Question 1

A change in the price level ________ the AE curve and ________ the AD curve.

Accepted Answer

A)  shifts; shifts 
B)  shifts; results in a movement along 
C)  results in a movement along; shifts 
D)  results in a movement along; results in a movement along 
E)  has no effect on; results in a movement along 
A)  shifts; shifts 
B)  shifts; results in a movement along 
C)  results in a movement along; shifts 
D)  results in a movement along; results in a movement along 
E)  has no effect on; results in a movement along

Question 2

Consumption expenditure exceeds disposable income

Accepted Answer

A)  never. 
B)  when there is positive saving. 
C)  when there is dissaving. 
D)  always. 
E)  only when the economy is in equilibrium. 
A)  never. 
B)  when there is positive saving. 
C)  when there is dissaving. 
D)  always. 
E)  only when the economy is in equilibrium.

Question 3

On a graph of the consumption function, where the consumption function is below the 45 degree line, there is

Accepted Answer

A)  saving. 
B)  dissaving. 
C)  zero disposable income. 
D)  maximum disposable income. 
E)  no induced consumption. 
A)  saving. 
B)  dissaving. 
C)  zero disposable income. 
D)  maximum disposable income. 
E)  no induced consumption.

Question 4

If your MPC is 0.5, then when your disposable income increases by $100, your consumption expenditure increases by

Accepted Answer

A)  $5. 
B)  $200. 
C)  $100. 
D)  $50. 
E)  $95. 
A)  $5. 
B)  $200. 
C)  $100. 
D)  $50. 
E)  $95.

Question 5

The consumption function shows the relationship between

Accepted Answer

A)  consumption expenditure and disposable income. 
B)  inventory levels and real GDP. 
C)  consumption expenditure and planned income. 
D)  consumption expenditure and planned inventory investment. 
E)  consumption expenditure and the price level. 
A)  consumption expenditure and disposable income. 
B)  inventory levels and real GDP. 
C)  consumption expenditure and planned income. 
D)  consumption expenditure and planned inventory investment. 
E)  consumption expenditure and the price level.

Question 6

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

Accepted Answer

A)  unplanned inventory is -$200 billion 
B)  unplanned inventory is $200 billion 
C)  unplanned inventory is -$300 billion 
D)  aggregate expenditure is equal to consumption expenditure 
E)  aggregate expenditure is $450 billion 
A)  unplanned inventory is -$200 billion 
B)  unplanned inventory is $200 billion 
C)  unplanned inventory is -$300 billion 
D)  aggregate expenditure is equal to consumption expenditure 
E)  aggregate expenditure is $450 billion

Question 7

Discuss the relationship between the business cycle and changes in autonomous expenditures.

Accepted Answer

An increase in autonomous expenditure in

Question 8

-The above figure shows the AE curve and 45° line for an economy.
a. If real GDP equals $10 trillion, how do firms' inventories compare to their planned inventories?
b. If real GDP equals $20 trillion, how do firms' inventories compare to their planned inventories?
c. What is the equilibrium level of expenditure?
 Why is this amount the equilibrium?

Accepted Answer

a. If real GDP equals $10 trillion, aggr

Question 9

The equilibrium level of aggregate planned expenditure is found where

Accepted Answer

A)  there is no saving and no dissaving. 
B)  aggregate planned expenditure equals real GDP. 
C)  net exports is zero. 
D)  autonomous expenditure equals equilibrium expenditure. 
E)  the price level is rising at a constant rate. 
A)  there is no saving and no dissaving. 
B)  aggregate planned expenditure equals real GDP. 
C)  net exports is zero. 
D)  autonomous expenditure equals equilibrium expenditure. 
E)  the price level is rising at a constant rate.

Question 10

When the multiplier is ________ , an autonomous decrease in investment of $200 billion decreases equilibrium real GDP by $400 billion. When the multiplier is ________ , an autonomous decrease in investment of $200 billion decreases equilibrium real GDP by $800 billion.

Accepted Answer

A)  2.0; 4.0 
B)  0.2; 0.4 
C)  0.4; 0.2 
D)  $400 billion; $800 billion 
E)  4.0; 8.0 
A)  2.0; 4.0 
B)  0.2; 0.4 
C)  0.4; 0.2 
D)  $400 billion; $800 billion 
E)  4.0; 8.0

Question 11

An increase in the price level leads to

Accepted Answer

A)  a downward shift in the AE curve and a movement upward along the AD curve. 
B)  a downward shift in both the AE and AD curves. 
C)  a downward shift in the AD curve and a movement downward along the AE curve. 
D)  a leftward movement along both the AE and AD curves. 
E)  an upward shift in the AE curve and a movement upward along the AD curve. 
A)  a downward shift in the AE curve and a movement upward along the AD curve. 
B)  a downward shift in both the AE and AD curves. 
C)  a downward shift in the AD curve and a movement downward along the AE curve. 
D)  a leftward movement along both the AE and AD curves. 
E)  an upward shift in the AE curve and a movement upward along the AD curve.

