Question 1

Suppose at each price level, autonomous aggregate expenditures increase by $50 billion. As a result, the aggregate expenditures curve shifts

Accepted Answer

A)  downward at each price level and results in a leftward shift in aggregate demand. 
B)  upward at each price level and results in a rightward shift in aggregate demand. 
C)  downward at each price level and results in a movement down along a given aggregate demand. 
D)  upward at each price level and results in a movement up along a given aggregate demand. 
A)  downward at each price level and results in a leftward shift in aggregate demand. 
B)  upward at each price level and results in a rightward shift in aggregate demand. 
C)  downward at each price level and results in a movement down along a given aggregate demand. 
D)  upward at each price level and results in a movement up along a given aggregate demand.

Question 2

If an economy is in equilibrium,

Accepted Answer

A)  planned investment equals zero. 
B)  unplanned investment equals zero. 
C)  there is no change in inventories. 
D)  inventories equals zero. 
A)  planned investment equals zero. 
B)  unplanned investment equals zero. 
C)  there is no change in inventories. 
D)  inventories equals zero.

Question 3

Unplanned investment occurs when
I. aggregate expenditures exceed real GDP produced.
II. aggregate expenditures fall short of real GDP produced.
III. when real GDP produced is less than potential real GDP.
IV. when real GDP produced is greater than potential real GDP.

Accepted Answer

A)  I and II only 
B)  I and IV only 
C)  II and III only 
D)  I, II, III, and IV 
A)  I and II only 
B)  I and IV only 
C)  II and III only 
D)  I, II, III, and IV

Question 4

What is the international trade effect?

Accepted Answer

A)  It is the tendency for exports to fall and imports to rise when the domestic price level falls relative to the foreign price level. 
B)  It is the tendency for exports to rise and imports to fall when the domestic price level falls relative to the foreign price level. 
C)  It is the tendency for domestic investments to fall when foreign interest rates rise relative to domestic interest rates. 
D)  It is the tendency for exchange rates to fall when foreign interest rates rise relative to domestic interest rates. 
A)  It is the tendency for exports to fall and imports to rise when the domestic price level falls relative to the foreign price level. 
B)  It is the tendency for exports to rise and imports to fall when the domestic price level falls relative to the foreign price level. 
C)  It is the tendency for domestic investments to fall when foreign interest rates rise relative to domestic interest rates. 
D)  It is the tendency for exchange rates to fall when foreign interest rates rise relative to domestic interest rates.

Question 5

Consider a simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption. The marginal propensity to consume is ⅔. Holding all else constant, if net exports increase by $50 billion, what happens to
Aggregate demand?

Accepted Answer

A)  It shifts left by $150 billion. 
B)  There is a movement down along a given aggregate demand so that aggregate quantity demanded increases by $150 billion. 
C)  It shifts right by $150 billion 
D)  There is a movement down along a given aggregate demand so that aggregate quantity demanded increases by $50 billion. 
A)  It shifts left by $150 billion. 
B)  There is a movement down along a given aggregate demand so that aggregate quantity demanded increases by $150 billion. 
C)  It shifts right by $150 billion 
D)  There is a movement down along a given aggregate demand so that aggregate quantity demanded increases by $50 billion.

Question 6

Use the following to answer questions .
Exhibit: Income and Consumption
  
-(Exhibit: Income and Consumption) When disposable personal income is $100, what is the amount of personal saving?

Accepted Answer

A)  −$40 
B)  −$20 
C)  $0 
D)  $20 
A)  −$40 
B)  −$20 
C)  $0 
D)  $20

Question 7

Disposable personal income is

Accepted Answer

A)  the income households receive after paying personal taxes and personal debt. 
B)  the income households earn from supplying labor services for the production of aggregate output. 
C)  the income households receive after paying personal taxes. 
D)  the income households have leftover after paying personal taxes and purchasing necessities. 
A)  the income households receive after paying personal taxes and personal debt. 
B)  the income households earn from supplying labor services for the production of aggregate output. 
C)  the income households receive after paying personal taxes. 
D)  the income households have leftover after paying personal taxes and purchasing necessities.

Question 8

If prices of the goods and services in the domestic market rise relative to those in foreign markets

Accepted Answer

A)  households and firms will buy more foreign products and less domestic products, thereby decreasing net exports. 
B)  households and firms will buy more foreign products and less domestic products, thereby increasing net exports. 
C)  exports will rise and imports will fall, leading to an increase in net exports. 
D)  the exchange rate will rise, leading to an increase in exports. 
A)  households and firms will buy more foreign products and less domestic products, thereby decreasing net exports. 
B)  households and firms will buy more foreign products and less domestic products, thereby increasing net exports. 
C)  exports will rise and imports will fall, leading to an increase in net exports. 
D)  the exchange rate will rise, leading to an increase in exports.

Question 9

Use the following to answer questions .
Exhibit: Real GDP and the Multiplier
  
-(Exhibit: Real GDP and the Multiplier) What is the equilibrium level of GDP?

