Question 1

The marginal propensity to consume equals

Accepted Answer

A)  consumption expenditure divided by the change in disposable income. 
B)  the change in autonomous consumption divided by the change in induced consumption. 
C)  consumption expenditure divided by disposable income. 
D)  the change in consumption expenditure divided by the change in disposable income. 
E)  the change in consumption expenditure divided by disposable income. 
A)  consumption expenditure divided by the change in disposable income. 
B)  the change in autonomous consumption divided by the change in induced consumption. 
C)  consumption expenditure divided by disposable income. 
D)  the change in consumption expenditure divided by the change in disposable income. 
E)  the change in consumption expenditure divided by disposable income.

Question 2

During the start of an expansion, aggregate planned expenditure

Accepted Answer

A)  is slowly decreasing. 
B)  increases the magnitude of the expenditure multiplier. 
C)  decreases the magnitude of the expenditure multiplier. 
D)  exceeds real GDP. 
E)  is less than real GDP. 
A)  is slowly decreasing. 
B)  increases the magnitude of the expenditure multiplier. 
C)  decreases the magnitude of the expenditure multiplier. 
D)  exceeds real GDP. 
E)  is less than real GDP.

Question 3

If autonomous spending decreases, then

Accepted Answer

A)  the expenditure multiplier means that equilibrium expenditure decreases by a larger amount. 
B)  equilibrium expenditure does not change. 
C)  equilibrium expenditure decreases by the same amount. 
D)  the expenditure multiplier means that equilibrium expenditure increases by a larger amount. 
E)  the expenditure multiplier means that equilibrium expenditure increases by a smaller amount. 
A)  the expenditure multiplier means that equilibrium expenditure decreases by a larger amount. 
B)  equilibrium expenditure does not change. 
C)  equilibrium expenditure decreases by the same amount. 
D)  the expenditure multiplier means that equilibrium expenditure increases by a larger amount. 
E)  the expenditure multiplier means that equilibrium expenditure increases by a smaller amount.

Question 4

When the economy enters an expansion of a business cycle, households become more optimistic about expected future disposable income. The increase in optimism leads to

Accepted Answer

A)  a shift upward of the consumption function. 
B)  a movement downward along the consumption function. 
C)  a movement upward along the consumption function. 
D)  an increase in consumption expenditures. 
E)  no change in the level of consumption expenditures. 
A)  a shift upward of the consumption function. 
B)  a movement downward along the consumption function. 
C)  a movement upward along the consumption function. 
D)  an increase in consumption expenditures. 
E)  no change in the level of consumption expenditures.

Question 5

When aggregate planned expenditure exceeds real GDP, there are unplanned ________ in inventories, and firms ________ production, so that real GDP ________.

Accepted Answer

A)  decreases; increase; increases 
B)  decreases; decrease; increases 
C)  decreases; decrease; decreases 
D)  increases; increase; increases 
E)  increases; decrease; decreases 
A)  decreases; increase; increases 
B)  decreases; decrease; increases 
C)  decreases; decrease; decreases 
D)  increases; increase; increases 
E)  increases; decrease; decreases

Question 6

When disposable income is $8 trillion, consumption expenditure is $5 trillion; when disposable income is $5 trillion, consumption expenditure is $3 trillion. The MPC is

Accepted Answer

A)  (5 + 3) ÷ (8 + 5) = 0.615. 
B)  (5 - 3) ÷ (8 - 5) = 0.667. 
C)  (5 + 3) ÷ (8 - 5) = 2.667. 
D)  (5/8 + 3/5) = 1.225. 
E)  (8 - 5) ÷ (5 - 3) = 1.333. 
A)  (5 + 3) ÷ (8 + 5) = 0.615. 
B)  (5 - 3) ÷ (8 - 5) = 0.667. 
C)  (5 + 3) ÷ (8 - 5) = 2.667. 
D)  (5/8 + 3/5) = 1.225. 
E)  (8 - 5) ÷ (5 - 3) = 1.333.

