Question 1

In the range of disposable income where the consumption function lies above the 45° line,

Accepted Answer

A)  disposable income is negative. 
B)  saving is negative. 
C)  saving is positive. 
D)  disposable income equals planned expenditures. 
E)  induced consumption is zero. 
A)  disposable income is negative. 
B)  saving is negative. 
C)  saving is positive. 
D)  disposable income equals planned expenditures. 
E)  induced consumption is zero.

Question 2

Actual aggregate expenditure

Accepted Answer

A)  always equals GDP but not necessarily income. 
B)  always equals income and GDP. 
C)  might not equal income or GDP. 
D)  always equals income but not necessarily GDP. 
E)  must always equal aggregate planned expenditure. 
A)  always equals GDP but not necessarily income. 
B)  always equals income and GDP. 
C)  might not equal income or GDP. 
D)  always equals income but not necessarily GDP. 
E)  must always equal aggregate planned expenditure.

Question 3

"Similar to imports, U.S.exports depend on the level of U.S.real GDP so that if real GDP increases, U.S.exports increase." Explain whether the previous sentence is correct or incorrect.

Accepted Answer

The sentence is incorrect along two dime

Question 4

Autonomous expenditure is the component of

Accepted Answer

A)  aggregate expenditure that changes when real GDP changes. 
B)  induced expenditure that changes when in real GDP changes. 
C)  aggregate planned expenditure that changes only when government expenditure on goods and services change. 
D)  aggregate expenditure that does not change when real GDP changes. 
E)  aggregate expenditure that does not change when the interest rate changes. 
A)  aggregate expenditure that changes when real GDP changes. 
B)  induced expenditure that changes when in real GDP changes. 
C)  aggregate planned expenditure that changes only when government expenditure on goods and services change. 
D)  aggregate expenditure that does not change when real GDP changes. 
E)  aggregate expenditure that does not change when the interest rate changes.

Question 5

The aggregate expenditure (AE) curve

Accepted Answer

A)  includes expenditures by domestic residents only. 
B)  includes expenditures on foreign as well as domestic goods. 
C)  does not include expenditures on either imports or exports. 
D)  includes all expenditures on domestic goods. 
E)  adds expenditures on imports because they are consumed in the nation and subtracts expenditures on exports because they are consumed abroad. 
A)  includes expenditures by domestic residents only. 
B)  includes expenditures on foreign as well as domestic goods. 
C)  does not include expenditures on either imports or exports. 
D)  includes all expenditures on domestic goods. 
E)  adds expenditures on imports because they are consumed in the nation and subtracts expenditures on exports because they are consumed abroad.

Question 6

The figure above shows two aggregate expenditure lines.
-In the figure above, what would happen to the size of the multiplier if marginal income tax rates were increased?

Accepted Answer

A)  the multiplier would rise in value 
B)  the multiplier would fall in value but would not become negative 
C)  the multiplier would not change in value 
D)  the multiplier would fall in value and might become negative 
E)  More information is needed to determine the effect on the size of the multiplier. 
A)  the multiplier would rise in value 
B)  the multiplier would fall in value but would not become negative 
C)  the multiplier would not change in value 
D)  the multiplier would fall in value and might become negative 
E)  More information is needed to determine the effect on the size of the multiplier.

Question 7

The expenditure multiplier is larger than one because

Accepted Answer

A)  an increase in autonomous expenditure induces further increases in aggregate expenditure. 
B)  additional expenditure induces lower incomes. 
C)  an increase in autonomous expenditure brings about a reduction in the real interest rate. 
D)  an increase in autonomous expenditure induces further decreases in aggregate expenditure. 
E)  the price level rises, thereby reinforcing the initial effect. 
A)  an increase in autonomous expenditure induces further increases in aggregate expenditure. 
B)  additional expenditure induces lower incomes. 
C)  an increase in autonomous expenditure brings about a reduction in the real interest rate. 
D)  an increase in autonomous expenditure induces further decreases in aggregate expenditure. 
E)  the price level rises, thereby reinforcing the initial effect.

