Question 1

Which of the following does not influence autonomous spending?

Accepted Answer

A)   Financial and housing wealth
B)   Interest rates
C)   Income
D)   Export demand

Question 2

If spending increases by $200, and GDP increases by $1,000 as a result, what must the MPC be?

Accepted Answer

A)   0.80
B)   0.75
C)   4
D)   5

Question 3

If the marginal propensity to consume is 0.25, it would mean that:

Accepted Answer

A)   $0.25 of an additional $1 of individuals' after-tax income is spent on consumption.
B)   $0.25 of an additional $1 of individuals' after-tax income is saved.
C)   $0.75 of an additional $1 of individuals' after-tax income is spent on consumption.
D)   None of these are true.

Question 4

If the MPC is 0.75, and the government cuts spending by $100 billion, the overall effect on GDP will be:

Accepted Answer

A)   a decrease of $400 billion.
B)   an increase of $250 billion.
C)   a decrease of $250 billion.
D)   an increase of $400 billion.

Question 5

Suppose Chen receives a promotion that earns him an additional $20,000 per year. If the MPC is 0.9, how much of the additional $20,000 that Chen earns will be spent?

Accepted Answer

A)   $20,000
B)   $2,500
C)   $17,500
D)   $18,000

Question 6

If the domestic income of a nation's citizens decreases, net exports will likely:

Accepted Answer

A)   increase.
B)   decrease.
C)   remain constant.
D)   There is not enough information to determine what will happen.

Question 7

Which of the following scenarios would cause investment to increase?

Accepted Answer

A)   The Federal Reserve announces an increase in the interest rate.
B)   Housing prices increase.
C)   A free trade agreement increases overall exports.
D)   The U.S. government announces a plan to tax the ad revenue of large tech companies.

Question 8

The figure shows planned aggregate expenditure and output for an economy. 1, there should be _______ in production because PAE is _______ actual output. A)  an increase; less than B)  an increase; greater than C)  no change; equal to D)  a decrease; greater than" class="answers-bank-image d-inline" rel="preload" > If output in this economy is Y1, there should be _______ in production because PAE is _______ actual output.

Accepted Answer

A)   an increase; less than
B)   an increase; greater than
C)   no change; equal to
D)   a decrease; greater than

Question 9

Which of the following scenarios would increase the net exports component of aggregate expenditure?

Accepted Answer

A)   The dollar increases in value relative to other currencies.
B)   Countries in the European Union experience a long period of economic growth.
C)   A series of recalls for domestic automobiles shifts preferences towards foreign cars and trucks.
D)   The United States experiences a long period of economic growth.

Question 10

The marginal propensity to consume:

Accepted Answer

A)   is the amount by which consumption increases when after-tax income increases by $1.
B)   is closely linked to the multiplier effect of government spending.
C)   is a value between 0 and 1.
D)   All of these are true.

Question 11

The figure shows planned aggregate expenditure and output for an economy. 2. This level of GDP would be considered: A)  inflationary. B)  recessionary. C)  a long-run level of output. D)  unsustainable over time." class="answers-bank-image d-inline" rel="preload" > Suppose that the economy's output is Y2. This level of GDP would be considered:

Accepted Answer

A)   inflationary.
B)   recessionary.
C)   a long-run level of output.
D)   unsustainable over time.

Question 12

In general, households with lower wealth tend to have a(n)  _______ MPC relative to wealthier households.

Accepted Answer

A)   lower
B)   higher
C)   similar
D)   identical

Question 13

When PAE is less than Y, inventories should:

Accepted Answer

A)   increase.
B)   decrease.
C)   remain the same.
D)   decrease slightly before sharply increasing.

Question 14

A(n)  _______ relationship exists between expected future income and consumption.

Accepted Answer

A)   negative
B)   positive
C)   indirect
D)   constant

Question 15

An inflationary output gap exists when the current level of output is _______ full employment GDP.

Accepted Answer

A)   below
B)   above
C)   equal to
D)   decreasing rapidly relative to

Question 16

Which of the following is not an example of a transfer payment?

Accepted Answer

A)   Social Security payments
B)   Sales tax
C)   Unemployment benefits
D)   Workman's compensation

Question 17

A(n)  _______ relationship exists between profitability and investment spending.

Accepted Answer

A)   negative
B)   positive
C)   indirect
D)   constant

Question 18

Which of the following describes the relationship between production and inventories?

Accepted Answer

A)   If planned inventories are greater than actual inventories, firms should increase production.
B)   If planned inventories are less than actual inventories, firms should decrease production.
C)   If planned inventories are less than actual inventories, firms should increase production.
D)   If planned inventories are greater than actual inventories, firms should decrease production.

Question 19

Suppose a housing bubble inflates house prices to new records. What will happen to overall consumption in this economy?

Accepted Answer

A)   It will decrease.
B)   It will stay the same.
C)   It will increase.
D)   The impact on consumption is unclear.

Question 20

Suppose Erin receives an inheritance worth $50,000. If her MPC is 0.75, how much of the additional $50,000 that Erin earns will be spent?

Accepted Answer

A)   $50,000
B)   $12,500
C)   $37,500
D)   $40,000

Exam 11: Aggregateexpenditures

Suppose a housing bubble inflates house prices to new records. What will happen to overall consumption in this economy?

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If spending increases by $200, and GDP increases by $1,000 as a result, what must the MPC be?

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An inflationary output gap exists when the current level of output is _______ full employment GDP.

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Which of the following does not influence autonomous spending?

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A(n) _______ relationship exists between expected future income and consumption.

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When PAE is less than Y, inventories should:

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Which of the following scenarios would cause investment to increase?

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In general, households with lower wealth tend to have a(n) _______ MPC relative to wealthier households.

Correct AnswerverifiedShow Answer

The figure shows planned aggregate expenditure and output for an economy. If output in this economy is Y1, there should be _______ in production because PAE is _______ actual output.

Correct AnswerverifiedShow Answer

If the MPC is 0.75, and the government cuts spending by $100 billion, the overall effect on GDP will be:

Correct AnswerverifiedShow Answer

Which of the following describes the relationship between production and inventories?

Correct AnswerverifiedShow Answer

Suppose Chen receives a promotion that earns him an additional $20,000 per year. If the MPC is 0.9, how much of the additional $20,000 that Chen earns will be spent?

Correct AnswerverifiedShow Answer

Which of the following is not an example of a transfer payment?

Correct AnswerverifiedShow Answer

If the domestic income of a nation's citizens decreases, net exports will likely:

Correct AnswerverifiedShow Answer

A(n) _______ relationship exists between profitability and investment spending.

Correct AnswerverifiedShow Answer

If the marginal propensity to consume is 0.25, it would mean that:

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The figure shows planned aggregate expenditure and output for an economy. Suppose that the economy's output is Y2. This level of GDP would be considered:

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The marginal propensity to consume:

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Which of the following scenarios would increase the net exports component of aggregate expenditure?

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Suppose Erin receives an inheritance worth $50,000. If her MPC is 0.75, how much of the additional $50,000 that Erin earns will be spent?

Correct AnswerverifiedShow Answer

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The figure shows planned aggregate expenditure and output for an economy. If output in this economy is Y₁, there should be _ in production because PAE is _ actual output.

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The figure shows planned aggregate expenditure and output for an economy. Suppose that the economy's output is Y₂. This level of GDP would be considered:

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