Question 1

Which of the following is not true about a change in the price level?​

Accepted Answer

A)  It will shift the aggregate demand curve.
B)  It will shift the aggregate expenditure curve.
C)  It will result in a new value of equilibrium real GDP demanded.
D)  It will change the real value of dollar-denominated assets.
E)  It will shift the consumption function.

Question 2

If a household's income rises from $46,000 to $46,700 and its consumption spending rises from $35,800 to $36,400,then its:​

Accepted Answer

A)  marginal propensity to consume is 0.86.
B)  marginal propensity to consume is 0.99.
C)  marginal propensity to consume is 0.98.
D)  marginal propensity to save is 0.01.
E)  marginal propensity to save is 0.86.

Question 3

Historically,consumption spending in the United States has _____.​

Accepted Answer

A)  fluctuated greatly with changes in the level of income
B)  remained approximately constant as a percentage of income​
C)  decreased as a percentage of income​
D)  varied inversely with the inflation rate​
E)  varied inversely with the interest rate

Question 4

Government outlays equal:​

Accepted Answer

A)  the difference between government expenditures and government revenues.
B)  the sum of government expenditures and government revenues.
C)  the sum of government purchases and transfer payments.
D)  the difference between government purchases and transfer payments.
E)  the ratio of government purchases to transfer payments.

Question 5

If the marginal propensity to consume (MPC) equals 0.9,the multiplier is _____.​

Accepted Answer

A)  1
B)  2​
C)  5​
D)  10​
E)  12​

Question 6

An increase in the price level in an economy will _____.​

Accepted Answer

A)  shift the aggregate expenditure line upward
B)  shift the aggregate expenditure line downward​
C)  cause an upward movement along the aggregate expenditure line​
D)  cause a downward movement along the aggregate expenditure line​
E)  shift the aggregate demand curve downward​

Question 7

The consumption function assumes that:​

Accepted Answer

A)  only disposable income affects consumption.
B)  only the price level affects consumption.
C)  many factors other than disposable income affect consumption,and each is allowed to vary along the consumption function.
D)  factors other than disposable income affect consumption,but those are held constant along the consumption function.
E)  only consumer expectations affect consumption.

Question 8

The aggregate expenditure line shows total planned spending at each _____.​

Accepted Answer

A)  consumption level
B)  investment level
C)  income level,holding the price level constant
D)  price level,holding the level of income constant
E)  interest rate,holding the price level constant

Question 9

In the income-expenditure framework,if planned aggregate expenditures are less than real gross domestic product (GDP) ,_____.​

Accepted Answer

A)  saving will increase​
B)  the price level will increase​
C)  inventories will increase​
D)  inventories will decrease​
E)  consumption will decrease​

Question 10

The market interest rate is important to the investment decision of firms:​

Accepted Answer

A)  only when funds are borrowed from financial intermediaries.
B)  only when firms have the money to invest in capital.
C)  regardless of whether funds must be borrowed or firms have the funds on hand.
D)  only when firms have funds on hand and are ready to lend them.
E)  only when firms purchase new equipment rather than a new building.

Question 11

An increase in the price level will:​

Accepted Answer

A)  make the consumption function flatter.
B)  make the consumption function steeper.
C)  increase consumption because wages will increase.
D)  decrease consumption because falling interest rates make it cheaper to borrow.
E)  decrease consumption because the value of net wealth will decrease.

Question 12

If investment increases by $100 and,as a result,gross domestic product (GDP) ultimately increases by $200,the multiplier equals _____.​

Accepted Answer

A)  1
B)  2​
C)  3​
D)  4​
E)  5​

Question 13

Which of the following will shift the consumption function upward?​

Accepted Answer

A)  A decrease in stock prices
B)  An increase in stock prices​
C)  A higher price level​
D)  A lower disposable income​
E)  A higher disposable income​

Question 14

In the income-expenditure model,if autonomous saving increases by $15 billion,_____.​

Accepted Answer

A)  the aggregate expenditure line shifts upward by $15 billion
B)  planned investment increases by $15 billion​
C)  the aggregate expenditure line shifts downward by $15 billion​
D)  planned investment decreases by $15 billion​
E)  the equilibrium level of real GDP demanded decreases by $15 billion​

Question 15

An increase in planned investment will shift the _____.​

Accepted Answer

A)  aggregate demand curve rightward
B)  aggregate demand curve leftward​
C)  aggregate supply curve rightward​
D)  aggregate supply curve leftward​
E)  consumption function upward​

Question 16

The sum of the marginal propensity to consume (MPC) and the marginal propensity to save (MPS) equals:​

Accepted Answer

A)  0.5.
B)  the multiplier.
C)  the slope of the consumption function.
D)  1.0.
E)  the slope of the saving function.