Question 8

Suppose that firms find that their inventories are less than planned.In this case, what is the initial relationship between aggregate planned expenditure and real GDP?
 Using the aggregate expenditure model, what adjustments, if any, take place?

Accepted Answer

If inventories are less than planned, ag

Question 9

Equilibrium expenditure is

Accepted Answer

A)  the amount of aggregate expenditure when aggregate planned expenditure equals real GDP. 
B)  when unplanned inventory change is positive. 
C)  the amount of aggregate expenditure when aggregate planned expenditure exceeds real GDP. 
D)  the amount of aggregate expenditure when aggregate planned expenditure is less than real GDP. 
E)  when unplanned inventory change is zero or negative. 
A)  the amount of aggregate expenditure when aggregate planned expenditure equals real GDP. 
B)  when unplanned inventory change is positive. 
C)  the amount of aggregate expenditure when aggregate planned expenditure exceeds real GDP. 
D)  the amount of aggregate expenditure when aggregate planned expenditure is less than real GDP. 
E)  when unplanned inventory change is zero or negative.

Question 10

If autonomous spending increases by $500 billion and, as a result, equilibrium real GDP increases by $2 trillion, then we know that the

Accepted Answer

A)  MPC is greater than 1. 
B)  expenditure multiplier is 0.25. 
C)  expenditure multiplier is 4.0. 
D)  MPC equals 1. 
E)  expenditure multiplier is 2.0. 
A)  MPC is greater than 1. 
B)  expenditure multiplier is 0.25. 
C)  expenditure multiplier is 4.0. 
D)  MPC equals 1. 
E)  expenditure multiplier is 2.0.

Question 11

In an economy with no income taxes or imports, the expenditure multiplier is

Accepted Answer

A)  less than 1 only if the MPC is less than 1. 
B)  greater than 1 only if the MPC is greater than 1. 
C)  equal to 1 if the MPC is greater than 1. 
D)  greater than 1 if the MPC is less than 1. 
E)  always less than 1 no matter what the size of the MPC. 
A)  less than 1 only if the MPC is less than 1. 
B)  greater than 1 only if the MPC is greater than 1. 
C)  equal to 1 if the MPC is greater than 1. 
D)  greater than 1 if the MPC is less than 1. 
E)  always less than 1 no matter what the size of the MPC.

Question 12

$$\begin{array} { c c c c } 
\begin{array} { c } 
\text { Real GDP, } Y \
\text { (billions of 2005 } \
\text { dollars) }
\end{array} & \begin{array} { c } 
\text { Consumption } \
\text { expenditure, } C
\end{array} & \begin{array} { c } 
\text { (billions of 2005 } \
\text { Investment, } I
\end{array} & \begin{array} { c } 
\text { Government } \
\text { expendithare, } G
\end{array} \
\text { (billions of 2005 } & \begin{array} { c } 
\text { (billions of 2005 } \
\text { dollars) }
\end{array} & \text { dollars) } \
\hline 100 & 150 & 150 & 150 \
200 & 200 & 150 & 150 \
300 & 250 & 150 & 150 \
400 & 300 & 150 & 150 \
500 & 350 & 150 & 150 \
600 & 400 & 150 & 150 \
700 & 450 & 150 & 150 \
800 & 500 & 150 & 150 \
900 & 550 & 150 & 150 \
\hline
\end{array}$$
-The above table gives data for the nation of Mouseville.There are no imports into or exports from Mouseville.Unplanned inventory changes equal $50 billion when real GDP equals

Accepted Answer

A)  $900 billion. 
B)  $800 billion. 
C)  $300 billion. 
D)  $500 billion. 
E)  $700 billion. 
A)  $900 billion. 
B)  $800 billion. 
C)  $300 billion. 
D)  $500 billion. 
E)  $700 billion.

