Question 1

In the simple aggregate expenditure model, the slope of the aggregate expenditure line depends on:

Accepted Answer

A)  interest rates. 
B)  real gross domestic product. 
C)  the price level. 
D)  the marginal propensity to consume. 
E)  the marginal propensity to save. 
A)  interest rates. 
B)  real gross domestic product. 
C)  the price level. 
D)  the marginal propensity to consume. 
E)  the marginal propensity to save.

Question 2

A household that expects a decrease in disposable income in the future will _____.

Accepted Answer

A)  increase its current consumption spending 
B)  decrease its current consumption spending 
C)  maintain its current consumption spending 
D)  first increase its current consumption spending and then decrease spending when income falls 
E)  first decrease its current consumption spending and then increase spending when income falls 
A)  increase its current consumption spending 
B)  decrease its current consumption spending 
C)  maintain its current consumption spending 
D)  first increase its current consumption spending and then decrease spending when income falls 
E)  first decrease its current consumption spending and then increase spending when income falls

Question 3

In the income-expenditure framework, if planned aggregate expenditures are less than real gross domestic product (GDP), _____.

Accepted Answer

A)  saving will increase 
B)  the price level will increase 
C)  inventories will increase 
D)  inventories will decrease 
E)  consumption will decrease 
A)  saving will increase 
B)  the price level will increase 
C)  inventories will increase 
D)  inventories will decrease 
E)  consumption will decrease

Question 4

An increase 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 quantity of real gross domestic product (GDP) demanded 
D)  decrease the quantity of real gross domestic product (GDP) demanded 
E)  increase the aggregate expenditure 
A)  shift the aggregate demand curve to the right 
B)  shift the aggregate demand curve to the left 
C)  increase the quantity of real gross domestic product (GDP) demanded 
D)  decrease the quantity of real gross domestic product (GDP) demanded 
E)  increase the aggregate expenditure

Question 5

The smaller the marginal propensity to save, other things constant, _____.

Accepted Answer

A)  the smaller the marginal propensity to consume 
B)  the larger the marginal propensity to consume 
C)  the smaller the multiplier 
D)  the flatter the consumption function 
E)  the steeper the saving function 
A)  the smaller the marginal propensity to consume 
B)  the larger the marginal propensity to consume 
C)  the smaller the multiplier 
D)  the flatter the consumption function 
E)  the steeper the saving function

Question 6

Data on annual percentage changes in real GDP, consumption, and investment in the United States shows that fluctuations in investment _____.

Accepted Answer

A)  are noticeably smaller during expansions than during recessions 
B)  are roughly similar to fluctuations in consumption 
C)  are roughly similar to fluctuations in GDP 
D)  are closely followed by economic forecasters because those fluctuations often signal that a recession will occur 
E)  account for most of the variability in GDP 
A)  are noticeably smaller during expansions than during recessions 
B)  are roughly similar to fluctuations in consumption 
C)  are roughly similar to fluctuations in GDP 
D)  are closely followed by economic forecasters because those fluctuations often signal that a recession will occur 
E)  account for most of the variability in GDP

Question 7

Which of the following is true of net taxes?

Accepted Answer

A)  The level of net taxes varies directly with the level of transfer payments. 
B)  The level of net taxes varies inversely with the level of transfer payments. 
C)  Net taxes must always be less than zero. 
D)  Net taxes increase when income tax rates are reduced. 
E)  Net taxes increase when income decreases. 
A)  The level of net taxes varies directly with the level of transfer payments. 
B)  The level of net taxes varies inversely with the level of transfer payments. 
C)  Net taxes must always be less than zero. 
D)  Net taxes increase when income tax rates are reduced. 
E)  Net taxes increase when income decreases.

Question 8

When current production of goods and services in an economy is greater than planned aggregate expenditure, _____.

Accepted Answer

A)  inventories of goods and services will increase 
B)  firms will increase production to replenish depleted inventories 
C)  businesses and households will increase planned aggregate spending 
D)  the price level will automatically rise to restore equilibrium in the economy 
E)  leakages must equal planned injections 
A)  inventories of goods and services will increase 
B)  firms will increase production to replenish depleted inventories 
C)  businesses and households will increase planned aggregate spending 
D)  the price level will automatically rise to restore equilibrium in the economy 
E)  leakages must equal planned injections

Question 9

Identify the correct statement about net exports.

Accepted Answer

A)  The value of net exports increases as real domestic income increases. 
B)  The value of net exports increases as real domestic income decreases. 
C)  The value of net exports is dependent on the amount of government purchases. 
D)  The value of net exports is always positive. 
E)  The value of net exports is always negative. 
A)  The value of net exports increases as real domestic income increases. 
B)  The value of net exports increases as real domestic income decreases. 
C)  The value of net exports is dependent on the amount of government purchases. 
D)  The value of net exports is always positive. 
E)  The value of net exports is always negative.

Question 10

The slope of the consumption function shows how:

Accepted Answer

A)  consumption changes over time. 
B)  consumption changes as household size changes. 
C)  consumption changes as the price level changes. 
D)  income changes as the level of consumption changes. 
E)  consumption changes as the level of income changes. 
A)  consumption changes over time. 
B)  consumption changes as household size changes. 
C)  consumption changes as the price level changes. 
D)  income changes as the level of consumption changes. 
E)  consumption changes as the level of income changes.

