Question 1

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

Accepted Answer

A) shift the aggregate expenditure line upward 
B) shift the aggregate expenditure line downward 
C) cause an upward movement along the aggregate expenditure line 
D) cause a downward movement along the aggregate expenditure line 
E) shift the aggregate demand curve leftward 
A) shift the aggregate expenditure line upward 
B) shift the aggregate expenditure line downward 
C) cause an upward movement along the aggregate expenditure line 
D) cause a downward movement along the aggregate expenditure line 
E) shift the aggregate demand curve leftward

Question 2

If planned spending exceeds planned output in an economy,the result is a(n)_____.

Accepted Answer

A) increase in inventories 
B) decrease in gross domestic product 
C) decrease in imports 
D) increase in government purchases 
E) unintended decrease in inventories 
A) increase in inventories 
B) decrease in gross domestic product 
C) decrease in imports 
D) increase in government purchases 
E) unintended decrease in inventories

Question 3

The slope of the consumption function shows how:

Accepted Answer

A) consumption changes over time. 
B) consumption changes as household size changes. 
C) consumption changes as the price level changes. 
D) income changes as the level of consumption changes. 
E) consumption changes as the level of income changes. 
A) consumption changes over time. 
B) consumption changes as household size changes. 
C) consumption changes as the price level changes. 
D) income changes as the level of consumption changes. 
E) consumption changes as the level of income changes.

Question 4

Identify the correct statement.

Accepted Answer

A) An increase in the price level in an economy will increase the real value of dollar-denominated assets. 
B) An increase in the price level in an economy will shift the aggregate expenditure line upward. 
C) An increase in the price level in an economy will decrease the equilibrium level of output demanded. 
D) An increase in the price level in an economy will cause an upward movement along the aggregate demand curve. 
E) An increase in the price level in an economy will shift the aggregate demand curve rightward. 
A) An increase in the price level in an economy will increase the real value of dollar-denominated assets. 
B) An increase in the price level in an economy will shift the aggregate expenditure line upward. 
C) An increase in the price level in an economy will decrease the equilibrium level of output demanded. 
D) An increase in the price level in an economy will cause an upward movement along the aggregate demand curve. 
E) An increase in the price level in an economy will shift the aggregate demand curve rightward.

Question 5

If consumption is greater than income,saving must be negative.

Accepted Answer

A) True 
 B)False

Question 6

The table given below shows the real gross domestic product (GDP),consumption,and planned investment in an economy.The marginal propensity to save (MPS)in the economy is _____.
Table 9.3
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$$\begin{array} { c c c } 
\begin{array} { c } 
\text { Real } \
\text { GDP } ( \$ )
\end{array} & \text { Consumption } ( \$ ) & \begin{array} { c } 
\text { Planned } \
\text { Investment } ( \$ )
\end{array} \
\hline 0 & 140 & 100 \
100 & 220 & 100 \
200 & 300 & 100 \
300 & 380 & 100 \
400 & 460 & 100 \
500 & 540 & 100 \
600 & 620 & 100 \
700 & 700 & 100 \
800 & 780 & 100 \
900 & 860 & 100 \
1,000 & 940 & 100 \
1,100 & 1,020 & 100 \
1,200 & 1,100 & 100 \
1,300 & 1,180 & 100
\end{array}$$

Accepted Answer

A) 0 
B) 0.1 
C) 0.2 
D) 0.8 
E) 20 
A) 0 
B) 0.1 
C) 0.2 
D) 0.8 
E) 20

Question 7

In the income-expenditure model,if autonomous saving increases by $15 billion,_____.

Accepted Answer

A) the aggregate expenditure line shifts upward by $15 billion 
B) planned investment increases by $15 billion 
C) the aggregate expenditure line shifts downward by $15 billion 
D) planned investment decreases by $15 billion 
E) the equilibrium level of real GDP demanded decreases by $15 billion 
A) the aggregate expenditure line shifts upward by $15 billion 
B) planned investment increases by $15 billion 
C) the aggregate expenditure line shifts downward by $15 billion 
D) planned investment decreases by $15 billion 
E) the equilibrium level of real GDP demanded decreases by $15 billion

Question 8

As the U.S.price level rises relative to price levels in other countries,U.S._____.

