Question 1

The table given below shows the values of different components of aggregate expenditure of an economy. The marginal propensity to consume (MPC) equals:

Accepted Answer

A)  0.20 or 1/5. 
B)  0.40 or 2/5. 
C)  0.80 or 4/5. 
D)  0.90 or 9/10. 
E)  0.60 or 3/5. 
A)  0.20 or 1/5. 
B)  0.40 or 2/5. 
C)  0.80 or 4/5. 
D)  0.90 or 9/10. 
E)  0.60 or 3/5.

Question 2

An increase in the market interest rate, other things equal, will _____.

Accepted Answer

A)  have no effect on investment 
B)  increase the amount invested since the rate of return will be lower 
C)  increase the amount invested because income will increase 
D)  reduce the amount invested because the opportunity costs of investing will be higher 
E)  increase the amount invested because the rate of return will be higher 
A)  have no effect on investment 
B)  increase the amount invested since the rate of return will be lower 
C)  increase the amount invested because income will increase 
D)  reduce the amount invested because the opportunity costs of investing will be higher 
E)  increase the amount invested because the rate of return will be higher

Question 3

Which of the following will shift the consumption function upward?

Accepted Answer

A)  A decrease in disposable income 
B)  An increase in disposable income 
C)  An increase in the interest rate 
D)  Expectations of lower future prices 
E)  An increase in net wealth 
A)  A decrease in disposable income 
B)  An increase in disposable income 
C)  An increase in the interest rate 
D)  Expectations of lower future prices 
E)  An increase in net wealth

Question 4

As disposable income increases, _____.

Accepted Answer

A)  consumption and saving both increase 
B)  consumption increases and saving decreases 
C)  consumption and saving both decrease 
D)  consumption decreases but saving increases 
E)  saving increases, but we cannot predict what happens to consumption 
A)  consumption and saving both increase 
B)  consumption increases and saving decreases 
C)  consumption and saving both decrease 
D)  consumption decreases but saving increases 
E)  saving increases, but we cannot predict what happens to consumption

Question 5

In the income-expenditure model, if autonomous investment decreases by $10 billion, _____.

Accepted Answer

A)  the aggregate expenditure line shifts upward by $10 billion 
B)  planned saving increases by $10 billion 
C)  the aggregate expenditure line shifts downward by $10 billion 
D)  planned saving decreases by $10 billion 
E)  the equilibrium level of real GDP demanded increases by $10 billion 
A)  the aggregate expenditure line shifts upward by $10 billion 
B)  planned saving increases by $10 billion 
C)  the aggregate expenditure line shifts downward by $10 billion 
D)  planned saving decreases by $10 billion 
E)  the equilibrium level of real GDP demanded increases by $10 billion

Question 6

A decrease in net wealth will _____.

Accepted Answer

A)  shift the consumption function downward 
B)  make the consumption function steeper 
C)  cause an upward movement along the consumption function 
D)  cause a downward movement along the consumption function 
E)  make the consumption function flatter 
A)  shift the consumption function downward 
B)  make the consumption function steeper 
C)  cause an upward movement along the consumption function 
D)  cause a downward movement along the consumption function 
E)  make the consumption function flatter

Question 7

An increase in net wealth will:

Accepted Answer

A)  increase consumption and saving at each level of income. 
B)  increase saving and decrease consumption at each level of income. 
C)  decrease consumption and saving at each level of income. 
D)  increase consumption and decrease saving at each level of income. 
E)  have no effect on consumption because consumption is a function of income. 
A)  increase consumption and saving at each level of income. 
B)  increase saving and decrease consumption at each level of income. 
C)  decrease consumption and saving at each level of income. 
D)  increase consumption and decrease saving at each level of income. 
E)  have no effect on consumption because consumption is a function of income.

Question 8

The aggregate output demanded for a given price level occurs at the point where:

Accepted Answer

A)  an economy reaches the full employment of labor. 
B)  aggregate expenditure equals real GDP. 
C)  actual aggregate expenditures exceeds real GDP. 
D)  inventories of goods and services are increasing. 
E)  inventories of goods and services are decreasing. 
A)  an economy reaches the full employment of labor. 
B)  aggregate expenditure equals real GDP. 
C)  actual aggregate expenditures exceeds real GDP. 
D)  inventories of goods and services are increasing. 
E)  inventories of goods and services are decreasing.

