Question 1

Figure 23-1  
-Refer to Figure 23-1. If the economy is at a level of aggregate expenditure given by point K, then

Accepted Answer

A)  the economy is in equilibrium. 
B)  production is greater than spending. 
C)  production is less than spending. 
D)  inventories will increase above their desired level. 
A)  the economy is in equilibrium. 
B)  production is greater than spending. 
C)  production is less than spending. 
D)  inventories will increase above their desired level.

Question 2

Higher interest rates increase both consumption and investment spending.

Accepted Answer

A) True 
 B)False

Question 3

If the consumption function is defined as C = 5,500 + 0.9Y, what is the autonomous level of consumption expenditure?

Accepted Answer

A)  $4,950 
B)  $5,500 
C)  $6,050 
D)  $6,111 
A)  $4,950 
B)  $5,500 
C)  $6,050 
D)  $6,111

Question 4

If economists forecast an increase in aggregate expenditure, which of the following is likely to occur?

Accepted Answer

A)  GDP will rise. 
B)  GDP will fall. 
C)  Wages will fall. 
D)  Inventories will rise. 
A)  GDP will rise. 
B)  GDP will fall. 
C)  Wages will fall. 
D)  Inventories will rise.

Question 5

If planned aggregate expenditure is less than real GDP, some firms will experience unplanned increases in inventories.

Accepted Answer

A) True 
 B)False

Question 6

What is the macroeconomic consequence if firms accumulate large amounts of unplanned inventory at the beginning of a recession?

Accepted Answer

Firms will decrease

Question 7

Which of the following will cause a direct increase in consumption spending?

Accepted Answer

A)  an increase in planned investment 
B)  an increase in government spending 
C)  an increase in disposable income 
D)  a decrease in net export spending 
A)  an increase in planned investment 
B)  an increase in government spending 
C)  an increase in disposable income 
D)  a decrease in net export spending

Question 8

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

Accepted Answer

A)  increase; increase 
B)  decrease; increase 
C)  increase; decrease 
D)  decrease; decrease 
A)  increase; increase 
B)  decrease; increase 
C)  increase; decrease 
D)  decrease; decrease

Question 9

What impact does a higher price level have on interest rates, wealth, and investment spending?

Accepted Answer

A higher price level reduces t

Question 10

If the MPC is 0.5, then a $10 million increase in disposable income will increase consumption by

Accepted Answer

A)  $2 million. 
B)  $5 million. 
C)  $15 million 
D)  $50 million. 
A)  $2 million. 
B)  $5 million. 
C)  $15 million 
D)  $50 million.

Question 11

In the United States, spending on residential construction

Accepted Answer

A)  rose slowly in the period just before the recession of 2007-2009, declined slowly during the recession, and recovered slowly thereafter. 
B)  rose rapidly in the period just before the recession of 2007-2009, declined dramatically during the recession, and recovered rapidly thereafter. 
C)  rose rapidly in the period just before the recession of 2007-2009, declined dramatically during the recession, and continued to decline slowly thereafter. 
D)  rose rapidly in the period just before the recession of 2007-2009, declined dramatically during the recession, and recovered only slowly thereafter. 
A)  rose slowly in the period just before the recession of 2007-2009, declined slowly during the recession, and recovered slowly thereafter. 
B)  rose rapidly in the period just before the recession of 2007-2009, declined dramatically during the recession, and recovered rapidly thereafter. 
C)  rose rapidly in the period just before the recession of 2007-2009, declined dramatically during the recession, and continued to decline slowly thereafter. 
D)  rose rapidly in the period just before the recession of 2007-2009, declined dramatically during the recession, and recovered only slowly thereafter.

Question 12

Which is the smallest component of aggregate expenditure?

Accepted Answer

A)  planned investment expenditures 
B)  consumption expenditures 
C)  government expenditures 
D)  net export expenditures 
A)  planned investment expenditures 
B)  consumption expenditures 
C)  government expenditures 
D)  net export expenditures

Question 13

If national income increases by $75 million and consumption increases by $15 million, the marginal propensity to consume is

Accepted Answer

A)  5. 
B)  0.75. 
C)  0.20. 
D)  0.15. 
A)  5. 
B)  0.75. 
C)  0.20. 
D)  0.15.

