Question 1

Firms react to an unplanned inventory investment by increasing output.

Accepted Answer

A) True 
 B)False

Question 2

Suppose saving is $1,000 when income is $10,000 and the MPC equals 0.9. When income increases to $15,000, saving is

Accepted Answer

A)  $1,500. 
B)  $1,400. 
C)  $900. 
D)  $500. 
A)  $1,500. 
B)  $1,400. 
C)  $900. 
D)  $500.

Question 3

The marginal propensity to consume must always be larger than the marginal propensity to save.

Accepted Answer

A) True 
 B)False

Question 4

Assuming there is no government or foreign sector, if the multiplier is 10, the MPC is

Accepted Answer

A)  0.9. 
B)  0.8. 
C)  0.5. 
D)  0.1. 
A)  0.9. 
B)  0.8. 
C)  0.5. 
D)  0.1.

Question 5

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. Planned saving equals planned investment at an aggregate output level

Accepted Answer

A)  of $1,000 billion. 
B)  of $800 billion. 
C)  of $600 billion. 
D)  that cannot be determined from this information. 
A)  of $1,000 billion. 
B)  of $800 billion. 
C)  of $600 billion. 
D)  that cannot be determined from this information.

Question 6

Refer to the information provided in Figure 23.1 below to answer the question(s) that follow.   Figure 23.1
-Refer to Figure 23.1. [-500 + 0.5Y] is this household's

Accepted Answer

A)  MPC. 
B)  MPS. 
C)  saving function. 
D)  consumption. 
A)  MPC. 
B)  MPS. 
C)  saving function. 
D)  consumption.

Question 7

Refer to the information provided in Table 23.8 below to answer the question(s) that follow.
Table 23.8  
-Refer to Table 23.8. If aggregate output equals ________, there will be a $200 million unplanned decrease in inventories.

Accepted Answer

A)  $3,000 million 
B)  $4,000 million 
C)  $5,000 million 
D)  $6,000 million 
A)  $3,000 million 
B)  $4,000 million 
C)  $5,000 million 
D)  $6,000 million

Question 8

Household income is ________ related to consumption and ________ related to household saving.

Accepted Answer

A)  positively; positively 
B)  positively; negatively 
C)  negatively; positively 
D)  negatively; negatively 
A)  positively; positively 
B)  positively; negatively 
C)  negatively; positively 
D)  negatively; negatively

Question 9

Firms react to negative inventory investment by increasing output.

Accepted Answer

A) True 
 B)False

Question 10

Firms react to unplanned increases in inventories by

Accepted Answer

A)  reducing output. 
B)  increasing output. 
C)  increasing planned investment. 
D)  increasing consumption. 
A)  reducing output. 
B)  increasing output. 
C)  increasing planned investment. 
D)  increasing consumption.

Question 11

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. Suppose Jerry's MPC increases, and the vertical intercept of the consumption function does not change. At income Y1, Jerry's

Accepted Answer

A)  consumption will be greater than his income. 
B)  consumption will be less than his income. 
C)  saving will be zero. 
D)  all of the above. 
A)  consumption will be greater than his income. 
B)  consumption will be less than his income. 
C)  saving will be zero. 
D)  all of the above.

Question 12

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. Along the segment AB, Jerry's

Accepted Answer

A)  consumption is less than his income. 
B)  saving is positive. 
C)  consumption equals his income. 
D)  saving is negative. 
A)  consumption is less than his income. 
B)  saving is positive. 
C)  consumption equals his income. 
D)  saving is negative.

Question 13

Refer to the information provided in Table 23.9 below to answer the question(s) that follow.
Table 23.9  
-Refer to Table 23.9. The equilibrium level of aggregate output is

Accepted Answer

A)  $200 billion. 
B)  $300 billion. 
C)  $400 billion. 
D)  $500 billion. 
A)  $200 billion. 
B)  $300 billion. 
C)  $400 billion. 
D)  $500 billion.

Question 14

Refer to the information provided in Figure 23.5 below to answer the question(s) that follow.   Figure 23.5
-Refer to Figure 23.5. In this graph, 0.25 represents this society's

Accepted Answer

A)  MPC. 
B)  MPS. 
C)  saving function. 
D)  consumption function. 
A)  MPC. 
B)  MPS. 
C)  saving function. 
D)  consumption function.

Question 15

Refer to the information provided in Figure 23.3 below to answer the question(s) that follow.   Figure 23.3
-Refer to Figure 23.3. Which of the following statements is false?