Question 9

If the spending multiplier is greater than 1.0, a $200 billion increase in autonomous investment will cause:

Accepted Answer

A)  equilibrium investment to increase by less than $200 billion. 
B)  equilibrium investment to decrease by more than $200 billion. 
C)  equilibrium real GDP demanded to increase by more than $200 billion. 
D)  equilibrium real GDP demanded to decrease by less than $200 billion. 
E)  equilibrium saving to decrease by more than $200 billion. 
A)  equilibrium investment to increase by less than $200 billion. 
B)  equilibrium investment to decrease by more than $200 billion. 
C)  equilibrium real GDP demanded to increase by more than $200 billion. 
D)  equilibrium real GDP demanded to decrease by less than $200 billion. 
E)  equilibrium saving to decrease by more than $200 billion.

Question 10

Which of the following will shift the consumption function upward?

Accepted Answer

A)  A lower interest rate 
B)  An increase in the interest rate 
C)  An increase in disposable income 
D)  A decrease in disposable income 
E)  Expectations of lower prices in the future 
A)  A lower interest rate 
B)  An increase in the interest rate 
C)  An increase in disposable income 
D)  A decrease in disposable income 
E)  Expectations of lower prices in the future

Question 11

A decrease in the price level in an economy is likely to cause a:

Accepted Answer

A)  decrease in the real value of dollar-denominated assets. 
B)  downward shift of the aggregate expenditure line. 
C)  decrease in the equilibrium level of output demanded. 
D)  downward movement along the aggregate demand curve. 
E)  leftward shift of the aggregate demand curve. 
A)  decrease in the real value of dollar-denominated assets. 
B)  downward shift of the aggregate expenditure line. 
C)  decrease in the equilibrium level of output demanded. 
D)  downward movement along the aggregate demand curve. 
E)  leftward shift of the aggregate demand curve.

Question 12

The marginal propensity to consume:

Accepted Answer

A)  is the proportion of disposable income that is consumed. 
B)  is the ratio of disposable income to consumption. 
C)  is the change in consumption relative to a change in disposable income. 
D)  minus the marginal propensity to save must equal 1. 
E)  is greater than 1 at all levels of income. 
A)  is the proportion of disposable income that is consumed. 
B)  is the ratio of disposable income to consumption. 
C)  is the change in consumption relative to a change in disposable income. 
D)  minus the marginal propensity to save must equal 1. 
E)  is greater than 1 at all levels of income.

Question 13

An increase in planned investment will shift the _____.

Accepted Answer

A)  aggregate demand curve rightward 
B)  aggregate demand curve leftward 
C)  aggregate supply curve rightward 
D)  aggregate supply curve leftward 
E)  consumption function upward 
A)  aggregate demand curve rightward 
B)  aggregate demand curve leftward 
C)  aggregate supply curve rightward 
D)  aggregate supply curve leftward 
E)  consumption function upward

Question 14

Which of the following best describes the simple spending multiplier?

Accepted Answer

A)  It shows the magnified change in planned aggregate spending that arises from a change in output. 
B)  It shows the magnified change in equilibrium output demanded that arises from a change in income. 
C)  It shows the magnified change in planned aggregate spending that arises from a change in equilibrium output. 
D)  It shows the magnified change in equilibrium output demanded that arises from a given initial change in planned aggregate spending. 
E)  It shows the change in planned aggregate spending that arises from a change in real output. 
A)  It shows the magnified change in planned aggregate spending that arises from a change in output. 
B)  It shows the magnified change in equilibrium output demanded that arises from a change in income. 
C)  It shows the magnified change in planned aggregate spending that arises from a change in equilibrium output. 
D)  It shows the magnified change in equilibrium output demanded that arises from a given initial change in planned aggregate spending. 
E)  It shows the change in planned aggregate spending that arises from a change in real output.

Question 15

A higher interest rate will:

Accepted Answer

A)  shift the consumption function upward. 
B)  shift the consumption function downward. 
C)  make the consumption function steeper. 
D)  make the consumption function flatter. 
E)  cause an upward movement along the consumption function. 
A)  shift the consumption function upward. 
B)  shift the consumption function downward. 
C)  make the consumption function steeper. 
D)  make the consumption function flatter. 
E)  cause an upward movement along the consumption function.

Question 16

Identify the correct statement.

