Question 1

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

Question 2

Linda earns an income of $3,000 per month. She saves 10 percent and spends the remainder on food, lodging, and other expenses. So far, she has managed to save $20,000. What is her consumption per month?

Accepted Answer

A)  $3,500 
B)  $3,700 
C)  $2,700 
D)  $3,150 
E)  $450 
A)  $3,500 
B)  $3,700 
C)  $2,700 
D)  $3,150 
E)  $450

Question 3

Which of the following is correct if real GDP is $20 trillion and spending is $20 trillion?

Accepted Answer

A)  Inventories increase by 0.5 trillion. 
B)  Inventories decrease by 0.5 trillion. 
C)  GDP increases by 0.5 trillion. 
D)  GDP decreases by 0.5 trillion. 
E)  Spending and GDP are in equilibrium. 
A)  Inventories increase by 0.5 trillion. 
B)  Inventories decrease by 0.5 trillion. 
C)  GDP increases by 0.5 trillion. 
D)  GDP decreases by 0.5 trillion. 
E)  Spending and GDP are in equilibrium.

Question 4

Which of the following is illustrated by the distance between the aggregate expenditure line and the 45-degree line at each level of real GDP?

Accepted Answer

A)  the level of saving in an economy 
B)  unplanned inventory change 
C)  planned investment undertaken in an economy 
D)  the marginal propensity to save 
E)  the marginal propensity to consume 
A)  the level of saving in an economy 
B)  unplanned inventory change 
C)  planned investment undertaken in an economy 
D)  the marginal propensity to save 
E)  the marginal propensity to consume

Question 5

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 6

Which of the following is correct if real GDP is $20 trillion and spending is $20.5 trillion?

Accepted Answer

A)  Spending is greater than output by $0.5 trillion. 
B)  Spending is lesser than output by $0.5 trillion. 
C)  Spending is greater than output by $20.5 trillion. 
D)  Spending is lesser than output by $20.5 trillion. 
E)  Spending is equal to output. 
A)  Spending is greater than output by $0.5 trillion. 
B)  Spending is lesser than output by $0.5 trillion. 
C)  Spending is greater than output by $20.5 trillion. 
D)  Spending is lesser than output by $20.5 trillion. 
E)  Spending is equal to output.

Question 7

The consumption function relates consumption spending to _____

Accepted Answer

A)  the price level. 
B)  interest rates. 
C)  disposable income. 
D)  expectations about the price level. 
E)  household wealth. 
A)  the price level. 
B)  interest rates. 
C)  disposable income. 
D)  expectations about the price level. 
E)  household wealth.

Question 8

Expectations that the price level will decrease in the future will _____

Accepted Answer

A)  make the current consumption function flatter. 
B)  shift the current consumption function downward. 
C)  result in an upward movement along the current consumption function. 
D)  result in a downward movement along the current consumption function. 
E)  make the current consumption function steeper. 
A)  make the current consumption function flatter. 
B)  shift the current consumption function downward. 
C)  result in an upward movement along the current consumption function. 
D)  result in a downward movement along the current consumption function. 
E)  make the current consumption function steeper.

Question 9

Which of the following is correct if real GDP is $20 trillion and spending is $20 trillion?

Accepted Answer

A)  Inventories increase by 0.5 trillion. 
B)  Inventories decrease by 0.5 trillion. 
C)  GDP increases by 0.5 trillion. 
D)  GDP decreases by 0.5 trillion. 
E)  Spending and GDP are in equilibrium. 
A)  Inventories increase by 0.5 trillion. 
B)  Inventories decrease by 0.5 trillion. 
C)  GDP increases by 0.5 trillion. 
D)  GDP decreases by 0.5 trillion. 
E)  Spending and GDP are in equilibrium.

Question 10

The fraction of a change in income that is saved is known as _____

Accepted Answer

A)  disposable income. 
B)  the consumption function. 
C)  the marginal propensity to consume. 
D)  the marginal propensity to save. 
E)  net wealth. 
A)  disposable income. 
B)  the consumption function. 
C)  the marginal propensity to consume. 
D)  the marginal propensity to save. 
E)  net wealth.

Question 11

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 12

Linda earned an income of $3,000 per month which has now increased to $3,500 per month. She saves 10 percent and spends the remainder on food, lodging, and other expenses. So far, she has managed to save $20,000. What is her consumption after the increase?

Accepted Answer

A)  $20,000 
B)  $3,500 
C)  $2,700 
D)  $3,150 
E)  $450 
A)  $20,000 
B)  $3,500 
C)  $2,700 
D)  $3,150 
E)  $450

Question 13

Exhibit 9.1
  
-Refer to Exhibit 9.1, which shows the income-expenditure model. Which of the following best describes the situation at point B?

Accepted Answer

A)  Consumption expenditure exceeds disposable income. 
B)  Real GDP exceeds aggregate expenditure. 
C)  Aggregate expenditure is exactly equal to real GDP. 
D)  Aggregate expenditure exceeds real GDP. 
E)  Producers experience an unexpected accumulation of inventory. 
A)  Consumption expenditure exceeds disposable income. 
B)  Real GDP exceeds aggregate expenditure. 
C)  Aggregate expenditure is exactly equal to real GDP. 
D)  Aggregate expenditure exceeds real GDP. 
E)  Producers experience an unexpected accumulation of inventory.

Question 14

An upward shift of the consumption function might be caused by _____

Accepted Answer

A)  an increase in disposable income. 
B)  a decrease in disposable income. 
C)  a decrease in the price level. 
D)  a decrease in household wealth. 
E)  an increase in the interest rate. 
A)  an increase in disposable income. 
B)  a decrease in disposable income. 
C)  a decrease in the price level. 
D)  a decrease in household wealth. 
E)  an increase in the interest rate.