Question 11

The main determinants of investment are the interest rates and expected profit.

Accepted Answer

A) True 
 B)False

Question 12

A decrease in disposable income will:

Accepted Answer

A)  shift the consumption function upward. 
B)  shift the consumption function downward. 
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 upward. 
B)  shift the consumption function downward. 
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 13

If the price level in an economy increases, other things constant, consumption spending is likely to _____.

Accepted Answer

A)  increase because real income increases 
B)  decrease because real income increases 
C)  increase because the real value of wealth increases 
D)  decrease because the real value of wealth decreases 
E)  increase because nominal income increases 
A)  increase because real income increases 
B)  decrease because real income increases 
C)  increase because the real value of wealth increases 
D)  decrease because the real value of wealth decreases 
E)  increase because nominal income increases

Question 14

Which of the following is not an example of a government purchase?

Accepted Answer

A)  Salaries of teachers in public schools 
B)  Chinese toys to be sold in stores 
C)  Purchase of military aircrafts 
D)  Construction of an interstate highway 
E)  Building a public school 
A)  Salaries of teachers in public schools 
B)  Chinese toys to be sold in stores 
C)  Purchase of military aircrafts 
D)  Construction of an interstate highway 
E)  Building a public school

Question 15

Which of the following is true of the simple spending multiplier

Accepted Answer

A)  It equals the ratio of the marginal propensity to consume to the marginal propensity to save. 
B)    It equals the difference between the marginal propensity to save and the marginal propensity to consume. 
C)  It is the reciprocal of the marginal propensity to save. 
D)  It is the reciprocal of the marginal propensity to consume. 
E)  It is the sum of the marginal propensity to consume and the marginal propensity to save. 
A)  It equals the ratio of the marginal propensity to consume to the marginal propensity to save. 
B)    It equals the difference between the marginal propensity to save and the marginal propensity to consume. 
C)  It is the reciprocal of the marginal propensity to save. 
D)  It is the reciprocal of the marginal propensity to consume. 
E)  It is the sum of the marginal propensity to consume and the marginal propensity to save.

Question 16

When economists say investment is autonomous, they mean that investment is independent of the level of saving.

Accepted Answer

A) True 
 B)False

Question 17

The fraction of a change in disposable income that is consumed is called _____.

Accepted Answer

A)  autonomous consumption 
B)  induced consumption 
C)  the multiplier 
D)  the marginal propensity to consume 
E)  the marginal propensity to save 
A)  autonomous consumption 
B)  induced consumption 
C)  the multiplier 
D)  the marginal propensity to consume 
E)  the marginal propensity to save

Question 18

If current aggregate expenditure equals current production, an economy is in equilibrium.

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

Question 20

_____ is the reward savers earn for deferring consumption.

Accepted Answer

A)  Dividend 
B)  Wage 
C)  Rent 
D)  Profit 
E)  Interest 
A)  Dividend 
B)  Wage 
C)  Rent 
D)  Profit 
E)  Interest

In the simple aggregate expenditure model, the slope of the aggregate expenditure line depends on:

A household that expects a decrease in disposable income in the future will _____.

In the income-expenditure framework, if planned aggregate expenditures are less than real gross domestic product (GDP), _____.

An increase in the price level in an economy will _____.

The smaller the marginal propensity to save, other things constant, _____.

Data on annual percentage changes in real GDP, consumption, and investment in the United States shows that fluctuations in investment _____.

Which of the following is true of net taxes?

When current production of goods and services in an economy is greater than planned aggregate expenditure, _____.

Identify the correct statement about net exports.

The slope of the consumption function shows how:

The main determinants of investment are the interest rates and expected profit.

A decrease in disposable income will:

If the price level in an economy increases, other things constant, consumption spending is likely to _____.

Which of the following is not an example of a government purchase?

Which of the following is true of the simple spending multiplier

When economists say investment is autonomous, they mean that investment is independent of the level of saving.

The fraction of a change in disposable income that is consumed is called _____.

If current aggregate expenditure equals current production, an economy is in equilibrium.

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

_____ is the reward savers earn for deferring consumption.

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

In the simple aggregate expenditure model, the slope of the aggregate expenditure line depends on:

A household that expects a decrease in disposable income in the future will _____.

In the income-expenditure framework, if planned aggregate expenditures are less than real gross domestic product (GDP), _____.

An increase in the price level in an economy will _____.

The smaller the marginal propensity to save, other things constant, _____.

Data on annual percentage changes in real GDP, consumption, and investment in the United States shows that fluctuations in investment _____.

Which of the following is true of net taxes?

When current production of goods and services in an economy is greater than planned aggregate expenditure, _____.

Identify the correct statement about net exports.

The slope of the consumption function shows how:

The main determinants of investment are the interest rates and expected profit.

A decrease in disposable income will:

If the price level in an economy increases, other things constant, consumption spending is likely to _____.

Which of the following is not an example of a government purchase?

Which of the following is true of the simple spending multiplier

When economists say investment is autonomous, they mean that investment is independent of the level of saving.

The fraction of a change in disposable income that is consumed is called _____.

If current aggregate expenditure equals current production, an economy is in equilibrium.

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

_____ is the reward savers earn for deferring consumption.

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