Accepted Answer

A)  During a recession, investment decreases while consumption increases. 
B)  During a recession, investment increases while consumption decreases. 
C)  During a recession, investment is constant while consumption increases. 
D)  Annual variations in investment are larger than annual variations in consumption. 
E)  Annual variations in investment are smaller than annual variations in consumption. 
A)  During a recession, investment decreases while consumption increases. 
B)  During a recession, investment increases while consumption decreases. 
C)  During a recession, investment is constant while consumption increases. 
D)  Annual variations in investment are larger than annual variations in consumption. 
E)  Annual variations in investment are smaller than annual variations in consumption.

Question 17

The aggregate demand curve of an economy illustrates the relationship between:

Accepted Answer

A)  interest rates and income levels. 
B)  the price level and real gross domestic product (GDP). 
C)  the price level and interest rates. 
D)  income levels and real gross domestic product (GDP). 
E)  real income levels and nominal income levels. 
A)  interest rates and income levels. 
B)  the price level and real gross domestic product (GDP). 
C)  the price level and interest rates. 
D)  income levels and real gross domestic product (GDP). 
E)  real income levels and nominal income levels.

Question 18

If there are no unintended changes in inventories, the economy is at its equilibrium level of real gross domestic product (GDP) demanded.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is an effect of an increase in the price level in an economy?

Accepted Answer

A)  The real value of dollar-denominated assets will increase. 
B)  The aggregate expenditure line will shift upward. 
C)  The equilibrium real gross domestic product will decrease. 
D)  There will be downward movement along a particular aggregate demand curve. 
E)  The aggregate demand curve will shift rightward. 
A)  The real value of dollar-denominated assets will increase. 
B)  The aggregate expenditure line will shift upward. 
C)  The equilibrium real gross domestic product will decrease. 
D)  There will be downward movement along a particular aggregate demand curve. 
E)  The aggregate demand curve will shift rightward.

Question 20

The aggregate expenditure line shows total planned spending at each _____.

Accepted Answer

A)  consumption level 
B)  investment level 
C)  income level, holding the price level constant 
D)  price level, holding the level of income constant 
E)  interest rate, holding the price level constant 
A)  consumption level 
B)  investment level 
C)  income level, holding the price level constant 
D)  price level, holding the level of income constant 
E)  interest rate, holding the price level constant

The table given below shows the values of different components of aggregate expenditure of an economy. The marginal propensity to consume (MPC) equals:

An increase in the market interest rate, other things equal, will _____.

Which of the following will shift the consumption function upward?

As disposable income increases, _____.

In the income-expenditure model, if autonomous investment decreases by $10 billion, _____.

A decrease in net wealth will _____.

An increase in net wealth will:

The aggregate output demanded for a given price level occurs at the point where:

If the spending multiplier is greater than 1.0, a $200 billion increase in autonomous investment will cause:

Which of the following will shift the consumption function upward?

A decrease in the price level in an economy is likely to cause a:

The marginal propensity to consume:

An increase in planned investment will shift the _____.

Which of the following best describes the simple spending multiplier?

A higher interest rate will:

Identify the correct statement.

The aggregate demand curve of an economy illustrates the relationship between:

If there are no unintended changes in inventories, the economy is at its equilibrium level of real gross domestic product (GDP) demanded.

Which of the following is an effect of an increase in the price level in an economy?

The aggregate expenditure line shows total planned spending at each _____.

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

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Exam 9: Aggregate Demand

The table given below shows the values of different components of aggregate expenditure of an economy. The marginal propensity to consume (MPC) equals:

An increase in the market interest rate, other things equal, will _____.

Which of the following will shift the consumption function upward?

As disposable income increases, _____.

In the income-expenditure model, if autonomous investment decreases by $10 billion, _____.

A decrease in net wealth will _____.

An increase in net wealth will:

The aggregate output demanded for a given price level occurs at the point where:

If the spending multiplier is greater than 1.0, a $200 billion increase in autonomous investment will cause:

Which of the following will shift the consumption function upward?

A decrease in the price level in an economy is likely to cause a:

The marginal propensity to consume:

An increase in planned investment will shift the _____.

Which of the following best describes the simple spending multiplier?

A higher interest rate will:

Identify the correct statement.

The aggregate demand curve of an economy illustrates the relationship between:

If there are no unintended changes in inventories, the economy is at its equilibrium level of real gross domestic product (GDP) demanded.

Which of the following is an effect of an increase in the price level in an economy?

The aggregate expenditure line shows total planned spending at each _____.

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