Question 1

The marginal propensity to consume is

Accepted Answer

A)  consumption times income. 
B)  the amount of consumption at a specific level of income. 
C)  a change in saving divided by a change in consumption. 
D)  the fraction of a change in income that is consumed or spent. 
A)  consumption times income. 
B)  the amount of consumption at a specific level of income. 
C)  a change in saving divided by a change in consumption. 
D)  the fraction of a change in income that is consumed or spent. D

Question 2

Refer to the information provided in Table 23.7 below to answer the question(s) that follow.
Table 23.7  
-Refer to Table 23.7. The equilibrium level of aggregate output equals

Accepted Answer

A)  $400 billion. 
B)  $600 billion. 
C)  $800 billion. 
D)  $1,000 billion. 
A)  $400 billion. 
B)  $600 billion. 
C)  $800 billion. 
D)  $1,000 billion. D

Question 3

Refer to the information provided in Figure 23.10 below to answer the question(s) that follow.   Figure 23.10
-Refer to Figure 23.10. Unplanned inventories increase and output decreases when aggregate output is

Accepted Answer

A)  $0. 
B)  $500 million. 
C)  $1,000 million. 
D)  > $1,000 million. 
A)  $0. 
B)  $500 million. 
C)  $1,000 million. 
D)  > $1,000 million. D

Question 4

The economy can be in equilibrium if, and only if

Accepted Answer

A)  planned investment is zero. 
B)  actual investment is zero. 
C)  planned investment is greater than actual investment. 
D)  planned investment equals actual investment. 
A)  planned investment is zero. 
B)  actual investment is zero. 
C)  planned investment is greater than actual investment. 
D)  planned investment equals actual investment.

Question 5

Refer to the information provided in Table 23.4 below to answer the question(s) that follow.
Table 23.4  
-Refer to Table 23.4. Assuming society's MPC is constant, at an aggregate income level of $1,200, aggregate consumption would be

Accepted Answer

A)  $2,000. 
B)  $1,400. 
C)  $1,100. 
D)  $950. 
A)  $2,000. 
B)  $1,400. 
C)  $1,100. 
D)  $950.

Question 6

Refer to the information provided in Figure 23.9 below to answer the question(s) that follow.   Figure 23.9
-Refer to Figure 23.9. [150 + 0.25Y] is the

Accepted Answer

A)  MPC. 
B)  MPS. 
C)  saving function. 
D)  aggregate expenditures function. 
A)  MPC. 
B)  MPS. 
C)  saving function. 
D)  aggregate expenditures function.

Question 7

Which of the following is considered investment?

Accepted Answer

A)  the acquisition of capital goods 
B)  the purchase of government bonds 
C)  the purchase of IBM stock 
D)  the sale of foreign currency 
A)  the acquisition of capital goods 
B)  the purchase of government bonds 
C)  the purchase of IBM stock 
D)  the sale of foreign currency

Question 8

Related to the Economics in Practice on p. 476: According to the "paradox of thrift," as individuals increase their saving

Accepted Answer

A)  income in the economy increases because there is more money available for firms to invest. 
B)  income in the economy increases because interest rates will fall and the economy will expand. 
C)  income in the economy will remain constant because the change in consumption equals the change in saving. 
D)  income in the economy will fall because the decreased consumption that results from increased saving causes the economy to contract. 
A)  income in the economy increases because there is more money available for firms to invest. 
B)  income in the economy increases because interest rates will fall and the economy will expand. 
C)  income in the economy will remain constant because the change in consumption equals the change in saving. 
D)  income in the economy will fall because the decreased consumption that results from increased saving causes the economy to contract.

Question 9

Refer to the information provided in Figure 23.2 below to answer the question(s) that follow.   Figure 23.2
-Refer to Figure 23.2. The line segment BD represents Jerry's

Accepted Answer

A)  consumption when income equals Y1. 
B)  saving when income equals zero. 
C)  saving when income is Y1. 
D)  consumption when income equals zero. 
A)  consumption when income equals Y1. 
B)  saving when income equals zero. 
C)  saving when income is Y1. 
D)  consumption when income equals zero.