Accepted Answer

A)  $6,000 billion 
B)  $6,500 billion 
C)  $7,000 billion 
D)  $7,500 billion 
A)  $6,000 billion 
B)  $6,500 billion 
C)  $7,000 billion 
D)  $7,500 billion

Question 10

Unplanned investment is

Accepted Answer

A)  the level of investment minus depreciation. 
B)  the level of investment plus depreciation. 
C)  investment that occurs that is unexpected by the government. 
D)  investment that firms did not intend to make. 
A)  the level of investment minus depreciation. 
B)  the level of investment plus depreciation. 
C)  investment that occurs that is unexpected by the government. 
D)  investment that firms did not intend to make.

Question 11

Use the following to answer questions .
Exhibit: Consumption and Real GDP  
-(Exhibit: Consumption and Real GDP) If real GDP were $12 trillion, consumption equals

Accepted Answer

A)  5 trillion. 
B)  7 trillion. 
C)  9 trillion. 
D)  11 trillion. 
A)  5 trillion. 
B)  7 trillion. 
C)  9 trillion. 
D)  11 trillion.

Question 12

Consider a simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption. If the consumption function is
C = $500 + 0.8Y, planned investment = $200, government purchases = $300,
Net exports = $100, and real GDP = $1,000, what is the amount of aggregate expenditures?

Accepted Answer

A)  $800 
B)  $1,000 
C)  $1,100 
D)  $1,900 
A)  $800 
B)  $1,000 
C)  $1,100 
D)  $1,900

Question 13

Use the following to answer questions .
Exhibit: Aggregate Expenditures (AE) in a Simplified Economy
  
-(Exhibit: Aggregate Expenditures (AE) in a Simplified Economy) Consider a simple economy that is made up of only two sectors, households and firms, and that all investment is autonomous. Further, disposable personal income = real GDP and the economy is currently producing at its level of potential real GDP. What is the marginal propensity to consume in this economy?

Accepted Answer

A)  0.5 
B)  0.6 
C)  0.75 
D)  0.8 
A)  0.5 
B)  0.6 
C)  0.75 
D)  0.8

Question 14

The multiplier effect is triggered by a shift in the aggregate expenditures curve.

Accepted Answer

A) True 
 B)False

Question 15

The marginal propensity to consume is the

Accepted Answer

A)  slope of the saving function. 
B)  slope of the consumption function. 
C)  proportion of disposable personal income used for consumption. 
D)  change in consumption divided by the change in saving. 
A)  slope of the saving function. 
B)  slope of the consumption function. 
C)  proportion of disposable personal income used for consumption. 
D)  change in consumption divided by the change in saving.

Question 16

Use the following to answer questions .
Exhibit: Real GDP and the Multiplier
  
-(Exhibit: Real GDP and the Multiplier) What is the value of the multiplier?

Accepted Answer

A)  2.5 
B)  3 
C)  5 
D)  15 
A)  2.5 
B)  3 
C)  5 
D)  15

Question 17

Expenditures that do not vary with the level of real GDP are called

Accepted Answer

A)  exogenous aggregate expenditures. 
B)  induced aggregate expenditures. 
C)  endogenous aggregate expenditures. 
D)  autonomous aggregate expenditures. 
A)  exogenous aggregate expenditures. 
B)  induced aggregate expenditures. 
C)  endogenous aggregate expenditures. 
D)  autonomous aggregate expenditures.

Question 18

In the aggregate expenditures model, if aggregate expenditures equal $800 billion and real GDP equals $600 billion,

Accepted Answer

A)  unplanned inventory accumulation equals $200 billion. 
B)  unplanned inventory depletion equals $200 billion. 
C)  consumption plus investment equals $200 billion. 
D)  net investment equals $200 billion. 
A)  unplanned inventory accumulation equals $200 billion. 
B)  unplanned inventory depletion equals $200 billion. 
C)  consumption plus investment equals $200 billion. 
D)  net investment equals $200 billion.

Question 19

During an economic downturn, households respond to a decline in income by

Accepted Answer

A)  reducing taxes. 
B)  reducing consumption. 
C)  increasing the quantity of labor supplied. 
D)  negotiating higher wages. 
A)  reducing taxes. 
B)  reducing consumption. 
C)  increasing the quantity of labor supplied. 
D)  negotiating higher wages.

Question 20

Use the following to answer questions .
Exhibit: Consumption Functions
Figure 13-3  
-(Exhibit: Consumption Functions) Suppose the consumption function is given by curve C1. What will cause an upward shift to curve C2?

Accepted Answer

A)  an increase in the amount consumed as disposable personal income increases. 
B)  an increase in consumption at any level of disposable personal income 
C)  an increase in the price level 
D)  an increase in transfer payments 
A)  an increase in the amount consumed as disposable personal income increases. 
B)  an increase in consumption at any level of disposable personal income 
C)  an increase in the price level 
D)  an increase in transfer payments

Suppose at each price level, autonomous aggregate expenditures increase by $50 billion. As a result, the aggregate expenditures curve shifts

If an economy is in equilibrium,

Unplanned investment occurs when I. aggregate expenditures exceed real GDP produced. II. aggregate expenditures fall short of real GDP produced. III. when real GDP produced is less than potential real GDP. IV. when real GDP produced is greater than potential real GDP.

