Question 1

If firms find that consumers are purchasing less than expected,which of the following would you expect?

Accepted Answer

A)  Aggregate expenditure will likely be greater than GDP. 
B)  Aggregate expenditure will likely be less than GDP. 
C)  The economy will adjust to macroeconomic equilibrium as inventories rise, and production and employment rise. 
D)  The economy will adjust to macroeconomic equilibrium as inventories fall, and production and employment rise. 
A)  Aggregate expenditure will likely be greater than GDP. 
B)  Aggregate expenditure will likely be less than GDP. 
C)  The economy will adjust to macroeconomic equilibrium as inventories rise, and production and employment rise. 
D)  The economy will adjust to macroeconomic equilibrium as inventories fall, and production and employment rise. B

Question 2

C = 3,600 + (MPC)Y
I = 1,200
G = 1,400
NX = -200
If the equilibrium level of GDP is $30,000,using the equations for C,I,G,and NX shown above,find the value of the marginal propensity to consume.

Accepted Answer

Y = C + I + G + NX.
30,000 = 3,600 + (MPC)30,000 + 1,200 + 1,400 - 200.
30,000 = 6,000 + (MPC)30,000.
24,000 = (MPC)30,000.
0.8 = MPC.

Question 3

If economists forecast an increase in aggregate expenditure,which of the following is likely to occur?

Accepted Answer

A)  GDP will rise. 
B)  GDP will fall. 
C)  Wages will fall. 
D)  Inventories will rise. 
A)  GDP will rise. 
B)  GDP will fall. 
C)  Wages will fall. 
D)  Inventories will rise. A

Question 4

Which is the smallest component of aggregate expenditure?

Accepted Answer

A)  planned investment expenditures 
B)  consumption expenditures 
C)  government expenditures 
D)  net export expenditures 
A)  planned investment expenditures 
B)  consumption expenditures 
C)  government expenditures 
D)  net export expenditures

Question 5

Figure 23-2
  
-Refer to Figure 23-2. If the U.S.economy is currently at point N,which of the following could cause it to move to point K?

Accepted Answer

A)  Households expect future income to rise. 
B)  Household wealth falls. 
C)  The firm's cash flow rises as profits rise. 
D)  Government expenditures increase. 
A)  Households expect future income to rise. 
B)  Household wealth falls. 
C)  The firm's cash flow rises as profits rise. 
D)  Government expenditures increase.

Question 6

Table 23-6
  
-Refer to Table 23-6. Using the table above,answer the following questions. The numbers in the table are in billions of dollars.
a.What is the equilibrium level of real GDP?
b.What is the MPC?
c.If potential GDP is $4,000 billion,is the economy at full employment? If not,what is the condition of the economy?
d.If the economy is not at full employment,by how much should government spending increase so that the economy can move to the full employment level of GDP?

Accepted Answer

a.Equilibrium real GDP is determined whe

Question 7

At each of the three points in the following graph,indicate whether planned aggregate expenditure is greater than,equal to,or less than GDP?

Accepted Answer

At point J,planned aggregate e

Question 8

If consumption is defined as C = 2,400 + 0.9Y,then the marginal propensity to consume is 0.9.

Accepted Answer

A) True 
 B)False

Question 9

What is the difference between aggregate expenditure and aggregate demand?

Accepted Answer

Aggregate expenditure is the t

Question 10

If planned aggregate expenditure is less than real GDP,some firms will experience unplanned increases in inventories.

Accepted Answer

A) True 
 B)False

Question 11

The aggregate expenditure model focuses on the short-run relationship between ________ and ________.

Accepted Answer

A)  real spending; real GDP 
B)  unemployment; inflation 
C)  nominal spending; nominal GDP 
D)  planned inventories; unplanned inventories 
A)  real spending; real GDP 
B)  unemployment; inflation 
C)  nominal spending; nominal GDP 
D)  planned inventories; unplanned inventories

Question 12

The ratio of the increase in equilibrium real GDP to the increase in autonomous expenditure is called the

Accepted Answer

A)  MPC. 
B)  multiplier. 
C)  MPS. 
D)  consumption function. 
A)  MPC. 
B)  multiplier. 
C)  MPS. 
D)  consumption function.

Question 13

If an increase in autonomous consumption spending of $25 million results in a $100 million increase in equilibrium real GDP,then

Accepted Answer

A)  the MPC is 0.25. 
B)  the MPC is 0.75. 
C)  the MPC is 0.8. 
D)  the MPC is 2.5. 
A)  the MPC is 0.25. 
B)  the MPC is 0.75. 
C)  the MPC is 0.8. 
D)  the MPC is 2.5.

Question 14

Consumption spending is $5 million,planned investment spending is $8 million,unplanned investment spending is -$2 million,government purchases are $10 million,and net export spending is $2 million. What is GDP?

Accepted Answer

A)  $15 million 
B)  $23 million 
C)  $25 million 
D)  $27 million 
A)  $15 million 
B)  $23 million 
C)  $25 million 
D)  $27 million

Question 15

U.S.net export spending falls when

Accepted Answer

A)  the price level in the United States falls relative to the price level in other countries. 
B)  the growth rate of U.S. GDP is faster than the growth rate of GDP in other countries. 
C)  the value of the U.S. dollar decreases relative to other currencies. 
D)  the inflation rate is lower in the United States relative to other countries. 
A)  the price level in the United States falls relative to the price level in other countries. 
B)  the growth rate of U.S. GDP is faster than the growth rate of GDP in other countries. 
C)  the value of the U.S. dollar decreases relative to other currencies. 
D)  the inflation rate is lower in the United States relative to other countries.