Question 10

Refer to the information provided in Figure 23.11 below to answer the question(s) that follow.   Figure 23.11
-Refer to Figure 23.11. Equilibrium aggregate output will increase to $250 million if the

Accepted Answer

A)  MPC increases to 0.8. 
B)  MPS increases to 0.8. 
C)  multiplier increases to 8. 
D)  all of the above. 
A)  MPC increases to 0.8. 
B)  MPS increases to 0.8. 
C)  multiplier increases to 8. 
D)  all of the above.

Question 11

A decrease in planned investment causes

Accepted Answer

A)  output to increase. 
B)  output to decrease, but by a smaller amount than the decrease in investment. 
C)  output to decrease, but by a larger amount than the decrease in investment. 
D)  output to decrease by an amount equal to the decrease in investment. 
A)  output to increase. 
B)  output to decrease, but by a smaller amount than the decrease in investment. 
C)  output to decrease, but by a larger amount than the decrease in investment. 
D)  output to decrease by an amount equal to the decrease in investment.

Question 12

If the marginal propensity to consume is 0.8, the marginal propensity to save is 8.

Accepted Answer

A) True 
 B)False

Question 13

Refer to the information provided in Figure 23.4 below to answer the question(s) that follow.   Figure 23.4
-Refer to Figure 23.4. Suppose the consumption function for C1 = 20 + 0.5Y, the consumption function that best fits C3 is

Accepted Answer

A)  C3 = 20 + 0.8Y. 
B)  C3 = 20 + 0.4Y. 
C)  C3 = 40 + 0.5Y. 
D)  C3 = 40 + 0.4Y. 
A)  C3 = 20 + 0.8Y. 
B)  C3 = 20 + 0.4Y. 
C)  C3 = 40 + 0.5Y. 
D)  C3 = 40 + 0.4Y.

Question 14

If the consumption function is of the form [C = 80 + 0.4Y], the MPS equals

Accepted Answer

A)  -0.6. 
B)  -0.4. 
C)  0.4. 
D)  0.6. 
A)  -0.6. 
B)  -0.4. 
C)  0.4. 
D)  0.6.

Question 15

Related to the Economics in Practice on p. 473: If a recovery from a recession is slower than expected, companies like General Motors would likely experience ________ in unplanned inventories and as a result ________ production.

Accepted Answer

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

Question 16

The larger the MPC, the smaller the MPS.

Accepted Answer

A) True 
 B)False

Question 17

If planned investment is perfectly responsive to changes in the interest rate, the planned investment schedule

Accepted Answer

A)  has a negative slope. 
B)  is horizontal. 
C)  is vertical. 
D)  has a positive slope. 
A)  has a negative slope. 
B)  is horizontal. 
C)  is vertical. 
D)  has a positive slope.

Question 18

Refer to the information provided in Table 23.2 below to answer the question(s) that follow.
Table 23.2  
-Refer to Table 23.2. The equation for the aggregate saving function is

Accepted Answer

A)  S = -100 + 0.15Y. 
B)  S = -100 + 0.1Y. 
C)  S = -150 + 0.2Y. 
D)  S = -150 + 0.85Y. 
A)  S = -100 + 0.15Y. 
B)  S = -100 + 0.1Y. 
C)  S = -150 + 0.2Y. 
D)  S = -150 + 0.85Y.

Question 19

Assume that in Jabara, planned investment is $30 billion, but actual investment is $45 billion. Unplanned inventory investment is

Accepted Answer

A)  -$75 billion. 
B)  -$15 billion. 
C)  $15 billion. 
D)  $75 billion. 
A)  -$75 billion. 
B)  -$15 billion. 
C)  $15 billion. 
D)  $75 billion.

Question 20

If unplanned business investment is $20 million and planned investment is $20 million, then actual investment is

Accepted Answer

A)  -$20 million. 
B)  $20 million. 
C)  $40 million. 
D)  $200 million. 
A)  -$20 million. 
B)  $20 million. 
C)  $40 million. 
D)  $200 million.