Question 7

-The above table has data from the nation of Atlantic. Based on these data, at what point does saving equal zero?

Accepted Answer

A)  None, dissavings occurs at all of the above points. 
B)  None, savings occurs at all of the above points. 
C)  Between disposable income of $8.0 trillion and $7.5 trillion. 
D)  Between disposable income of $0.0 and $1.5 trillion. 
E)  At disposable income of $6.0 trillion. 
A)  None, dissavings occurs at all of the above points. 
B)  None, savings occurs at all of the above points. 
C)  Between disposable income of $8.0 trillion and $7.5 trillion. 
D)  Between disposable income of $0.0 and $1.5 trillion. 
E)  At disposable income of $6.0 trillion.

Question 8

-The above table has data from the nation of Atlantica. Based on these data, when disposable income equals $2.0 trillion there is

Accepted Answer

A)  savings of $1.0 trillion. 
B)  dissavings of $1.0 trillion. 
C)  savings of $3.0 trillion. 
D)  dissavings of $3.0 trillion. 
E)  dissavings of $5.0 trillion. 
A)  savings of $1.0 trillion. 
B)  dissavings of $1.0 trillion. 
C)  savings of $3.0 trillion. 
D)  dissavings of $3.0 trillion. 
E)  dissavings of $5.0 trillion.

Question 9

Consumption expenditure exceeds disposable income

Accepted Answer

A)  only when the economy is in equilibrium. 
B)  when there is dissaving. 
C)  never. 
D)  when there is positive saving. 
E)  always. 
A)  only when the economy is in equilibrium. 
B)  when there is dissaving. 
C)  never. 
D)  when there is positive saving. 
E)  always.

Question 10

-The table above gives data for the nation of Mosh. If real GDP is $9 trillion, then unplanned inventory change equals

Accepted Answer

A)  $5.5 trillion. 
B)  0. 
C)  $5 trillion. 
D)  $9 trillion. 
E)  $1.25 trillion. 
A)  $5.5 trillion. 
B)  0. 
C)  $5 trillion. 
D)  $9 trillion. 
E)  $1.25 trillion.

Question 11

An economy has no imports or income taxes. The MPC is 0.75 and real GDP is $120 billion. Businesses increase investment by $4 billion. The new level of real GDP is

Accepted Answer

A)  $140 billion. 
B)  $132 billion. 
C)  $136 billion. 
D)  $124 billion. 
E)  $128 billion. 
A)  $140 billion. 
B)  $132 billion. 
C)  $136 billion. 
D)  $124 billion. 
E)  $128 billion.

Question 12

The equilibrium level of aggregate planned expenditure is found where

Accepted Answer

A)  there is no saving and no dissaving. 
B)  the price level is rising at a constant rate. 
C)  autonomous expenditure equals equilibrium expenditure. 
D)  aggregate planned expenditure equals real GDP. 
E)  net exports is zero. 
A)  there is no saving and no dissaving. 
B)  the price level is rising at a constant rate. 
C)  autonomous expenditure equals equilibrium expenditure. 
D)  aggregate planned expenditure equals real GDP. 
E)  net exports is zero.

Question 13

-The above table has data from the nation of Atlantica. Based on these data, what is the marginal propensity to consume?

Accepted Answer

A)  1.00 
B)  1.50 
C)  0.50 
D)  1.33 
E)  0.75 
A)  1.00 
B)  1.50 
C)  0.50 
D)  1.33 
E)  0.75

Question 14

In the aggregate expenditure (AE) model, when real GDP exceeds aggregate planned expenditure, actual inventories ________ planned inventories and real GDP ________.

Accepted Answer

A)  exceed; increases 
B)  exceed; does not change 
C)  exceed; decreases 
D)  are less than; increases 
E)  are less than; decreases 
A)  exceed; increases 
B)  exceed; does not change 
C)  exceed; decreases 
D)  are less than; increases 
E)  are less than; decreases

Question 15

If the marginal propensity to import is ________, then a $2 trillion increase in disposable income would increase import expenditure by $0.2 trillion. If the marginal propensity to import is ________, then a $2 trillion increase in disposable income would increase import expenditure by $0.6 trillion.

