Question 1

Government outlays equal:

Accepted Answer

A)  the difference between government expenditures and government revenues. 
B)  the sum of government expenditures and government revenues. 
C)  the sum of government purchases and transfer payments. 
D)  the difference between government purchases and transfer payments. 
E)  the ratio of government purchases to transfer payments. 
A)  the difference between government expenditures and government revenues. 
B)  the sum of government expenditures and government revenues. 
C)  the sum of government purchases and transfer payments. 
D)  the difference between government purchases and transfer payments. 
E)  the ratio of government purchases to transfer payments.

Question 2

Fluctuations in investment:

Accepted Answer

A)  account for almost all of the variability in gross domestic product (GDP) only during expansions. 
B)  account for little of the variability in gross domestic product (GDP). 
C)  account for almost all of the variability in gross domestic product (GDP) only during recessions. 
D)  are larger during expansions than during recessions. 
E)  account for more of the variability in gross domestic product (GDP) than consumption. 
A)  account for almost all of the variability in gross domestic product (GDP) only during expansions. 
B)  account for little of the variability in gross domestic product (GDP). 
C)  account for almost all of the variability in gross domestic product (GDP) only during recessions. 
D)  are larger during expansions than during recessions. 
E)  account for more of the variability in gross domestic product (GDP) than consumption.

Question 3

If a household's income falls from $20,000 to $17,000 and its consumption spending falls from $18,000 to $15,000, then its:

Accepted Answer

A)  marginal propensity to consume is −0.67. 
B)  marginal propensity to consume is 0.88. 
C)  marginal propensity to consume is 0.20. 
D)  marginal propensity to save is 0. 
E)  marginal propensity to save is 0.12. 
A)  marginal propensity to consume is −0.67. 
B)  marginal propensity to consume is 0.88. 
C)  marginal propensity to consume is 0.20. 
D)  marginal propensity to save is 0. 
E)  marginal propensity to save is 0.12.

Question 4

Which of the following will shift the investment demand curve rightward?

Accepted Answer

A)  Higher interest rates 
B)  Gloomy sales expectations 
C)  A cut in corporate taxes that raises after-tax profits 
D)  A decrease in the marginal propensity to consume 
E)  An increase in aggregate income 
A)  Higher interest rates 
B)  Gloomy sales expectations 
C)  A cut in corporate taxes that raises after-tax profits 
D)  A decrease in the marginal propensity to consume 
E)  An increase in aggregate income

Question 5

If the marginal propensity to consume (MPC) is 4/5, the value of the simple multiplier is:

Accepted Answer

A)  4. 
B)  1/5. 
C)  4/5. 
D)  5/4. 
E)  5. 
A)  4. 
B)  1/5. 
C)  4/5. 
D)  5/4. 
E)  5.

Question 6

If the simple spending multiplier is 8, the marginal propensity to consume is _____.

Accepted Answer

A)  1/8 
B)  1/4 
C)  4/5 
D)  7/8 
E)  8 
A)  1/8 
B)  1/4 
C)  4/5 
D)  7/8 
E)  8

Question 7

If investment increases by $100 and, as a result, gross domestic product (GDP) ultimately increases by $200, the multiplier equals _____.

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  4 
E)  5 
A)  1 
B)  2 
C)  3 
D)  4 
E)  5

Question 8

A decrease in stock prices will _____ the net wealth of households and _____ consumption.

Accepted Answer

A)  reduce; increase 
B)  reduce; decrease 
C)  reduce; not change 
D)  increase; increase 
E)  increase; decrease 
A)  reduce; increase 
B)  reduce; decrease 
C)  reduce; not change 
D)  increase; increase 
E)  increase; decrease

Question 9

The fraction of an increase in income that is saved is referred to as the _____.

Accepted Answer

A)  marginal propensity to save 
B)  average propensity to save 
C)  marginal propensity to consume 
D)  average propensity to consume 
E)  saving-consumption ratio 
A)  marginal propensity to save 
B)  average propensity to save 
C)  marginal propensity to consume 
D)  average propensity to consume 
E)  saving-consumption ratio

Question 10

Which of the following will shift the consumption function upward?

Accepted Answer

A)  A decrease in stock prices 
B)  An increase in stock prices 
C)  A higher price level 
D)  A lower disposable income 
E)  A higher disposable income 
A)  A decrease in stock prices 
B)  An increase in stock prices 
C)  A higher price level 
D)  A lower disposable income 
E)  A higher disposable income

Question 11

Which of the following best describes aggregate expenditure?

Accepted Answer

A)  C + I + G + (X − M) 
B)  C + S + G + (X − M) 
C)  C + I + G + (X + M) 
D)  C + I + T + (X − M) 
E)  C + I + T + (X + M) 
A)  C + I + G + (X − M) 
B)  C + S + G + (X − M) 
C)  C + I + G + (X + M) 
D)  C + I + T + (X − M) 
E)  C + I + T + (X + M)

Question 12

An aggregate demand curve can be drawn by:

Accepted Answer

A)  shifting the 45-degree line. 
B)  letting changes in autonomous spending shift the aggregate expenditure line. 
C)  letting changes in the price level shift the aggregate expenditure line. 
D)  letting changes in the level of income shift the aggregate expenditure line. 
E)  letting changes in real GDP shift the aggregate expenditure line. 
A)  shifting the 45-degree line. 
B)  letting changes in autonomous spending shift the aggregate expenditure line. 
C)  letting changes in the price level shift the aggregate expenditure line. 
D)  letting changes in the level of income shift the aggregate expenditure line. 
E)  letting changes in real GDP shift the aggregate expenditure line.

Question 13

If the marginal propensity to consume is equal to 0.70 and income rises by $20 billion in an economy, then consumption spending will increase by:

Accepted Answer

A)  $6 billion. 
B)  $14 billion. 
C)  $20 billion. 
D)  $28 billion. 
E)  $67 billion. 
A)  $6 billion. 
B)  $14 billion. 
C)  $20 billion. 
D)  $28 billion. 
E)  $67 billion.

Question 14

The table given below shows the values of different components of aggregate expenditure of an economy. At the equilibrium level of gross domestic product (GDP), saving equals _____.

Accepted Answer

A)  $0.4 trillion 
B)  $0.1 trillion 
C)  $0.5 trillion 
D)  $0.2 trillion 
E)  $0.3 trillion 
A)  $0.4 trillion 
B)  $0.1 trillion 
C)  $0.5 trillion 
D)  $0.2 trillion 
E)  $0.3 trillion

Question 15

The slope of the consumption function equals the marginal propensity to consume.

Accepted Answer

A) True 
 B)False

Question 16

The figure given below shows the income-expenditure model. At point C, _____.

Accepted Answer

A)  consumption expenditure exceeds disposable income 
B)  producers experience an unexpected loss of inventory 
C)  aggregate expenditure is exactly equal to real GDP 
D)  real GDP exceeds aggregate expenditure 
E)  producers experience an unexpected accumulation of inventory 
A)  consumption expenditure exceeds disposable income 
B)  producers experience an unexpected loss of inventory 
C)  aggregate expenditure is exactly equal to real GDP 
D)  real GDP exceeds aggregate expenditure 
E)  producers experience an unexpected accumulation of inventory

Question 17

A decrease in the price level in an economy will _____.

Accepted Answer

A)  shift the aggregate demand curve to the right 
B)  shift the aggregate demand curve to the left 
C)  increase the level of aggregate quantity demanded 
D)  decrease the level of aggregate quantity demanded 
E)  shift the aggregate expenditure line downward 
A)  shift the aggregate demand curve to the right 
B)  shift the aggregate demand curve to the left 
C)  increase the level of aggregate quantity demanded 
D)  decrease the level of aggregate quantity demanded 
E)  shift the aggregate expenditure line downward

Question 18

A decrease in the U.S. price level, other things constant, will _____.

Accepted Answer

A)  stimulate U.S. exports, pushing the aggregate demand curve to the right 
B)  stimulate U.S. imports, pushing the aggregate demand curve to the right 
C)  stimulate U.S. exports but discourage imports, causing a downward movement along a given aggregate demand curve 
D)  discourage U.S. exports but stimulate imports, causing an upward movement along a given aggregate demand curve 
E)  not affect U.S. net exports, so the aggregate quantity demanded will remain constant 
A)  stimulate U.S. exports, pushing the aggregate demand curve to the right 
B)  stimulate U.S. imports, pushing the aggregate demand curve to the right 
C)  stimulate U.S. exports but discourage imports, causing a downward movement along a given aggregate demand curve 
D)  discourage U.S. exports but stimulate imports, causing an upward movement along a given aggregate demand curve 
E)  not affect U.S. net exports, so the aggregate quantity demanded will remain constant

Question 19

Which of the following is true of disposable income?

