Question 1

Expectations that the price level will decrease in the future will _____.

Accepted Answer

A) make the current consumption function flatter 
B) shift the current consumption function downward 
C) result in an upward movement along the current consumption function 
D) result in a downward movement along the current consumption function 
E) make the current consumption function steeper 
A) make the current consumption function flatter 
B) shift the current consumption function downward 
C) result in an upward movement along the current consumption function 
D) result in a downward movement along the current consumption function 
E) make the current consumption function steeper

Question 2

A decrease in the price level in an economy is likely to cause a:

Accepted Answer

A) decrease in the real value of dollar-denominated assets. 
B) downward shift of the aggregate expenditure line. 
C) decrease in the equilibrium level of output demanded. 
D) downward movement along the aggregate demand curve. 
E) leftward shift of the aggregate demand curve. 
A) decrease in the real value of dollar-denominated assets. 
B) downward shift of the aggregate expenditure line. 
C) decrease in the equilibrium level of output demanded. 
D) downward movement along the aggregate demand curve. 
E) leftward shift of the aggregate demand curve.

Question 3

An upward shift of the consumption function might be caused by:

Accepted Answer

A) an increase in disposable income. 
B) a decrease in disposable income. 
C) a decrease in the price level. 
D) a decrease in household wealth. 
E) an increase in the interest rate. 
A) an increase in disposable income. 
B) a decrease in disposable income. 
C) a decrease in the price level. 
D) a decrease in household wealth. 
E) an increase in the interest rate.

Question 4

At the equilibrium level of real gross domestic product (GDP),unplanned inventory adjustment equals _____.

Accepted Answer

A) planned investment 
B) saving 
C) zero 
D) actual investment 
E) consumption 
A) planned investment 
B) saving 
C) zero 
D) actual investment 
E) consumption

Question 5

The higher the opportunity cost of borrowing,the higher the amount of investment,other things constant.

Accepted Answer

A) True 
 B)False

Question 6

The difference between consumption spending and disposable income _____.

Accepted Answer

A) decreases as income increases 
B) stays proportionally the same as income increases 
C) decreases if the interest rate increases 
D) equals the amount of taxes paid 
E) equals saving 
A) decreases as income increases 
B) stays proportionally the same as income increases 
C) decreases if the interest rate increases 
D) equals the amount of taxes paid 
E) equals saving

Question 7

The figure given below shows the income-expenditure model.Which of the following best describes the situation at point B?

Accepted Answer

A) Consumption expenditure exceeds disposable income 
B) Real GDP exceeds aggregate expenditure 
C) Aggregate expenditure is exactly equal to real GDP 
D) Aggregate expenditure exceeds real GDP 
E) Producers experience an unexpected accumulation of inventory 
A) Consumption expenditure exceeds disposable income 
B) Real GDP exceeds aggregate expenditure 
C) Aggregate expenditure is exactly equal to real GDP 
D) Aggregate expenditure exceeds real GDP 
E) Producers experience an unexpected accumulation of inventory

Question 8

The aggregate expenditure line is drawn on a graph that measures:

Accepted Answer

A) real GDP on the horizontal axis and aggregate expenditure on the vertical axis. 
B) aggregate expenditure on the horizontal axis and real GDP on the vertical axis. 
C) consumption on the horizontal axis and aggregate expenditure on the vertical axis. 
D) aggregate expenditure on the horizontal axis and consumption on the vertical axis. 
E) investment on the horizontal axis and aggregate expenditure on the vertical axis. 
A) real GDP on the horizontal axis and aggregate expenditure on the vertical axis. 
B) aggregate expenditure on the horizontal axis and real GDP on the vertical axis. 
C) consumption on the horizontal axis and aggregate expenditure on the vertical axis. 
D) aggregate expenditure on the horizontal axis and consumption on the vertical axis. 
E) investment on the horizontal axis and aggregate expenditure on the vertical axis.

