Question 1

Autonomous investment and autonomous consumption are:

Accepted Answer

A)  related to income 
B)  unrelated to income 
C)  dependent on income 
D)  dependent on GDP 
A)  related to income 
B)  unrelated to income 
C)  dependent on income 
D)  dependent on GDP

Question 2

Refer to the following table to answer this
   question:
(a) Fill in columns (2) and (4).
(b) What is the value of autonomous expenditures?
(c) What is the slope of the AE function (ΔAE/ΔY)?
(d) What is the AE equation?
(e) Draw the AE curve in a 45 degree line diagram
(f) What is the equilibrium real GDP? Illustrate equilibrium Y in the diagram for (e)

Accepted Answer

(a) Col (2): 500 in each row.

Question 3

The principle of the multiplier states that:

Accepted Answer

A)  any autonomous increase in spending that causes the aggregate expenditure line to shift up will result in a larger increase in national income. 
B)  any autonomous increase in spending that causes the aggregate expenditure line to shift up several times will result in a larger increase in national income. 
C)  any equilibrium increase in national income will result in a larger increase in autonomous spending. 
D)  for any given increase in equilibrium income, there will be a less than proportional increase in consumer spending. 
A)  any autonomous increase in spending that causes the aggregate expenditure line to shift up will result in a larger increase in national income. 
B)  any autonomous increase in spending that causes the aggregate expenditure line to shift up several times will result in a larger increase in national income. 
C)  any equilibrium increase in national income will result in a larger increase in autonomous spending. 
D)  for any given increase in equilibrium income, there will be a less than proportional increase in consumer spending.

Question 4

What is meant by the term equilibrium real GDP in an open economy with no government? What are the three equivalent ways of expressing it?

Accepted Answer

Equilibrium real GDP is the real GDP at

Question 5

Suppose that planned spending for consumer and investment goods is greater than the level of total output produced by the economy, then:

Accepted Answer

A)  the resulting shortage of goods and reductions in inventories will cause producers to increase their level of output and national income will rise. 
B)  an unplanned build-up in inventories with the result that national income rises. 
C)  a decline in national income because planned spending is less than actual spending. 
D)  either an increase or decrease in national income, it depends on the relative size of the marginal propensity to consume.
Respectively. 
A)  the resulting shortage of goods and reductions in inventories will cause producers to increase their level of output and national income will rise. 
B)  an unplanned build-up in inventories with the result that national income rises. 
C)  a decline in national income because planned spending is less than actual spending. 
D)  either an increase or decrease in national income, it depends on the relative size of the marginal propensity to consume.
Respectively.

Question 6

Investment expenditure is considered to be part of autonomous expenditure:

Accepted Answer

A)  because it increases when savings increase. 
B)  decreases when real GDP decreases. 
C)  does not change when real GDP changes. 
D)  decreases when consumption decreases. 
A)  because it increases when savings increase. 
B)  decreases when real GDP decreases. 
C)  does not change when real GDP changes. 
D)  decreases when consumption decreases.

Question 7

If national income is above its equilibrium level, then:

Accepted Answer

A)  there are unplanned reductions in inventories and national income will fall. 
B)  there are unplanned reductions in inventories and national income will rise. 
C)  there are unplanned increases in inventories and national income will rise. 
D)  there are unplanned increases in inventories and national income will fall. 
A)  there are unplanned reductions in inventories and national income will fall. 
B)  there are unplanned reductions in inventories and national income will rise. 
C)  there are unplanned increases in inventories and national income will rise. 
D)  there are unplanned increases in inventories and national income will fall.

Question 8

In the short run with fixed wages and prices:

Accepted Answer

A)  equilibrium real GDP is determined by aggregate demand. 
B)  equilibrium real GDP is determined by aggregate supply. 
C)  labour and the productive capacity of firms are always fully employed. 
D)  equilibrium real GDP is a fixed amount and will not change. 
A)  equilibrium real GDP is determined by aggregate demand. 
B)  equilibrium real GDP is determined by aggregate supply. 
C)  labour and the productive capacity of firms are always fully employed. 
D)  equilibrium real GDP is a fixed amount and will not change.

Question 9

-Refer to Figure 6.3. Figure 6.3 shows that below Y0:

Accepted Answer

A)  investment is less than savings. 
B)  savings is always positive. 
C)  savings is less than investment. 
D)  investment falls with income. 
A)  investment is less than savings. 
B)  savings is always positive. 
C)  savings is less than investment. 
D)  investment falls with income.

Question 10

Empirical data show that a strong, positive relationship exists between personal consumption expenditures and:

Accepted Answer

A)  planned investment spending. 
B)  the real interest rate. 
C)  the level of personal disposable income. 
D)  progressive taxes. 
A)  planned investment spending. 
B)  the real interest rate. 
C)  the level of personal disposable income. 
D)  progressive taxes.

Question 11

The investment multiplier is:

Accepted Answer

A)  negatively related to the MPS. 
B)  positively related to the MPC. 
C)  negatively related to the MPZ. 
D)  all of the above 
A)  negatively related to the MPS. 
B)  positively related to the MPC. 
C)  negatively related to the MPZ. 
D)  all of the above

Question 12

When an economy is at its equilibrium level of output, we know that:

Accepted Answer

A)  aggregate spending by the private sector equals the value of the output produced by the economy minus the capital consumption. 
B)  firms will not hold any inventories. 
C)  aggregate expenditure will always equal the value of the aggregate output produced by the economy. 
D)  consumption expenditures equal the total value of the goods produced by the economy. 
A)  aggregate spending by the private sector equals the value of the output produced by the economy minus the capital consumption. 
B)  firms will not hold any inventories. 
C)  aggregate expenditure will always equal the value of the aggregate output produced by the economy. 
D)  consumption expenditures equal the total value of the goods produced by the economy.

Autonomous investment and autonomous consumption are:

The principle of the multiplier states that:

What is meant by the term equilibrium real GDP in an open economy with no government? What are the three equivalent ways of expressing it?

Suppose that planned spending for consumer and investment goods is greater than the level of total output produced by the economy, then:

Investment expenditure is considered to be part of autonomous expenditure:

If national income is above its equilibrium level, then:

In the short run with fixed wages and prices:

-Refer to Figure 6.3. Figure 6.3 shows that below Y₀:

Empirical data show that a strong, positive relationship exists between personal consumption expenditures and:

The investment multiplier is:

When an economy is at its equilibrium level of output, we know that:

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

Autonomous investment and autonomous consumption are:

The principle of the multiplier states that:

What is meant by the term equilibrium real GDP in an open economy with no government? What are the three equivalent ways of expressing it?

Suppose that planned spending for consumer and investment goods is greater than the level of total output produced by the economy, then:

Investment expenditure is considered to be part of autonomous expenditure:

If national income is above its equilibrium level, then:

In the short run with fixed wages and prices:

-Refer to Figure 6.3. Figure 6.3 shows that below Y0:

Empirical data show that a strong, positive relationship exists between personal consumption expenditures and:

The investment multiplier is:

When an economy is at its equilibrium level of output, we know that:

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

-Refer to Figure 6.3. Figure 6.3 shows that below Y₀: