Question 1

Table 23-2
  
-Refer to Table 23-2.Given the consumption schedule in the table above,the marginal propensity to consume is

Accepted Answer

A)  0.1. 
B)  0.3. 
C)  0.6. 
D)  0.9. 
A)  0.1. 
B)  0.3. 
C)  0.6. 
D)  0.9.

Question 2

If the MPC is 0.5,then a $10 million increase in disposable income will increase consumption by

Accepted Answer

A)  $2 million. 
B)  $5 million. 
C)  $15 million 
D)  $50 million. 
A)  $2 million. 
B)  $5 million. 
C)  $15 million 
D)  $50 million.

Question 3

An increase in aggregate expenditure has what result on equilibrium GDP?

Accepted Answer

A)  Equilibrium GDP rises. 
B)  Equilibrium GDP is not affected by a decrease in aggregate expenditure. 
C)  Equilibrium GDP falls. 
D)  Equilibrium GDP may rise or fall depending on the size of the decrease in aggregate expenditure relative to the initial level of GDP. 
A)  Equilibrium GDP rises. 
B)  Equilibrium GDP is not affected by a decrease in aggregate expenditure. 
C)  Equilibrium GDP falls. 
D)  Equilibrium GDP may rise or fall depending on the size of the decrease in aggregate expenditure relative to the initial level of GDP.

Question 4

Why do economists care about aggregate expenditures?

Accepted Answer

Increases and decreases in aggregate exp

Question 5

An increase in the real interest rate will

Accepted Answer

A)  cause consumers to spend more and save less. 
B)  most likely lower consumers' purchases of durable goods. 
C)  most likely lower the reward to savings. 
D)  most likely lower the cost of borrowing. 
A)  cause consumers to spend more and save less. 
B)  most likely lower consumers' purchases of durable goods. 
C)  most likely lower the reward to savings. 
D)  most likely lower the cost of borrowing.

Question 6

If the marginal propensity to save is 0.4,the multiplier is 2.5.

Accepted Answer

A) True 
 B)False

Question 7

If the consumption function is defined as C = 5,500 + 0.9Y,what is the multiplier?

Accepted Answer

A)  0.l 
B)  0.9 
C)  6.1 
D)  10 
A)  0.l 
B)  0.9 
C)  6.1 
D)  10

Question 8

Consumption is $5 million,planned investment spending is $8 million,government purchases are $10 million,and net exports are equal to $2 million.If GDP during that same time period is equal to $27 million,what unplanned changes in inventories occurred?

Accepted Answer

A)  There was an unplanned increase in inventories equal to $2 million. 
B)  There was no unplanned change in inventories. 
C)  There was an unplanned decrease in inventories equal to $2 million. 
D)  There was an unplanned decrease in inventories equal to $19 million. 
A)  There was an unplanned increase in inventories equal to $2 million. 
B)  There was no unplanned change in inventories. 
C)  There was an unplanned decrease in inventories equal to $2 million. 
D)  There was an unplanned decrease in inventories equal to $19 million.

Question 9

If the economy is currently in equilibrium at a level of GDP that is below potential GDP,which of the following would move the economy back to potential GDP?

Accepted Answer

A)  an increase in wealth 
B)  an increase in interest rates 
C)  a decrease in business confidence 
D)  an increase in the value of the dollar relative to other currencies 
A)  an increase in wealth 
B)  an increase in interest rates 
C)  a decrease in business confidence 
D)  an increase in the value of the dollar relative to other currencies

Question 10

Given the equations for C,I,G,and NX below,what is the marginal propensity to consume?
C = 2,000 + 0.9Y
I = 2,500
G = 3,000
NX = 400

Accepted Answer

A)  -0.1 
B)  0.1 
C)  0.9 
D)  2000 
A)  -0.1 
B)  0.1 
C)  0.9 
D)  2000

Question 11

Figure 23-3
  
-Refer to Figure 23-3.Suppose that investment spending increases by $10 million,shifting up the aggregate expenditure line and GDP increases from GDP1 to GDP2.If the MPC is 0.9,then what is the change in GDP?

