Question 1

If the investment multiplier in an economy is 5, an increase in exports by $20 billion will:

Accepted Answer

A)  increase GDP by any amount, since we do not know the investment multiplier. 
B)  increase GDP by $20 billion. 
C)  decrease GDP by $20 billion. 
D)  increase GDP by $100 billion. 
A)  increase GDP by any amount, since we do not know the investment multiplier. 
B)  increase GDP by $20 billion. 
C)  decrease GDP by $20 billion. 
D)  increase GDP by $100 billion.

Question 2

If income is at a level at which planned saving is greater than planned investment, then:

Accepted Answer

A)  income will rise. 
B)  income will fall. 
C)  income will not change, but saving will. 
D)  investment will rise. 
A)  income will rise. 
B)  income will fall. 
C)  income will not change, but saving will. 
D)  investment will rise.

Question 3

Answer parts (a) - (e) below based on the AE equation AE = 2500 + 0.9Y.
(a) What is the level of autonomous expenditures?
(b) If income is 1000 what is the level of induced expenditures?
(c) What is the slope of the AE function?
(d) What is the value of the multiplier?
(e) What is the level of equilibrium income?

Accepted Answer

(a) Autonomous expenditures are determin

Question 4

If the marginal propensity to import (MPZ) is positive but less than unity:

Accepted Answer

A)  the import function is horizontal. 
B)  the import function has a negative slope. 
C)  the import function has a positive slope. 
D)  the import function is vertical. 
A)  the import function is horizontal. 
B)  the import function has a negative slope. 
C)  the import function has a positive slope. 
D)  the import function is vertical.

Question 5

Which of the following statements is correct for a closed economy with no government?

Accepted Answer

A)  Planned saving equals planned investment only at the equilibrium level of domestic output. 
B)  All levels of domestic output where planned investment exceeds planned saving will be too high for equilibrium. 
C)  Planned and actual investment are identical at all possible levels of domestic output. 
D)  Saving equals actual investment only at the equilibrium level of domestic output. 
A)  Planned saving equals planned investment only at the equilibrium level of domestic output. 
B)  All levels of domestic output where planned investment exceeds planned saving will be too high for equilibrium. 
C)  Planned and actual investment are identical at all possible levels of domestic output. 
D)  Saving equals actual investment only at the equilibrium level of domestic output.

Question 6

-Refer to Figure 6.4. The equilibrium Y in a private sector closed economy will be:

Accepted Answer

A)  $100. 
B)  $500. 
C)  $600. 
D)  cannot be determined from the information given. 
A)  $100. 
B)  $500. 
C)  $600. 
D)  cannot be determined from the information given.

Question 7

Table 6.3
-Refer to Table 6.3. Fill in the column of AE schedule. The AE equation is:

Accepted Answer

A)  AE = 90 + 0.6Y. 
B)  AE = 120 + 0.6Y. 
C)  AE = 90 + 0.5Y. 
D)  AE = 200 + 0.5Y. 
A)  AE = 90 + 0.6Y. 
B)  AE = 120 + 0.6Y. 
C)  AE = 90 + 0.5Y. 
D)  AE = 200 + 0.5Y.

Question 8

C=60+.8Y
I=IS1U1B10S1U1B0=30
X=40
Z=10+0.2Y
-Which of the following statements is false in equilibrium situations?

Accepted Answer

A)  We fund that (Z-X) is +30 and (I-S) is +30. 
B)  We find that NX is -30. 
C)  We find that investment equals saving. 
D)  We find that the aggregate expenditure is 300. 
A)  We fund that (Z-X) is +30 and (I-S) is +30. 
B)  We find that NX is -30. 
C)  We find that investment equals saving. 
D)  We find that the aggregate expenditure is 300.

Question 9

Suppose an economy has total autonomous expenditure of 100 and a change in household behaviour increases the slope of the AE function from 0.75 to 0.80. The initial equilibrium income was _______ and
The new equilibrium income will be __________.

Accepted Answer

A)  100, 100. 
B)  750, 800. 
C)  250, 200. 
D)  400, 500. 
A)  100, 100. 
B)  750, 800. 
C)  250, 200. 
D)  400, 500.

Question 10

Other things remaining the same, if households become more frugal and decide to spend less at each level of income, then the consumption function will:

Accepted Answer

A)  become less steep because the MPS rises. 
B)  remain unchanged but the savings function will shift downward. 
C)  become steeper because the MPC falls. 
D)  make a parallel shift downward. 
A)  become less steep because the MPS rises. 
B)  remain unchanged but the savings function will shift downward. 
C)  become steeper because the MPC falls. 
D)  make a parallel shift downward.

