Question 1

Suppose the United States experiences a long period of high inflation relative to other countries. How will this affect U.S. net exports?

Accepted Answer

If inflation in the United States is hig

Question 2

When Jack's income increases by $1,000, he spends an additional $850 dollars. This implies that his marginal propensity to save is 0.85.

Accepted Answer

A) True 
 B)False

Question 3

Macroeconomic equilibrium occurs when

Accepted Answer

A)  aggregate expenditure = GDP. 
B)  aggregate expenditure = C+ I + G + net transfers. 
C)  aggregate income = planned inventories. 
D)  aggregate expenditure = planned inventories. 
A)  aggregate expenditure = GDP. 
B)  aggregate expenditure = C+ I + G + net transfers. 
C)  aggregate income = planned inventories. 
D)  aggregate expenditure = planned inventories.

Question 4

If national income increases by $20 million and consumption increases by $5 million, the marginal propensity to consume is

Accepted Answer

A)  4. 
B)  0.75. 
C)  0.5. 
D)  0.25. 
A)  4. 
B)  0.75. 
C)  0.5. 
D)  0.25.

Question 5

When aggregate expenditure is more than GDP, which of the following is true?

Accepted Answer

A)  There was an unplanned decrease in inventories. 
B)  Firms spent less on capital goods than they planned. 
C)  Households bought fewer new homes than they planned. 
D)  All of the above must be true when aggregate expenditure is more than GDP. 
A)  There was an unplanned decrease in inventories. 
B)  Firms spent less on capital goods than they planned. 
C)  Households bought fewer new homes than they planned. 
D)  All of the above must be true when aggregate expenditure is more than GDP.

Question 6

Figure 23-4  
-Refer to Figure 23-4. Potential GDP equals $100 billion. The economy is currently producing GDP1 which is equal to $90 billion. If the MPC is 0.8, then how much must autonomous spending change for the economy to move to potential GDP?

Accepted Answer

A)  -$18 billion 
B)  -$2 billion 
C)  $2 billion 
D)  $18 billion 
A)  -$18 billion 
B)  -$2 billion 
C)  $2 billion 
D)  $18 billion

Question 7

________ spending follows a smooth trend whereas, ________ spending is more volatile and subject to fluctuations.

Accepted Answer

A)  Consumption; government 
B)  Consumption; investment 
C)  Investment; consumer 
D)  Government; consumer 
A)  Consumption; government 
B)  Consumption; investment 
C)  Investment; consumer 
D)  Government; consumer

Question 8

What impact does a decrease in the price level in the United States have on net exports and why?

Accepted Answer

A)  A decrease in the U.S. price level increases net exports because lower prices increase the value of the dollar. 
B)  A decrease in the U.S. price level increases net exports by reducing the relative cost of American goods. 
C)  A decrease in the U.S. price level reduces net exports because lower prices raise the value of the dollar. 
D)  A decrease in the U.S. price level reduces net exports because lower prices increase American spending on imports. 
A)  A decrease in the U.S. price level increases net exports because lower prices increase the value of the dollar. 
B)  A decrease in the U.S. price level increases net exports by reducing the relative cost of American goods. 
C)  A decrease in the U.S. price level reduces net exports because lower prices raise the value of the dollar. 
D)  A decrease in the U.S. price level reduces net exports because lower prices increase American spending on imports.

Question 9

If disposable income falls by $40 billion and consumption falls by $30 billion, then the slope of the consumption function is

Accepted Answer

A)  1.33. 
B)  0.75. 
C)  0.4. 
D)  0.3. 
A)  1.33. 
B)  0.75. 
C)  0.4. 
D)  0.3.

Question 10

Household spending on goods and services is known as

Accepted Answer

A)  consumption spending. 
B)  planned investment spending. 
C)  government purchases. 
D)  net exports. 
A)  consumption spending. 
B)  planned investment spending. 
C)  government purchases. 
D)  net exports.

Question 11

Economists think that the marginal propensity to consume for the U.S. economy is somewhere around 0.9. Based on our simple multiplier formula, this would imply that the multiplier for the United States should be around 10. However, economists agree that the spending multiplier is closer to 2. What might explain this supposed anomaly?

Accepted Answer

The formula for the multiplier, M = @#IMG-DLM& , i

Question 12

Intel is the world's largest semiconductor manufacturer and a major supplier of the microprocessors and memory chips found in most personal computers. During the recession of 2007-2009, Intel's revenues ________ and it ________ the size of its workforce.

Accepted Answer

A)  fell; increased 
B)  fell; decreased 
C)  rose; increased 
D)  rose; decreased 
A)  fell; increased 
B)  fell; decreased 
C)  rose; increased 
D)  rose; decreased

Question 13

Use a 45 degree-line diagram to illustrate macroeconomic equilibrium. Make sure your diagram shows the aggregate expenditure function. Include in your diagram a point where aggregate expenditure is greater than GDP and a point where aggregate expenditure is less than GDP.