Question 13

Other things remaining the same, ________ in U.S.real GDP results in ________ in U.S.imports.

Accepted Answer

A)  an increase; an increase 
B)  an increase; a decrease 
C)  a decrease; an increase 
D)  a decrease; no change 
E)  an increase; a decrease followed by no change 
A)  an increase; an increase 
B)  an increase; a decrease 
C)  a decrease; an increase 
D)  a decrease; no change 
E)  an increase; a decrease followed by no change

Question 14

Discuss how the marginal propensity to consume, imports, and marginal tax rates influence the expenditure multiplier.

Accepted Answer

The simple expenditure multiplier, in an

Question 15

When consumption expenditure is ________ disposable income, saving is ________.

Accepted Answer

A)  less than; positive 
B)  greater than; positive 
C)  equal to; positive 
D)  equal to; negative 
E)  less than; negative 
A)  less than; positive 
B)  greater than; positive 
C)  equal to; positive 
D)  equal to; negative 
E)  less than; negative

Question 16

What is the relationship between U.S.real GDP and U.S.imports?

Accepted Answer

When U.S.real GDP increases, s

Question 17

$$\begin{array} { c c } 
\begin{array} { c } 
\text { Disposable income } \
\text { (trillions of 2005 dollars) }
\end{array} & \begin{array} { c } 
\text { Consumption expenditure } \
\text { (trillions of 2005 dollars) }
\end{array} \
\hline 0.0 & 1.5 \
2.0 & 3.0 \
4.0 & 4.5 \
6.0 & 6.0 \
8.0 & 7.5 \
\hline
\end{array}$$
-The above table has data from the nation of Atlantica.Based on these data, when disposable income equals 2.0 there is

Accepted Answer

A)  dissavings of $1.0 trillion. 
B)  savings of $1.0 trillion. 
C)  dissavings of $5.0 trillion 
D)  dissavings of $5.0 trillion. 
E)  savings of $3.0 trillion 
A)  dissavings of $1.0 trillion. 
B)  savings of $1.0 trillion. 
C)  dissavings of $5.0 trillion 
D)  dissavings of $5.0 trillion. 
E)  savings of $3.0 trillion

Question 18

When the real interest rate falls, there is

Accepted Answer

A)  an increase in the slope of the consumption function. 
B)  an upward shift of the consumption function. 
C)  a downward shift of the consumption function. 
D)  a decrease in the slope of the consumption function. 
E)  a movement upward along the consumption function. 
A)  an increase in the slope of the consumption function. 
B)  an upward shift of the consumption function. 
C)  a downward shift of the consumption function. 
D)  a decrease in the slope of the consumption function. 
E)  a movement upward along the consumption function.

Question 19

During 2010, exports increase from $1.0 trillion to $1.5 trillion.If the slope of the aggregate planned expenditure (AE) curve is 0.75, real GDP increases by

Accepted Answer

A)  $1.0 trillion. 
B)  $2.0 trillion. 
C)  $4.0 trillion. 
D)  $6.0 trillion. 
E)  $8.0 trillion. 
A)  $1.0 trillion. 
B)  $2.0 trillion. 
C)  $4.0 trillion. 
D)  $6.0 trillion. 
E)  $8.0 trillion.

Question 20

If firms' inventories exceed their planned inventories, firms

Accepted Answer

A)  increase production. 
B)  decrease production. 
C)  increase GDP. 
D)  increase income. 
E)  increase employment. 
A)  increase production. 
B)  decrease production. 
C)  increase GDP. 
D)  increase income. 
E)  increase employment.

In the range of disposable income where the consumption function lies above the 45° line,

Actual aggregate expenditure

"Similar to imports, U.S.exports depend on the level of U.S.real GDP so that if real GDP increases, U.S.exports increase." Explain whether the previous sentence is correct or incorrect.