Question 11

The paradox of thrift refers to the result that:

Accepted Answer

A)  an attempt by households to save more will leave saving unchanged. 
B)  an attempt by households to save more will reduce saving. 
C)  an attempt by households to save more will reduce investment spending. 
D)  an attempt by households to save more will increase equilibrium income. 
A)  an attempt by households to save more will leave saving unchanged. 
B)  an attempt by households to save more will reduce saving. 
C)  an attempt by households to save more will reduce investment spending. 
D)  an attempt by households to save more will increase equilibrium income.

Question 12

The numerical value of the multiplier will be smaller:

Accepted Answer

A)  higher the level of the AE function. 
B)  higher the slope of the saving function. 
C)  higher the slope of the AE function. 
D)  smaller the slope of the AE function. 
A)  higher the level of the AE function. 
B)  higher the slope of the saving function. 
C)  higher the slope of the AE function. 
D)  smaller the slope of the AE function.

Question 13

Consider a no government open economy. If the marginal propensity to consume is 0.9 and the marginal propensity to import is 0.15, then:

Accepted Answer

A)  the multiplier is 1/0.9 
B)  the multiplier is 1/.75. 
C)  the multiplier is 1/0.25. 
D)  the multiplier is 1/0.1. 
A)  the multiplier is 1/0.9 
B)  the multiplier is 1/.75. 
C)  the multiplier is 1/0.25. 
D)  the multiplier is 1/0.1.

Question 14

Suppose, the multiplier is 4. If the AE curve shifts down by 100 due to either investment slump or export slump, then:

Accepted Answer

A)  the AD curve will shift to the left by 100. 
B)  the AD curve will shift to the left by 400. 
C)  the AD curve will shift to the right by 100. 
D)  the AS curve will shift to the left by 100. 
A)  the AD curve will shift to the left by 100. 
B)  the AD curve will shift to the left by 400. 
C)  the AD curve will shift to the right by 100. 
D)  the AS curve will shift to the left by 100.

Question 15

Consider a no government open economy. If the slope of the economy's AE function is 0.75 and if investment increases by $3 billion, the equilibrium GDP will:

Accepted Answer

A)  increase by about $10 billion. 
B)  increase by $3 billion. 
C)  decrease by $9 billion. 
D)  increase by $12 billion. 
A)  increase by about $10 billion. 
B)  increase by $3 billion. 
C)  decrease by $9 billion. 
D)  increase by $12 billion.

Question 16

Multiplier in an open economy with no government taxing or spending is:

Accepted Answer

A)  1/(1-MP
C) . 
B)  1/(MPC + MPZ). 
C)  1/(1 - MPS). 
D)  1/(MPS + MPZ). 
A)  1/(1-MP
C) . 
B)  1/(MPC + MPZ). 
C)  1/(1 - MPS). 
D)  1/(MPS + MPZ).

Question 17

When there is an intersection of an economy's aggregate demand and aggregate supply curves:

Accepted Answer

A)  output may be greater or less then potential output. 
B)  an equilibrium price level is established in the economy. 
C)  an equilibrium level of real GDP is established. 
D)  all of the above are correct. 
A)  output may be greater or less then potential output. 
B)  an equilibrium price level is established in the economy. 
C)  an equilibrium level of real GDP is established. 
D)  all of the above are correct.

Question 18

The increase in equilibrium income that results from an increase in autonomous investment spending would be:

Accepted Answer

A)  smaller the MPS. 
B)  smaller the APC. 
C)  larger the MPS. 
D)  smaller the MPC. 
A)  smaller the MPS. 
B)  smaller the APC. 
C)  larger the MPS. 
D)  smaller the MPC.

Question 19

The marginal propensity to consume is the rate at which aggregate expenditure increases when investment spending increases.

Accepted Answer

A) True 
 B)False

Question 20

The expression AE = C + I + X - Z refers to:

Accepted Answer

A)  aggregate expenditure in a closed economy. 
B)  aggregate expenditure in an economy trading internationally. 
C)  aggregate expenditure in an economy with a government sector. 
D)  aggregate expenditure in an economy with international trade and without government sector. 
A)  aggregate expenditure in a closed economy. 
B)  aggregate expenditure in an economy trading internationally. 
C)  aggregate expenditure in an economy with a government sector. 
D)  aggregate expenditure in an economy with international trade and without government sector.

