Question 1

An increase in the price level, all other things unchanged, shifts the aggregate expenditures
curve upwards.

Accepted Answer

A) True 
 B)False

Question 2

Use the following to answer questions 
Exhibit: Aggregate Expenditures and Real GDP 1  
-(Exhibit: Aggregate Expenditures and Real GDP 1)
Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, IP = Planned Investment.Suppose AE = C + IP, and IP is autonomous.At a real GDP of $5,000 billion,

Accepted Answer

A) planned investment is greater than actual investment. 
B) planned investment equals actual investment. 
C) planned investment is less than actual investment. 
D) there will be no unplanned investment. 
A) planned investment is greater than actual investment. 
B) planned investment equals actual investment. 
C) planned investment is less than actual investment. 
D) there will be no unplanned investment.

Question 3

The saving function expresses the relationship between

Accepted Answer

A) personal saving and consumption. 
B) gross domestic income and saving. 
C) disposable personal income and saving. 
D) wage income and personal saving. 
A) personal saving and consumption. 
B) gross domestic income and saving. 
C) disposable personal income and saving. 
D) wage income and personal saving.

Question 4

Personal saving equals

Accepted Answer

A) gross domestic income − consumption. 
B) personal disposable income − consumption. 
C) gross domestic product − consumption. 
D) personal disposable income − taxes − consumption. 
A) gross domestic income − consumption. 
B) personal disposable income − consumption. 
C) gross domestic product − consumption. 
D) personal disposable income − taxes − consumption.

Question 5

The multiplier effect indicates that

Accepted Answer

A) the aggregate demand curve is downward sloping. 
B) a change in any autonomous component of aggregate expenditure is buffered by the multiplier effect 
C) a change in income causes a magnified change in investment. 
D) a change in any autonomous component of aggregate expenditure brings about a magnified change in income. 
A) the aggregate demand curve is downward sloping. 
B) a change in any autonomous component of aggregate expenditure is buffered by the multiplier effect 
C) a change in income causes a magnified change in investment. 
D) a change in any autonomous component of aggregate expenditure brings about a magnified change in income.

Question 6

Suppose at each price level, autonomous aggregate expenditures increase by $50 billion.As a result, the aggregate expenditures curve shifts

Accepted Answer

A) downward at each price level and results in a leftward shift in aggregate demand. 
B) upward at each price level and results in a rightward shift in aggregate demand. 
C) downward at each price level and results in a movement down along a given aggregate demand. 
D) upward at each price level and results in a movement up along a given aggregate demand. 
A) downward at each price level and results in a leftward shift in aggregate demand. 
B) upward at each price level and results in a rightward shift in aggregate demand. 
C) downward at each price level and results in a movement down along a given aggregate demand. 
D) upward at each price level and results in a movement up along a given aggregate demand.

Question 7

The consumption function shows

Accepted Answer

A) the amount of consumption at each level of aggregate demand, holding all other determinants constant. 
B) the amount of consumption at each price level, holding all other determinants constant. 
C) the amount of consumption at each level of disposable income, holding all other determinants constant. 
D) the amount of consumption at each wage rate holding all other determinants constant. 
A) the amount of consumption at each level of aggregate demand, holding all other determinants constant. 
B) the amount of consumption at each price level, holding all other determinants constant. 
C) the amount of consumption at each level of disposable income, holding all other determinants constant. 
D) the amount of consumption at each wage rate holding all other determinants constant.

Question 8

The consumption function expresses the

Accepted Answer

A) purposes of consumption. 
B) relationship between consumption and prices. 
C) relationship between consumption and saving. 
D) relationship between consumption and disposable personal income. 
A) purposes of consumption. 
B) relationship between consumption and prices. 
C) relationship between consumption and saving. 
D) relationship between consumption and disposable personal income.

Question 9

Use the following to answer questions 
Exhibit: Consumption Functions
Figure 13-3  
-(Exhibit: Consumption Functions)
Suppose the consumption function is given by curve C1.What will cause an upward shift to curve C2?

Accepted Answer

A) an increase in the amount consumed as disposable personal income increases. 
B) an increase in consumption at any level of disposable personal income 
C) an increase in the price level 
D) an increase in transfer payments 
A) an increase in the amount consumed as disposable personal income increases. 
B) an increase in consumption at any level of disposable personal income 
C) an increase in the price level 
D) an increase in transfer payments

Question 10

In the simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption, suppose when autonomous aggregate expenditures rise by $500 billion, equilibrium real GDP increases by $2,500 billion.Which of the following statements is true?

Accepted Answer

A) The MPS = 0.8. 
B) The MPC = 0.2 
C) The MPS = 0.2. 
D) The MPC = 5. 
A) The MPS = 0.8. 
B) The MPC = 0.2 
C) The MPS = 0.2. 
D) The MPC = 5.

Question 11

Let AE = Aggregate Expenditures, C = Consumption, IP = Planned Investment,
G =Government Purchases.Consider a simple aggregate expenditures model, where
AE = C + IP + G, and all components of aggregate expenditures except consumption are autonomous.In this model, the multiplier is found using the formula

Accepted Answer

A) ∆Y* ÷ initial ∆AE where Y* = equilibrium real GDP by the ∆ = change in, AE = aggregate expenditures. 
B) ∆AE ÷ ∆Y*. 
C) ∆Y* *MPC where MPC = marginal propensity to consume. 
D) 1 ÷ MPC. 
A) ∆Y* ÷ initial ∆AE where Y* = equilibrium real GDP by the ∆ = change in, AE = aggregate expenditures. 
B) ∆AE ÷ ∆Y*. 
C) ∆Y* *MPC where MPC = marginal propensity to consume. 
D) 1 ÷ MPC.

Question 12

The multiplier effect is triggered by a shift in the aggregate expenditures curve.

Accepted Answer

A) True 
 B)False

Question 13

Use the following to answer questions 
Exhibit: Real GDP and the Multiplier
  
-(Exhibit: Real GDP and the Multiplier)
What is the equilibrium level of GDP?

Accepted Answer

A) $6,000 billion 
B) $6,500 billion 
C) $7,000 billion 
D) $7,500 billion 
A) $6,000 billion 
B) $6,500 billion 
C) $7,000 billion 
D) $7,500 billion

Question 14

Use the following to answer questions 
Exhibit: Income and Consumption
  
-(Exhibit: Income and Consumption)
Calculate the marginal propensity to consume based on the information in the table.

Accepted Answer

A) 0.00 
B) 0.20 
C) 0.80 
D) 1.40 
A) 0.00 
B) 0.20 
C) 0.80 
D) 1.40

Question 15

Use the following to answer questions 
Exhibit: Consumption Functions
Figure 13-3  
-(Exhibit: Consumption Functions)
Suppose the consumption function is given by curve C1.Which of the following will cause a downward shift to curve C1?

Accepted Answer

A) a stock market crash that decreases household wealth 
B) a decrease in price level 
C) an increase in withholding tax rate 
D) rising optimism about economic conditions 
A) a stock market crash that decreases household wealth 
B) a decrease in price level 
C) an increase in withholding tax rate 
D) rising optimism about economic conditions

Question 16

Use the following to answer questions 
Exhibit: Aggregate Expenditures and Real GDP 1  
-(Exhibit: Aggregate Expenditures and Real GDP 1)
Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, IP = Planned Investment.Suppose AE = C + IP, and IP is autonomous.If potential real GDP is $7,000 billion, what must happen to planned investment for the economy to reach its potential real GDP?

Accepted Answer

A) IP must be decreased by $1,000 billion 
B) IP must be increased by $1,000 billion 
C) IP must be decreased by $500 billion 
D) IP must be increased by $500 billion 
A) IP must be decreased by $1,000 billion 
B) IP must be increased by $1,000 billion 
C) IP must be decreased by $500 billion 
D) IP must be increased by $500 billion

Question 17

In the aggregate expenditures model, in equilibrium,

Accepted Answer

A) consumption equals investment. 
B) unplanned inventory changes equal zero. 
C) inventory changes equal investment. 
D) aggregate expenditures equal consumption. 
A) consumption equals investment. 
B) unplanned inventory changes equal zero. 
C) inventory changes equal investment. 
D) aggregate expenditures equal consumption.

Question 18

Consider a simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption.If the consumption function is
C = $500 + 0.8Y, planned investment = $200, government purchases = $300,
Net exports = $100, and real GDP = $1,000, what is the amount of aggregate expenditures?

Accepted Answer

A) $800 
B) $1,000 
C) $1,100 
D) $1,900 
A) $800 
B) $1,000 
C) $1,100 
D) $1,900

Question 19

In the aggregate expenditures model, if aggregate expenditures are less than real GDP,

Accepted Answer

A) actual real output is less than equilibrium real output. 
B) employment increases. 
C) aggregate output increases. 
D) there will be unplanned increases in inventories. 
A) actual real output is less than equilibrium real output. 
B) employment increases. 
C) aggregate output increases. 
D) there will be unplanned increases in inventories.

Question 20

The aggregate demand curve can be derived from the aggregate expenditures curves by

Accepted Answer

A) changing the income level and observing the equilibrium real GDP associated at a given price level. 
B) changing the price level and observing the size of the vertical shift in the aggregate expenditures curve. 
C) changing the price level and observing the equilibrium real GDP associated with each price level. 
D) changing the autonomous expenditure and observing the equilibrium real GDP associated at a given price level. 
A) changing the income level and observing the equilibrium real GDP associated at a given price level. 
B) changing the price level and observing the size of the vertical shift in the aggregate expenditures curve. 
C) changing the price level and observing the equilibrium real GDP associated with each price level. 
D) changing the autonomous expenditure and observing the equilibrium real GDP associated at a given price level.

An increase in the price level, all other things unchanged, shifts the aggregate expenditures curve upwards.