Exam 23: Aggregate Expenditure and Equilibrium Output

The marginal propensity to consume is

Refer to the information provided in Table 23.7 below to answer the question(s) that follow. Table 23.7 -Refer to Table 23.7. The equilibrium level of aggregate output equals

Refer to the information provided in Figure 23.10 below to answer the question(s) that follow. Figure 23.10 -Refer to Figure 23.10. Unplanned inventories increase and output decreases when aggregate output is

The economy can be in equilibrium if, and only if

Refer to the information provided in Table 23.4 below to answer the question(s) that follow. Table 23.4 -Refer to Table 23.4. Assuming society's MPC is constant, at an aggregate income level of $1,200, aggregate consumption would be

Refer to the information provided in Figure 23.9 below to answer the question(s) that follow. Figure 23.9 -Refer to Figure 23.9. [150 + 0.25Y] is the

Which of the following is considered investment?

Related to the Economics in Practice on p. 476: According to the "paradox of thrift," as individuals increase their saving

Refer to the information provided in Figure 23.2 below to answer the question(s) that follow. Figure 23.2 -Refer to Figure 23.2. The line segment BD represents Jerry's

Refer to the information provided in Figure 23.11 below to answer the question(s) that follow. Figure 23.11 -Refer to Figure 23.11. Equilibrium aggregate output will increase to $250 million if the

A decrease in planned investment causes

If the marginal propensity to consume is 0.8, the marginal propensity to save is 8.

Refer to the information provided in Figure 23.4 below to answer the question(s) that follow. Figure 23.4 -Refer to Figure 23.4. Suppose the consumption function for C1 = 20 + 0.5Y, the consumption function that best fits C3 is

If the consumption function is of the form [C = 80 + 0.4Y], the MPS equals

Related to the Economics in Practice on p. 473: If a recovery from a recession is slower than expected, companies like General Motors would likely experience ________ in unplanned inventories and as a result ________ production.

The larger the MPC, the smaller the MPS.

If planned investment is perfectly responsive to changes in the interest rate, the planned investment schedule

Refer to the information provided in Table 23.2 below to answer the question(s) that follow. Table 23.2 -Refer to Table 23.2. The equation for the aggregate saving function is

Assume that in Jabara, planned investment is $30 billion, but actual investment is $45 billion. Unplanned inventory investment is

If unplanned business investment is $20 million and planned investment is $20 million, then actual investment is

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand, Supply, and Market Equilibrium

Demand and Supply Applications

Elasticity

Household Behavior and Consumer Choice

The Production Process: the Behavior of Profit-Maximizing Firms

Short-Run Costs and Output Decisions

Long-Run Costs and Output Decisions

Input Demand: The Labor and Land Markets

Input Demand: The Capital Market and the Investment Decision

General Equilibrium and the Efficiency of Perfect Competition

Monopoly and Antitrust Policy

Oligopoly

Monopolistic Competition

Externalities, Public Goods, and Common Resources

Uncertainty and Asymmetric Information

Income Distribution and Poverty

Public Finance: The Economics of Taxation

Introduction to Macroeconomics

Measuring National Output and National Income

Unemployment, Inflation, and Long-Run Growth

The Government and Fiscal Policy

Money, the Federal Reserve, and the Interest Rate

The Determination of Aggregate Output, the Price Level, and the Interest Rate

Policy Effects and Cost Shocks in the Asad Model

The Labor Market in the Macroeconomy

Financial Crises, Stabilization, and Deficits

Household and Firm Behavior in the Macroeconomy: a Further Look

Long-Run Growth

Alternative Views in Macroeconomics

International Trade, Comparative Advantage, and Protectionism

Open-Economy Macroeconomics: the Balance of Payments and Exchange Rates

Economic Growth in Developing Economies

Critical Thinking About Research

Filters

Refer to the information provided in Figure 23.4 below to answer the question(s) that follow. Figure 23.4 -Refer to Figure 23.4. Suppose the consumption function for C₁ = 20 + 0.5Y, the consumption function that best fits C₃ is

Related to the Economics in Practice on p. 473: If a recovery from a recession is slower than expected, companies like General Motors would likely experience in unplanned inventories and as a result production.