Question 1

A decrease in government spending would:

Accepted Answer

A)  decrease autonomous spending. 
B)  increase spending dependent on income. 
C)  increase autonomous spending. 
D)  decrease spending dependent on income. 
A)  decrease autonomous spending. 
B)  increase spending dependent on income. 
C)  increase autonomous spending. 
D)  decrease spending dependent on income.

Question 2

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 increases. 
B)  Interest rates increase. 
C)  Taxes decrease. 
D)  Domestic income decreases. 
A)  The wealth level increases. 
B)  Interest rates increase. 
C)  Taxes decrease. 
D)  Domestic income decreases.

Question 3

In a recession, the federal government may choose to increase spending in order to:

Accepted Answer

A)  decrease real interest rates. 
B)  decrease the overall price level. 
C)  achieve full-employment GDP. 
D)  increase exports. 
A)  decrease real interest rates. 
B)  decrease the overall price level. 
C)  achieve full-employment GDP. 
D)  increase exports.

Question 4

The table shown displays the spending habits of three coworkers   Who has the lowest MPC?

Accepted Answer

A)  Mary 
B)  Chris 
C)  Steve 
D)  There is not enough information to answer this question. 
A)  Mary 
B)  Chris 
C)  Steve 
D)  There is not enough information to answer this question.

Question 5

Which of the following is not a determinant of investment spending?

Accepted Answer

A)  Real income 
B)  Interest rates 
C)  Taxes 
D)  Expected profitability 
A)  Real income 
B)  Interest rates 
C)  Taxes 
D)  Expected profitability

Question 6

The figure shows planned aggregate expenditure and output for an economy.   The distance between what 2 lines illustrate a recessionary output gap?

Accepted Answer

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

Question 7

When PAE decreases an economy will move towards:

Accepted Answer

A)  lower levels of equilibrium GDP. 
B)  higher levels of equilibrium GDP. 
C)  constant levels of GDP. 
D)  higher levels of equilibrium aggregate expenditure. 
A)  lower levels of equilibrium GDP. 
B)  higher levels of equilibrium GDP. 
C)  constant levels of GDP. 
D)  higher levels of equilibrium aggregate expenditure.

Question 8

In the equation PAE = A + bY, the independent part of the equation that depends on income is:

Accepted Answer

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

Question 9

Which of the following could cause a decrease in consumption?

Accepted Answer

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

Question 10

Which of the following scenarios would decrease the net exports component of aggregate expenditure?

Accepted Answer

A)  The euro increases in value relative to other currencies. 
B)  A "Buy American" campaign reduces the amount of goods imported. 
C)  The United States experiences a recession. 
D)  A decrease in tariffs makes it less expensive to import goods into the United States. 
A)  The euro increases in value relative to other currencies. 
B)  A "Buy American" campaign reduces the amount of goods imported. 
C)  The United States experiences a recession. 
D)  A decrease in tariffs makes it less expensive to import goods into the United States.

Question 11

The multiplier effect suggests that:

Accepted Answer

A)  a ripple effect occurs from one person's initial spending. 
B)  spending $1 will create more than a $1 increase in GDP. 
C)  a tax cut will increase GDP by more than the amount of the initial tax cut. 
D)  All of these are true. 
A)  a ripple effect occurs from one person's initial spending. 
B)  spending $1 will create more than a $1 increase in GDP. 
C)  a tax cut will increase GDP by more than the amount of the initial tax cut. 
D)  All of these are true.

Question 12

If the marginal propensity to consume is 0.9, it would mean that:

Accepted Answer

A)  consumers spend $9 out of every $10 of additional disposable income. 
B)  consumers save $9 out of every $10 of additional disposable income. 
C)  consumers spend $1 out of every $10 of additional disposable income. 
D)  consumers spend $9.90 out of every $10 of additional disposable income. 
A)  consumers spend $9 out of every $10 of additional disposable income. 
B)  consumers save $9 out of every $10 of additional disposable income. 
C)  consumers spend $1 out of every $10 of additional disposable income. 
D)  consumers spend $9.90 out of every $10 of additional disposable income.

Question 13

If the MPC is 0.6, and the government increases spending by $300 billion, the overall effect on GDP will be:

Accepted Answer

A)  a decrease of $750 billion. 
B)  an increase of $750 billion. 
C)  a decrease of $550 billion. 
D)  an increase of $250 billion. 
A)  a decrease of $750 billion. 
B)  an increase of $750 billion. 
C)  a decrease of $550 billion. 
D)  an increase of $250 billion.

