Question 1

If PAE is greater than Y, we expect:

Accepted Answer

A)  inventories to increase. 
B)  inventories to decrease. 
C)  there will be no change in inventories. 
D)  the government will spend more than it has collected in taxes. 
A)  inventories to increase. 
B)  inventories to decrease. 
C)  there will be no change in inventories. 
D)  the government will spend more than it has collected in taxes.

Question 2

If the government wishes to increase GDP by $1,200 billion, and the MPC is 0.75, it should _______ its spending by _______ billion.

Accepted Answer

A)  increase; $300 
B)  decrease; $300 
C)  increase; $900 
D)  decrease; $900 
A)  increase; $300 
B)  decrease; $300 
C)  increase; $900 
D)  decrease; $900

Question 3

If the MPC is 0.8, and the government spends an additional $100 billion, the overall effect on GDP will be _______ billion.

Accepted Answer

A)  $400 
B)  $500 
C)  $120 
D)  $180 
A)  $400 
B)  $500 
C)  $120 
D)  $180

Question 4

Foreign income is earned:

Accepted Answer

A)  by a nation's firms when they operate abroad. 
B)  when a domestic citizen works abroad. 
C)  on investments made abroad. 
D)  by those living outside a country. 
A)  by a nation's firms when they operate abroad. 
B)  when a domestic citizen works abroad. 
C)  on investments made abroad. 
D)  by those living outside a country.

Question 5

The figure shows planned aggregate expenditure and output for an economy.   Suppose that the economy starts at PAE2. Which change would cause a move from PAE2 to PAE1?

Accepted Answer

A)  The wealth level decreases. 
B)  Interest rates decrease. 
C)  The expected profitability of investments increase. 
D)  Domestic income decreases. 
A)  The wealth level decreases. 
B)  Interest rates decrease. 
C)  The expected profitability of investments increase. 
D)  Domestic income decreases.

Question 6

The figure shows planned aggregate expenditure and output for an economy.   Suppose that the economy starts at PAE2. What change would cause a move from PAE2 to PAE1?

Accepted Answer

A)  Consumption increases. 
B)  Investment increases. 
C)  Exports increase. 
D)  Government spending decreases. 
A)  Consumption increases. 
B)  Investment increases. 
C)  Exports increase. 
D)  Government spending decreases.

Question 7

The Keynesian equilibrium occurs when:

Accepted Answer

A)  planned inventories are equal to actual inventories. 
B)  planned investment is equal to domestic consumption. 
C)  national capital investment is equal to planned aggregate expenditure. 
D)  planned spending is equal to expected household spending. 
A)  planned inventories are equal to actual inventories. 
B)  planned investment is equal to domestic consumption. 
C)  national capital investment is equal to planned aggregate expenditure. 
D)  planned spending is equal to expected household spending.

Question 8

Which of the following is a determinant of investment spending?

Accepted Answer

A)  Disposable income 
B)  Expected future income 
C)  Expected profitability 
D)  Real income 
A)  Disposable income 
B)  Expected future income 
C)  Expected profitability 
D)  Real income

Question 9

The spending multiplier tells us the amount by which:

Accepted Answer

A)  GDP increases when spending increases by $1. 
B)  GDP decreases when spending on capital goods increases by $1. 
C)  GDP increases when saving increases by $1. 
D)  spending increases when GDP increases by $1. 
A)  GDP increases when spending increases by $1. 
B)  GDP decreases when spending on capital goods increases by $1. 
C)  GDP increases when saving increases by $1. 
D)  spending increases when GDP increases by $1.

Question 10

The real exchange rate generally has a _______ relationship with aggregate expenditure.

Accepted Answer

A)  negative 
B)  positive 
C)  nonexistent 
D)  constant 
A)  negative 
B)  positive 
C)  nonexistent 
D)  constant

Question 11

Autonomous expenditure is spending that:

Accepted Answer

A)  is based on the rate of borrowing. 
B)  is determined by the government. 
C)  is not sensitive to the level of income in the economy. 
D)  occurs when income changes in the economy. 
A)  is based on the rate of borrowing. 
B)  is determined by the government. 
C)  is not sensitive to the level of income in the economy. 
D)  occurs when income changes in the economy.

