Question 1

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

Accepted Answer

A)  0.1. 
B)  0.3. 
C)  0.6. 
D)  0.9. 
A)  0.1. 
B)  0.3. 
C)  0.6. 
D)  0.9.

Question 2

Figure 23-2  
-Refer to Figure 23-2. If the U.S. economy is currently at point N, which of the following could cause it to move to point K?

Accepted Answer

A)  Households expect future income to decline. 
B)  Household wealth rises. 
C)  The firm's cash flow rises as profits rise. 
D)  Government expenditures increase. 
A)  Households expect future income to decline. 
B)  Household wealth rises. 
C)  The firm's cash flow rises as profits rise. 
D)  Government expenditures increase.

Question 3

What are inventories? What usually happens to inventories at the beginning of a recession, and what usually happens to inventories at the beginning of an expansion?

Accepted Answer

Inventories are goods that hav

Question 4

If firms sell what they expected to sell, which of the following will be true?

Accepted Answer

A)  Aggregate expenditure will be greater than GDP. 
B)  There is no unplanned change in inventories. 
C)  Inventories will rise, and GDP and employment will fall. 
D)  Aggregate expenditure will be less than GDP. 
A)  Aggregate expenditure will be greater than GDP. 
B)  There is no unplanned change in inventories. 
C)  Inventories will rise, and GDP and employment will fall. 
D)  Aggregate expenditure will be less than GDP.

Question 5

On the 45 degree-line diagram, for points that lie below the 45 degree line

Accepted Answer

A)  planned aggregate expenditure is greater than GDP. 
B)  planned aggregate expenditure is less than GDP. 
C)  planned aggregate expenditure is equal to GDP. 
D)  planned aggregate expenditure is less than aggregate income. 
A)  planned aggregate expenditure is greater than GDP. 
B)  planned aggregate expenditure is less than GDP. 
C)  planned aggregate expenditure is equal to GDP. 
D)  planned aggregate expenditure is less than aggregate income.

Question 6

If the consumption function is defined as C = 5,500 + 0.9Y, what is the value of the marginal propensity to consume?

Accepted Answer

A)  0.1 
B)  0.9 
C)  5.5 
D)  6.1 
A)  0.1 
B)  0.9 
C)  5.5 
D)  6.1

Question 7

Figure 23-2  
-Refer to Figure 23-2. If the U.S. economy is currently at point K, which of the following could cause it to move to point N?

Accepted Answer

A)  The price level in the United States falls relative to the price level in other countries. 
B)  Congress abolishes investment tax incentives. 
C)  The interest rate rises. 
D)  Household wealth declines. 
A)  The price level in the United States falls relative to the price level in other countries. 
B)  Congress abolishes investment tax incentives. 
C)  The interest rate rises. 
D)  Household wealth declines.

Question 8

A decrease in the real interest rate will

Accepted Answer

A)  cause consumers to spend less and save more. 
B)  most likely increase consumer's purchases of durable goods. 
C)  most likely increase the reward to savings. 
D)  most likely increase the cost of borrowing. 
A)  cause consumers to spend less and save more. 
B)  most likely increase consumer's purchases of durable goods. 
C)  most likely increase the reward to savings. 
D)  most likely increase the cost of borrowing.

Question 9

If the marginal propensity to consume is 0.6, the marginal propensity to save is

Accepted Answer

A)  0.4. 
B)  0.6. 
C)  1. 
D)  1.5. 
A)  0.4. 
B)  0.6. 
C)  1. 
D)  1.5.

Question 10

In a small economy in 2018, aggregate expenditure was $850 million while GDP that year was $800 million. Which of the following can explain the difference between aggregate expenditure and GDP that year?

Accepted Answer

A)  Aggregate expenditure is always less than GDP in developed countries. 
B)  Firm investment in inventories was less than anticipated in 2018. 
C)  Firm investment in inventories was greater than anticipated in 2018. 
D)  Aggregate expenditure is always less than GDP in developing countries. 
A)  Aggregate expenditure is always less than GDP in developed countries. 
B)  Firm investment in inventories was less than anticipated in 2018. 
C)  Firm investment in inventories was greater than anticipated in 2018. 
D)  Aggregate expenditure is always less than GDP in developing countries.

Question 11

Consumption spending refers to ________ spending on goods and services.

Accepted Answer

A)  household 
B)  business 
C)  government 
D)  foreign 
A)  household 
B)  business 
C)  government 
D)  foreign

Question 12

You review a salesman's income over a 5-year period. You note it fluctuates tremendously from year to year, yet his consumption of goods and services remains consistently at the same level, year after year. Does this mean that income is not a determinant of consumption, or could something else explain his behavior?

Accepted Answer

The salesman is not making purchase deci

Question 13

Explain how a stock market crash has the potential to lead to a recession in an economy.

