Question 1

________ usually increase(s) when the U.S.economy is in a recession and decrease(s) when the U.S.economy is expanding.

Accepted Answer

A)  Consumer spending
B)  Planned investment
C)  Net Exports
D)  Unplanned investment

Question 2

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 3

The slope of the consumption function is equal to

Accepted Answer

A)  the change in consumption divided by the change in disposable income.
B)  the change in consumption divided by the change in personal income.
C)  the change in disposable income divided by the change in consumption.
D)  the change in national income divided by the change in consumption.

Question 4

At macroeconomic equilibrium

Accepted Answer

A)  total investment equals total inventories.
B)  total spending equals total production.
C)  total consumption equals total production.
D)  total taxes equal total transfers.

Question 5

If aggregate expenditure is greater than GDP,how will the economy reach macroeconomic equilibrium?

Accepted Answer

A)  Inventories will decline,and GDP and employment will decline.
B)  Inventories will rise,and GDP and employment will decline.
C)  Inventories will decline,and GDP and employment will rise.
D)  Inventories will rise,and GDP and employment will rise.

Question 6

Ceteris paribus,how does a recession in the United States affect U.S.net exports?

Accepted Answer

As GDP decreases in the United States du...

Question 7

Figure 23-1 
-Refer to Figure 23-1.If the economy is at point L,what will happen?

Accepted Answer

A)  Inventories have fallen below their desired level,and firms decrease production.
B)  Inventories have fallen below their desired level,and firms increase production.
C)  Inventories have risen above their desired level,and firms decrease production.
D)  Inventories have risen above their desired level,and firms increase production.

Question 8

Firms in a small economy planned that inventories would grow over the past year by $500,000.Over that year,inventories did grow by exactly $500,000.This implies that

Accepted Answer

A)  aggregate expenditure that year was equal to GDP that year.
B)  there was an unplanned increase in inventories that year.
C)  there was an unplanned decrease in inventories that year.
D)  aggregate expenditure that year was greater than GDP that year.

Question 9

Consumption spending will ________ when disposable income ________.

Accepted Answer

A)  increase;increases
B)  increase;decreases
C)  decrease;increases
D)  change unpredictably;decreases

Question 10

A general formula for the multiplier is

Accepted Answer

A)    1(1−MPS) \frac { 1 } { ( 1 - M P S )  }(1−MPS) 1​  .
B)    1(MP
C)  \frac { 1 } { ( M P C )  }(MP
C)  1​  .
C)    1(MPS) \frac { 1 } { ( M P S )  }(MPS) 1​  .
D)    1(MPC−1) \frac { 1 } { ( M P C - 1 )  }(MPC−1) 1​  .

Question 11

If planned aggregate expenditure is greater than total production

Accepted Answer

A)  actual inventories will equal planned inventories.
B)  firms will experience an unplanned increase in inventories.
C)  GDP will increase.
D)  the economy is in equilibrium.

Question 12

On the 45-degree line diagram,for points that lie below the 45-degree line

Accepted Answer

A)  planned aggregate expenditure is greater than GDP.
B)  planned aggregate expenditure is less than GDP.
C)  planned aggregate expenditure is equal to GDP.
D)  planned aggregate expenditure is less than aggregate income.

Question 13

Investment spending will decrease when

Accepted Answer

A)  the interest rate falls.
B)  the corporate income tax decreases.
C)  business cash flow decreases.
D)  firms become more optimistic about earning future profits.

Question 14

Suppose the United States experiences a long period of relatively stable prices while other countries experience long periods of inflation.How will this affect U.S.net exports?

Accepted Answer

If inflation in the United States is low...

Question 15

________ spending follows a smooth trend whereas,________ spending is more volatile and subject to fluctuations.

Accepted Answer

A)  Consumer;government
B)  Consumer;investment
C)  Investment;consumer
D)  Government;consumer

Question 16

All of the following are components of aggregate expenditure except

Accepted Answer

A)  consumption spending.
B)  net export spending.
C)  actual investment spending.
D)  government spending.

Question 17

Given the equations for C,I,G,and NX below,what is the marginal propensity to consume? C = 2,000 + 0.9Y
I = 2,500
G = 3,000
NX = 400

Accepted Answer

A)  -0.1
B)  0.1
C)  0.9
D)  2000

Question 18

What is the difference between aggregate expenditure and consumption spending?

Accepted Answer

Aggregate expenditure represents the tot...

Question 19

MPC + MPS =

Accepted Answer

A)  0.
B)  0.5.
C)  1.
D)  100.

Question 20

Figure 23-2 
-Refer to Figure 23-2.Suppose that the level of GDP associated with point K is potential GDP.If the U.S.economy is currently at point N,

Accepted Answer

A)  firms are operating below capacity.
B)  the economy is at full employment.
C)  the economy is in an expansion.
D)  the level of unemployment is above the natural rate.

Exam 23: Aggregate Expenditure and Output in the Short Run

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

Correct AnswerverifiedShow Answer

What is the difference between aggregate expenditure and consumption spending?

Correct AnswerverifiedAggregate expenditure represents the tot...View AnswerShow Answer

Consumption spending will ________ when disposable income ________.

Correct AnswerverifiedShow Answer

At macroeconomic equilibrium

Correct AnswerverifiedShow Answer

If planned aggregate expenditure is greater than total production

Correct AnswerverifiedShow Answer

________ spending follows a smooth trend whereas,________ spending is more volatile and subject to fluctuations.

Correct AnswerverifiedShow Answer

Ceteris paribus,how does a recession in the United States affect U.S.net exports?

Correct AnswerverifiedAs GDP decreases in the United States du...View AnswerShow Answer

________ usually increase(s) when the U.S.economy is in a recession and decrease(s) when the U.S.economy is expanding.

Correct AnswerverifiedShow Answer

Firms in a small economy planned that inventories would grow over the past year by $500,000.Over that year,inventories did grow by exactly $500,000.This implies that

Correct AnswerverifiedShow Answer

The slope of the consumption function is equal to

Correct AnswerverifiedShow Answer

On the 45-degree line diagram,for points that lie below the 45-degree line

Correct AnswerverifiedShow Answer

A general formula for the multiplier is

Correct AnswerverifiedShow Answer

Figure 23-1 -Refer to Figure 23-1.If the economy is at point L,what will happen?

Correct AnswerverifiedShow Answer

If aggregate expenditure is greater than GDP,how will the economy reach macroeconomic equilibrium?

Correct AnswerverifiedShow Answer

MPC + MPS =

Correct AnswerverifiedShow Answer

Investment spending will decrease when

Correct AnswerverifiedShow Answer

Figure 23-2 -Refer to Figure 23-2.Suppose that the level of GDP associated with point K is potential GDP.If the U.S.economy is currently at point N,

Correct AnswerverifiedShow Answer

All of the following are components of aggregate expenditure except

Correct AnswerverifiedShow Answer

Suppose the United States experiences a long period of relatively stable prices while other countries experience long periods of inflation.How will this affect U.S.net exports?

Correct AnswerverifiedIf inflation in the United States is low...View AnswerShow Answer

Given the equations for C,I,G,and NX below,what is the marginal propensity to consume? C = 2,000 + 0.9Y I = 2,500 G = 3,000 NX = 400

Correct AnswerverifiedShow Answer

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Aggregate expenditure represents the tot...
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Consumption spending will when disposable income .

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spending follows a smooth trend whereas, spending is more volatile and subject to fluctuations.

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As GDP decreases in the United States du...
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If inflation in the United States is low...
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