Accepted Answer

A)  It excludes transfer payments. 
B)  It is the portion of income that is used solely for consumption. 
C)  It is that part of total earned income that is paid to the government in the form of taxes. 
D)  It is the difference between income and saving. 
E)  It equals consumption expenditures plus saving. 
A)  It excludes transfer payments. 
B)  It is the portion of income that is used solely for consumption. 
C)  It is that part of total earned income that is paid to the government in the form of taxes. 
D)  It is the difference between income and saving. 
E)  It equals consumption expenditures plus saving.

Question 20

The sum of the marginal propensity to consume (MPC) and the marginal propensity to save (MPS) equals:

Accepted Answer

A)  0.5. 
B)  the multiplier. 
C)  the slope of the consumption function. 
D)  1.0. 
E)  the slope of the saving function. 
A)  0.5. 
B)  the multiplier. 
C)  the slope of the consumption function. 
D)  1.0. 
E)  the slope of the saving function.

Government outlays equal:

Fluctuations in investment:

If a household's income falls from $20,000 to $17,000 and its consumption spending falls from $18,000 to $15,000, then its:

Which of the following will shift the investment demand curve rightward?

If the marginal propensity to consume (MPC) is 4/5, the value of the simple multiplier is:

If the simple spending multiplier is 8, the marginal propensity to consume is _____.

If investment increases by $100 and, as a result, gross domestic product (GDP) ultimately increases by $200, the multiplier equals _____.

A decrease in stock prices will _ the net wealth of households and _ consumption.

The fraction of an increase in income that is saved is referred to as the _____.

Which of the following will shift the consumption function upward?

Which of the following best describes aggregate expenditure?

An aggregate demand curve can be drawn by:

If the marginal propensity to consume is equal to 0.70 and income rises by $20 billion in an economy, then consumption spending will increase by:

The table given below shows the values of different components of aggregate expenditure of an economy. At the equilibrium level of gross domestic product (GDP), saving equals _____.

The slope of the consumption function equals the marginal propensity to consume.

The figure given below shows the income-expenditure model. At point C, _____.

A decrease in the price level in an economy will _____.

A decrease in the U.S. price level, other things constant, will _____.

Which of the following is true of disposable income?

The sum of the marginal propensity to consume (MPC) and the marginal propensity to save (MPS) equals:

The Art and Science of Economic Analysis

Some Tools of Economic Analysis

Economic Decision Makers

Demand, Supply, and Markets

Introduction to Macroeconomics

Tracking the U S Economy

Unemployment and Inflation

Us Productivity and Growth

Aggregate Supply

Fiscal Policy

Federal Budgets and Public Policy

Money and the Financial System

Banking and the Money Supply

Monetary Theory and Policy

The Policy Debate: Active or Passive

International Trade

International Finance

Economic Development

Filters

Exam 9: Aggregate Demand

Government outlays equal:

Fluctuations in investment:

If a household's income falls from $20,000 to $17,000 and its consumption spending falls from $18,000 to $15,000, then its:

Which of the following will shift the investment demand curve rightward?

If the marginal propensity to consume (MPC) is 4/5, the value of the simple multiplier is:

If the simple spending multiplier is 8, the marginal propensity to consume is _____.

If investment increases by $100 and, as a result, gross domestic product (GDP) ultimately increases by $200, the multiplier equals _____.

A decrease in stock prices will _____ the net wealth of households and _____ consumption.

The fraction of an increase in income that is saved is referred to as the _____.

Which of the following will shift the consumption function upward?

Which of the following best describes aggregate expenditure?

An aggregate demand curve can be drawn by:

If the marginal propensity to consume is equal to 0.70 and income rises by $20 billion in an economy, then consumption spending will increase by:

The table given below shows the values of different components of aggregate expenditure of an economy. At the equilibrium level of gross domestic product (GDP), saving equals _____.

The slope of the consumption function equals the marginal propensity to consume.

The figure given below shows the income-expenditure model. At point C, _____.

A decrease in the price level in an economy will _____.

A decrease in the U.S. price level, other things constant, will _____.

Which of the following is true of disposable income?

The sum of the marginal propensity to consume (MPC) and the marginal propensity to save (MPS) equals:

The Art and Science of Economic Analysis

Some Tools of Economic Analysis

Economic Decision Makers

Demand, Supply, and Markets

Introduction to Macroeconomics

Tracking the U S Economy

Unemployment and Inflation

Us Productivity and Growth

Aggregate Supply

Fiscal Policy

Federal Budgets and Public Policy

Money and the Financial System

Banking and the Money Supply

Monetary Theory and Policy

The Policy Debate: Active or Passive

International Trade

International Finance

Economic Development

Filters

A decrease in stock prices will _ the net wealth of households and _ consumption.