Question 9

The slope of the consumption function equals the marginal propensity to consume.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following is illustrated by the distance between the aggregate expenditure line and the 45-degree line at each level of real GDP?

Accepted Answer

A) The level of saving in an economy 
B) Unplanned inventory change 
C) Planned investment undertaken in an economy 
D) The marginal propensity to save 
E) The marginal propensity to consume 
A) The level of saving in an economy 
B) Unplanned inventory change 
C) Planned investment undertaken in an economy 
D) The marginal propensity to save 
E) The marginal propensity to consume

Question 11

If a household's income falls from $20,000 to $17,000 and its consumption spending falls from $18,000 to $15,000,then its:

Accepted Answer

A) marginal propensity to consume is −0.67. 
B) marginal propensity to consume is 0.88. 
C) marginal propensity to consume is 0.20. 
D) marginal propensity to save is 0. 
E) marginal propensity to save is 0.12. 
A) marginal propensity to consume is −0.67. 
B) marginal propensity to consume is 0.88. 
C) marginal propensity to consume is 0.20. 
D) marginal propensity to save is 0. 
E) marginal propensity to save is 0.12.

Question 12

A decrease in the price level will _____.

Accepted Answer

A) shift the consumption function upward 
B) result in an upward movement along the consumption function 
C) result in a downward movement along the consumption function 
D) shift the consumption function downward 
A) shift the consumption function upward 
B) result in an upward movement along the consumption function 
C) result in a downward movement along the consumption function 
D) shift the consumption function downward

Question 13

If the market interest rate equals 8 percent,the opportunity cost of the last new investment project undertaken would approximately be equal to _____.

Accepted Answer

A) zero percent 
B) 4 percent 
C) infinity 
D) 8 percent 
E) 16 percent 
A) zero percent 
B) 4 percent 
C) infinity 
D) 8 percent 
E) 16 percent

Question 14

Which of the following will shift the consumption function upward?

Accepted Answer

A) A decrease in stock prices 
B) An increase in stock prices 
C) A higher price level 
D) A lower disposable income 
E) A higher disposable income 
A) A decrease in stock prices 
B) An increase in stock prices 
C) A higher price level 
D) A lower disposable income 
E) A higher disposable income

Question 15

A firm's level of investment depends on the market interest rate:

Accepted Answer

A) only when the firm has to borrow funds to invest in new equipment. 
B) only when the firm has to borrow funds to buy stocks and bonds. 
C) only when the firm already has sufficient funds and could lend them. 
D) because the interest rate represents the opportunity cost of investing in capital. 
E) because investments are always made with borrowed funds. 
A) only when the firm has to borrow funds to invest in new equipment. 
B) only when the firm has to borrow funds to buy stocks and bonds. 
C) only when the firm already has sufficient funds and could lend them. 
D) because the interest rate represents the opportunity cost of investing in capital. 
E) because investments are always made with borrowed funds.

Question 16

The smaller the marginal propensity to save,other things constant,_____.

Accepted Answer

A) the smaller the marginal propensity to consume 
B) the smaller the multiplier 
C) the flatter the consumption function 
D) the steeper the consumption function 
E) the steeper the saving function 
A) the smaller the marginal propensity to consume 
B) the smaller the multiplier 
C) the flatter the consumption function 
D) the steeper the consumption function 
E) the steeper the saving function

Question 17

A technological change that positively affects business expectations will:

Accepted Answer

A) cause a rightward shift of the investment demand curve. 
B) cause a leftward shift of the investment demand curve. 
C) cause an upward movement along the investment demand curve. 
D) cause a downward movement along the investment demand curve. 
E) make the investment demand curve upward sloping. 
A) cause a rightward shift of the investment demand curve. 
B) cause a leftward shift of the investment demand curve. 
C) cause an upward movement along the investment demand curve. 
D) cause a downward movement along the investment demand curve. 
E) make the investment demand curve upward sloping.