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

John Maynard Keynes argued that if many households decide at the same time to increase saving and reduce spending,

Accepted Answer

A)  this will increase investment spending in the short run and expand the economy in the long run. 
B)  the economy will benefit in the short run but the effect will not last into the long run. 
C)  this will have a major negative impact on the economy in both the short run and in the long run. 
D)  they may make themselves worse off by causing aggregate expenditure to fall, thereby pushing the economy into a recession. 
A)  this will increase investment spending in the short run and expand the economy in the long run. 
B)  the economy will benefit in the short run but the effect will not last into the long run. 
C)  this will have a major negative impact on the economy in both the short run and in the long run. 
D)  they may make themselves worse off by causing aggregate expenditure to fall, thereby pushing the economy into a recession.

Question 18

C = 2,800 + 0.9Y
I = 750
G= 1,200
NX = 150
Given the equations for C,I,G,and NX above,what is the equilibrium level of GDP (Y)?

Accepted Answer

Y = C + I + G + NX.
Y = 2,800

Question 19

The National Restaurant Association states that the restaurant industry has economic effect of more than $1.7 trillion annually in the United States,with every dollar spent in restaurants generating an estimated total of $2.05 in spending in the economy.This indicates that the spending multiplier for the restaurant industry is equal to

Accepted Answer

A)  1.21. 
B)  1.70. 
C)  2.05. 
D)  4.25 
A)  1.21. 
B)  1.70. 
C)  2.05. 
D)  4.25

Question 20

A decrease 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.

If firms find that consumers are purchasing less than expected,which of the following would you expect?

C = 3,600 + (MPC)Y I = 1,200 G = 1,400 NX = -200 If the equilibrium level of GDP is $30,000,using the equations for C,I,G,and NX shown above,find the value of the marginal propensity to consume.

If economists forecast an increase in aggregate expenditure,which of the following is likely to occur?

Which is the smallest component of aggregate expenditure?

Figure 23-2 -Refer to Figure 23-2. If the U.S.economy is currently at point N,which of the following could cause it to move to point K?

At each of the three points in the following graph,indicate whether planned aggregate expenditure is greater than,equal to,or less than GDP?

If consumption is defined as C = 2,400 + 0.9Y,then the marginal propensity to consume is 0.9.

What is the difference between aggregate expenditure and aggregate demand?

If planned aggregate expenditure is less than real GDP,some firms will experience unplanned increases in inventories.

The aggregate expenditure model focuses on the short-run relationship between and .

The ratio of the increase in equilibrium real GDP to the increase in autonomous expenditure is called the

If an increase in autonomous consumption spending of $25 million results in a $100 million increase in equilibrium real GDP,then

Consumption spending is $5 million,planned investment spending is $8 million,unplanned investment spending is -$2 million,government purchases are $10 million,and net export spending is $2 million. What is GDP?

U.S.net export spending falls when

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

John Maynard Keynes argued that if many households decide at the same time to increase saving and reduce spending,

C = 2,800 + 0.9Y I = 750 G= 1,200 NX = 150 Given the equations for C,I,G,and NX above,what is the equilibrium level of GDP (Y)?

A decrease in aggregate expenditure has what result on equilibrium GDP?

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

If firms find that consumers are purchasing less than expected,which of the following would you expect?

C = 3,600 + (MPC)Y I = 1,200 G = 1,400 NX = -200 If the equilibrium level of GDP is $30,000,using the equations for C,I,G,and NX shown above,find the value of the marginal propensity to consume.

If economists forecast an increase in aggregate expenditure,which of the following is likely to occur?

Which is the smallest component of aggregate expenditure?

Figure 23-2 -Refer to Figure 23-2. If the U.S.economy is currently at point N,which of the following could cause it to move to point K?

At each of the three points in the following graph,indicate whether planned aggregate expenditure is greater than,equal to,or less than GDP?

If consumption is defined as C = 2,400 + 0.9Y,then the marginal propensity to consume is 0.9.

What is the difference between aggregate expenditure and aggregate demand?

If planned aggregate expenditure is less than real GDP,some firms will experience unplanned increases in inventories.

The aggregate expenditure model focuses on the short-run relationship between ________ and ________.

The ratio of the increase in equilibrium real GDP to the increase in autonomous expenditure is called the

If an increase in autonomous consumption spending of $25 million results in a $100 million increase in equilibrium real GDP,then

Consumption spending is $5 million,planned investment spending is $8 million,unplanned investment spending is -$2 million,government purchases are $10 million,and net export spending is $2 million. What is GDP?

U.S.net export spending falls when

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

John Maynard Keynes argued that if many households decide at the same time to increase saving and reduce spending,

C = 2,800 + 0.9Y I = 750 G= 1,200 NX = 150 Given the equations for C,I,G,and NX above,what is the equilibrium level of GDP (Y)?

A decrease in aggregate expenditure has what result on equilibrium GDP?

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

The aggregate expenditure model focuses on the short-run relationship between and .