Accepted Answer

A)  1.0; 3.0 
B)  0.6; 2.0 
C)  0.2; 0.6 
D)  0.1; 0.3 
E)  0.3; 0.1 
A)  1.0; 3.0 
B)  0.6; 2.0 
C)  0.2; 0.6 
D)  0.1; 0.3 
E)  0.3; 0.1

Question 16

When aggregate planned expenditure exceeds real GDP,

Accepted Answer

A)  real GDP decreases. 
B)  an unplanned increase in inventories occurs. 
C)  firms decrease production. 
D)  an unplanned decrease in inventories occurs. 
E)  real GDP remains at its equilibrium level. 
A)  real GDP decreases. 
B)  an unplanned increase in inventories occurs. 
C)  firms decrease production. 
D)  an unplanned decrease in inventories occurs. 
E)  real GDP remains at its equilibrium level.

Question 17

-The above table gives data for the nation of Mouseville. There are no imports into or exports from Mouseville. Unplanned inventory changes equal $50 billion when real GDP equals

Accepted Answer

A)  $900 billion. 
B)  $300 billion. 
C)  $700 billion. 
D)  $500 billion. 
E)  $800 billion. 
A)  $900 billion. 
B)  $300 billion. 
C)  $700 billion. 
D)  $500 billion. 
E)  $800 billion.

Question 18

Increases in autonomous expenditure induce ________ in aggregate expenditure thereby making the multiplier ________.

Accepted Answer

A)  a decrease; less than one 
B)  further increases; less than one 
C)  further increases; greater than one 
D)  further increases; unnecessary 
E)  a decrease; greater than one 
A)  a decrease; less than one 
B)  further increases; less than one 
C)  further increases; greater than one 
D)  further increases; unnecessary 
E)  a decrease; greater than one

Question 19

-The above table has data from the nation of Media. Based on these data, the marginal propensity to consume is

Accepted Answer

A)  0.67. 
B)  1.33. 
C)  0.25. 
D)  0.75. 
E)  1.50. 
A)  0.67. 
B)  1.33. 
C)  0.25. 
D)  0.75. 
E)  1.50.

Question 20

-In the figure above, when disposable income equals $10 trillion,

Accepted Answer

A)  consumption expenditure is less than disposable income, so consumers are saving. 
B)  consumption expenditure is greater than disposable income, so consumers are dissaving. 
C)  consumption expenditure is greater than disposable income but it is not possible to determine if consumers are saving or dissaving. 
D)  consumption expenditure is greater than disposable income, so consumers are saving. 
E)  consumption expenditure is less than disposable income, so consumers are dissaving. 
A)  consumption expenditure is less than disposable income, so consumers are saving. 
B)  consumption expenditure is greater than disposable income, so consumers are dissaving. 
C)  consumption expenditure is greater than disposable income but it is not possible to determine if consumers are saving or dissaving. 
D)  consumption expenditure is greater than disposable income, so consumers are saving. 
E)  consumption expenditure is less than disposable income, so consumers are dissaving.

The marginal propensity to consume equals

During the start of an expansion, aggregate planned expenditure

If autonomous spending decreases, then

When the economy enters an expansion of a business cycle, households become more optimistic about expected future disposable income. The increase in optimism leads to

When aggregate planned expenditure exceeds real GDP, there are unplanned in inventories, and firms production, so that real GDP .

When disposable income is $8 trillion, consumption expenditure is $5 trillion; when disposable income is $5 trillion, consumption expenditure is $3 trillion. The MPC is

-The above table has data from the nation of Atlantic. Based on these data, at what point does saving equal zero?

