Question 1

An increase 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 an increase 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 an increase in the price level in the United States.

Question 2

Which is the largest 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 3

Actual investment spending does not include

Accepted Answer

A)  spending on consumer durable goods. 
B)  spending on new capital equipment. 
C)  spending on new houses. 
D)  changes in inventories. 
A)  spending on consumer durable goods. 
B)  spending on new capital equipment. 
C)  spending on new houses. 
D)  changes in inventories.

Question 4

If the consumption function is defined as C = 7,250 + 0.8Y, what is the autonomous level of consumption expenditure?

Accepted Answer

A)  $5,800 
B)  $7,250 
C)  $9,062.50 
D)  $9,700 
A)  $5,800 
B)  $7,250 
C)  $9,062.50 
D)  $9,700

Question 5

If the consumption function is defined as C = 5,500 + 0.9Y, what is the value of the multiplier?

Accepted Answer

A)  0.1 
B)  0.9 
C)  9 
D)  10 
A)  0.1 
B)  0.9 
C)  9 
D)  10

Question 6

The formula for aggregate expenditure is

Accepted Answer

A)  AE = C + I + G. 
B)  AE = C + I + G - NX. 
C)  AE = C + I + G + NX. 
D)  AE = C + I + depreciation - NX. 
A)  AE = C + I + G. 
B)  AE = C + I + G - NX. 
C)  AE = C + I + G + NX. 
D)  AE = C + I + depreciation - NX.

Question 7

When aggregate expenditure = GDP,

Accepted Answer

A)  macroeconomic equilibrium occurs. 
B)  the federal budget is balanced. 
C)  net exports equal zero. 
D)  saving equals zero. 
A)  macroeconomic equilibrium occurs. 
B)  the federal budget is balanced. 
C)  net exports equal zero. 
D)  saving equals zero.

Question 8

A general formula for the multiplier is

Accepted Answer

A)    . 
B)    . 
C)    . 
D)    . 
A)    . 
B)    . 
C)    . 
D)    .

Question 9

Explain, in detail, how the adjustment to macroeconomic equilibrium occurs when spending is less than production. Be sure to discuss how inventories play a crucial role in the adjustment process. State what happens to GDP and employment during the adjustment process.

Accepted Answer

If spending is less than production, the

Question 10

If planned aggregate expenditure is greater 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 11

The formula for the multiplier is (1 - MPC).

Accepted Answer

A) True 
 B)False

Question 12

Table 23-8
  
-Given Table 23-9 below, fill in the values of the marginal propensity to save (MPS) and the marginal propensity to consume (MPC). Show that MPC + MPS = 1.

Accepted Answer

The MPC is defined as:
MPC = @#IMG-DLM& = @#IMG-DLM& = @#IMG-DLM& = 0.

Question 13

Which of the following leads to a decrease in real GDP?

Accepted Answer

A)  an increase in government spending 
B)  an increase in the inflation rate in other countries, relative to the inflation in the United States 
C)  an increase in interest rates 
D)  Households have increasingly optimistic expectations about future income. 
A)  an increase in government spending 
B)  an increase in the inflation rate in other countries, relative to the inflation in the United States 
C)  an increase in interest rates 
D)  Households have increasingly optimistic expectations about future income.

Question 14

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 rise. 
B)  Household wealth falls. 
C)  Firm's cash flows rise as profits rise. 
D)  Government expenditures increase. 
A)  Households expect future income to rise. 
B)  Household wealth falls. 
C)  Firm's cash flows rise as profits rise. 
D)  Government expenditures increase.

Question 15

What is the formula for the multiplier? Explain why this formula is considered to be too simple.

Accepted Answer

Multiplier = @#IMG-DLM& The formula ignores the ef

Question 16

The multiplier is calculated as the change in ________ divided by the change in ________.

Accepted Answer

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

Question 17

Net exports usually ________ when the U.S. economy is in a recession and ________ when the U.S. economy is expanding.

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 18

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 GDP?

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 19

An increase in Social Security payments will

Accepted Answer

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

Question 20

If an increase in investment spending of $50 million results in a $400 million increase in equilibrium real GDP, then

Accepted Answer

A)  the multiplier is 0.125. 
B)  the multiplier is 3.5. 
C)  the multiplier is 8. 
D)  the multiplier is 50. 
A)  the multiplier is 0.125. 
B)  the multiplier is 3.5. 
C)  the multiplier is 8. 
D)  the multiplier is 50.

Exam 23: Aggregate Expenditure and Output in the Short Run

An increase in the price level in the United States will have what effect on the aggregate expenditure line?

Which is the largest component of aggregate expenditure?

Actual investment spending does not include

If the consumption function is defined as C = 7,250 + 0.8Y, what is the autonomous level of consumption expenditure?

If the consumption function is defined as C = 5,500 + 0.9Y, what is the value of the multiplier?

The formula for aggregate expenditure is

When aggregate expenditure = GDP,

A general formula for the multiplier is

Explain, in detail, how the adjustment to macroeconomic equilibrium occurs when spending is less than production. Be sure to discuss how inventories play a crucial role in the adjustment process. State what happens to GDP and employment during the adjustment process.

If planned aggregate expenditure is greater than total production

The formula for the multiplier is (1 - MPC).

Table 23-8 -Given Table 23-9 below, fill in the values of the marginal propensity to save (MPS) and the marginal propensity to consume (MPC). Show that MPC + MPS = 1.

Which of the following leads to a decrease in real GDP?

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 is the formula for the multiplier? Explain why this formula is considered to be too simple.

The multiplier is calculated as the change in ________ divided by the change in ________.

Net exports usually ________ when the U.S. economy is in a recession and ________ when the U.S. economy is expanding.

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 GDP?

An increase in Social Security payments will

If an increase in investment spending of $50 million results in a $400 million increase in equilibrium real GDP, then

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 multiplier is calculated as the change in divided by the change in .

Net exports usually when the U.S. economy is in a recession and when the U.S. economy is expanding.