Question 1

In an article regarding Bangladesh's economy, the author suggests that the government ..."[g]ive do tax breaks on investment dollars. Give a tax break to R&D [research and development]. Give a tax b on donations to educational institutions. "
HYPERLINK "http://www.groundreport.com/" www.groundreport.com, March 24, 20
The increase in investment is considered and will generate a larger increase in .

Accepted Answer

A)  induced expenditure; autonomous expenditure 
B)  autonomous expenditure; induced expenditure 
C)  autonomous expenditure; multiplier spending. 
D)  equilibrium spending; autonomous expenditure

Question 2

Suppose that saving equals $0 when disposable income equals $1 trillion. Along the saving function, occurs to the left of $1 trillion and occurs to the right of $1 trillion.

Accepted Answer

A)  saving; saving 
B)  saving; dissaving 
C)  dissaving; dissaving 
D)  dissaving; saving

Question 3

The MPC is equal to

Accepted Answer

A)  OC / OS. 
B)  OC / OYD. 
C)  OS / OYD. 
D)  OS / OC.

Question 4

When prices are fixed and there are no imports or income taxes, the value of the multiplier is

Accepted Answer

A)  equal to one. 
B)  equal to zero. 
C)  greater than one. 
D)  less than one.

Question 5

Which of the following statements is FALSE?

Accepted Answer

A)  Disposable income - saving = consumption expenditure. 
B)  Saving = disposable income - consumption expenditure. 
C)  Consumption expenditure + saving = disposable income. 
D)  Consumption expenditure = saving - disposable income.

Question 6

At equilibrium expenditure, unplanned changes in inventory

Accepted Answer

A)  must be positive. 
B)  might be either positive or negative. 
C)  must be zero. 
D)  must be negative.

Question 7

An increase in the value of the multiplier can be caused by

Accepted Answer

A)  an increase in autonomous consumption expenditure. 
B)  a decrease in the marginal propensity to consume. 
C)  an increase in the marginal propensity to import. 
D)  an increase in the marginal propensity to consume.

Question 8

Suppose that firms find that their inventories are less than planned. In this case, what is the initial relationship between aggregate planned expenditure and real GDP? Using the aggregate expenditure model, what adjustments, if any, take place?

Accepted Answer

The answer of Suppose that firms find that their inventories...

Question 9

If prices are fixed, an increase in aggregate expenditures results in an increase in equilibrium GDP that

Accepted Answer

A)  is greater than the change in aggregate expenditure. 
B)  is equal to the change in aggregate expenditure. 
C)  has no necessary relationship to the size of the change in aggregate expenditure. 
D)  is less than the change in aggregate expenditure.

Question 10

-In the above table, savings equal zero when disposable income equals

Accepted Answer

A)  $500. 
B)  $200. 
C)  0. 
D)  $300.

Question 11

Actual aggregate expenditures does not always equal real GDP.

Accepted Answer

A) True 
 B)False

Question 12

The consumption function relates consumption expenditure to

Accepted Answer

A)  saving. 
B)  the price level. 
C)  the interest rate. 
D)  disposable income.

Question 13

Planned saving equals

Accepted Answer

A)  zero when disposable income is less than planned consumption expenditure. 
B)  planned consumption expenditure minus disposable income. 
C)  disposable income minus planned consumption expenditure. 
D)  planned consumption expenditure plus disposable income.

Question 14

In a simple economy in which prices are constant and with no income taxes or imports, the marginal propensity to save is 0.2. If exports increase $50, what impact will that have on aggregate expenditure?

Accepted Answer

A)  decrease by $100 
B)  increase by $100 
C)  decrease by $250 
D)  increase by $250

Question 15

If the MPC increases from 0.75 to 0.80 and there are no income taxes or imports,

Accepted Answer

A)  the slope of the consumption function becomes smaller. 
B)  the multiplier becomes smaller. 
C)  the multiplier becomes larger. 
D)  the slope of the savings function becomes larger.

Question 16

Please explain the relationship between consumption, disposable income and saving.

Accepted Answer

The answer of Please explain the relationship between consumption, disposable...

Question 17

Which of the following is NOT an autonomous expenditure in the aggregate expenditures model?

Accepted Answer

A)  government expenditures 
B)  imports 
C)  exports 
D)  investment

Question 18

When disposable income equals consumption expenditure, then

Accepted Answer

A)  the MPC = zero. 
B)  the MPS = zero. 
C)  saving is zero. 
D)  None of the above is correct.

Question 19

The Keynesian model of aggregate expenditure describes the economy in

Accepted Answer

A)  the short run. 
B)  the long run. 
C)  only a strong expansion. 
D)  both the short run and the long run.

Question 20

Explain the relationship between real GDP and aggregate planned expenditure, AE. What change to inventories takes place when the two are not equal?

Accepted Answer

The answer of Explain the relationship between real GDP and...

Exam 11: Expenditure Multipliers: They Keynesian Model