Question 1

The aggregate demand curve of an economy:

Accepted Answer

A) is downward sloping. 
B) first declines and then becomes positively sloped. 
C) is horizontal. 
D) is vertical. 
E) first rises and then becomes negatively sloped. 
A) is downward sloping. 
B) first declines and then becomes positively sloped. 
C) is horizontal. 
D) is vertical. 
E) first rises and then becomes negatively sloped.

Question 2

In the income-expenditure framework,if planned aggregate expenditures are less than real gross domestic product (GDP),_____.

Accepted Answer

A) saving will increase 
B) the price level will increase 
C) inventories will increase 
D) inventories will decrease 
E) consumption will decrease 
A) saving will increase 
B) the price level will increase 
C) inventories will increase 
D) inventories will decrease 
E) consumption will decrease

Question 3

An economy's investment demand curve shows the inverse relationship between the quantity of investment demanded and the market interest rate,other things held constant.

Accepted Answer

A) True 
 B)False

Question 4

An increase in the marginal propensity to consume (MPC)will cause the consumption function to become steeper.

Accepted Answer

A) True 
 B)False

Question 5

When current production of goods and services in an economy is greater than planned aggregate expenditure,_____.

Accepted Answer

A) inventories of goods and services will increase 
B) firms will increase production to replenish depleted inventories 
C) businesses and households will increase planned aggregate spending 
D) the price level will automatically rise to restore equilibrium in the economy 
E) leakages must equal planned injections 
A) inventories of goods and services will increase 
B) firms will increase production to replenish depleted inventories 
C) businesses and households will increase planned aggregate spending 
D) the price level will automatically rise to restore equilibrium in the economy 
E) leakages must equal planned injections

Question 6

Which of the following will shift the investment demand curve rightward?

Accepted Answer

A) Higher interest rates 
B) Gloomy sales expectations 
C) A cut in corporate taxes that raises after-tax profits 
D) A decrease in the marginal propensity to consume 
E) An increase in aggregate income 
A) Higher interest rates 
B) Gloomy sales expectations 
C) A cut in corporate taxes that raises after-tax profits 
D) A decrease in the marginal propensity to consume 
E) An increase in aggregate income

Question 7

A higher interest rate will:

Accepted Answer

A) shift the consumption function upward. 
B) shift the consumption function downward. 
C) make the consumption function steeper. 
D) make the consumption function flatter. 
E) cause an upward movement along the consumption function. 
A) shift the consumption function upward. 
B) shift the consumption function downward. 
C) make the consumption function steeper. 
D) make the consumption function flatter. 
E) cause an upward movement along the consumption function.

Question 8

Which of the following is an effect of an increase in the price level in an economy?

Accepted Answer

A) The real value of dollar-denominated assets will fall. 
B) The aggregate expenditure line will shift upward. 
C) The equilibrium real gross domestic product will increase. 
D) There will be a downward movement along the aggregate demand curve of the economy. 
E) The aggregate demand curve of the economy will shift rightward. 
A) The real value of dollar-denominated assets will fall. 
B) The aggregate expenditure line will shift upward. 
C) The equilibrium real gross domestic product will increase. 
D) There will be a downward movement along the aggregate demand curve of the economy. 
E) The aggregate demand curve of the economy will shift rightward.

Question 9

An increase in the interest rate will increase consumption spending.

Accepted Answer

A) True 
 B)False

Question 10

Only a change in the price level can cause shifts in both the aggregate expenditure line and the aggregate demand curve.

Accepted Answer

A) True 
 B)False

Question 11

If the marginal propensity to consume,MPC,is less than 1 and a household's disposable income increases by $2,000,the household's consumption will _____.

Accepted Answer

A) increase by less than $2,000 
B) increase by $2,000 
C) decrease if the total income of the household is above $100,000 
D) remain the same unless the change in income significantly affects the household's wealth 
E) increase by more than $2,000 
A) increase by less than $2,000 
B) increase by $2,000 
C) decrease if the total income of the household is above $100,000 
D) remain the same unless the change in income significantly affects the household's wealth 
E) increase by more than $2,000

Question 12

Identify the correct statement about net exports.

Accepted Answer

A) The value of net exports increases as real domestic income increases. 
B) The value of net exports increases as real domestic income decreases. 
C) The value of net exports is dependent on the amount of government purchases. 
D) The value of net exports is always positive. 
E) The value of net exports is always negative. 
A) The value of net exports increases as real domestic income increases. 
B) The value of net exports increases as real domestic income decreases. 
C) The value of net exports is dependent on the amount of government purchases. 
D) The value of net exports is always positive. 
E) The value of net exports is always negative.