Question 18

A decrease in the price level in an economy implies that _____.

Accepted Answer

A) the spending multiplier will be equal to the marginal propensity to consume 
B) there will be an increase in investment 
C) there will be a decrease in investment 
D) the value of the spending multiplier will be equal to one 
E) the value of the spending multiplier will be equal to zero 
A) the spending multiplier will be equal to the marginal propensity to consume 
B) there will be an increase in investment 
C) there will be a decrease in investment 
D) the value of the spending multiplier will be equal to one 
E) the value of the spending multiplier will be equal to zero

Question 19

If investment increases by $100 and,as a result,gross domestic product (GDP)ultimately increases by $200,the multiplier equals _____.

Accepted Answer

A) 1 
B) 2 
C) 3 
D) 4 
E) 5 
A) 1 
B) 2 
C) 3 
D) 4 
E) 5

Question 20

Net taxes are:

Accepted Answer

A) taxes plus transfer payments. 
B) taxes minus transfer payments. 
C) an injection into the economic system. 
D) consumption after taxes. 
E) government spending minus taxes. 
A) taxes plus transfer payments. 
B) taxes minus transfer payments. 
C) an injection into the economic system. 
D) consumption after taxes. 
E) government spending minus taxes.

Expectations that the price level will decrease in the future will _____.

A decrease in the price level in an economy is likely to cause a:

An upward shift of the consumption function might be caused by:

At the equilibrium level of real gross domestic product (GDP),unplanned inventory adjustment equals _____.

The higher the opportunity cost of borrowing,the higher the amount of investment,other things constant.

The difference between consumption spending and disposable income _____.

The figure given below shows the income-expenditure model.Which of the following best describes the situation at point B?

The aggregate expenditure line is drawn on a graph that measures:

The slope of the consumption function equals the marginal propensity to consume.

Which of the following is illustrated by the distance between the aggregate expenditure line and the 45-degree line at each level of real GDP?

If a household's income falls from $20,000 to $17,000 and its consumption spending falls from $18,000 to $15,000,then its:

A decrease in the price level will _____.

If the market interest rate equals 8 percent,the opportunity cost of the last new investment project undertaken would approximately be equal to _____.

Which of the following will shift the consumption function upward?

A firm's level of investment depends on the market interest rate:

The smaller the marginal propensity to save,other things constant,_____.

A technological change that positively affects business expectations will:

A decrease in the price level in an economy implies that _____.

If investment increases by $100 and,as a result,gross domestic product (GDP)ultimately increases by $200,the multiplier equals _____.

Net taxes are:

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

Expectations that the price level will decrease in the future will _____.

A decrease in the price level in an economy is likely to cause a:

An upward shift of the consumption function might be caused by:

At the equilibrium level of real gross domestic product (GDP),unplanned inventory adjustment equals _____.

The higher the opportunity cost of borrowing,the higher the amount of investment,other things constant.

The difference between consumption spending and disposable income _____.

The figure given below shows the income-expenditure model.Which of the following best describes the situation at point B?

The aggregate expenditure line is drawn on a graph that measures:

The slope of the consumption function equals the marginal propensity to consume.

Which of the following is illustrated by the distance between the aggregate expenditure line and the 45-degree line at each level of real GDP?

If a household's income falls from $20,000 to $17,000 and its consumption spending falls from $18,000 to $15,000,then its:

A decrease in the price level will _____.

If the market interest rate equals 8 percent,the opportunity cost of the last new investment project undertaken would approximately be equal to _____.

Which of the following will shift the consumption function upward?

A firm's level of investment depends on the market interest rate:

The smaller the marginal propensity to save,other things constant,_____.

A technological change that positively affects business expectations will:

A decrease in the price level in an economy implies that _____.

If investment increases by $100 and,as a result,gross domestic product (GDP)ultimately increases by $200,the multiplier equals _____.

Net taxes are:

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