Accepted Answer

A) consumption and net exports will both decrease 
B) consumption and net exports will both increase 
C) consumption would increase and net exports will decrease 
D) consumption would decrease and net exports will increase 
E) consumption and net exports will remain constant 
A) consumption and net exports will both decrease 
B) consumption and net exports will both increase 
C) consumption would increase and net exports will decrease 
D) consumption would decrease and net exports will increase 
E) consumption and net exports will remain constant

Question 9

Which of the following is true of disposable income?

Accepted Answer

A) It excludes transfer payments. 
B) It is the portion of income that is used solely for consumption. 
C) It is that part of total earned income that is paid to the government in the form of taxes. 
D) It is the difference between income and saving. 
E) It equals consumption expenditures plus saving. 
A) It excludes transfer payments. 
B) It is the portion of income that is used solely for consumption. 
C) It is that part of total earned income that is paid to the government in the form of taxes. 
D) It is the difference between income and saving. 
E) It equals consumption expenditures plus saving.

Question 10

If the marginal propensity to consume is equal to 0.70 and income rises by $20 billion in an economy,then consumption spending will increase by:

Accepted Answer

A) $6 billion. 
B) $14 billion. 
C) $20 billion. 
D) $28 billion. 
E) $67 billion. 
A) $6 billion. 
B) $14 billion. 
C) $20 billion. 
D) $28 billion. 
E) $67 billion.

Question 11

An aggregate demand curve can be drawn by:

Accepted Answer

A) shifting the 45-degree line. 
B) letting changes in autonomous spending shift the aggregate expenditure line. 
C) letting changes in the price level shift the aggregate expenditure line. 
D) letting changes in the level of income shift the aggregate expenditure line. 
E) letting changes in real GDP shift the aggregate expenditure line. 
A) shifting the 45-degree line. 
B) letting changes in autonomous spending shift the aggregate expenditure line. 
C) letting changes in the price level shift the aggregate expenditure line. 
D) letting changes in the level of income shift the aggregate expenditure line. 
E) letting changes in real GDP shift the aggregate expenditure line.

Question 12

In an economy without a government and without international transactions,aggregate expenditure at each level of income is equal to:

Accepted Answer

A) consumption plus saving. 
B) planned investment plus saving. 
C) disposable income plus the price level. 
D) consumption plus planned investment. 
E) planned investment minus saving. 
A) consumption plus saving. 
B) planned investment plus saving. 
C) disposable income plus the price level. 
D) consumption plus planned investment. 
E) planned investment minus saving.

Question 13

The aggregate output demanded for a given price level occurs at the point where:

Accepted Answer

A) an economy reaches the full employment of labor. 
B) aggregate expenditure equals real GDP. 
C) actual aggregate expenditures exceeds real GDP. 
D) inventories of goods and services are increasing. 
E) inventories of goods and services are decreasing. 
A) an economy reaches the full employment of labor. 
B) aggregate expenditure equals real GDP. 
C) actual aggregate expenditures exceeds real GDP. 
D) inventories of goods and services are increasing. 
E) inventories of goods and services are decreasing.

Question 14

The table given below shows the values of different components of aggregate expenditure of an economy.The marginal propensity to save (MPS)equals _____.
?
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) 0.80 or 4/5 
B) 0.60 or 3/5 
C) 0.40 or 2/5 
D) 0.10 or 1/10 
E) 0.20 or 1/5 
A) 0.80 or 4/5 
B) 0.60 or 3/5 
C) 0.40 or 2/5 
D) 0.10 or 1/10 
E) 0.20 or 1/5

Question 15

Which of the following is true of the relationship between disposable income and consumption?

