Question 1

Uncertainty about the future is likely to

Accepted Answer

A)  increase current spending. 
B)  have no impact on current spending. 
C)  decrease current spending. 
D)  either increase or decrease current spending. 
A)  increase current spending. 
B)  have no impact on current spending. 
C)  decrease current spending. 
D)  either increase or decrease current spending.

Question 2

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. On this graph, 4 represents the

Accepted Answer

A)  MPC. 
B)  MPS. 
C)  break even income level. 
D)  multiplier. 
A)  MPC. 
B)  MPS. 
C)  break even income level. 
D)  multiplier.

Question 3

The marginal propensity to consume is the change in consumption per change in income.

Accepted Answer

A) True 
 B)False

Question 4

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. At an aggregate output level of $500 million, there is a

Accepted Answer

A)  $100 million unplanned increase in inventories. 
B)  $175 million unplanned decrease in inventories. 
C)  $0 change in unplanned inventories. 
D)  $100 million unplanned decrease in inventories. 
A)  $100 million unplanned increase in inventories. 
B)  $175 million unplanned decrease in inventories. 
C)  $0 change in unplanned inventories. 
D)  $100 million unplanned decrease in inventories.

Question 5

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. There is a $75 million decrease in unplanned inventories at an aggregate output level of

Accepted Answer

A)  < $100 million. 
B)  $100 million. 
C)  $200 million. 
D)  $300 million. 
A)  < $100 million. 
B)  $100 million. 
C)  $200 million. 
D)  $300 million.

Question 6

Planned investment must equal actual investment for

Accepted Answer

A)  the MPC to equal the MPS. 
B)  consumption to equal saving. 
C)  saving to equal income. 
D)  the economy to be in equilibrium. 
A)  the MPC to equal the MPS. 
B)  consumption to equal saving. 
C)  saving to equal income. 
D)  the economy to be in equilibrium.

Question 7

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. What is the equation for the aggregate expenditure function (AE)?

Accepted Answer

A)  AE = 200 + 0.5Y. 
B)  AE = 150 + 0.25Y. 
C)  AE = 200 + 0.8Y. 
D)  AE = 350 + 0.6Y. 
A)  AE = 200 + 0.5Y. 
B)  AE = 150 + 0.25Y. 
C)  AE = 200 + 0.8Y. 
D)  AE = 350 + 0.6Y.

Question 8

The Bob & Weave Company manufactures only hair extensions. In 2016 Bob & Weave manufactured 50,000 hair extensions, but sold only 32,000 hair extensions. In 2016 Bob & Weave's change in inventory was ________ hair extensions.

Accepted Answer

A)  16,000 
B)  18,000 
C)  32,000 
D)  82,000 
A)  16,000 
B)  18,000 
C)  32,000 
D)  82,000

Question 9

If the MPC is 0.75, then the multiplier is 4.

Accepted Answer

A) True 
 B)False

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. The equation for the aggregate expenditure function AE0 is

Accepted Answer

A)  AE0 = 50 + 0.6Y. 
B)  AE0 = 80 + 0.6Y. 
C)  AE0 = 50 + 0.75Y. 
D)  AE0 = 50 + 0.4Y. 
A)  AE0 = 50 + 0.6Y. 
B)  AE0 = 80 + 0.6Y. 
C)  AE0 = 50 + 0.75Y. 
D)  AE0 = 50 + 0.4Y.

Question 11

Assume there is no government or foreign sector. If the multiplier is 10, a $10 billion increase in planned investment will cause aggregate output to increase by

Accepted Answer

A)  $1 billion. 
B)  $5 billion. 
C)  $10 billion. 
D)  $100 billion. 
A)  $1 billion. 
B)  $5 billion. 
C)  $10 billion. 
D)  $100 billion.

Question 12

Planned aggregate expenditure equals consumption plus planned investment.

Accepted Answer

A) True 
 B)False

Question 13

In a closed economy with no government, ________ is consumption plus investment.

Accepted Answer

A)  saving 
B)  national income 
C)  aggregate expenditures 
D)  real spending 
A)  saving 
B)  national income 
C)  aggregate expenditures 
D)  real spending

Question 14

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. Aggregate saving is $240 if aggregate income is

Accepted Answer

A)  $300. 
B)  $500. 
C)  $800. 
D)  $1,000. 
A)  $300. 
B)  $500. 
C)  $800. 
D)  $1,000.

Question 15

When the economy is in equilibrium, savings equals planned investment.

Accepted Answer

A) True 
 B)False

Question 16

If C = 100 + 0.8Y and I = 50, then the equilibrium level of income is

Accepted Answer

A)  187.5. 
B)  375. 
C)  600. 
D)  750. 
A)  187.5. 
B)  375. 
C)  600. 
D)  750.

Question 17

As long as income is above planned aggregate expenditure, unplanned inventory reductions have occurred.

Accepted Answer

A) True 
 B)False

Question 18

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. Society's MPC is

Accepted Answer

A)  0.1. 
B)  0.2. 
C)  0.75. 
D)  0.9. 
A)  0.1. 
B)  0.2. 
C)  0.75. 
D)  0.9.

Question 19

As the MPS increases, the multiplier will

Accepted Answer

A)  increase. 
B)  decrease. 
C)  remain constant. 
D)  either increase or decrease depending on the size of the change in investment. 
A)  increase. 
B)  decrease. 
C)  remain constant. 
D)  either increase or decrease depending on the size of the change in investment.

Question 20

If Lily's consumption function is of the form [C = 100 + 0.8Y], her saving equals zero at an income level of

Accepted Answer

A)  180. 
B)  500. 
C)  800. 
D)  cannot be determined from the given information. 
A)  180. 
B)  500. 
C)  800. 
D)  cannot be determined from the given information.

Exam 23: Aggregate Expenditure and Equilibrium Output

Uncertainty about the future is likely to

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. On this graph, 4 represents the

The marginal propensity to consume is the change in consumption per change in income.

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. At an aggregate output level of $500 million, there is a

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. There is a $75 million decrease in unplanned inventories at an aggregate output level of

Planned investment must equal actual investment for

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. What is the equation for the aggregate expenditure function (AE)?

The Bob & Weave Company manufactures only hair extensions. In 2016 Bob & Weave manufactured 50,000 hair extensions, but sold only 32,000 hair extensions. In 2016 Bob & Weave's change in inventory was ________ hair extensions.

If the MPC is 0.75, then the multiplier is 4.

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. The equation for the aggregate expenditure function AE0 is

Assume there is no government or foreign sector. If the multiplier is 10, a $10 billion increase in planned investment will cause aggregate output to increase by

Planned aggregate expenditure equals consumption plus planned investment.

In a closed economy with no government, ________ is consumption plus investment.

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. Aggregate saving is $240 if aggregate income is

When the economy is in equilibrium, savings equals planned investment.

If C = 100 + 0.8Y and I = 50, then the equilibrium level of income is

As long as income is above planned aggregate expenditure, unplanned inventory reductions have occurred.

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. Society's MPC is

As the MPS increases, the multiplier will

If Lily's consumption function is of the form [C = 100 + 0.8Y], her saving equals zero at an income level of

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 23.11 below to answer the question(s) that follow. Figure 23.11 -Refer to Figure 23.11. The equation for the aggregate expenditure function AE₀ is