Question 1

If the MPC is 0.6, and the government spends an additional $50 billion, the overall effect on GDP will be:

Accepted Answer

A)  an increase of $250 billion. 
B)  a decrease of $25 billion. 
C)  a decrease of $75 billion. 
D)  an increase of $125 billion. 
A)  an increase of $250 billion. 
B)  a decrease of $25 billion. 
C)  a decrease of $75 billion. 
D)  an increase of $125 billion.

Question 2

What is the calculation for the simplified spending multiplier?

Accepted Answer

A)  1/(1 − MP
C)  
B)  −1/(1 − MP
C)  
C)  −MPC/(1 − MP
C)  
D)  (1 − MP
C)  × − MPC 
A)  1/(1 − MP
C)  
B)  −1/(1 − MP
C)  
C)  −MPC/(1 − MP
C)  
D)  (1 − MP
C)  × − MPC

Question 3

If the MPC is 0.75, what must the spending multiplier be?

Accepted Answer

A)  3 
B)  4 
C)  5 
D)  1.25 
A)  3 
B)  4 
C)  5 
D)  1.25

Question 4

The figure shows planned aggregate expenditure and output for an economy.   The distance between _______ illustrates an inflationary expenditure gap.

Accepted Answer

A)  PAE 2 and PAE 3 
B)  PAE 1 and PAE 2 
C)  Y 1 and Y 2 
D)  Y 2 and Y 3 
A)  PAE 2 and PAE 3 
B)  PAE 1 and PAE 2 
C)  Y 1 and Y 2 
D)  Y 2 and Y 3

Question 5

A _______ relationship exists between business taxes and investment spending.

Accepted Answer

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

Question 6

The four components of aggregate expenditure (AE) are:

Accepted Answer

A)  consumption, investment, exports, and imports. 
B)  consumption, investment, government, and capital. 
C)  consumption, investment, government, and net exports. 
D)  consumption, internet, government, and capital. 
A)  consumption, investment, exports, and imports. 
B)  consumption, investment, government, and capital. 
C)  consumption, investment, government, and net exports. 
D)  consumption, internet, government, and capital.

Question 7

If spending increases by $250, and GDP decreases by $1,000 as a result, what must the MPC be?

Accepted Answer

A)  0.25 
B)  0.75 
C)  4 
D)  2 
A)  0.25 
B)  0.75 
C)  4 
D)  2

Question 8

If the MPC is 0.5, and the government cuts spending by $400 billion, the overall effect on GDP will be:

Accepted Answer

A)  a decrease of $400 billion. 
B)  an increase of $400 billion. 
C)  a decrease of $800 billion. 
D)  an increase of $800 billion. 
A)  a decrease of $400 billion. 
B)  an increase of $400 billion. 
C)  a decrease of $800 billion. 
D)  an increase of $800 billion.

Question 9

The figure shows planned aggregate expenditure and output for an economy.   If output in this economy is Y1, we would expect there to be:

Accepted Answer

A)  a decrease in inventories. 
B)  an increase in inventories. 
C)  no change in inventories. 
D)  an increase in consumption spending. 
A)  a decrease in inventories. 
B)  an increase in inventories. 
C)  no change in inventories. 
D)  an increase in consumption spending.

Question 10

Which of the following is a determinant of investment spending?

Accepted Answer

A)  Real income 
B)  Expected future income 
C)  Taxes 
D)  Wealth 
A)  Real income 
B)  Expected future income 
C)  Taxes 
D)  Wealth

Question 11

In the equation PAE = A + bY, the MPC is captured by:

Accepted Answer

A)  b. 
B)  Y. 
C)  A. 
D)  PAE. 
A)  b. 
B)  Y. 
C)  A. 
D)  PAE.

Question 12

The macroeconomic variable used to assess the equivalence of PAE and actual output (Y) is:

Accepted Answer

A)  unemployment. 
B)  interest rates. 
C)  inventories. 
D)  capital expenditure. 
A)  unemployment. 
B)  interest rates. 
C)  inventories. 
D)  capital expenditure.

Question 13

Consumer preference for foreign goods and services generally has a _______ relationship with aggregate expenditure.

Accepted Answer

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

Question 14

Which of the following is not a primary determinant of consumption spending?

Accepted Answer

A)  Interest rates on savings 
B)  Real income 
C)  Wealth 
D)  Rate of return on capital 
A)  Interest rates on savings 
B)  Real income 
C)  Wealth 
D)  Rate of return on capital

Question 15

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

Question 16

The acronym MPC stands for:

Accepted Answer

A)  marginal production cost. 
B)  marginal propensity to consume. 
C)  marginally perfect consumption. 
D)  macro possibility curve. 
A)  marginal production cost. 
B)  marginal propensity to consume. 
C)  marginally perfect consumption. 
D)  macro possibility curve.