Accepted Answer

A) Disposable income and consumption are both dependent variables. 
B) Disposable income and consumption are both independent variables. 
C) Disposable income is the dependent variable and consumption is the independent variable. 
D) Consumption is the dependent variable and disposable income is the independent variable. 
E) Disposable income and consumption are negatively related to each other. 
A) Disposable income and consumption are both dependent variables. 
B) Disposable income and consumption are both independent variables. 
C) Disposable income is the dependent variable and consumption is the independent variable. 
D) Consumption is the dependent variable and disposable income is the independent variable. 
E) Disposable income and consumption are negatively related to each other.

Question 16

As disposable income decreases,saving decreases.

Accepted Answer

A) True 
 B)False

Question 17

Less of an economy's resources will be channeled into building new factories and equipment when:

Accepted Answer

A) interest rates are high. 
B) households decide to save more of their income. 
C) firms are optimistic about their future profits. 
D) aggregate income increases. 
E) an economy has a trade deficit. 
A) interest rates are high. 
B) households decide to save more of their income. 
C) firms are optimistic about their future profits. 
D) aggregate income increases. 
E) an economy has a trade deficit.

Question 18

Along the consumption function,an increase in disposable income will:

Accepted Answer

A) cause autonomous consumption to rise. 
B) shift the consumption function upward. 
C) cause a corresponding downward shift of the saving function. 
D) cause a movement along the given consumption function. 
E) shift the consumption function downward. 
A) cause autonomous consumption to rise. 
B) shift the consumption function upward. 
C) cause a corresponding downward shift of the saving function. 
D) cause a movement along the given consumption function. 
E) shift the consumption function downward.

Question 19

A household that expects a decrease in disposable income in the future will _____.

Accepted Answer

A) increase its current consumption spending 
B) decrease its current consumption spending 
C) maintain its current consumption spending 
D) first increase its current consumption spending and then decrease spending when income falls 
E) first decrease its current consumption spending and then increase spending when income falls 
A) increase its current consumption spending 
B) decrease its current consumption spending 
C) maintain its current consumption spending 
D) first increase its current consumption spending and then decrease spending when income falls 
E) first decrease its current consumption spending and then increase spending when income falls

Question 20

If current aggregate expenditure equals current production,an economy is in equilibrium.

Accepted Answer

A) True 
 B)False

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

If planned spending exceeds planned output in an economy,the result is a(n)_____.

The slope of the consumption function shows how:

Identify the correct statement.

If consumption is greater than income,saving must be negative.

In the income-expenditure model,if autonomous saving increases by $15 billion,_____.

As the U.S.price level rises relative to price levels in other countries,U.S._____.

Which of the following is true of disposable income?

If the marginal propensity to consume is equal to 0.70 and income rises by $20 billion in an economy,then consumption spending will increase by:

An aggregate demand curve can be drawn by:

In an economy without a government and without international transactions,aggregate expenditure at each level of income is equal to:

The aggregate output demanded for a given price level occurs at the point where:

Which of the following is true of the relationship between disposable income and consumption?

As disposable income decreases,saving decreases.

Less of an economy's resources will be channeled into building new factories and equipment when:

Along the consumption function,an increase in disposable income will:

A household that expects a decrease in disposable income in the future will _____.

If current aggregate expenditure equals current production,an economy is in equilibrium.

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

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

If planned spending exceeds planned output in an economy,the result is a(n)_____.

The slope of the consumption function shows how:

Identify the correct statement.

If consumption is greater than income,saving must be negative.

In the income-expenditure model,if autonomous saving increases by $15 billion,_____.

As the U.S.price level rises relative to price levels in other countries,U.S._____.

Which of the following is true of disposable income?

If the marginal propensity to consume is equal to 0.70 and income rises by $20 billion in an economy,then consumption spending will increase by:

An aggregate demand curve can be drawn by:

In an economy without a government and without international transactions,aggregate expenditure at each level of income is equal to:

The aggregate output demanded for a given price level occurs at the point where:

Which of the following is true of the relationship between disposable income and consumption?

As disposable income decreases,saving decreases.

Less of an economy's resources will be channeled into building new factories and equipment when:

Along the consumption function,an increase in disposable income will:

A household that expects a decrease in disposable income in the future will _____.

If current aggregate expenditure equals current production,an economy is in equilibrium.

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