Question 14

The marginal propensity to save is defined as

Accepted Answer

A)  saving divided by disposable income. 
B)  disposable income divided by saving. 
C)  the change in saving divided by the change in disposable income. 
D)  the change in disposable income divided by the change in saving. 
A)  saving divided by disposable income. 
B)  disposable income divided by saving. 
C)  the change in saving divided by the change in disposable income. 
D)  the change in disposable income divided by the change in saving.

Question 15

Figure 23-2  
-Refer to Figure 23-2. Suppose that the level of GDP associated with point N is potential GDP. If the U.S. economy is currently at point K, then

Accepted Answer

A)  firms are operating above capacity. 
B)  the economy is at full employment. 
C)  the economy is in recession. 
D)  the level of unemployment is equal to the natural rate. 
A)  firms are operating above capacity. 
B)  the economy is at full employment. 
C)  the economy is in recession. 
D)  the level of unemployment is equal to the natural rate.

Question 16

The Apple iPhone is sold in a box labeled "Made in China." A study by economists at the Asian Development Bank found the value of the iPhone components China ________ U.S. firms is ________ the value of assembling the iPhones in Chinese factories.

Accepted Answer

A)  exports to; equal to 
B)  exports to; greater than 
C)  imports from; less than 
D)  imports from; greater than 
A)  exports to; equal to 
B)  exports to; greater than 
C)  imports from; less than 
D)  imports from; greater than

Question 17

If aggregate expenditure is more than GDP, then inventories fall and GDP rises.

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

A)  An increase in the price level decreases net exports because higher prices decrease the value of the dollar. 
B)  An increase in the price level decreases net exports by increasing the relative cost of American goods. 
C)  An increase in the price level increases net exports because higher prices lower the value of the dollar. 
D)  An increase in the price level increases net exports because higher prices decrease American spending on imports. 
A)  An increase in the price level decreases net exports because higher prices decrease the value of the dollar. 
B)  An increase in the price level decreases net exports by increasing the relative cost of American goods. 
C)  An increase in the price level increases net exports because higher prices lower the value of the dollar. 
D)  An increase in the price level increases net exports because higher prices decrease American spending on imports.

Question 19

Which of the following is true?

Accepted Answer

A)  National income = Consumption + Savings - Taxes 
B)  National income = Consumption - Savings - Taxes 
C)  National income = Consumption + Savings + Taxes 
D)  National income = Consumption - Savings + Taxes 
A)  National income = Consumption + Savings - Taxes 
B)  National income = Consumption - Savings - Taxes 
C)  National income = Consumption + Savings + Taxes 
D)  National income = Consumption - Savings + Taxes

Question 20

MPC + MPS =

Accepted Answer

A)  0. 
B)  0.5. 
C)  1. 
D)  100. 
A)  0. 
B)  0.5. 
C)  1. 
D)  100.

Exam 23: Aggregate Expenditure and Output in the Short Run

Figure 23-1 -Refer to Figure 23-1. If the economy is at a level of aggregate expenditure given by point K, then

Higher interest rates increase both consumption and investment spending.

If the consumption function is defined as C = 5,500 + 0.9Y, what is the autonomous level of consumption expenditure?

If economists forecast an increase in aggregate expenditure, which of the following is likely to occur?

If planned aggregate expenditure is less than real GDP, some firms will experience unplanned increases in inventories.

What is the macroeconomic consequence if firms accumulate large amounts of unplanned inventory at the beginning of a recession?

Which of the following will cause a direct increase in consumption spending?

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

What impact does a higher price level have on interest rates, wealth, and investment spending?

If the MPC is 0.5, then a $10 million increase in disposable income will increase consumption by

In the United States, spending on residential construction

Which is the smallest component of aggregate expenditure?

If national income increases by $75 million and consumption increases by $15 million, the marginal propensity to consume is

The marginal propensity to save is defined as

Figure 23-2 -Refer to Figure 23-2. Suppose that the level of GDP associated with point N is potential GDP. If the U.S. economy is currently at point K, then

The Apple iPhone is sold in a box labeled "Made in China." A study by economists at the Asian Development Bank found the value of the iPhone components China ________ U.S. firms is ________ the value of assembling the iPhones in Chinese factories.

If aggregate expenditure is more than GDP, then inventories fall and GDP rises.

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

Which of the following is true?

MPC + MPS =

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 passage of the Smoot-Hawley Tariff in 1930 sparked a trade war that caused net exports to and real GDP to .

The Apple iPhone is sold in a box labeled "Made in China." A study by economists at the Asian Development Bank found the value of the iPhone components China U.S. firms is the value of assembling the iPhones in Chinese factories.