Question 1

If planned aggregate expenditure is less 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. 
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 2

If planned aggregate expenditure is below potential GDP and planned aggregate expenditure equals GDP, then

Accepted Answer

A)  actual inventory investment will be less than planned inventory investment. 
B)  actual inventory investment will be greater than planned inventory investment. 
C)  the economy is in a recession. 
D)  the economy is at full employment. 
A)  actual inventory investment will be less than planned inventory investment. 
B)  actual inventory investment will be greater than planned inventory investment. 
C)  the economy is in a recession. 
D)  the economy is at full employment.

Question 3

________ is equal to consumption spending plus planned investment spending plus government purchases plus net exports.

Accepted Answer

A)  Full employment GDP 
B)  Short-run aggregate supply 
C)  Planned inventory investment 
D)  Planned aggregate expenditure 
A)  Full employment GDP 
B)  Short-run aggregate supply 
C)  Planned inventory investment 
D)  Planned aggregate expenditure

Question 4

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 5

Consumption spending is $5 million, planned investment spending is $8 million, unplanned investment spending is $2 million, government purchases are $10 million, and net export spending is $2 million. What is aggregate expenditure?

Accepted Answer

A)  $15 million 
B)  $23 million 
C)  $25 million 
D)  $27 million 
A)  $15 million 
B)  $23 million 
C)  $25 million 
D)  $27 million

Question 6

Table 23-3
  
-Refer to Table 23-3. Given the consumption schedule in the table above, the marginal propensity to save is

Accepted Answer

A)  0.1. 
B)  0.4. 
C)  0.7. 
D)  0.9. 
A)  0.1. 
B)  0.4. 
C)  0.7. 
D)  0.9.

Question 7

A decrease in the price level in the United States will have what effect on the aggregate expenditure line?

Accepted Answer

A)  Aggregate expenditure will shift downward. 
B)  Aggregate expenditure will become steeper. 
C)  Aggregate expenditure will shift upward. 
D)  Aggregate expenditure will not be affected by a decrease in the price level in the United States. 
A)  Aggregate expenditure will shift downward. 
B)  Aggregate expenditure will become steeper. 
C)  Aggregate expenditure will shift upward. 
D)  Aggregate expenditure will not be affected by a decrease in the price level in the United States.

Question 8

If planned investment is greater than actual investment, then aggregate expenditure is less than GDP.

Accepted Answer

A) True 
 B)False

Question 9

An unplanned decrease in inventories results in

Accepted Answer

A)  a decrease in planned investment. 
B)  an increase in planned investment. 
C)  actual investment that is greater than planned investment. 
D)  actual investment that is less than planned investment. 
A)  a decrease in planned investment. 
B)  an increase in planned investment. 
C)  actual investment that is greater than planned investment. 
D)  actual investment that is less than planned investment.

Question 10

If disposable income increases by $500 million, and consumption increases by $400 million, then the marginal propensity to consume is

Accepted Answer

A)  1.25. 
B)  0.8. 
C)  0.6. 
D)  0.4. 
A)  1.25. 
B)  0.8. 
C)  0.6. 
D)  0.4.

Question 11

During a(n) ________ many firms experience reduced profits, which reduces ________ and investment spending.

Accepted Answer

A)  expansion; business confidence 
B)  recession; cash flow 
C)  expansion; cash flow 
D)  recession; government spending 
A)  expansion; business confidence 
B)  recession; cash flow 
C)  expansion; cash flow 
D)  recession; government spending

Question 12

Would a larger multiplier lead to longer and more severe recessions or shorter and less severe recessions? Briefly explain.

Accepted Answer

A larger multiplier would be l

Question 13

If the economy is currently in equilibrium at a level of GDP that is below potential GDP, which of the following would move the economy back to potential GDP?

Accepted Answer

A)  an increase in wealth 
B)  an increase in interest rates 
C)  a decrease in business confidence 
D)  an increase in the value of the dollar relative to other currencies 
A)  an increase in wealth 
B)  an increase in interest rates 
C)  a decrease in business confidence 
D)  an increase in the value of the dollar relative to other currencies

Question 14

Which of the following is a true statement about the multiplier?