Question 15

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

Accepted Answer

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

Question 16

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 17

An increase in the market interest rate will _____

Accepted Answer

A)  increase investment for individual firms, so total investment in the economy increases. 
B)  increase investment for individual firms, so total investment in the economy decreases. 
C)  decrease investment for individual firms, so total investment in the economy increases. 
D)  decrease investment for individual firms, so total investment in the economy decreases. 
E)  not change investment for individual firms, so total investment in the economy is unchanged. 
A)  increase investment for individual firms, so total investment in the economy increases. 
B)  increase investment for individual firms, so total investment in the economy decreases. 
C)  decrease investment for individual firms, so total investment in the economy increases. 
D)  decrease investment for individual firms, so total investment in the economy decreases. 
E)  not change investment for individual firms, so total investment in the economy is unchanged.

Question 18

Fewer of an economy's resources will be channeled into building new factories and equipment when _____

Accepted Answer

A)  interest rates are high. 
B)  households decide to spend more of their income. 
C)  firms are optimistic about their future profits. 
D)  aggregate income increases. 
E)  an economy has a trade deficit. 
A)  interest rates are high. 
B)  households decide to spend more of their income. 
C)  firms are optimistic about their future profits. 
D)  aggregate income increases. 
E)  an economy has a trade deficit.

Question 19

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 20

What is the relationship between net taxes, transfers, and income?

Accepted Answer

A)  Net taxes increase with income but transfers decrease with income. 
B)  Net taxes increase with income and transfers increase with income. 
C)  Net taxes decrease with income and transfers decrease with income. 
D)  Net taxes decrease with income but transfers are not related to income. 
E)  Neither net taxes nor transfers are related to income. 
A)  Net taxes increase with income but transfers decrease with income. 
B)  Net taxes increase with income and transfers increase with income. 
C)  Net taxes decrease with income and transfers decrease with income. 
D)  Net taxes decrease with income but transfers are not related to income. 
E)  Neither net taxes nor transfers are related to income.

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

Linda earns an income of $3,000 per month. She saves 10 percent and spends the remainder on food, lodging, and other expenses. So far, she has managed to save $20,000. What is her consumption per month?

Which of the following is correct if real GDP is $20 trillion and spending is $20 trillion?

Which of the following is illustrated by the distance between the aggregate expenditure line and the 45-degree line at each level of real GDP?

Fluctuations in investment _____

Which of the following is correct if real GDP is $20 trillion and spending is $20.5 trillion?

The consumption function relates consumption spending to _____

Expectations that the price level will decrease in the future will _____

Which of the following is correct if real GDP is $20 trillion and spending is $20 trillion?

The fraction of a change in income that is saved is known as _____

An aggregate demand curve can be drawn by _____

Linda earned an income of $3,000 per month which has now increased to $3,500 per month. She saves 10 percent and spends the remainder on food, lodging, and other expenses. So far, she has managed to save $20,000. What is her consumption after the increase?

Exhibit 9.1 -Refer to Exhibit 9.1, which shows the income-expenditure model. Which of the following best describes the situation at point B?

An upward shift of the consumption function might be caused by _____

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

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

An increase in the market interest rate will _____

Fewer of an economy's resources will be channeled into building new factories and equipment when _____

The marginal propensity to consume _____

What is the relationship between net taxes, transfers, and income?

The Art and Science of Economic Analysis.

Economic Tools and Economic Systems.

Economic Decision Makers.

Demand, Supply, and Markets.

Introduction to Macroeconomics.

Tracking the U. S. Economy.

Unemployment and Inflation.

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.

Macro Policy Debate: Active or Passive?

International Trade.

International Finance.

Economic Development.

Filters

Exam 9: Aggregate Demand.

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

Linda earns an income of $3,000 per month. She saves 10 percent and spends the remainder on food, lodging, and other expenses. So far, she has managed to save $20,000. What is her consumption per month?

Which of the following is correct if real GDP is $20 trillion and spending is $20 trillion?

Which of the following is illustrated by the distance between the aggregate expenditure line and the 45-degree line at each level of real GDP?

Fluctuations in investment _____

Which of the following is correct if real GDP is $20 trillion and spending is $20.5 trillion?

The consumption function relates consumption spending to _____

Expectations that the price level will decrease in the future will _____

Which of the following is correct if real GDP is $20 trillion and spending is $20 trillion?

The fraction of a change in income that is saved is known as _____

An aggregate demand curve can be drawn by _____

Linda earned an income of $3,000 per month which has now increased to $3,500 per month. She saves 10 percent and spends the remainder on food, lodging, and other expenses. So far, she has managed to save $20,000. What is her consumption after the increase?

Exhibit 9.1 -Refer to Exhibit 9.1, which shows the income-expenditure model. Which of the following best describes the situation at point B?

An upward shift of the consumption function might be caused by _____

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

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

An increase in the market interest rate will _____

Fewer of an economy's resources will be channeled into building new factories and equipment when _____

The marginal propensity to consume _____

What is the relationship between net taxes, transfers, and income?

The Art and Science of Economic Analysis.

Economic Tools and Economic Systems.

Economic Decision Makers.

Demand, Supply, and Markets.

Introduction to Macroeconomics.

Tracking the U. S. Economy.

Unemployment and Inflation.

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.

Macro Policy Debate: Active or Passive?

International Trade.

International Finance.

Economic Development.

Filters