Accepted Answer

A)  $9 million 
B)  $10 million 
C)  $90 million 
D)  $100 million 
A)  $9 million 
B)  $10 million 
C)  $90 million 
D)  $100 million

Question 12

Higher interest rates increase both consumption and investment spending.

Accepted Answer

A) True 
 B)False

Question 13

If the consumption function is defined as C = 7,250 + 0.8Y,what is the marginal propensity to save?

Accepted Answer

A)  0.2 
B)  0.8 
C)  5.8 
D)  9.1 
A)  0.2 
B)  0.8 
C)  5.8 
D)  9.1

Question 14

The larger the MPC,the smaller the value of the multiplier.

Accepted Answer

A) True 
 B)False

Question 15

Assume that inventories declined by more than analysts predicted.This implies that

Accepted Answer

A)  planned aggregate expenditure was greater than real GDP. 
B)  planned aggregate expenditure was equal to real GDP. 
C)  planned aggregate expenditure was less than real GDP. 
D)  planned aggregate expenditure is unrelated to real GDP. 
A)  planned aggregate expenditure was greater than real GDP. 
B)  planned aggregate expenditure was equal to real GDP. 
C)  planned aggregate expenditure was less than real GDP. 
D)  planned aggregate expenditure is unrelated to real GDP.

Question 16

When Jack's income increases by $1,000,he spends an additional $850 dollars.This implies that his marginal propensity to consume is 0.85.

Accepted Answer

A) True 
 B)False

Question 17

Equations for C,I,G,and NX are given below.If the equilibrium level of GDP is $32,000,what is the marginal propensity to consume?
C = 5,000 + (MPC)Y
I = 1,500
G = 2,000
NX = -500

Accepted Answer

A)  0.67 
B)  0.75 
C)  0.8 
D)  0.9 
A)  0.67 
B)  0.75 
C)  0.8 
D)  0.9

Question 18

Which of the following will decrease aggregate expenditure in the United States?

Accepted Answer

A)  a decrease in the value of the dollar 
B)  a decrease in the price level 
C)  a decrease in interest rates 
D)  a decrease in government purchases 
A)  a decrease in the value of the dollar 
B)  a decrease in the price level 
C)  a decrease in interest rates 
D)  a decrease in government purchases

Question 19

At macroeconomic equilibrium,

Accepted Answer

A)  total investment equals total inventories. 
B)  total spending equals total production. 
C)  total consumption equals total production. 
D)  total taxes equal total transfers. 
A)  total investment equals total inventories. 
B)  total spending equals total production. 
C)  total consumption equals total production. 
D)  total taxes equal total transfers.

Question 20

Which of the following correctly describes how an increase in the price level affects consumption spending?

Accepted Answer

A)  An increase in the price level raises real wealth, which causes consumption to increase. 
B)  An increase in the price level decreases the amount of money a household needs to buy goods and raises the interest rate, which causes consumption to increase. 
C)  An increase in the price level increases the amount of money a household needs to buy goods and raises the interest rate, which causes consumption to increase. 
D)  An increase in the price level lowers real wealth, which causes consumption to decrease. 
A)  An increase in the price level raises real wealth, which causes consumption to increase. 
B)  An increase in the price level decreases the amount of money a household needs to buy goods and raises the interest rate, which causes consumption to increase. 
C)  An increase in the price level increases the amount of money a household needs to buy goods and raises the interest rate, which causes consumption to increase. 
D)  An increase in the price level lowers real wealth, which causes consumption to decrease.

Table 23-2 -Refer to Table 23-2.Given the consumption schedule in the table above,the marginal propensity to consume is

If the MPC is 0.5,then a $10 million increase in disposable income will increase consumption by

An increase in aggregate expenditure has what result on equilibrium GDP?

Why do economists care about aggregate expenditures?

An increase in the real interest rate will

If the marginal propensity to save is 0.4,the multiplier is 2.5.