Accepted Answer

A)  Aggregate saving is negative for all income levels below $400 billion. 
B)  For all aggregate income levels above $200 billion, aggregate consumption is less than aggregate income. 
C)  If consumption is the only expenditure, this economy would be in equilibrium at an aggregate income level of $200 billion. 
D)  Saving is negative at all income levels below $200 billion. 
A)  Aggregate saving is negative for all income levels below $400 billion. 
B)  For all aggregate income levels above $200 billion, aggregate consumption is less than aggregate income. 
C)  If consumption is the only expenditure, this economy would be in equilibrium at an aggregate income level of $200 billion. 
D)  Saving is negative at all income levels below $200 billion.

Question 16

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. [200 + 0.8Y] represents the

Accepted Answer

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

Question 17

Refer to the information provided in Figure 23.8 below to answer the question(s) that follow.   Figure 23.8
-Refer to Figure 23.8. The amount of planned investment ________ if the interest rate rises from 4% to 8%.

Accepted Answer

A)  drops by $150 billion 
B)  rises by $150 billion 
C)  remains at $275 billion 
D)  remains at $125 billion 
A)  drops by $150 billion 
B)  rises by $150 billion 
C)  remains at $275 billion 
D)  remains at $125 billion

Question 18

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. Jerry's ________ equals ________ at income level Y1.

Accepted Answer

A)  consumption; saving 
B)  saving; zero 
C)  consumption; investment 
D)  consumption; zero 
A)  consumption; saving 
B)  saving; zero 
C)  consumption; investment 
D)  consumption; zero

Question 19

Firms react to unplanned inventory reductions by

Accepted Answer

A)  reducing output. 
B)  increasing output. 
C)  reducing planned investment. 
D)  increasing consumption. 
A)  reducing output. 
B)  increasing output. 
C)  reducing planned investment. 
D)  increasing consumption.

Question 20

Related to the Economics in Practice on p. 466: A recent study by economists at Yale University and the University of Chicago suggests that changing retirement plan enrollment options from "opt-in" systems to "opt-out" systems increased pension plan enrollment after three months of work from ________ percent of workers to ________ percent of workers.

Accepted Answer

A)  80; 22 
B)  10; 100 
C)  65; 98 
D)  77; 42 
A)  80; 22 
B)  10; 100 
C)  65; 98 
D)  77; 42

Exam 23: Aggregate Expenditure and Equilibrium Output

Firms react to an unplanned inventory investment by increasing output.

Suppose saving is $1,000 when income is $10,000 and the MPC equals 0.9. When income increases to $15,000, saving is

The marginal propensity to consume must always be larger than the marginal propensity to save.

Assuming there is no government or foreign sector, if the multiplier is 10, the MPC 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. Planned saving equals planned investment at an aggregate output level

Refer to the information provided in Figure 23.1 below to answer the question(s) that follow. Figure 23.1 -Refer to Figure 23.1. [-500 + 0.5Y] is this household's

Refer to the information provided in Table 23.8 below to answer the question(s) that follow. Table 23.8 -Refer to Table 23.8. If aggregate output equals ________, there will be a $200 million unplanned decrease in inventories.

Household income is ________ related to consumption and ________ related to household saving.

Firms react to negative inventory investment by increasing output.

Firms react to unplanned increases in inventories by

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. Suppose Jerry's MPC increases, and the vertical intercept of the consumption function does not change. At income Y1, Jerry's

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. Along the segment AB, Jerry's

Refer to the information provided in Table 23.9 below to answer the question(s) that follow. Table 23.9 -Refer to Table 23.9. The equilibrium level of aggregate output is

Refer to the information provided in Figure 23.5 below to answer the question(s) that follow. Figure 23.5 -Refer to Figure 23.5. In this graph, 0.25 represents this society's

Refer to the information provided in Figure 23.3 below to answer the question(s) that follow. Figure 23.3 -Refer to Figure 23.3. Which of the following statements is false?

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. [200 + 0.8Y] represents the

Refer to the information provided in Figure 23.8 below to answer the question(s) that follow. Figure 23.8 -Refer to Figure 23.8. The amount of planned investment ________ if the interest rate rises from 4% to 8%.

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. Jerry's ________ equals ________ at income level Y1.

Firms react to unplanned inventory reductions by

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

Household income is related to consumption and related to household 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. Suppose Jerry's MPC increases, and the vertical intercept of the consumption function does not change. At income Y₁, Jerry's

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. Jerry's equals at income level Y₁.