Question 17

An increase in the interest rate,other things constant,decreases the amount of investment spending.​

Accepted Answer

A) True 
 B)False

Question 18

The smaller the marginal propensity to save,other things constant,_____.​

Accepted Answer

A)  the smaller the marginal propensity to consume
B)  the larger the multiplier​
C)  the smaller the multiplier​
D)  the flatter the consumption function​
E)  the steeper the saving function​

Question 19

An increase in the marginal propensity to consume (MPC)will cause the consumption function to become steeper.​

Accepted Answer

A) True 
 B)False

Question 20

The fraction of a change in disposable income that is consumed is called _____.​

Accepted Answer

A)  autonomous consumption
B)  induced consumption​
C)  the multiplier​
D)  the marginal propensity to consume​
E)  the marginal propensity to save​

Exam 9: Aggregate Demand

The aggregate expenditure line shows total planned spending at each _____.​

Correct AnswerverifiedShow Answer

The fraction of a change in disposable income that is consumed is called _____.​

Correct AnswerverifiedShow Answer

An increase in the price level will:​

Correct AnswerverifiedShow Answer

The consumption function assumes that:​

Correct AnswerverifiedShow Answer

An increase in the price level in an economy will _____.​

Correct AnswerverifiedShow Answer

If investment increases by $100 and,as a result,gross domestic product (GDP) ultimately increases by $200,the multiplier equals _____.​

Correct AnswerverifiedShow Answer

An increase in the marginal propensity to consume (MPC)will cause the consumption function to become steeper.​

Correct AnswerverifiedShow Answer

The smaller the marginal propensity to save,other things constant,_____.​

Correct AnswerverifiedShow Answer

Which of the following will shift the consumption function upward?​

Correct AnswerverifiedShow Answer

An increase in planned investment will shift the _____.​

Correct AnswerverifiedShow Answer

Which of the following is not true about a change in the price level?​

Correct AnswerverifiedShow Answer

Historically,consumption spending in the United States has _____.​

Correct AnswerverifiedShow Answer

In the income-expenditure model,if autonomous saving increases by $15 billion,_____.​

Correct AnswerverifiedShow Answer

In the income-expenditure framework,if planned aggregate expenditures are less than real gross domestic product (GDP) ,_____.​

Correct AnswerverifiedShow Answer

The sum of the marginal propensity to consume (MPC) and the marginal propensity to save (MPS) equals:​

Correct AnswerverifiedShow Answer

Government outlays equal:​

Correct AnswerverifiedShow Answer

If the marginal propensity to consume (MPC) equals 0.9,the multiplier is _____.​

Correct AnswerverifiedShow Answer

If a household's income rises from $46,000 to $46,700 and its consumption spending rises from $35,800 to $36,400,then its:​

Correct AnswerverifiedShow Answer

The market interest rate is important to the investment decision of firms:​

Correct AnswerverifiedShow Answer

An increase in the interest rate,other things constant,decreases the amount of investment spending.​

Correct AnswerverifiedShow Answer

The aggregate expenditure line shows total planned spending at each _____.

Correct Answer
verified

The fraction of a change in disposable income that is consumed is called _____.

Correct Answer
verified

An increase in the price level will:

Correct Answer
verified

The consumption function assumes that:

Correct Answer
verified

An increase in the price level in an economy will _____.

Correct Answer
verified

If investment increases by $100 and,as a result,gross domestic product (GDP) ultimately increases by $200,the multiplier equals _____.

Correct Answer
verified

An increase in the marginal propensity to consume (MPC)will cause the consumption function to become steeper.

Correct Answer
verified

The smaller the marginal propensity to save,other things constant,_____.

Correct Answer
verified

Which of the following will shift the consumption function upward?

Correct Answer
verified

An increase in planned investment will shift the _____.

Correct Answer
verified

Which of the following is not true about a change in the price level?

Correct Answer
verified

Historically,consumption spending in the United States has _____.

Correct Answer
verified

In the income-expenditure model,if autonomous saving increases by $15 billion,_____.

Correct Answer
verified

In the income-expenditure framework,if planned aggregate expenditures are less than real gross domestic product (GDP) ,_____.

Correct Answer
verified

The sum of the marginal propensity to consume (MPC) and the marginal propensity to save (MPS) equals:

Correct Answer
verified

Government outlays equal:

Correct Answer
verified

If the marginal propensity to consume (MPC) equals 0.9,the multiplier is _____.

Correct Answer
verified

If a household's income rises from $46,000 to $46,700 and its consumption spending rises from $35,800 to $36,400,then its:

Correct Answer
verified

The market interest rate is important to the investment decision of firms:

Correct Answer
verified

An increase in the interest rate,other things constant,decreases the amount of investment spending.

Correct Answer
verified