Question 1

In aggregate spending, investment does not include _____

Accepted Answer

A)  buying stocks and bonds. 
B)  a new housing development. 
C)  net increases to inventories. 
D)  purchases of equipment. 
E)  building a new factory. 
A)  buying stocks and bonds. 
B)  a new housing development. 
C)  net increases to inventories. 
D)  purchases of equipment. 
E)  building a new factory.

Question 2

If the market interest rate equals 8 percent, the opportunity cost of the last new investment project undertaken would approximately be equal to _____

Accepted Answer

A)  zero percent. 
B)  4 percent. 
C)  infinity. 
D)  8 percent. 
E)  16 percent. 
A)  zero percent. 
B)  4 percent. 
C)  infinity. 
D)  8 percent. 
E)  16 percent.

Question 3

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 4

Which of the following is correct if real GDP is $20 trillion and spending is $20.5 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 5

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 6

A decrease in the price level will _____

Accepted Answer

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

Question 7

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 8

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 9

Suppose at a particular level of real gross domestic product (GDP), there are no unintended inventory adjustments. In this context, which of the following is true?

Accepted Answer

A)  Real GDP is less than the equilibrium level of real GDP demanded. 
B)  Real GDP is greater than the equilibrium level of real GDP demanded. 
C)  Real GDP equals the equilibrium level of real GDP demanded. 
D)  At equilibrium real GDP, there is no inflation. 
E)  At equilibrium real GDP, there is no saving. 
A)  Real GDP is less than the equilibrium level of real GDP demanded. 
B)  Real GDP is greater than the equilibrium level of real GDP demanded. 
C)  Real GDP equals the equilibrium level of real GDP demanded. 
D)  At equilibrium real GDP, there is no inflation. 
E)  At equilibrium real GDP, there is no saving.

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

A change in consumers' expectations about the future will shift both the aggregate expenditure curve and the aggregate demand curve.

Accepted Answer

A) True 
 B)False

Question 12

The higher the opportunity cost of borrowing, the higher the amount of investment, other things constant.

Accepted Answer

A) True 
 B)False

Question 13

Historically, consumption spending in the United States has _____

Accepted Answer

A)  fluctuated greatly with changes in the level of income. 
B)  remained approximately constant as a percentage of income. 
C)  decreased as a percentage of income. 
D)  varied inversely with the inflation rate. 
E)  varied inversely with the interest rate. 
A)  fluctuated greatly with changes in the level of income. 
B)  remained approximately constant as a percentage of income. 
C)  decreased as a percentage of income. 
D)  varied inversely with the inflation rate. 
E)  varied inversely with the interest rate.

Question 14

The difference between consumption spending and disposable income _____

Accepted Answer

A)  decreases as income increases. 
B)  stays proportionally the same as income increases. 
C)  decreases if the interest rate increases. 
D)  equals the amount of taxes paid. 
E)  equals saving. 
A)  decreases as income increases. 
B)  stays proportionally the same as income increases. 
C)  decreases if the interest rate increases. 
D)  equals the amount of taxes paid. 
E)  equals saving.

Question 15

A decrease in the price level in an economy will _____

Accepted Answer

A)  shift the aggregate expenditure line upward. 
B)  shift the aggregate expenditure line downward. 
C)  cause an upward movement along the aggregate expenditure line. 
D)  cause a downward movement along the aggregate expenditure line. 
E)  shift the aggregate demand curve leftward. 
A)  shift the aggregate expenditure line upward. 
B)  shift the aggregate expenditure line downward. 
C)  cause an upward movement along the aggregate expenditure line. 
D)  cause a downward movement along the aggregate expenditure line. 
E)  shift the aggregate demand curve leftward.

Question 16

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 17

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 18

As the U.S. price level rises relative to price levels in other countries, U.S. _____

Accepted Answer

A)  consumption and net exports will both decrease. 
B)  consumption and net exports will both increase. 
C)  consumption would increase and net exports will decrease. 
D)  consumption would decrease and net exports will increase. 
E)  consumption and net exports will remain constant. 
A)  consumption and net exports will both decrease. 
B)  consumption and net exports will both increase. 
C)  consumption would increase and net exports will decrease. 
D)  consumption would decrease and net exports will increase. 
E)  consumption and net exports will remain constant.

Question 19

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 20

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.

In aggregate spending, investment does not include _____

If the market interest rate equals 8 percent, the opportunity cost of the last new investment project undertaken would approximately be equal to _____

A higher interest rate will _____

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

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

A decrease in the price level will _____

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

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

Suppose at a particular level of real gross domestic product (GDP), there are no unintended inventory adjustments. In this context, which of the following is true?

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

A change in consumers' expectations about the future will shift both the aggregate expenditure curve and the aggregate demand curve.

The higher the opportunity cost of borrowing, the higher the amount of investment, other things constant.

Historically, consumption spending in the United States has _____

The difference between consumption spending and disposable income _____

A decrease in the price level in an economy will _____

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

Identify the correct statement about net exports.

As the U.S. price level rises relative to price levels in other countries, U.S. _____

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

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 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.

In aggregate spending, investment does not include _____

If the market interest rate equals 8 percent, the opportunity cost of the last new investment project undertaken would approximately be equal to _____

A higher interest rate will _____

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

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

A decrease in the price level will _____

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

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

Suppose at a particular level of real gross domestic product (GDP), there are no unintended inventory adjustments. In this context, which of the following is true?

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

A change in consumers' expectations about the future will shift both the aggregate expenditure curve and the aggregate demand curve.

The higher the opportunity cost of borrowing, the higher the amount of investment, other things constant.

Historically, consumption spending in the United States has _____

The difference between consumption spending and disposable income _____

A decrease in the price level in an economy will _____

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

Identify the correct statement about net exports.

As the U.S. price level rises relative to price levels in other countries, U.S. _____

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

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 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