Question 1

Examples of assets that are included in household wealth would be

Accepted Answer

A)  stocks, bonds, and savings accounts. 
B)  stocks, loans owed, and savings accounts. 
C)  stocks, bonds, and mortgages. 
D)  stocks, credit cards, and savings accounts. 
A)  stocks, bonds, and savings accounts. 
B)  stocks, loans owed, and savings accounts. 
C)  stocks, bonds, and mortgages. 
D)  stocks, credit cards, and savings accounts.

Question 2

For all points above the 45 degree line, planned aggregate expenditure will be less than GDP.

Accepted Answer

A) True 
 B)False

Question 3

When we graph consumption as a function of national income rather than as a function of ________, the slope of this consumption function is the ________.

Accepted Answer

A)  disposable income; MPC 
B)  personal income; MPC 
C)  disposable income; MPS 
D)  personal income; MPS 
A)  disposable income; MPC 
B)  personal income; MPC 
C)  disposable income; MPS 
D)  personal income; MPS

Question 4

National income =

Accepted Answer

A)  Consumption + Saving - Taxes 
B)  Consumption - Saving - Taxes 
C)  Consumption - Saving +Taxes 
D)  Consumption + Saving + Taxes 
A)  Consumption + Saving - Taxes 
B)  Consumption - Saving - Taxes 
C)  Consumption - Saving +Taxes 
D)  Consumption + Saving + Taxes

Question 5

All of the following are true statements about the multiplier except:

Accepted Answer

A)  The formula for the multiplier overstates the real world multiplier when we take into account the impact of changes in GDP on imports, inflation and the interest rate. 
B)  The larger the MPC, the larger the multiplier. 
C)  The multiplier is the ratio of the change in real GDP to the change in autonomous expenditure. 
D)  The multiplier makes the economy less sensitive to changes in autonomous expenditure. 
A)  The formula for the multiplier overstates the real world multiplier when we take into account the impact of changes in GDP on imports, inflation and the interest rate. 
B)  The larger the MPC, the larger the multiplier. 
C)  The multiplier is the ratio of the change in real GDP to the change in autonomous expenditure. 
D)  The multiplier makes the economy less sensitive to changes in autonomous expenditure.

Question 6

A decrease in ________ can put your job at risk if aggregate expenditures fall.

Accepted Answer

A)  consumer confidence 
B)  the natural rate of unemployment 
C)  the inflation rate 
D)  the length of a business cycle 
A)  consumer confidence 
B)  the natural rate of unemployment 
C)  the inflation rate 
D)  the length of a business cycle

Question 7

Each of the following is one of the four main categories of spending identified by John Maynard Keynes except

Accepted Answer

A)  consumption. 
B)  net exports. 
C)  government purchases. 
D)  taxes. 
A)  consumption. 
B)  net exports. 
C)  government purchases. 
D)  taxes.

Question 8

Macroeconomic equilibrium can occur at any point on the 45 degree line.

Accepted Answer

A) True 
 B)False

Question 9

If the marginal propensity to save is 0.4, the multiplier is 2.5.

Accepted Answer

A) True 
 B)False

Question 10

An increase in taxes will ________ consumption spending, and a decrease in transfer payments will ________ consumption spending.

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 11

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

Accepted Answer

A)  firms are operating below capacity. 
B)  the economy is at full employment. 
C)  the economy is in an expansion. 
D)  the level of unemployment is above the natural rate. 
A)  firms are operating below capacity. 
B)  the economy is at full employment. 
C)  the economy is in an expansion. 
D)  the level of unemployment is above the natural rate.

Question 12

Table 23-2
  
-Refer to Table 23-2. Using the table above, compute aggregate expenditure and identify the macroeconomic equilibrium.

Accepted Answer

The macroeconomic equilibrium is determi

Question 13

Given the equations for C, I, G, and NX below, what is the value of the marginal propensity to save? C = 1,000 + 0.8Y
I = 1,500
G =1,250
NX = 100

Accepted Answer

A)  0.2 
B)  0.8 
C)  1.8 
D)  10 
A)  0.2 
B)  0.8 
C)  1.8 
D)  10

Question 14

If planned investment is equal to actual investment, then aggregate expenditure is equal to GDP.

Accepted Answer

A) True 
 B)False

Question 15

Table 23-7
  
-Given Table 23-8 below, fill in the values for saving. Assume there are no taxes.

Accepted Answer

When taxes are zero, saving is

Question 16

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

Accepted Answer

A)  J. 
B)  K. 
C)  L. 
D)  Points J, K and L all represent equilibrium. 
A)  J. 
B)  K. 
C)  L. 
D)  Points J, K and L all represent equilibrium.

Question 17

When Jack's income increases by $5,000, he spends an additional $4,000 dollars. This implies that his marginal propensity to consume is 1.25.

Accepted Answer

A) True 
 B)False

Question 18

Investment spending will increase when

Accepted Answer

A)  the interest rate rises. 
B)  the corporate income tax increases. 
C)  business cash flow increases. 
D)  firms become more pessimistic about earning future profits. 
A)  the interest rate rises. 
B)  the corporate income tax increases. 
C)  business cash flow increases. 
D)  firms become more pessimistic about earning future profits.

Question 19

If consumption is defined as C = 1,350 + 0.6Y, then the value of the marginal propensity to consume is 0.6.

Accepted Answer

A) True 
 B)False

Question 20

An unplanned increase in inventories results from

Accepted Answer

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

Exam 23: Aggregate Expenditure and Output in the Short Run

Examples of assets that are included in household wealth would be

For all points above the 45 degree line, planned aggregate expenditure will be less than GDP.

When we graph consumption as a function of national income rather than as a function of ________, the slope of this consumption function is the ________.

National income =

All of the following are true statements about the multiplier except:

A decrease in ________ can put your job at risk if aggregate expenditures fall.

Each of the following is one of the four main categories of spending identified by John Maynard Keynes except

Macroeconomic equilibrium can occur at any point on the 45 degree line.

If the marginal propensity to save is 0.4, the multiplier is 2.5.

An increase in taxes will ________ consumption spending, and a decrease in transfer payments will ________ consumption spending.

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

Table 23-2 -Refer to Table 23-2. Using the table above, compute aggregate expenditure and identify the macroeconomic equilibrium.

Given the equations for C, I, G, and NX below, what is the value of the marginal propensity to save? C = 1,000 + 0.8Y I = 1,500 G =1,250 NX = 100

If planned investment is equal to actual investment, then aggregate expenditure is equal to GDP.

Table 23-7 -Given Table 23-8 below, fill in the values for saving. Assume there are no taxes.

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

When Jack's income increases by $5,000, he spends an additional $4,000 dollars. This implies that his marginal propensity to consume is 1.25.

Investment spending will increase when

If consumption is defined as C = 1,350 + 0.6Y, then the value of the marginal propensity to consume is 0.6.

An unplanned increase in inventories results from

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

When we graph consumption as a function of national income rather than as a function of , the slope of this consumption function is the .

An increase in taxes will consumption spending, and a decrease in transfer payments will consumption spending.