Question 1

The expenditure multiplier equals 5 and there is a $3 million increase in investment. Equilibrium expenditure

Accepted Answer

A)  increases by $0.60 million.
B)  increases by $15 million.
C)  increases by $3 million.
D)  decreases by $15 million.
E)  increases by $5 million.

Question 2

According to the aggregate expenditure model, when autonomous expenditure increases, equilibrium expenditure

Accepted Answer

A)  increases by a smaller amount.
B)  does not change because autonomous expenditures has no effect on equilibrium expenditure.
C)  increases by a larger amount.
D)  increases by an equal amount.
E)  does not change because only induced expenditures increase equilibrium expenditure.

Question 3

When the real interest rate falls, the consumption function

Accepted Answer

A)  shifts upward.
B)  does not shift and there is a movement downward along the consumption function.
C)  does not shift and there is no movement along the consumption function.
D)  does not shift and there is a movement upward along the consumption function.
E)  shifts downward.

Question 4

In an economy with no income taxes or imports, the marginal propensity to consume is 0.80. The
Expenditure multiplier is

Accepted Answer

A)  10.0.
B)  0.20.
C)  1.25.
D)  5.00.
E)  0.80.

Question 5

When investment increases, the multiplier points out that

Accepted Answer

A)  real GDP decreases by a greater amount.
B)  real GDP increases by a greater amount.
C)  consumption increases by the same amount.
D)  ultimately investment increases by more than the initial increase.
E)  consumption decreases by a greater amount.

Question 6

When disposable income increases from $9 trillion to $10 trillion, consumption expenditure increases from $6 trillion to $6.8 trillion. The MPC is

Accepted Answer

A)  $6.8 trillion.
B)  0.68.
C)  0.80.
D)  1.00.
E)  0.60.

Question 7

When aggregate planned expenditure -------------------- real GDP, there are unplanned -------------------- in inventories, and firms -------------------- production, therefore decreasing real GDP.

Accepted Answer

A)  exceeds; increases; increase
B)  is less than; increases; decrease
C)  is less than; increases; increase
D)  exceeds; decreases; decrease
E)  is less than; decreases; decrease

Question 8

If aggregate planned expenditures are less than real GDP, then

Accepted Answer

A)  there is no equilibrium level of real GDP.
B)  inventories decrease below their planned levels and businesses increase their production.
C)  inventories increase above their planned levels and businesses decrease their production.
D)  unplanned inventory changes equal zero.
E)  inventories increase above their planned levels and businesses increase their production.

Question 9

A country reports that when real GDP is $13.0 trillion, aggregate planned expenditure is $14.0 trillion. When real GDP equals $13.0 trillion,

Accepted Answer

A)  planned inventory changes by -$1.0 trillion.
B)  planned inventory changes by $1.0 trillion.
C)  unplanned inventory changes by -$1.0 trillion.
D)  both planned and unplanned inventory changes are -$1.0 trillion.
E)  unplanned inventory changes by $1.0 trillion.

Question 10

Which of the following variables is fixed in the aggregate expenditure model?

Accepted Answer

A)  consumption
B)  output
C)  price level
D)  investment
E)  real GDP

Question 11

Consumption  Government  Real GDP, Y expenditure, C Investment, I expenditure, G (billions of  (billions of  (billions of  (billions of  2005 dollars)   2005 dollars)   2005 dollars)   2005 dollars)  15655201055251455301855352255\begin{array}{rccc}\hline &	ext { Consumption }&&	ext { Government }\	ext { Real GDP, } Y &	ext { expenditure, } C& 	ext { Investment, } I& 	ext { expenditure, } G\	ext { (billions of } & 	ext { (billions of } & 	ext { (billions of } & 	ext { (billions of } \	ext { 2005 dollars)  } & 	ext { 2005 dollars)  } & 	ext { 2005 dollars)  } & 	ext { 2005 dollars)  }\\hline15 & 6 & 5 & 5 \20 & 10 & 5 & 5 \25 & 14 & 5 & 5 \30 & 18 & 5 & 5 \35 & 22 & 5 & 5\\hline\end{array} Real GDP, Y (billions of  2005 dollars)  1520253035​ Consumption  expenditure, C (billions of  2005 dollars)  610141822​ Investment, I (billions of  2005 dollars)  55555​ Government  expenditure, G (billions of  2005 dollars)  55555​​ 
The above table contains information about the nation of Syldavia
- There are no income taxes or
Imports in this nation. The expenditure multiplier is equal to

Accepted Answer

A)  10.
B)  0.8.
C)  5.
D)  2.
E)  1.25.