If the consumption function is defined as C = 5,500 + 0.9Y,what is the multiplier?

Consumption is $5 million,planned investment spending is $8 million,government purchases are $10 million,and net exports are equal to $2 million.If GDP during that same time period is equal to $27 million,what unplanned changes in inventories occurred?

If the economy is currently in equilibrium at a level of GDP that is below potential GDP,which of the following would move the economy back to potential GDP?

Given the equations for C,I,G,and NX below,what is the marginal propensity to consume? C = 2,000 + 0.9Y I = 2,500 G = 3,000 NX = 400

Figure 23-3 -Refer to Figure 23-3.Suppose that investment spending increases by $10 million,shifting up the aggregate expenditure line and GDP increases from GDP₁ to GDP₂.If the MPC is 0.9,then what is the change in GDP?

Higher interest rates increase both consumption and investment spending.

If the consumption function is defined as C = 7,250 + 0.8Y,what is the marginal propensity to save?

The larger the MPC,the smaller the value of the multiplier.

Assume that inventories declined by more than analysts predicted.This implies that

When Jack's income increases by $1,000,he spends an additional $850 dollars.This implies that his marginal propensity to consume is 0.85.

Equations for C,I,G,and NX are given below.If the equilibrium level of GDP is $32,000,what is the marginal propensity to consume? C = 5,000 + (MPC)Y I = 1,500 G = 2,000 NX = -500

Which of the following will decrease aggregate expenditure in the United States?

At macroeconomic equilibrium,

Which of the following correctly describes how an increase in the price level affects consumption spending?

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency,government Price Setting,and Taxes

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Demand and Aggregate Supply Analysis

Money,banks,and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

Exam 12: Aggregate Expenditure and Output in the Short Run

Table 23-2 -Refer to Table 23-2.Given the consumption schedule in the table above,the marginal propensity to consume is

If the MPC is 0.5,then a $10 million increase in disposable income will increase consumption by

An increase in aggregate expenditure has what result on equilibrium GDP?

Why do economists care about aggregate expenditures?

An increase in the real interest rate will

If the marginal propensity to save is 0.4,the multiplier is 2.5.

If the consumption function is defined as C = 5,500 + 0.9Y,what is the multiplier?

Consumption is $5 million,planned investment spending is $8 million,government purchases are $10 million,and net exports are equal to $2 million.If GDP during that same time period is equal to $27 million,what unplanned changes in inventories occurred?

If the economy is currently in equilibrium at a level of GDP that is below potential GDP,which of the following would move the economy back to potential GDP?

Given the equations for C,I,G,and NX below,what is the marginal propensity to consume? C = 2,000 + 0.9Y I = 2,500 G = 3,000 NX = 400

Figure 23-3 -Refer to Figure 23-3.Suppose that investment spending increases by $10 million,shifting up the aggregate expenditure line and GDP increases from GDP1 to GDP2.If the MPC is 0.9,then what is the change in GDP?

Higher interest rates increase both consumption and investment spending.

If the consumption function is defined as C = 7,250 + 0.8Y,what is the marginal propensity to save?

The larger the MPC,the smaller the value of the multiplier.

Assume that inventories declined by more than analysts predicted.This implies that

When Jack's income increases by $1,000,he spends an additional $850 dollars.This implies that his marginal propensity to consume is 0.85.

Equations for C,I,G,and NX are given below.If the equilibrium level of GDP is $32,000,what is the marginal propensity to consume? C = 5,000 + (MPC)Y I = 1,500 G = 2,000 NX = -500

Which of the following will decrease aggregate expenditure in the United States?

At macroeconomic equilibrium,

Which of the following correctly describes how an increase in the price level affects consumption spending?

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency,government Price Setting,and Taxes

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Demand and Aggregate Supply Analysis

Money,banks,and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

Figure 23-3 -Refer to Figure 23-3.Suppose that investment spending increases by $10 million,shifting up the aggregate expenditure line and GDP increases from GDP₁ to GDP₂.If the MPC is 0.9,then what is the change in GDP?