Question 13

The most important determinant of a household's consumption spending is:

Accepted Answer

A) its disposable income. 
B) the in-kind transfers received by the household. 
C) the level of education of the members of the household. 
D) the interest rate. 
E) the ratio of wage to non-wage income of the household. 
A) its disposable income. 
B) the in-kind transfers received by the household. 
C) the level of education of the members of the household. 
D) the interest rate. 
E) the ratio of wage to non-wage income of the household.

Question 14

The table given below shows the values of different components of aggregate expenditure of an economy.The equilibrium level of gross domestic product (GDP)is _____.
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Table 9.2
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$\text { (Trillions of Dollars) }$
$\begin{array}{llccccccc}
\text { Rea } & \text { Net } & \text { Disposab } & \text { Consumpti } & \text { Savin } & \text { Planned } & \text { Governme } & \text { Net } & \text { Planned } \
1 & \text { Taxe } & \text { le } & \text { on } & \text { g } & \text { Investme } & \text { nt } & \text { Export } & \text { Aggregate } \
\mathrm{GD} & \text { s } & \text { Income } & \text { (C) } & \text { (S) } & \text { nt } & \text { Purchases } & \text { s } & \text { Expenditures } \
\mathrm{P} & (\mathrm{NT}) & (\mathrm{Y}-\mathrm{NT}) & & & \text { (I) } & \text { (G) } & (\mathrm{X}- & \mathrm{C}+\mathrm{I}+\mathrm{G}+(\mathrm{X}- \
(\mathrm{Y}) & & & & & & & \text { M) } & \mathrm{M})
\
\hline 5.0 & 1.0 & 4.0 & 3.9 & 0.1 & 1.0 & 1.0 & -0.7 & 5.2 \
5.5 & 1.0 & 4.5 & 4.3 & 0.2 & 1.0 & 1.0 & -0.7 & 5.6 \
6.0 & 1.0 & 5.0 & 4.7 & 0.3 & 1.0 & 1.0 & -0.7 & 6.0 \
6.5 & 1.0 & 5.5 & 5.1 & 0.4 & 1.0 & 1.0 & -0.7 & 6.4 \
7.0 & 1.0 & 6.0 & 5.5 & 0.5 & 1.0 & 1.0 & -0.7 & 6.8
\end{array}$

Accepted Answer

A) $5.0 trillion 
B) $5.5 trillion 
C) $6.0 trillion 
D) $6.5 trillion 
E) $7.0 trillion 
A) $5.0 trillion 
B) $5.5 trillion 
C) $6.0 trillion 
D) $6.5 trillion 
E) $7.0 trillion

Question 15

Data on annual percentage changes in real GDP,consumption,and investment in the United States shows that fluctuations in investment _____.

Accepted Answer

A) are noticeably smaller during expansions than during recessions 
B) are roughly similar to fluctuations in consumption 
C) are roughly similar to fluctuations in GDP 
D) are closely followed by economic forecasters because those fluctuations often signal that a recession will occur 
E) account for most of the variability in GDP 
A) are noticeably smaller during expansions than during recessions 
B) are roughly similar to fluctuations in consumption 
C) are roughly similar to fluctuations in GDP 
D) are closely followed by economic forecasters because those fluctuations often signal that a recession will occur 
E) account for most of the variability in GDP

Question 16

_____ is the reward savers earn for deferring consumption.

Accepted Answer

A) Dividend 
B) Wage 
C) Rent 
D) Profit 
E) Interest 
A) Dividend 
B) Wage 
C) Rent 
D) Profit 
E) Interest

Question 17

If the price level in an economy increases,other things constant,consumption spending is likely to _____.

Accepted Answer

A) increase because real income increases 
B) decrease because real income increases 
C) increase because the real value of wealth increases 
D) decrease because the real value of wealth decreases 
E) increase because nominal income increases 
A) increase because real income increases 
B) decrease because real income increases 
C) increase because the real value of wealth increases 
D) decrease because the real value of wealth decreases 
E) increase because nominal income increases

Question 18

Which of the following best describes the simple spending multiplier?

Accepted Answer

A) It shows the magnified change in planned aggregate spending that arises from a change in output. 
B) It shows the magnified change in equilibrium output demanded that arises from a change in income. 
C) It shows the magnified change in planned aggregate spending that arises from a change in equilibrium output. 
D) It shows the magnified change in equilibrium output demanded that arises from a given initial change in planned aggregate spending. 
E) It shows the change in planned aggregate spending that arises from a change in real output. 
A) It shows the magnified change in planned aggregate spending that arises from a change in output. 
B) It shows the magnified change in equilibrium output demanded that arises from a change in income. 
C) It shows the magnified change in planned aggregate spending that arises from a change in equilibrium output. 
D) It shows the magnified change in equilibrium output demanded that arises from a given initial change in planned aggregate spending. 
E) It shows the change in planned aggregate spending that arises from a change in real output.