Accepted Answer

A)  The multiplier rises as the MPC rises. 
B)  The smaller the MPC, the larger the multiplier. 
C)  The multiplier is a value between zero and one. 
D)  The multiplier effect does not occur when autonomous expenditure decreases. 
A)  The multiplier rises as the MPC rises. 
B)  The smaller the MPC, the larger the multiplier. 
C)  The multiplier is a value between zero and one. 
D)  The multiplier effect does not occur when autonomous expenditure decreases.

Question 15

The sum of the marginal propensity to consume and the marginal propensity to save is always equal to

Accepted Answer

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

Question 16

The National Restaurant Association states that the restaurant industry has an economic effect of more than $1.7 trillion annually in the United States, with every dollar spent in restaurants generating an estimated total of $2.05 in spending in the economy. This indicates that the spending multiplier for the restaurant industry is equal to

Accepted Answer

A)  1.21. 
B)  1.70. 
C)  2.05. 
D)  4.25. 
A)  1.21. 
B)  1.70. 
C)  2.05. 
D)  4.25.

Question 17

An decrease in the price level in the United States will shift the aggregate expenditure line downward.

Accepted Answer

A) True 
 B)False

Question 18

Household wealth is defined as the value of a household's

Accepted Answer

A)  assets minus the value of its liabilities. 
B)  assets plus the value of its liabilities. 
C)  assets. 
D)  liabilities. 
A)  assets minus the value of its liabilities. 
B)  assets plus the value of its liabilities. 
C)  assets. 
D)  liabilities.

Question 19

The aggregate expenditure model focuses on the ________ relationship between real spending and ________.

Accepted Answer

A)  short-run; real GDP 
B)  short-run; inflation 
C)  long-run; real GDP 
D)  long-run; inflation 
A)  short-run; real GDP 
B)  short-run; inflation 
C)  long-run; real GDP 
D)  long-run; inflation

Question 20

During a(n) ________ many firms experience increased profits, which increases ________ and investment spending.

Accepted Answer

A)  expansion; government spending 
B)  recession; cash flow 
C)  expansion; cash flow 
D)  recession; business confidence 
A)  expansion; government spending 
B)  recession; cash flow 
C)  expansion; cash flow 
D)  recession; business confidence

Exam 23: Aggregate Expenditure and Output in the Short Run

If planned aggregate expenditure is less than total production

If planned aggregate expenditure is below potential GDP and planned aggregate expenditure equals GDP, then

________ is equal to consumption spending plus planned investment spending plus government purchases plus net exports.

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

Consumption spending is $5 million, planned investment spending is $8 million, unplanned investment spending is $2 million, government purchases are $10 million, and net export spending is $2 million. What is aggregate expenditure?

Table 23-3 -Refer to Table 23-3. Given the consumption schedule in the table above, the marginal propensity to save is

A decrease in the price level in the United States will have what effect on the aggregate expenditure line?

If planned investment is greater than actual investment, then aggregate expenditure is less than GDP.

An unplanned decrease in inventories results in

If disposable income increases by $500 million, and consumption increases by $400 million, then the marginal propensity to consume is

During a(n) ________ many firms experience reduced profits, which reduces ________ and investment spending.

Would a larger multiplier lead to longer and more severe recessions or shorter and less severe recessions? Briefly explain.

If the economy is currently in equilibrium at a level of GDP that is below potential GDP, which of the following would move the economy back to potential GDP?

Which of the following is a true statement about the multiplier?

The sum of the marginal propensity to consume and the marginal propensity to save is always equal to

An decrease in the price level in the United States will shift the aggregate expenditure line downward.

Household wealth is defined as the value of a household's

The aggregate expenditure model focuses on the ________ relationship between real spending and ________.

During a(n) ________ many firms experience increased profits, which increases ________ and investment spending.

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Demand and Aggregate Supply Analysis

Money, Banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, Unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

During a(n) many firms experience reduced profits, which reduces and investment spending.

The aggregate expenditure model focuses on the relationship between real spending and .

During a(n) many firms experience increased profits, which increases and investment spending.