Autonomous expenditure is the component of

The aggregate expenditure (AE) curve

The figure above shows two aggregate expenditure lines. -In the figure above, what would happen to the size of the multiplier if marginal income tax rates were increased?

The expenditure multiplier is larger than one because

Suppose that firms find that their inventories are less than planned.In this case, what is the initial relationship between aggregate planned expenditure and real GDP? Using the aggregate expenditure model, what adjustments, if any, take place?

Equilibrium expenditure is

If autonomous spending increases by $500 billion and, as a result, equilibrium real GDP increases by $2 trillion, then we know that the

In an economy with no income taxes or imports, the expenditure multiplier is

Other things remaining the same, in U.S.real GDP results in in U.S.imports.

Discuss how the marginal propensity to consume, imports, and marginal tax rates influence the expenditure multiplier.

When consumption expenditure is disposable income, saving is .

What is the relationship between U.S.real GDP and U.S.imports?

Disposable income (trillions of 2005 dollars) Consumption expenditure (trillions of 2005 dollars) 0.0 1.5 2.0 3.0 4.0 4.5 6.0 6.0 8.0 7.5 -The above table has data from the nation of Atlantica.Based on these data, when disposable income equals 2.0 there is

When the real interest rate falls, there is

During 2010, exports increase from $1.0 trillion to $1.5 trillion.If the slope of the aggregate planned expenditure (AE) curve is 0.75, real GDP increases by

If firms' inventories exceed their planned inventories, firms

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and the Natural Unemployment Rate

Economic Growth

Finance, Saving, and Investment

The Monetary System

Money, Interest, and Inflation

Aggregate Supply and Aggregate Demand

The Short-Run Policy Tradeoff

Fiscal Policy

Monetary Policy

International Trade Policy

International Finance

Filters

Exam 14: Aggregate Expenditure Multiplier

In the range of disposable income where the consumption function lies above the 45° line,

Actual aggregate expenditure

"Similar to imports, U.S.exports depend on the level of U.S.real GDP so that if real GDP increases, U.S.exports increase." Explain whether the previous sentence is correct or incorrect.

Autonomous expenditure is the component of

The aggregate expenditure (AE) curve

The figure above shows two aggregate expenditure lines. -In the figure above, what would happen to the size of the multiplier if marginal income tax rates were increased?

The expenditure multiplier is larger than one because

Suppose that firms find that their inventories are less than planned.In this case, what is the initial relationship between aggregate planned expenditure and real GDP? Using the aggregate expenditure model, what adjustments, if any, take place?

Equilibrium expenditure is

If autonomous spending increases by $500 billion and, as a result, equilibrium real GDP increases by $2 trillion, then we know that the

In an economy with no income taxes or imports, the expenditure multiplier is

Other things remaining the same, ________ in U.S.real GDP results in ________ in U.S.imports.

Discuss how the marginal propensity to consume, imports, and marginal tax rates influence the expenditure multiplier.

When consumption expenditure is ________ disposable income, saving is ________.

What is the relationship between U.S.real GDP and U.S.imports?

Disposable income (trillions of 2005 dollars) Consumption expenditure (trillions of 2005 dollars) 0.0 1.5 2.0 3.0 4.0 4.5 6.0 6.0 8.0 7.5 -The above table has data from the nation of Atlantica.Based on these data, when disposable income equals 2.0 there is

When the real interest rate falls, there is

During 2010, exports increase from $1.0 trillion to $1.5 trillion.If the slope of the aggregate planned expenditure (AE) curve is 0.75, real GDP increases by

If firms' inventories exceed their planned inventories, firms

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and the Natural Unemployment Rate

Economic Growth

Finance, Saving, and Investment

The Monetary System

Money, Interest, and Inflation

Aggregate Supply and Aggregate Demand

The Short-Run Policy Tradeoff

Fiscal Policy

Monetary Policy

International Trade Policy

International Finance

Filters

Other things remaining the same, in U.S.real GDP results in in U.S.imports.

When consumption expenditure is disposable income, saving is .