Question 19

In the income-expenditure framework,if planned aggregate expenditures are greater than real gross domestic product (GDP),_____.

Accepted Answer

A) the price level will fall 
B) consumption will fall 
C) inventories will increase 
D) inventories will decrease 
E) consumption will decrease 
A) the price level will fall 
B) consumption will fall 
C) inventories will increase 
D) inventories will decrease 
E) consumption will decrease

Question 20

A decrease in the price level in an economy will _____.

Accepted Answer

A) shift the aggregate demand curve to the right 
B) shift the aggregate demand curve to the left 
C) increase the level of aggregate quantity demanded 
D) decrease the level of aggregate quantity demanded 
E) shift the aggregate expenditure line downward 
A) shift the aggregate demand curve to the right 
B) shift the aggregate demand curve to the left 
C) increase the level of aggregate quantity demanded 
D) decrease the level of aggregate quantity demanded 
E) shift the aggregate expenditure line downward

The aggregate demand curve of an economy:

In the income-expenditure framework,if planned aggregate expenditures are less than real gross domestic product (GDP),_____.

An economy's investment demand curve shows the inverse relationship between the quantity of investment demanded and the market interest rate,other things held constant.

An increase in the marginal propensity to consume (MPC)will cause the consumption function to become steeper.

When current production of goods and services in an economy is greater than planned aggregate expenditure,_____.

Which of the following will shift the investment demand curve rightward?

A higher interest rate will:

Which of the following is an effect of an increase in the price level in an economy?

An increase in the interest rate will increase consumption spending.

Only a change in the price level can cause shifts in both the aggregate expenditure line and the aggregate demand curve.

If the marginal propensity to consume,MPC,is less than 1 and a household's disposable income increases by $2,000,the household's consumption will _____.

Identify the correct statement about net exports.

The most important determinant of a household's consumption spending is:

Data on annual percentage changes in real GDP,consumption,and investment in the United States shows that fluctuations in investment _____.

_____ is the reward savers earn for deferring consumption.

If the price level in an economy increases,other things constant,consumption spending is likely to _____.

Which of the following best describes the simple spending multiplier?

In the income-expenditure framework,if planned aggregate expenditures are greater than real gross domestic product (GDP),_____.

A decrease in the price level in an economy will _____.

The Art and Science of Economic Analysis

Some Tools of Economic Analysis

Economic Decision Makers

Demand, Supply, and Markets

Introduction to Macroeconomics

Tracking the U S Economy

Unemployment and Inflation

Us Productivity and Growth

Aggregate Supply

Fiscal Policy

Federal Budgets and Public Policy

Money and the Financial System

Banking and the Money Supply

Monetary Theory and Policy

The Policy Debate: Active or Passive

International Trade

International Finance

Economic Development

Filters

Exam 9: Aggregate Demand

The aggregate demand curve of an economy:

In the income-expenditure framework,if planned aggregate expenditures are less than real gross domestic product (GDP),_____.

An economy's investment demand curve shows the inverse relationship between the quantity of investment demanded and the market interest rate,other things held constant.

An increase in the marginal propensity to consume (MPC)will cause the consumption function to become steeper.

When current production of goods and services in an economy is greater than planned aggregate expenditure,_____.

Which of the following will shift the investment demand curve rightward?

A higher interest rate will:

Which of the following is an effect of an increase in the price level in an economy?

An increase in the interest rate will increase consumption spending.

Only a change in the price level can cause shifts in both the aggregate expenditure line and the aggregate demand curve.

If the marginal propensity to consume,MPC,is less than 1 and a household's disposable income increases by $2,000,the household's consumption will _____.

Identify the correct statement about net exports.

The most important determinant of a household's consumption spending is:

Data on annual percentage changes in real GDP,consumption,and investment in the United States shows that fluctuations in investment _____.

_____ is the reward savers earn for deferring consumption.

If the price level in an economy increases,other things constant,consumption spending is likely to _____.

Which of the following best describes the simple spending multiplier?

In the income-expenditure framework,if planned aggregate expenditures are greater than real gross domestic product (GDP),_____.

A decrease in the price level in an economy will _____.

The Art and Science of Economic Analysis

Some Tools of Economic Analysis

Economic Decision Makers

Demand, Supply, and Markets

Introduction to Macroeconomics

Tracking the U S Economy

Unemployment and Inflation

Us Productivity and Growth

Aggregate Supply

Fiscal Policy

Federal Budgets and Public Policy

Money and the Financial System

Banking and the Money Supply

Monetary Theory and Policy

The Policy Debate: Active or Passive

International Trade

International Finance

Economic Development

Filters