Accepted Answer

@#IMG-DLM& Macroeconomic equilibrium occ

Question 14

The consumption function describes the relationship between

Accepted Answer

A)  consumption spending and national income. 
B)  consumption spending and aggregate income. 
C)  consumption spending and disposable income. 
D)  consumption spending and personal income. 
A)  consumption spending and national income. 
B)  consumption spending and aggregate income. 
C)  consumption spending and disposable income. 
D)  consumption spending and personal income.

Question 15

The ratio of the increase in equilibrium real GDP to the increase in autonomous expenditure is called the

Accepted Answer

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

Question 16

The difference between GDP and disposable income is

Accepted Answer

A)  national income. 
B)  actual investment spending. 
C)  net taxes. 
D)  unplanned investment spending. 
A)  national income. 
B)  actual investment spending. 
C)  net taxes. 
D)  unplanned investment spending.

Question 17

Figure 23-3  
-Refer to Figure 23-3. Suppose that government spending increases, shifting up the aggregate expenditure line. GDP increases from GDP1 to GDP2, and this amount is $400 billion. If the MPC is 0.75, then what is the distance between N and L or by how much did government spending change?

Accepted Answer

A)  $10 billion 
B)  $100 billion 
C)  $200 billion 
D)  $300 billion 
A)  $10 billion 
B)  $100 billion 
C)  $200 billion 
D)  $300 billion

Question 18

The passage of the ________ in 1930 sparked a trade war that caused net exports to decrease and real GDP to decrease.

Accepted Answer

A)  Cellar-Kefauver Act 
B)  Sherman Antitrust Act 
C)  Clayton Act 
D)  Smoot-Hawley Tariff Act 
A)  Cellar-Kefauver Act 
B)  Sherman Antitrust Act 
C)  Clayton Act 
D)  Smoot-Hawley Tariff Act

Question 19

A decrease in Social Security payments will

Accepted Answer

A)  decrease consumption spending. 
B)  decrease investment spending. 
C)  decrease government spending. 
D)  decrease export spending. 
A)  decrease consumption spending. 
B)  decrease investment spending. 
C)  decrease government spending. 
D)  decrease export spending.

Question 20

All of the following are components of aggregate expenditure except

Accepted Answer

A)  consumption spending. 
B)  net export spending. 
C)  actual investment spending. 
D)  government spending. 
A)  consumption spending. 
B)  net export spending. 
C)  actual investment spending. 
D)  government spending.

Exam 23: Aggregate Expenditure and Output in the Short Run

Suppose the United States experiences a long period of high inflation relative to other countries. How will this affect U.S. net exports?

When Jack's income increases by $1,000, he spends an additional $850 dollars. This implies that his marginal propensity to save is 0.85.

Macroeconomic equilibrium occurs when

If national income increases by $20 million and consumption increases by $5 million, the marginal propensity to consume is

When aggregate expenditure is more than GDP, which of the following is true?

Figure 23-4 -Refer to Figure 23-4. Potential GDP equals $100 billion. The economy is currently producing GDP1 which is equal to $90 billion. If the MPC is 0.8, then how much must autonomous spending change for the economy to move to potential GDP?

________ spending follows a smooth trend whereas, ________ spending is more volatile and subject to fluctuations.

What impact does a decrease in the price level in the United States have on net exports and why?

If disposable income falls by $40 billion and consumption falls by $30 billion, then the slope of the consumption function is

Household spending on goods and services is known as

Intel is the world's largest semiconductor manufacturer and a major supplier of the microprocessors and memory chips found in most personal computers. During the recession of 2007-2009, Intel's revenues ________ and it ________ the size of its workforce.

Use a 45 degree-line diagram to illustrate macroeconomic equilibrium. Make sure your diagram shows the aggregate expenditure function. Include in your diagram a point where aggregate expenditure is greater than GDP and a point where aggregate expenditure is less than GDP.

The consumption function describes the relationship between

The ratio of the increase in equilibrium real GDP to the increase in autonomous expenditure is called the

The difference between GDP and disposable income is

Figure 23-3 -Refer to Figure 23-3. Suppose that government spending increases, shifting up the aggregate expenditure line. GDP increases from GDP1 to GDP2, and this amount is $400 billion. If the MPC is 0.75, then what is the distance between N and L or by how much did government spending change?

The passage of the ________ in 1930 sparked a trade war that caused net exports to decrease and real GDP to decrease.

A decrease in Social Security payments will

All of the following are components of aggregate expenditure except

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

Figure 23-4 -Refer to Figure 23-4. Potential GDP equals $100 billion. The economy is currently producing GDP₁ which is equal to $90 billion. If the MPC is 0.8, then how much must autonomous spending change for the economy to move to potential GDP?

spending follows a smooth trend whereas, spending is more volatile and subject to fluctuations.

Intel is the world's largest semiconductor manufacturer and a major supplier of the microprocessors and memory chips found in most personal computers. During the recession of 2007-2009, Intel's revenues and it the size of its workforce.