Accepted Answer

A) disposable income,wealth,expected future income,price level,and interest rate. 
B) wealth,savings account balances,checking account balances,stock portfolio balances,and bond portfolio balances. 
C) government purchases,interest rates,income,taxes,and transfers. 
D) government purchases,saving account balances,wealth,interest rates,portfolio balances. 
A) disposable income,wealth,expected future income,price level,and interest rate. 
B) wealth,savings account balances,checking account balances,stock portfolio balances,and bond portfolio balances. 
C) government purchases,interest rates,income,taxes,and transfers. 
D) government purchases,saving account balances,wealth,interest rates,portfolio balances.

Question 18

If planned aggregate expenditure equals GDP,the economy is in macroeconomic equilibrium.

Accepted Answer

A) True 
 B)False

Question 19

In the United States,spending on residential construction

Accepted Answer

A) rose slowly in the period just before the recession of 2007-2009,declined slowly during the recession,and recovered slowly thereafter. 
B) rose rapidly in the period just before the recession of 2007-2009,declined dramatically during the recession,and recovered rapidly thereafter. 
C) rose rapidly in the period just before the recession of 2007-2009,declined dramatically during the recession,and continued to decline slowly thereafter. 
D) rose rapidly in the period just before the recession of 2007-2009,declined dramatically during the recession,and recovered only slowly thereafter. 
A) rose slowly in the period just before the recession of 2007-2009,declined slowly during the recession,and recovered slowly thereafter. 
B) rose rapidly in the period just before the recession of 2007-2009,declined dramatically during the recession,and recovered rapidly thereafter. 
C) rose rapidly in the period just before the recession of 2007-2009,declined dramatically during the recession,and continued to decline slowly thereafter. 
D) rose rapidly in the period just before the recession of 2007-2009,declined dramatically during the recession,and recovered only slowly thereafter.

Question 20

Use a 45-degree diagram to illustrate macroeconomic equilibrium.Make sure your diagram shows the aggregate expenditure function.Include in your diagram a point where aggregate expenditure is greater than GDP and a point where aggregate expenditure is less than GDP.

Accepted Answer

@#IMG-DLM& Macroeconomic equilibrium occ

A decrease in aggregate expenditure has what result on equilibrium GDP?

What impact does an increase in the price level in the United States have on net exports and why?

What is the difference between aggregate expenditure and aggregate demand?

When aggregate expenditure is less than GDP,which of the following is true?

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 the price level results in a(n) in household consumption spending and a(n) in investment spending.

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?

The aggregate demand curve shows the relationship between the price level and the level of planned aggregate expenditure in the economy.

Figure 12-3 -Refer to Figure 12-3.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?

The marginal propensity to consume is the slope of the consumption function.

Consumption is $5 million,planned investment spending is $8 million,government purchases are $10 million,and net exports are equal to $2 million.If GDP during that same time period is equal to $23 million,what unplanned changes in inventories occurred?

Figure 12-3 -Refer to Figure 12-3.Suppose that investment spending increases by $10 million,shifting up the aggregate expenditure line and GDP increases from GDP1 to GDP2.If the MPC is 0.9,then what is the change in GDP?

The ________ model focuses on the relationship between total spending and real GDP in the short run,assuming the price level is constant.

If the consumption function is defined as C = 7,250 + 0.8Y,what is the autonomous level of consumption expenditure?

The key idea of the aggregate expenditure model is that in any particular year,the level of GDP is determined mainly by

The key idea of the aggregate expenditure model is that in any particular year,the level of ________ is determined mainly by the level of aggregate expenditure.

The five most important variables that determine the level of consumption are

If planned aggregate expenditure equals GDP,the economy is in macroeconomic equilibrium.

In the United States,spending on residential construction

Use a 45-degree diagram to illustrate macroeconomic equilibrium.Make sure your diagram shows the aggregate expenditure function.Include in your diagram a point where aggregate expenditure is greater than GDP and a point where aggregate expenditure is less than 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

A decrease in aggregate expenditure has what result on equilibrium GDP?

What impact does an increase in the price level in the United States have on net exports and why?

What is the difference between aggregate expenditure and aggregate demand?

When aggregate expenditure is less than GDP,which of the following is true?

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 the price level results in a(n)________ in household consumption spending and a(n)________ in investment spending.

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?

The aggregate demand curve shows the relationship between the price level and the level of planned aggregate expenditure in the economy.

Figure 12-3 -Refer to Figure 12-3.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?

The marginal propensity to consume is the slope of the consumption function.

Consumption is $5 million,planned investment spending is $8 million,government purchases are $10 million,and net exports are equal to $2 million.If GDP during that same time period is equal to $23 million,what unplanned changes in inventories occurred?

Figure 12-3 -Refer to Figure 12-3.Suppose that investment spending increases by $10 million,shifting up the aggregate expenditure line and GDP increases from GDP1 to GDP2.If the MPC is 0.9,then what is the change in GDP?

The ________ model focuses on the relationship between total spending and real GDP in the short run,assuming the price level is constant.

If the consumption function is defined as C = 7,250 + 0.8Y,what is the autonomous level of consumption expenditure?

The key idea of the aggregate expenditure model is that in any particular year,the level of GDP is determined mainly by

The key idea of the aggregate expenditure model is that in any particular year,the level of ________ is determined mainly by the level of aggregate expenditure.

The five most important variables that determine the level of consumption are

If planned aggregate expenditure equals GDP,the economy is in macroeconomic equilibrium.

In the United States,spending on residential construction

Use a 45-degree diagram to illustrate macroeconomic equilibrium.Make sure your diagram shows the aggregate expenditure function.Include in your diagram a point where aggregate expenditure is greater than GDP and a point where aggregate expenditure is less than 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

A decrease in the price level results in a(n) in household consumption spending and a(n) in investment spending.