Question 12

Consumption  Government  Real GDP, Y expenditure, C Investment, I expenditure, G (billions of  (billions of  (billions of  (billions of  2005 dollars)   2005 dollars)   2005 dollars)   2005 dollars)  15655201055251455301855352255\begin{array}{rccc}\hline &	ext { Consumption }&&	ext { Government }\	ext { Real GDP, } Y &	ext { expenditure, } C& 	ext { Investment, } I& 	ext { expenditure, } G\	ext { (billions of } & 	ext { (billions of } & 	ext { (billions of } & 	ext { (billions of } \	ext { 2005 dollars)  } & 	ext { 2005 dollars)  } & 	ext { 2005 dollars)  } & 	ext { 2005 dollars)  }\\hline15 & 6 & 5 & 5 \20 & 10 & 5 & 5 \25 & 14 & 5 & 5 \30 & 18 & 5 & 5 \35 & 22 & 5 & 5\\hline\end{array} Real GDP, Y (billions of  2005 dollars)  1520253035​ Consumption  expenditure, C (billions of  2005 dollars)  610141822​ Investment, I (billions of  2005 dollars)  55555​ Government  expenditure, G (billions of  2005 dollars)  55555​​ 
-

The above table gives data for the nation of Mouseville. There are no imports into or exports from Mouseville. Unplanned inventory changes are zero when real GDP equals

Accepted Answer

A)  $500 billion.
B)  $900 billion.
C)  $300 billion.
D)  $800 billion.
E)  $700 billion.

Question 13

The MPC is equal to the

Accepted Answer

A)  level of consumption expenditure divided by the level of total disposable income that brought it about.
B)  level of consumption divided by the change in disposable income that brought it about.
C)  change in consumption expenditure divided by the total disposable income that brought it about.
D)  change in disposable income divided by the change in consumption expenditure.
E)  change in consumption expenditure divided by the change in disposable income that brought it about.

Question 14

Autonomous expenditure includes

Accepted Answer

A)  investment, government expenditure on goods and services, and exports.
B)  investment, government expenditure for goods and services, and imports.
C)  consumption expenditure, investment, and net taxes.
D)  consumption expenditures, investment, and exports.
E)  consumption expenditure, investment, and imports.

Question 15

The smaller the amount saved out of a change in disposable income, the

Accepted Answer

A)  larger the MPC.
B)  smaller is autonomous consumption.
C)  more net taxes affect consumption.
D)  more horizontal the consumption function.
E)  smaller the MPC.

Question 16

If the level of real GDP is $14 trillion while aggregate planned expenditure is $15 trillion, then

Accepted Answer

A)  inventories rise more than planned, leading firms to increase production.
B)  inventories rise more than planned, leading firms to cut production.
C)  aggregate planned expenditure decreases to reach the equilibrium of $14 trillion.
D)  inventories fall more than planned, leading firms to increase production.
E)  real GDP increases and planned expenditure decreases reaching equilibrium in the middle.

Question 17

Based on data from the U.S. economy, the marginal propensity to consume is about

Accepted Answer

A)  0.60.
B)  0.75.
C)  0.95.
D)  0.87.
E)  1.10.

Question 18

In the range of disposable income where the consumption function lies above the 45° line,

Accepted Answer

A)  induced consumption is zero.
B)  disposable income is negative.
C)  saving is negative.
D)  saving is positive.
E)  disposable income equals planned expenditures.

Question 19

When aggregate planned expenditure exceeds real GDP, there are unplanned
-------------------- in inventories, and firms  -------------------- production, so that real GDP  --------------------.

Accepted Answer

A)  decreases; decrease; increases
B)  increases; increase; increases
C)  decreases; increase; increases
D)  increases; decrease; decreases
E)  decreases; decrease; decreases

Question 20

The expenditure multiplier is larger than one because

Accepted Answer

A)  an increase in autonomous expenditure induces further decreases in aggregate expenditure.
B)  additional expenditure induces lower incomes.
C)  an increase in autonomous expenditure induces further increases in aggregate expenditure.
D)  the price level rises, thereby reinforcing the initial effect.
E)  an increase in autonomous expenditure brings about a reduction in the real interest rate.

Exam 14: Aggregate Expenditure Multiplier

Which of the following variables is fixed in the aggregate expenditure model?