What is the international trade effect?

Consider a simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption. The marginal propensity to consume is ⅔. Holding all else constant, if net exports increase by $50 billion, what happens to Aggregate demand?

Use the following to answer questions . Exhibit: Income and Consumption -(Exhibit: Income and Consumption) When disposable personal income is $100, what is the amount of personal saving?

Disposable personal income is

If prices of the goods and services in the domestic market rise relative to those in foreign markets

Use the following to answer questions . Exhibit: Real GDP and the Multiplier -(Exhibit: Real GDP and the Multiplier) What is the equilibrium level of GDP?

Unplanned investment is

Use the following to answer questions . Exhibit: Consumption and Real GDP -(Exhibit: Consumption and Real GDP) If real GDP were $12 trillion, consumption equals

The multiplier effect is triggered by a shift in the aggregate expenditures curve.

The marginal propensity to consume is the

Use the following to answer questions . Exhibit: Real GDP and the Multiplier -(Exhibit: Real GDP and the Multiplier) What is the value of the multiplier?

Expenditures that do not vary with the level of real GDP are called

In the aggregate expenditures model, if aggregate expenditures equal $800 billion and real GDP equals $600 billion,

During an economic downturn, households respond to a decline in income by

Use the following to answer questions . Exhibit: Consumption Functions Figure 13-3 -(Exhibit: Consumption Functions) Suppose the consumption function is given by curve C₁. What will cause an upward shift to curve C₂?

Economics: the Study of Choice

Demand and Supply

Applications of Supply and Demand

Macroeconomics: the Big Picture

Measuring Total Output and Income

Aggregate Demand and Aggregate Supply

Economic Growth

The Nature and Creation of Money

Financial Markets and the Economy

Monetary Policy and the Fed

Government and Fiscal Policy

Investment and Economic Activity

Net Exports and International Finance

Inflation and Unemployment

A Brief History of Macroeconomic Thought and Policy

Inequality, Poverty, and Discrimination

Filters

Exam 13: Consumption and the Aggregate Expenditures Model

Suppose at each price level, autonomous aggregate expenditures increase by $50 billion. As a result, the aggregate expenditures curve shifts

If an economy is in equilibrium,

Unplanned investment occurs when I. aggregate expenditures exceed real GDP produced. II. aggregate expenditures fall short of real GDP produced. III. when real GDP produced is less than potential real GDP. IV. when real GDP produced is greater than potential real GDP.

What is the international trade effect?

Consider a simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption. The marginal propensity to consume is ⅔. Holding all else constant, if net exports increase by $50 billion, what happens to Aggregate demand?

Use the following to answer questions . Exhibit: Income and Consumption -(Exhibit: Income and Consumption) When disposable personal income is $100, what is the amount of personal saving?

Disposable personal income is

If prices of the goods and services in the domestic market rise relative to those in foreign markets

Use the following to answer questions . Exhibit: Real GDP and the Multiplier -(Exhibit: Real GDP and the Multiplier) What is the equilibrium level of GDP?

Unplanned investment is

Use the following to answer questions . Exhibit: Consumption and Real GDP -(Exhibit: Consumption and Real GDP) If real GDP were $12 trillion, consumption equals

The multiplier effect is triggered by a shift in the aggregate expenditures curve.

The marginal propensity to consume is the

Use the following to answer questions . Exhibit: Real GDP and the Multiplier -(Exhibit: Real GDP and the Multiplier) What is the value of the multiplier?

Expenditures that do not vary with the level of real GDP are called

In the aggregate expenditures model, if aggregate expenditures equal $800 billion and real GDP equals $600 billion,

During an economic downturn, households respond to a decline in income by

Use the following to answer questions . Exhibit: Consumption Functions Figure 13-3 -(Exhibit: Consumption Functions) Suppose the consumption function is given by curve C1. What will cause an upward shift to curve C2?

Economics: the Study of Choice

Demand and Supply

Applications of Supply and Demand

Macroeconomics: the Big Picture

Measuring Total Output and Income

Aggregate Demand and Aggregate Supply

Economic Growth

The Nature and Creation of Money

Financial Markets and the Economy

Monetary Policy and the Fed

Government and Fiscal Policy

Investment and Economic Activity

Net Exports and International Finance

Inflation and Unemployment

A Brief History of Macroeconomic Thought and Policy

Inequality, Poverty, and Discrimination

Filters

Use the following to answer questions . Exhibit: Consumption Functions Figure 13-3 -(Exhibit: Consumption Functions) Suppose the consumption function is given by curve C₁. What will cause an upward shift to curve C₂?