Use the following to answer questions Exhibit: Aggregate Expenditures and Real GDP 1 -(Exhibit: Aggregate Expenditures and Real GDP 1) Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, I_P = Planned Investment.Suppose AE = C + I_P, and I_P is autonomous.At a real GDP of $5,000 billion,

The saving function expresses the relationship between

Personal saving equals

The multiplier effect indicates that

Suppose at each price level, autonomous aggregate expenditures increase by $50 billion.As a result, the aggregate expenditures curve shifts

The consumption function shows

The consumption function expresses the

Use the following to answer questions Exhibit: Consumption Functions Figure 13-3 -(Exhibit: Consumption Functions) Suppose the consumption function is given by curve C₁.What will cause an upward shift to curve C₂?

In the simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption, suppose when autonomous aggregate expenditures rise by $500 billion, equilibrium real GDP increases by $2,500 billion.Which of the following statements is true?

The multiplier effect is triggered by a shift in the aggregate expenditures curve.

Use the following to answer questions Exhibit: Real GDP and the Multiplier -(Exhibit: Real GDP and the Multiplier) What is the equilibrium level of GDP?

Use the following to answer questions Exhibit: Income and Consumption -(Exhibit: Income and Consumption) Calculate the marginal propensity to consume based on the information in the table.

Use the following to answer questions Exhibit: Consumption Functions Figure 13-3 -(Exhibit: Consumption Functions) Suppose the consumption function is given by curve C₁.Which of the following will cause a downward shift to curve C₁?

In the aggregate expenditures model, in equilibrium,

In the aggregate expenditures model, if aggregate expenditures are less than real GDP,

The aggregate demand curve can be derived from the aggregate expenditures curves by

Economics: the Study of Choice

Confronting Scarcity: Choices in Production

Demand and Supply

Applications of Supply and Demand

Macroeconomics: the Big Picture

Measuring Total Output and Income

Aggregate Demand and Aggregate Supply

Economic Growth

The Nature and Creation of Money

Financial Markets and the Economy

Monetary Policy and the Fed

Government and Fiscal Policy

Investment and Economic Activity

Net Exports and International Finance

Inflation and Unemployment

A Brief History of Macroeconomic Thought and Policy

Inequality, Poverty, and Discrimination

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Exam 13: Consumption and the Aggregate Expenditures Model

An increase in the price level, all other things unchanged, shifts the aggregate expenditures curve upwards.

Use the following to answer questions Exhibit: Aggregate Expenditures and Real GDP 1 -(Exhibit: Aggregate Expenditures and Real GDP 1) Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, IP = Planned Investment.Suppose AE = C + IP, and IP is autonomous.At a real GDP of $5,000 billion,

The saving function expresses the relationship between

Personal saving equals

The multiplier effect indicates that

Suppose at each price level, autonomous aggregate expenditures increase by $50 billion.As a result, the aggregate expenditures curve shifts

The consumption function shows

The consumption function expresses the

Use the following to answer questions Exhibit: Consumption Functions Figure 13-3 -(Exhibit: Consumption Functions) Suppose the consumption function is given by curve C1.What will cause an upward shift to curve C2?

In the simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption, suppose when autonomous aggregate expenditures rise by $500 billion, equilibrium real GDP increases by $2,500 billion.Which of the following statements is true?

The multiplier effect is triggered by a shift in the aggregate expenditures curve.

Use the following to answer questions Exhibit: Real GDP and the Multiplier -(Exhibit: Real GDP and the Multiplier) What is the equilibrium level of GDP?

Use the following to answer questions Exhibit: Income and Consumption -(Exhibit: Income and Consumption) Calculate the marginal propensity to consume based on the information in the table.

Use the following to answer questions Exhibit: Consumption Functions Figure 13-3 -(Exhibit: Consumption Functions) Suppose the consumption function is given by curve C1.Which of the following will cause a downward shift to curve C1?

In the aggregate expenditures model, in equilibrium,

In the aggregate expenditures model, if aggregate expenditures are less than real GDP,

The aggregate demand curve can be derived from the aggregate expenditures curves by

Economics: the Study of Choice

Confronting Scarcity: Choices in Production

Demand and Supply

Applications of Supply and Demand

Macroeconomics: the Big Picture

Measuring Total Output and Income

Aggregate Demand and Aggregate Supply

Economic Growth

The Nature and Creation of Money

Financial Markets and the Economy

Monetary Policy and the Fed

Government and Fiscal Policy

Investment and Economic Activity

Net Exports and International Finance

Inflation and Unemployment

A Brief History of Macroeconomic Thought and Policy

Inequality, Poverty, and Discrimination

Filters

Use the following to answer questions Exhibit: Consumption Functions Figure 13-3 -(Exhibit: Consumption Functions) Suppose the consumption function is given by curve C₁.What will cause an upward shift to curve C₂?

Use the following to answer questions Exhibit: Consumption Functions Figure 13-3 -(Exhibit: Consumption Functions) Suppose the consumption function is given by curve C₁.Which of the following will cause a downward shift to curve C₁?