If the investment multiplier in an economy is 5, an increase in exports by $20 billion will:

If income is at a level at which planned saving is greater than planned investment, then:

If the marginal propensity to import (MPZ) is positive but less than unity:

Which of the following statements is correct for a closed economy with no government?

-Refer to Figure 6.4. The equilibrium Y in a private sector closed economy will be:

Table 6.3 -Refer to Table 6.3. Fill in the column of AE schedule. The AE equation is:

C=60+.8Y I=I₀=30 X=40 Z=10+0.2Y -Which of the following statements is false in equilibrium situations?

Suppose an economy has total autonomous expenditure of 100 and a change in household behaviour increases the slope of the AE function from 0.75 to 0.80. The initial equilibrium income was _ and The new equilibrium income will be ____.

Other things remaining the same, if households become more frugal and decide to spend less at each level of income, then the consumption function will:

The paradox of thrift refers to the result that:

The numerical value of the multiplier will be smaller:

Consider a no government open economy. If the marginal propensity to consume is 0.9 and the marginal propensity to import is 0.15, then:

Suppose, the multiplier is 4. If the AE curve shifts down by 100 due to either investment slump or export slump, then:

Consider a no government open economy. If the slope of the economy's AE function is 0.75 and if investment increases by $3 billion, the equilibrium GDP will:

Multiplier in an open economy with no government taxing or spending is:

When there is an intersection of an economy's aggregate demand and aggregate supply curves:

The increase in equilibrium income that results from an increase in autonomous investment spending would be:

The marginal propensity to consume is the rate at which aggregate expenditure increases when investment spending increases.

The expression AE = C + I + X - Z refers to:

Introduction to Key Ideas

Theories, Models and Data

The Classical Marketplace Demand and Supply

Economic Activity and Performance

Output, Business Cycles, Growth Employment

The Government Sector

Money, Banking Money Supply

Financial Markets, Interest Rates, Foreign Exchange Rates & AD

Central Banking and Monetary Policy

A Traditional Ad As Model

An AD As Model of the Inflation Rate and Real GDP

Economic Growth

International Macroeconomics

International Trade

Filters

Exam 6: Aggregate Expenditure Aggregate Demand

If the investment multiplier in an economy is 5, an increase in exports by $20 billion will:

If income is at a level at which planned saving is greater than planned investment, then:

If the marginal propensity to import (MPZ) is positive but less than unity:

Which of the following statements is correct for a closed economy with no government?

-Refer to Figure 6.4. The equilibrium Y in a private sector closed economy will be:

Table 6.3 -Refer to Table 6.3. Fill in the column of AE schedule. The AE equation is:

C=60+.8Y I=I0=30 X=40 Z=10+0.2Y -Which of the following statements is false in equilibrium situations?

Suppose an economy has total autonomous expenditure of 100 and a change in household behaviour increases the slope of the AE function from 0.75 to 0.80. The initial equilibrium income was _______ and The new equilibrium income will be __________.

Other things remaining the same, if households become more frugal and decide to spend less at each level of income, then the consumption function will:

The paradox of thrift refers to the result that:

The numerical value of the multiplier will be smaller:

Consider a no government open economy. If the marginal propensity to consume is 0.9 and the marginal propensity to import is 0.15, then:

Suppose, the multiplier is 4. If the AE curve shifts down by 100 due to either investment slump or export slump, then:

Consider a no government open economy. If the slope of the economy's AE function is 0.75 and if investment increases by $3 billion, the equilibrium GDP will:

Multiplier in an open economy with no government taxing or spending is:

When there is an intersection of an economy's aggregate demand and aggregate supply curves:

The increase in equilibrium income that results from an increase in autonomous investment spending would be:

The marginal propensity to consume is the rate at which aggregate expenditure increases when investment spending increases.

The expression AE = C + I + X - Z refers to:

Introduction to Key Ideas

Theories, Models and Data

The Classical Marketplace Demand and Supply

Economic Activity and Performance

Output, Business Cycles, Growth Employment

The Government Sector

Money, Banking Money Supply

Financial Markets, Interest Rates, Foreign Exchange Rates & AD

Central Banking and Monetary Policy

A Traditional Ad As Model

An AD As Model of the Inflation Rate and Real GDP

Economic Growth

International Macroeconomics

International Trade

Filters

C=60+.8Y I=I₀=30 X=40 Z=10+0.2Y -Which of the following statements is false in equilibrium situations?

Suppose an economy has total autonomous expenditure of 100 and a change in household behaviour increases the slope of the AE function from 0.75 to 0.80. The initial equilibrium income was _ and The new equilibrium income will be ____.