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Exam 10: Aggregate Expenditure and Aggregate Demand

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Question 71

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Suppose the price level increases.How will the aggregate demand curve be affected?  

A)  The aggregate demand curve will shift to the right. 
B)  The aggregate demand curve will shift to the left. 
C)  The level of aggregate quantity demanded will increase. 
D)  The level of aggregate quantity demanded will decrease.

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Question 72

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Suppose planned investment increases by $200 billion and the marginal propensity to consume equals 0.80.By what amount will the aggregate expenditure line shift upward at every level of real GDP?  

A)  by $40 billion 
B)  by $160 billion 
C)  by $200 billion 
D)  by $250 billion

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Question 73

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How will an increase in the price level affect the aggregate demand curve?  

How will a rise in the price level affect the aggregate expenditure curve and the aggregate demand curve?  

In the income-expenditure framework, if planned aggregate expenditures are less than real GDP.How will inventories be affected?  

What is the effect of a decrease in the price level?  

Which of the following is NOT included in the aggregate expenditure line?  

Other things constant, how does an increase in the marginal propensity to consume affect the value of the multiplier?  

$\begin{array}{l}\text { Schedule for Real GDP, Net Taxes and Government Purchases (Trillions of Dollars) }\\\begin{array}{ccccccccc}\hline \begin{array}{c}\text { Real } \\\text { GDP }\end{array} & \begin{array}{c}\text { Net } \\\text { taxes }\end{array} & \begin{array}{c}\text { Disposable } \\\text { income } \\(Y) \end{array} & \begin{array}{c}\text { Consumption } \\(N T) \end{array} & \begin{array}{c}\text { Saving } \\(Y-N T) \end{array} & \begin{array}{c}\text { Planned } \\\text { investment } \\(S) \end{array} & \begin{array}{c}\text { Net } \\\text { exports } \\(N X) \end{array} & \begin{array}{c}\text { Government } \\\text { purchases } \\(G) \end{array} & \begin{array}{c}\text { Planned } \\\text { aggregate } \\\text { expenditure } \\(C+I+N X+G) \end{array} \\\hline 3.0 & 0.9 & 2.1 & 2.0 & 0.1 & 0.5 & -0.2 & 0.9 & 3.2 \\3.6 & 0.9 & 2.7 & 2.4 & 0.3 & 0.5 & -0.2 & 0.9 & 3.5 \\4.2 & 0.9 & 3.3 & 2.8 & 0.5 & 0.5 & -0.2 & 0.9 & 4.0 \\4.8 & 0.9 & 3.9 & 3.2 & 0.7 & 0.5 & -0.2 & 0.9 & 4.4 \\5.4 & 0.9 & 4.5 & 3.6 & 0.9 & 0.5 & -0.2 & 0.9 & 4.8 \\\hline\end{array}\end{array}$ -Refer to the table in the exhibit.What is the marginal propensity to save?  

On the aggregate expenditure graph, suppose autonomous investment increases by $20 billion.What will be the effect on the aggregate expenditure line?  

Consider the aggregate expenditure line.What do the graph's horizontal axis and the vertical axis represent?  

-Refer to the table in the exhibit.At the equilibrium level of GDP, what do leakages equal?  

$\begin{array}{l}\text { Schedule for Real GDP, Net Taxes and Government Purchases (Trillions of Dollars) }\\\begin{array}{ccccccccc}\hline \begin{array}{c}\text { Real } \\\text { GDP }\end{array} & \begin{array}{c}\text { Net } \\\text { taxes }\end{array} & \begin{array}{c}\text { Disposable } \\\text { income } \\(Y) \end{array} & \begin{array}{c}\text { Consumption } \\(N T) \end{array} & \begin{array}{c}\text { Saving } \\(Y-N T) \end{array} & \begin{array}{c}\text { Planned } \\\text { investment } \\(S) \end{array} & \begin{array}{c}\text { Net } \\\text { exports } \\(N X) \end{array} & \begin{array}{c}\text { Government } \\\text { purchases } \\(G) \end{array} & \begin{array}{c}\text { Planned } \\\text { aggregate } \\\text { expenditure } \\(C+I+N X+G) \end{array} \\\hline 3.0 & 0.9 & 2.1 & 2.0 & 0.1 & 0.5 & -0.2 & 0.9 & 3.2 \\3.6 & 0.9 & 2.7 & 2.4 & 0.3 & 0.5 & -0.2 & 0.9 & 3.5 \\4.2 & 0.9 & 3.3 & 2.8 & 0.5 & 0.5 & -0.2 & 0.9 & 4.0 \\4.8 & 0.9 & 3.9 & 3.2 & 0.7 & 0.5 & -0.2 & 0.9 & 4.4 \\5.4 & 0.9 & 4.5 & 3.6 & 0.9 & 0.5 & -0.2 & 0.9 & 4.8 \\\hline\end{array}\end{array}$ -Refer to the table in the exhibit.What is the equilibrium level of income?  

-Refer to the graph in the exhibit.Which of the following best describes the situation at point C?  

What is the definition of the simple multiplier?  

Suppose an increase in planned investment of $70 billion causes equilibrium output demanded to rise by $280 billion.What is the value of the marginal propensity to consume?  

Suppose planned autonomous investment increases by $200 billion and the marginal propensity to consume equals 0.80.What will be the increase in the equilibrium level of real GDP?  

Suppose an economy is in equilibrium when net taxes = $50 trillion, saving = $40 trillion, government purchases = $50 trillion, exports = $30 trillion, and imports = $10 trillion.What must planned investment spending be equal to?  

Suppose the multiplier is 4.What would be the cause of a $10 billion increase in autonomous investment?  

Suppose the level of autonomous spending increases at a given price level.How does this relate to the aggregate expenditure line and aggregate demand?