Question 12

If the MPC is 0.5, what must the spending multiplier be?

Accepted Answer

A)  1.2 
B)  2 
C)  2.25 
D)  2.5 
A)  1.2 
B)  2 
C)  2.25 
D)  2.5

Question 13

Which of the following would cause investment spending to decrease?

Accepted Answer

A)  Real income increases. 
B)  Real interest rates increase. 
C)  A firm's revenues increase while their costs remain constant. 
D)  Expected future income increases. 
A)  Real income increases. 
B)  Real interest rates increase. 
C)  A firm's revenues increase while their costs remain constant. 
D)  Expected future income increases.

Question 14

Which of the following could cause an increase in consumption?

Accepted Answer

A)  Income decreases. 
B)  Interest rates increase. 
C)  Wealth increases. 
D)  Expected future income decreases. 
A)  Income decreases. 
B)  Interest rates increase. 
C)  Wealth increases. 
D)  Expected future income decreases.

Question 15

Which of the following would increase autonomous spending?

Accepted Answer

A)  An increase in interest rates. 
B)  An increase in house prices. 
C)  A decrease in exports. 
D)  An increase in business taxes. 
A)  An increase in interest rates. 
B)  An increase in house prices. 
C)  A decrease in exports. 
D)  An increase in business taxes.

Question 16

If planned inventories are _______ actual inventories, then demand will be _______ than anticipated.

Accepted Answer

A)  greater than; higher 
B)  less than; lower 
C)  equal to; higher 
D)  greater than; lower 
A)  greater than; higher 
B)  less than; lower 
C)  equal to; higher 
D)  greater than; lower

Question 17

The figure shows planned aggregate expenditure and output for an economy.   Suppose that the economy's output is Y3. This level of GDP would be considered:

Accepted Answer

A)  inflationary. 
B)  recessionary. 
C)  below full employment. 
D)  a natural rate of output. 
A)  inflationary. 
B)  recessionary. 
C)  below full employment. 
D)  a natural rate of output.

Question 18

If a firm's business taxes decrease, we would expect investment spending to:

Accepted Answer

A)  increase. 
B)  decrease. 
C)  remain constant. 
D)  There is not enough information to determine what would happen. 
A)  increase. 
B)  decrease. 
C)  remain constant. 
D)  There is not enough information to determine what would happen.

Question 19

A recessionary output gap exists when equilibrium aggregate expenditure is _______ full employment GDP.

Accepted Answer

A)  below 
B)  equal to 
C)  above 
D)  unchanging relative to 
A)  below 
B)  equal to 
C)  above 
D)  unchanging relative to

Question 20

The figure shows planned aggregate expenditure and output for an economy.   Suppose that the economy starts at PAE2. Which change would cause a move from PAE2 to PAE3?

Accepted Answer

A)  The wealth level decreases. 
B)  Interest rates decrease. 
C)  The expected profitability of investments decrease. 
D)  Domestic income increases. 
A)  The wealth level decreases. 
B)  Interest rates decrease. 
C)  The expected profitability of investments decrease. 
D)  Domestic income increases.

If PAE is greater than Y, we expect:

If the government wishes to increase GDP by $1,200 billion, and the MPC is 0.75, it should _ its spending by _ billion.

If the MPC is 0.8, and the government spends an additional $100 billion, the overall effect on GDP will be _______ billion.

Foreign income is earned:

The figure shows planned aggregate expenditure and output for an economy. Suppose that the economy starts at PAE₂. Which change would cause a move from PAE₂ to PAE₁?

The figure shows planned aggregate expenditure and output for an economy. Suppose that the economy starts at PAE₂. What change would cause a move from PAE₂ to PAE₁?

The Keynesian equilibrium occurs when:

Which of the following is a determinant of investment spending?