Question 17

In order to accurately capture the multiplier effect, it is important to know:

Accepted Answer

A)  an individual's wealth. 
B)  what proportion of additional income people spend. 
C)  what people's expectations of the future are. 
D)  real GDP. 
A)  an individual's wealth. 
B)  what proportion of additional income people spend. 
C)  what people's expectations of the future are. 
D)  real GDP.

Question 18

Actual investment is the:

Accepted Answer

A)  spending households engage in based on what they earn. 
B)  amount that firms spend on their workforces. 
C)  investment a firm makes into stocks and bonds to generate profit. 
D)  amount firms allocate to new capital resources and inventory accumulation. 
A)  spending households engage in based on what they earn. 
B)  amount that firms spend on their workforces. 
C)  investment a firm makes into stocks and bonds to generate profit. 
D)  amount firms allocate to new capital resources and inventory accumulation.

Question 19

Autonomous expenditure:

Accepted Answer

A)  has a positive relationship with income. 
B)  is mostly controlled by the government. 
C)  is independent of the current level of income in the economy. 
D)  stays constant over time. 
A)  has a positive relationship with income. 
B)  is mostly controlled by the government. 
C)  is independent of the current level of income in the economy. 
D)  stays constant over time.

Question 20

Planned investment is the:

Accepted Answer

A)  spending households engage in based on their forecasted budget. 
B)  amount that firms budget to spend on their workforces. 
C)  investment that a firm decides upon as a result of temporary market changes. 
D)  amount that firms budget for new capital resources and inventory accumulation. 
A)  spending households engage in based on their forecasted budget. 
B)  amount that firms budget to spend on their workforces. 
C)  investment that a firm decides upon as a result of temporary market changes. 
D)  amount that firms budget for new capital resources and inventory accumulation.

If the MPC is 0.6, and the government spends an additional $50 billion, the overall effect on GDP will be:

What is the calculation for the simplified spending multiplier?

If the MPC is 0.75, what must the spending multiplier be?

The figure shows planned aggregate expenditure and output for an economy. The distance between _______ illustrates an inflationary expenditure gap.

A _______ relationship exists between business taxes and investment spending.

The four components of aggregate expenditure (AE) are:

If spending increases by $250, and GDP decreases by $1,000 as a result, what must the MPC be?

If the MPC is 0.5, and the government cuts spending by $400 billion, the overall effect on GDP will be:

The figure shows planned aggregate expenditure and output for an economy. If output in this economy is Y₁, we would expect there to be:

Which of the following is a determinant of investment spending?

In the equation PAE = A + bY, the MPC is captured by:

The macroeconomic variable used to assess the equivalence of PAE and actual output (Y) is:

Consumer preference for foreign goods and services generally has a _______ relationship with aggregate expenditure.

Which of the following is not a primary determinant of consumption spending?

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?

The acronym MPC stands for:

In order to accurately capture the multiplier effect, it is important to know:

Actual investment is the:

Autonomous expenditure:

Planned investment is the:

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 the MPC is 0.6, and the government spends an additional $50 billion, the overall effect on GDP will be:

What is the calculation for the simplified spending multiplier?

If the MPC is 0.75, what must the spending multiplier be?

The figure shows planned aggregate expenditure and output for an economy. The distance between _______ illustrates an inflationary expenditure gap.

A _______ relationship exists between business taxes and investment spending.

The four components of aggregate expenditure (AE) are:

If spending increases by $250, and GDP decreases by $1,000 as a result, what must the MPC be?

If the MPC is 0.5, and the government cuts spending by $400 billion, the overall effect on GDP will be:

The figure shows planned aggregate expenditure and output for an economy. If output in this economy is Y1, we would expect there to be:

Which of the following is a determinant of investment spending?

In the equation PAE = A + bY, the MPC is captured by:

The macroeconomic variable used to assess the equivalence of PAE and actual output (Y) is:

Consumer preference for foreign goods and services generally has a _______ relationship with aggregate expenditure.

Which of the following is not a primary determinant of consumption spending?

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?

The acronym MPC stands for:

In order to accurately capture the multiplier effect, it is important to know:

Actual investment is the:

Autonomous expenditure:

Planned investment is the:

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

The figure shows planned aggregate expenditure and output for an economy. If output in this economy is Y₁, we would expect there to be:

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?