Question 1

National income =

Accepted Answer

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

Question 2

Which of the following will reduce consumer expenditures?

Accepted Answer

A) a decrease in interest rates 
B) a general increase in housing prices 
C) a decrease in expected future income 
D) a decrease in the price level

Question 3

Household wealth is defined as the value of a household's

Accepted Answer

A) assets minus the value of its liabilities. 
B) assets plus the value of its liabilities. 
C) assets. 
D) liabilities.

Question 4

Which of the following will raise consumer expenditures?

Accepted Answer

A) an increase in interest rates 
B) a general decline in housing prices 
C) an increase in expected future income 
D) an increase in the price level

Question 5

During a(n)________ many firms experience increased profits,which increases ________ and investment spending.

Accepted Answer

A) expansion;government spending 
B) recession;cash flow 
C) expansion;cash flow 
D) recession;business confidence

Question 6

The sum of the marginal propensity to consume and the marginal propensity to save is always equal to

Accepted Answer

A) zero. 
B) 0.5. 
C) 1. 
D) 100.

Question 7

If the MPC is 0.95,then a $10 million increase in disposable income will

Accepted Answer

A) increase consumption by $200 million. 
B) increase consumption by $9.5 million. 
C) decrease consumption by $105 million. 
D) increase consumption by $950 million.

Question 8

Equations for C,I,G,and NX are given below.If the equilibrium level of GDP is $32,000,what is the marginal propensity to consume? C = 5,000 + (MPC)Y
I = 1,500
G = 2,000
NX = -500

Accepted Answer

A) 0.67 
B) 0.75 
C) 0.8 
D) 0.9

Question 9

Higher interest rates increase both consumption and investment spending.

Accepted Answer

A) True 
 B)False

Question 10

If firms are more optimistic that future profits will rise and remain strong for the next few years,then

Accepted Answer

A) investment spending will fall. 
B) investment spending will rise. 
C) investment spending will remain unaffected. 
D) investment spending will rise and then fall.

Question 11

Examples of assets that are included in household wealth would be

Accepted Answer

A) stocks,bonds,and savings accounts. 
B) stocks,loans owed,and savings accounts. 
C) stocks,bonds,and mortgages. 
D) stocks,credit cards,and savings accounts.

Question 12

If the marginal propensity to save is 0.4,then a $2 million increase in disposable income will

Accepted Answer

A) increase consumption by $5 million. 
B) increase consumption by $1.2 million. 
C) decrease consumption by $5 million. 
D) decrease consumption by $1.2 million.

Question 13

If economists forecast an increase in aggregate expenditure,which of the following is likely to occur?

Accepted Answer

A) GDP will rise. 
B) GDP will fall. 
C) Wages will fall. 
D) Inventories will rise.

Question 14

Which of the following will increase aggregate expenditure in the United States?

Accepted Answer

A) an increase in the value of the dollar 
B) an increase in the price level 
C) an increase in interest rates 
D) an increase in government purchases

Question 15

If consumption is defined as C = 1,350 + 0.6Y,then the marginal propensity to consume is 0.6.

Accepted Answer

A) True 
 B)False

Question 16

If planned aggregate expenditure is above 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 an expansion. 
D) the economy is at full employment.

Question 17

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

Accepted Answer

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

Question 18

An increase in the price level in the United States will have what effect on the aggregate expenditure line?

Accepted Answer

A) Aggregate expenditure will shift downward. 
B) Aggregate expenditure will become steeper. 
C) Aggregate expenditure will shift upward. 
D) Aggregate expenditure will not be affected by an increase in the price level in the United States.

Question 19

In a small economy in 2016,aggregate expenditure was $850 million while GDP that year was $800 million.Which of the following can explain the difference between aggregate expenditure and GDP that year?

Accepted Answer

A) Aggregate expenditure is always less than GDP in developed countries. 
B) Firm investment in inventories was less than anticipated in 2016. 
C) Firm investment in inventories was greater than anticipated in 2016. 
D) Aggregate expenditure is always less than GDP in developing countries.

Question 20

If inflation in the United States is lower than inflation in other countries,what will be the effect on net exports for the United States?

Accepted Answer

A) Net exports will rise as U.S.exports increase. 
B) Net exports will rise as U.S.imports increase. 
C) Net exports will decrease as U.S.exports decrease. 
D) Net exports will decrease as U.S.imports decrease.

Exam 12: Aggregate Expenditure and Output in the Short Run

National income =

Which of the following will reduce consumer expenditures?

Household wealth is defined as the value of a household's

Which of the following will raise consumer expenditures?

During a(n) many firms experience increased profits,which increases and investment spending.

The sum of the marginal propensity to consume and the marginal propensity to save is always equal to

If the MPC is 0.95,then a $10 million increase in disposable income will

Equations for C,I,G,and NX are given below.If the equilibrium level of GDP is $32,000,what is the marginal propensity to consume? C = 5,000 + (MPC) Y I = 1,500 G = 2,000 NX = -500

Higher interest rates increase both consumption and investment spending.

If firms are more optimistic that future profits will rise and remain strong for the next few years,then

Examples of assets that are included in household wealth would be

If the marginal propensity to save is 0.4,then a $2 million increase in disposable income will

If economists forecast an increase in aggregate expenditure,which of the following is likely to occur?

Which of the following will increase aggregate expenditure in the United States?

If consumption is defined as C = 1,350 + 0.6Y,then the marginal propensity to consume is 0.6.

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

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

An increase in the price level in the United States will have what effect on the aggregate expenditure line?

In a small economy in 2016,aggregate expenditure was $850 million while GDP that year was $800 million.Which of the following can explain the difference between aggregate expenditure and GDP that year?

If inflation in the United States is lower than inflation in other countries,what will be the effect on net exports for the United States?

Exam 12: Aggregate Expenditure and Output in the Short Run

National income =

Which of the following will reduce consumer expenditures?

Household wealth is defined as the value of a household's

Which of the following will raise consumer expenditures?

During a(n) ________ many firms experience increased profits,which increases ________ and investment spending.

The sum of the marginal propensity to consume and the marginal propensity to save is always equal to

If the MPC is 0.95,then a $10 million increase in disposable income will

Equations for C,I,G,and NX are given below.If the equilibrium level of GDP is $32,000,what is the marginal propensity to consume? C = 5,000 + (MPC) Y I = 1,500 G = 2,000 NX = -500

Higher interest rates increase both consumption and investment spending.

If firms are more optimistic that future profits will rise and remain strong for the next few years,then

Examples of assets that are included in household wealth would be

If the marginal propensity to save is 0.4,then a $2 million increase in disposable income will

If economists forecast an increase in aggregate expenditure,which of the following is likely to occur?

Which of the following will increase aggregate expenditure in the United States?

If consumption is defined as C = 1,350 + 0.6Y,then the marginal propensity to consume is 0.6.

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

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

An increase in the price level in the United States will have what effect on the aggregate expenditure line?

In a small economy in 2016,aggregate expenditure was $850 million while GDP that year was $800 million.Which of the following can explain the difference between aggregate expenditure and GDP that year?

If inflation in the United States is lower than inflation in other countries,what will be the effect on net exports for the United States?

During a(n) many firms experience increased profits,which increases and investment spending.