-The above table has data from the nation of Atlantica. Based on these data, when disposable income equals $2.0 trillion there is

Consumption expenditure exceeds disposable income

-The table above gives data for the nation of Mosh. If real GDP is $9 trillion, then unplanned inventory change equals

An economy has no imports or income taxes. The MPC is 0.75 and real GDP is $120 billion. Businesses increase investment by $4 billion. The new level of real GDP is

The equilibrium level of aggregate planned expenditure is found where

-The above table has data from the nation of Atlantica. Based on these data, what is the marginal propensity to consume?

In the aggregate expenditure (AE) model, when real GDP exceeds aggregate planned expenditure, actual inventories planned inventories and real GDP .

If the marginal propensity to import is , then a $2 trillion increase in disposable income would increase import expenditure by $0.2 trillion. If the marginal propensity to import is , then a $2 trillion increase in disposable income would increase import expenditure by $0.6 trillion.

When aggregate planned expenditure exceeds real GDP,

-The above table gives data for the nation of Mouseville. There are no imports into or exports from Mouseville. Unplanned inventory changes equal $50 billion when real GDP equals

Increases in autonomous expenditure induce in aggregate expenditure thereby making the multiplier .

-The above table has data from the nation of Media. Based on these data, the marginal propensity to consume is

-In the figure above, when disposable income equals $10 trillion,

Getting Started

The Australian and Global Economies

The Economic Problem

Demand and Supply

GDP: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Economic Growth

Finance, Saving and Investment

Money, the Price Level and Inflation

Aggregate Supply and Aggregate Demand

The Short-Run Policy Tradeoff

Fiscal Policy

Monetary Policy

International Trade Policy

International Finance

Filters

Exam 12: Aggregate Expenditure Multiplier

The marginal propensity to consume equals

During the start of an expansion, aggregate planned expenditure

If autonomous spending decreases, then

When the economy enters an expansion of a business cycle, households become more optimistic about expected future disposable income. The increase in optimism leads to

When aggregate planned expenditure exceeds real GDP, there are unplanned ________ in inventories, and firms ________ production, so that real GDP ________.

When disposable income is $8 trillion, consumption expenditure is $5 trillion; when disposable income is $5 trillion, consumption expenditure is $3 trillion. The MPC is

-The above table has data from the nation of Atlantic. Based on these data, at what point does saving equal zero?

-The above table has data from the nation of Atlantica. Based on these data, when disposable income equals $2.0 trillion there is

Consumption expenditure exceeds disposable income

-The table above gives data for the nation of Mosh. If real GDP is $9 trillion, then unplanned inventory change equals

An economy has no imports or income taxes. The MPC is 0.75 and real GDP is $120 billion. Businesses increase investment by $4 billion. The new level of real GDP is

The equilibrium level of aggregate planned expenditure is found where

-The above table has data from the nation of Atlantica. Based on these data, what is the marginal propensity to consume?

In the aggregate expenditure (AE) model, when real GDP exceeds aggregate planned expenditure, actual inventories ________ planned inventories and real GDP ________.

When aggregate planned expenditure exceeds real GDP,

-The above table gives data for the nation of Mouseville. There are no imports into or exports from Mouseville. Unplanned inventory changes equal $50 billion when real GDP equals

Increases in autonomous expenditure induce ________ in aggregate expenditure thereby making the multiplier ________.

-The above table has data from the nation of Media. Based on these data, the marginal propensity to consume is

-In the figure above, when disposable income equals $10 trillion,

Getting Started

The Australian and Global Economies

The Economic Problem

Demand and Supply

GDP: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Economic Growth

Finance, Saving and Investment

Money, the Price Level and Inflation

Aggregate Supply and Aggregate Demand

The Short-Run Policy Tradeoff

Fiscal Policy

Monetary Policy

International Trade Policy

International Finance

Filters

When aggregate planned expenditure exceeds real GDP, there are unplanned in inventories, and firms production, so that real GDP .

In the aggregate expenditure (AE) model, when real GDP exceeds aggregate planned expenditure, actual inventories planned inventories and real GDP .

Increases in autonomous expenditure induce in aggregate expenditure thereby making the multiplier .