The spending multiplier tells us the amount by which:

The real exchange rate generally has a _______ relationship with aggregate expenditure.

Autonomous expenditure is spending that:

If the MPC is 0.5, what must the spending multiplier be?

Which of the following would cause investment spending to decrease?

Which of the following could cause an increase in consumption?

Which of the following would increase autonomous spending?

If planned inventories are _ actual inventories, then demand will be _ than anticipated.

The figure shows planned aggregate expenditure and output for an economy. Suppose that the economy's output is Y₃. This level of GDP would be considered:

If a firm's business taxes decrease, we would expect investment spending to:

A recessionary output gap exists when equilibrium aggregate expenditure is _______ full employment GDP.

The figure shows planned aggregate expenditure and output for an economy. Suppose that the economy starts at PAE₂. Which change would cause a move from PAE₂ to PAE₃?

Economicsand Life

Specializationand Exchange

Markets

Elasticity

Efficiency

Governmentintervention

Measuringgdp

Thecost of Living

Unemploymentand the Labor Market

Economicgrowth

Aggregatedemand and Aggregate Supply

Fiscalpolicy

Thebasics of Finance

Moneyand the Monetary System

Inflation

Financialcrisis

Open-Marketmacroeconomics

Developmenteconomics

Filters

Exam 11: Aggregateexpenditures

If PAE is greater than Y, we expect:

If the government wishes to increase GDP by $1,200 billion, and the MPC is 0.75, it should _______ its spending by _______ billion.

If the MPC is 0.8, and the government spends an additional $100 billion, the overall effect on GDP will be _______ billion.

Foreign income is earned:

The figure shows planned aggregate expenditure and output for an economy. Suppose that the economy starts at PAE2. Which change would cause a move from PAE2 to PAE1?

The figure shows planned aggregate expenditure and output for an economy. Suppose that the economy starts at PAE2. What change would cause a move from PAE2 to PAE1?

The Keynesian equilibrium occurs when:

Which of the following is a determinant of investment spending?

The spending multiplier tells us the amount by which:

The real exchange rate generally has a _______ relationship with aggregate expenditure.

Autonomous expenditure is spending that:

If the MPC is 0.5, what must the spending multiplier be?

Which of the following would cause investment spending to decrease?

Which of the following could cause an increase in consumption?

Which of the following would increase autonomous spending?

If planned inventories are _______ actual inventories, then demand will be _______ than anticipated.

The figure shows planned aggregate expenditure and output for an economy. Suppose that the economy's output is Y3. This level of GDP would be considered:

If a firm's business taxes decrease, we would expect investment spending to:

A recessionary output gap exists when equilibrium aggregate expenditure is _______ full employment GDP.

The figure shows planned aggregate expenditure and output for an economy. Suppose that the economy starts at PAE2. Which change would cause a move from PAE2 to PAE3?

Economicsand Life

Specializationand Exchange

Markets

Elasticity

Efficiency

Governmentintervention

Measuringgdp

Thecost of Living

Unemploymentand the Labor Market

Economicgrowth

Aggregatedemand and Aggregate Supply

Fiscalpolicy

Thebasics of Finance

Moneyand the Monetary System

Inflation

Financialcrisis

Open-Marketmacroeconomics

Developmenteconomics

Filters

If the government wishes to increase GDP by $1,200 billion, and the MPC is 0.75, it should _ its spending by _ billion.

The figure shows planned aggregate expenditure and output for an economy. Suppose that the economy starts at PAE₂. Which change would cause a move from PAE₂ to PAE₁?

The figure shows planned aggregate expenditure and output for an economy. Suppose that the economy starts at PAE₂. What change would cause a move from PAE₂ to PAE₁?

If planned inventories are _ actual inventories, then demand will be _ than anticipated.

The figure shows planned aggregate expenditure and output for an economy. Suppose that the economy's output is Y₃. This level of GDP would be considered:

The figure shows planned aggregate expenditure and output for an economy. Suppose that the economy starts at PAE₂. Which change would cause a move from PAE₂ to PAE₃?