Correct Answer
verified

A country reports that when real GDP is $13.0 trillion, aggregate planned expenditure is $14.0 trillion. When real GDP equals $13.0 trillion,

Correct Answer
verified

According to the aggregate expenditure model, when autonomous expenditure increases, equilibrium expenditure

Correct Answer
verified

The MPC is equal to the

Correct Answer
verified

When investment increases, the multiplier points out that

Correct Answer
verified

When disposable income increases from $9 trillion to $10 trillion, consumption expenditure increases from $6 trillion to $6.8 trillion. The MPC is

Correct Answer
verified

In the range of disposable income where the consumption function lies above the 45° line,

Correct Answer
verified

The expenditure multiplier equals 5 and there is a $3 million increase in investment. Equilibrium expenditure

Correct Answer
verified

Based on data from the U.S. economy, the marginal propensity to consume is about

Correct Answer
verified

If the level of real GDP is $14 trillion while aggregate planned expenditure is $15 trillion, then

Correct Answer
verified

When the real interest rate falls, the consumption function

Correct Answer
verified

Correct Answer
verified

The expenditure multiplier is larger than one because

Correct Answer
verified

When aggregate planned expenditure exceeds real GDP, there are unplanned _{--------------------} in inventories, and firms _{--------------------} production, so that real GDP _{--------------------}.

Correct Answer
verified

In an economy with no income taxes or imports, the marginal propensity to consume is 0.80. The Expenditure multiplier is

Correct Answer
verified

Autonomous expenditure includes

Correct Answer
verified

Correct Answer
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If aggregate planned expenditures are less than real GDP, then

Correct Answer
verified

The smaller the amount saved out of a change in disposable income, the

Correct Answer
verified

When aggregate planned expenditure _{--------------------} real GDP, there are unplanned _{--------------------} in inventories, and firms _{--------------------} production, therefore decreasing real GDP.

Correct Answer
verified

Exam 14: Aggregate Expenditure Multiplier

Which of the following variables is fixed in the aggregate expenditure model?

Correct AnswerverifiedShow Answer

A country reports that when real GDP is $13.0 trillion, aggregate planned expenditure is $14.0 trillion. When real GDP equals $13.0 trillion,

Correct AnswerverifiedShow Answer

According to the aggregate expenditure model, when autonomous expenditure increases, equilibrium expenditure

Correct AnswerverifiedShow Answer

The MPC is equal to the

Correct AnswerverifiedShow Answer

When investment increases, the multiplier points out that

Correct AnswerverifiedShow Answer

When disposable income increases from $9 trillion to $10 trillion, consumption expenditure increases from $6 trillion to $6.8 trillion. The MPC is

Correct AnswerverifiedShow Answer

In the range of disposable income where the consumption function lies above the 45° line,

Correct AnswerverifiedShow Answer

The expenditure multiplier equals 5 and there is a $3 million increase in investment. Equilibrium expenditure

Correct AnswerverifiedShow Answer

Based on data from the U.S. economy, the marginal propensity to consume is about

Correct AnswerverifiedShow Answer

If the level of real GDP is $14 trillion while aggregate planned expenditure is $15 trillion, then

Correct AnswerverifiedShow Answer

When the real interest rate falls, the consumption function

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The expenditure multiplier is larger than one because

Correct AnswerverifiedShow Answer

When aggregate planned expenditure exceeds real GDP, there are unplanned -------------------- in inventories, and firms -------------------- production, so that real GDP --------------------.

Correct AnswerverifiedShow Answer

In an economy with no income taxes or imports, the marginal propensity to consume is 0.80. The Expenditure multiplier is

Correct AnswerverifiedShow Answer

Autonomous expenditure includes

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If aggregate planned expenditures are less than real GDP, then

Correct AnswerverifiedShow Answer

The smaller the amount saved out of a change in disposable income, the

Correct AnswerverifiedShow Answer

When aggregate planned expenditure -------------------- real GDP, there are unplanned -------------------- in inventories, and firms -------------------- production, therefore decreasing real GDP.

Correct AnswerverifiedShow Answer

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When aggregate planned expenditure exceeds real GDP, there are unplanned _{--------------------} in inventories, and firms _{--------------------} production, so that real GDP _{--------------------}.

Correct Answer
verified

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When aggregate planned expenditure _{--------------------} real GDP, there are unplanned _{--------------------} in inventories, and firms _{--------------------} production, therefore decreasing real GDP.

Correct Answer
verified