Accepted Answer

A stock market crash is essentially a su

Question 14

Equations for C, I, G, and NX are given below. If the equilibrium level of GDP is $32,000, what is the value of the marginal propensity to consume? C = 5,000 + (MPC)Y
I = 1,500
G = 2,000
NX = -500

Accepted Answer

A)  0.67 
B)  0.75 
C)  0.8 
D)  0.9 
A)  0.67 
B)  0.75 
C)  0.8 
D)  0.9

Question 15

The ratio of the increase in ________ to the increase in ________ is called the multiplier.

Accepted Answer

A)  equilibrium nominal GDP; autonomous expenditure 
B)  equilibrium real GDP; autonomous expenditure 
C)  autonomous expenditure; equilibrium real GDP 
D)  induced expenditure; equilibrium real GDP 
A)  equilibrium nominal GDP; autonomous expenditure 
B)  equilibrium real GDP; autonomous expenditure 
C)  autonomous expenditure; equilibrium real GDP 
D)  induced expenditure; equilibrium real GDP

Question 16

A decrease in consumer confidence can put your job at risk if

Accepted Answer

A)  aggregate expenditures fall. 
B)  consumers expect their incomes to rise in the future. 
C)  aggregate expenditures rise. 
D)  consumers expect firms to increase investment in the future. 
A)  aggregate expenditures fall. 
B)  consumers expect their incomes to rise in the future. 
C)  aggregate expenditures rise. 
D)  consumers expect firms to increase investment in the future.

Question 17

Equations for C, I, G, and NX are given below. If the equilibrium level of GDP is $32,000, what will the new equilibrium level of GDP be if government spending increases to 2,500? C = 5,000 + (MPC)Y
I = 1,500
G = 2,000
NX = -500

Accepted Answer

A)  $32,500 
B)  $34,000 
C)  $38,000 
D)  $42,000 
A)  $32,500 
B)  $34,000 
C)  $38,000 
D)  $42,000

Question 18

The multiplier is calculated as the

Accepted Answer

A)  change in real GDP/ change in autonomous expenditure. 
B)  change in autonomous expenditure/ change in real GDP. 
C)  change in nominal GDP/ change in autonomous expenditure. 
D)  change in real GDP/ change in induced spending. 
A)  change in real GDP/ change in autonomous expenditure. 
B)  change in autonomous expenditure/ change in real GDP. 
C)  change in nominal GDP/ change in autonomous expenditure. 
D)  change in real GDP/ change in induced spending.

Question 19

Planned aggregate expenditure is equal to

Accepted Answer

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

Question 20

If disposable income increases by $100 million, and consumption increases by $90 million, then the marginal propensity to consume is

Accepted Answer

A)  0.9. 
B)  0.8. 
C)  0.75. 
D)  0.6. 
A)  0.9. 
B)  0.8. 
C)  0.75. 
D)  0.6.

Exam 23: Aggregate Expenditure and Output in the Short Run

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

Figure 23-2 -Refer to Figure 23-2. If the U.S. economy is currently at point N, which of the following could cause it to move to point K?

What are inventories? What usually happens to inventories at the beginning of a recession, and what usually happens to inventories at the beginning of an expansion?

If firms sell what they expected to sell, which of the following will be true?

On the 45 degree-line diagram, for points that lie below the 45 degree line

If the consumption function is defined as C = 5,500 + 0.9Y, what is the value of the marginal propensity to consume?

Figure 23-2 -Refer to Figure 23-2. If the U.S. economy is currently at point K, which of the following could cause it to move to point N?

A decrease in the real interest rate will

If the marginal propensity to consume is 0.6, the marginal propensity to save is

In a small economy in 2018, aggregate expenditure was $850 million while GDP that year was $800 million. Which of the following can explain the difference between aggregate expenditure and GDP that year?

Consumption spending refers to ________ spending on goods and services.

Explain how a stock market crash has the potential to lead to a recession in an economy.

Equations for C, I, G, and NX are given below. If the equilibrium level of GDP is $32,000, what is the value of the marginal propensity to consume? C = 5,000 + (MPC)Y I = 1,500 G = 2,000 NX = -500

The ratio of the increase in ________ to the increase in ________ is called the multiplier.

A decrease in consumer confidence can put your job at risk if

Equations for C, I, G, and NX are given below. If the equilibrium level of GDP is $32,000, what will the new equilibrium level of GDP be if government spending increases to 2,500? C = 5,000 + (MPC)Y I = 1,500 G = 2,000 NX = -500

The multiplier is calculated as the

Planned aggregate expenditure is equal to

If disposable income increases by $100 million, and consumption increases by $90 million, then the marginal propensity to consume is

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

The ratio of the increase in to the increase in is called the multiplier.