Question 14

The figure shows planned aggregate expenditure and output for an economy.   Suppose that the economy's output is Y1. This level of GDP would be considered:

Accepted Answer

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

Question 15

During the Great Depression, unemployment was so bad that nearly _______ of the labor force was unemployed.

Accepted Answer

A)  half 
B)  three quarters 
C)  a quarter 
D)  one-third 
A)  half 
B)  three quarters 
C)  a quarter 
D)  one-third

Question 16

Net exports equal:

Accepted Answer

A)  imports minus exports. 
B)  imports minus investment. 
C)  exports minus imports. 
D)  exports minus investment. 
A)  imports minus exports. 
B)  imports minus investment. 
C)  exports minus imports. 
D)  exports minus investment.

Question 17

The figure shows planned aggregate expenditure and output for an economy.   Suppose that the economy starts at PAE2. Which change would shift the PAE curve upward?

Accepted Answer

A)  An increase in wealth. 
B)  An increase in interest rates. 
C)  And increase in taxes. 
D)  An increase in imports. 
A)  An increase in wealth. 
B)  An increase in interest rates. 
C)  And increase in taxes. 
D)  An increase in imports.

Question 18

The figure shows planned aggregate expenditure and output for an economy.   The distance between _______ illustrates a recessionary 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 19

A _______ relationship exists between domestic income and net export spending.

Accepted Answer

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

Question 20

If spending decreases by $400, and GDP decreases by $1,000 as a result, what must the MPC be?

Accepted Answer

A)  0.6 
B)  0.75 
C)  4 
D)  2.5 
A)  0.6 
B)  0.75 
C)  4 
D)  2.5

A decrease in government spending would:

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?

In a recession, the federal government may choose to increase spending in order to:

The table shown displays the spending habits of three coworkers Who has the lowest MPC?

Which of the following is not a determinant of investment spending?

The figure shows planned aggregate expenditure and output for an economy. The distance between what 2 lines illustrate a recessionary output gap?

When PAE decreases an economy will move towards:

In the equation PAE = A + bY, the independent part of the equation that depends on income is:

Which of the following could cause a decrease in consumption?

Which of the following scenarios would decrease the net exports component of aggregate expenditure?

The multiplier effect suggests that:

If the marginal propensity to consume is 0.9, it would mean that:

If the MPC is 0.6, and the government increases spending by $300 billion, the overall effect on GDP will be:

The figure shows planned aggregate expenditure and output for an economy. Suppose that the economy's output is Y₁. This level of GDP would be considered:

During the Great Depression, unemployment was so bad that nearly _______ of the labor force was unemployed.

Net exports equal:

The figure shows planned aggregate expenditure and output for an economy. Suppose that the economy starts at PAE₂. Which change would shift the PAE curve upward?

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

A _______ relationship exists between domestic income and net export spending.

If spending decreases by $400, and GDP decreases by $1,000 as a result, what must the MPC be?

Economicsand Life

Specializationand Exchange

Markets

Elasticity

Efficiency

Governmentintervention

Measuringgdp

Thecost of Living

Unemploymentand the Labor Market

Economicgrowth

Aggregatedemand and Aggregate Supply

Fiscalpolicy

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Exam 11: Aggregateexpenditures

A decrease in government spending would:

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?

In a recession, the federal government may choose to increase spending in order to:

The table shown displays the spending habits of three coworkers Who has the lowest MPC?

Which of the following is not a determinant of investment spending?

The figure shows planned aggregate expenditure and output for an economy. The distance between what 2 lines illustrate a recessionary output gap?

When PAE decreases an economy will move towards:

In the equation PAE = A + bY, the independent part of the equation that depends on income is:

Which of the following could cause a decrease in consumption?

Which of the following scenarios would decrease the net exports component of aggregate expenditure?

The multiplier effect suggests that:

If the marginal propensity to consume is 0.9, it would mean that:

If the MPC is 0.6, and the government increases spending by $300 billion, the overall effect on GDP will be:

The figure shows planned aggregate expenditure and output for an economy. Suppose that the economy's output is Y1. This level of GDP would be considered:

During the Great Depression, unemployment was so bad that nearly _______ of the labor force was unemployed.

Net exports equal:

The figure shows planned aggregate expenditure and output for an economy. Suppose that the economy starts at PAE2. Which change would shift the PAE curve upward?

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

A _______ relationship exists between domestic income and net export spending.

If spending decreases by $400, and GDP decreases by $1,000 as a result, what must the MPC be?

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. 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's output is Y₁. 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 shift the PAE curve upward?