Question 12

If the marginal propensity to consume is 0.85 and there are no imports or income taxes, the expenditure multiplier is equal to

Accepted Answer

A)  1 - 0.85 = 0.15. 
B)  0.85 × the change in autonomous expenditure. 
C)  1 ÷ 0.85 = 1.176. 
D)  1 ÷ (1 - 0.85) = 1 ÷ 0.15 = 1.45. 
E)  0.85 ÷ 1 = 0.85. 
A)  1 - 0.85 = 0.15. 
B)  0.85 × the change in autonomous expenditure. 
C)  1 ÷ 0.85 = 1.176. 
D)  1 ÷ (1 - 0.85) = 1 ÷ 0.15 = 1.45. 
E)  0.85 ÷ 1 = 0.85.

Question 13

Induced expenditure includes

Accepted Answer

A)  consumption expenditure, government expenditure on goods and services, and imports. 
B)  investment, consumption expenditures, and exports. 
C)  consumption expenditure and imports. 
D)  consumption expenditure and exports. 
E)  consumption expenditure and government expenditure on goods and services. 
A)  consumption expenditure, government expenditure on goods and services, and imports. 
B)  investment, consumption expenditures, and exports. 
C)  consumption expenditure and imports. 
D)  consumption expenditure and exports. 
E)  consumption expenditure and government expenditure on goods and services.

Question 14

Autonomous expenditure is expenditure that is

Accepted Answer

A)  influenced by real GDP. 
B)  influenced by the interest rate. 
C)  not influenced by real GDP. 
D)  not influenced by the interest rate. 
E)  not influenced by the price level. 
A)  influenced by real GDP. 
B)  influenced by the interest rate. 
C)  not influenced by real GDP. 
D)  not influenced by the interest rate. 
E)  not influenced by the price level.

Question 15

During 2010, a country has consumption expenditures of $3.0 trillion, investment expenditures of $1.5 trillion, government expenditure of $1.5 trillion, exports of $1.0 trillion, and imports of $1.5 trillion.Aggregate expenditure for the country is

Accepted Answer

A)  $5.5 trillion. 
B)  $6.0 trillion. 
C)  $7.0 trillion. 
D)  $8.5 trillion. 
E)  $6.5 trillion. 
A)  $5.5 trillion. 
B)  $6.0 trillion. 
C)  $7.0 trillion. 
D)  $8.5 trillion. 
E)  $6.5 trillion.

Question 16

Explain the basic idea of the expenditure multiplier and the role consumers play in determining its magnitude.

Accepted Answer

The basic idea of the expenditure multip

Question 17

Jane supports herself at college by working in a bookstore earning $300 a month, which she spends entirely every month.If she gets a salary increase of $100 a month, she spends $90 more dollars on consumption expenditure.Jane's MPC is equal to

Accepted Answer

A)  1.00. 
B)  0.90. 
C)  $90. 
D)  0.10. 
E)  0.50. 
A)  1.00. 
B)  0.90. 
C)  $90. 
D)  0.10. 
E)  0.50.

Question 18

If real GDP exceeds aggregate planned expenditure, what happens to firm's unplanned inventories?

Accepted Answer

If real GDP exceeds aggregate planned ex

Question 19

In an economy with no income taxes or imports, if the MPC is .75, the expenditure multiplier is

Accepted Answer

A)  0.25. 
B)  0.33. 
C)  0.50. 
D)  4.00. 
E)  3.00. 
A)  0.25. 
B)  0.33. 
C)  0.50. 
D)  4.00. 
E)  3.00.

Question 20

As disposable income ________ planned consumption expenditure ________.

Accepted Answer

A)  increases; decreases 
B)  decreases; increases 
C)  decreases; remains the same, since it is autonomous expenditure 
D)  increases; increases 
E)  increases; changes only if net taxes also change 
A)  increases; decreases 
B)  decreases; increases 
C)  decreases; remains the same, since it is autonomous expenditure 
D)  increases; increases 
E)  increases; changes only if net taxes also change

A change in the price level the AE curve and the AD curve.

Consumption expenditure exceeds disposable income

On a graph of the consumption function, where the consumption function is below the 45 degree line, there is

If your MPC is 0.5, then when your disposable income increases by $100, your consumption expenditure increases by

The consumption function shows the relationship between

Discuss the relationship between the business cycle and changes in autonomous expenditures.

The equilibrium level of aggregate planned expenditure is found where

When the multiplier is , an autonomous decrease in investment of $200 billion decreases equilibrium real GDP by $400 billion. When the multiplier is , an autonomous decrease in investment of $200 billion decreases equilibrium real GDP by $800 billion.

An increase in the price level leads to

If the marginal propensity to consume is 0.85 and there are no imports or income taxes, the expenditure multiplier is equal to

Induced expenditure includes

Autonomous expenditure is expenditure that is

During 2010, a country has consumption expenditures of $3.0 trillion, investment expenditures of $1.5 trillion, government expenditure of $1.5 trillion, exports of $1.0 trillion, and imports of $1.5 trillion.Aggregate expenditure for the country is

Explain the basic idea of the expenditure multiplier and the role consumers play in determining its magnitude.

Jane supports herself at college by working in a bookstore earning $300 a month, which she spends entirely every month.If she gets a salary increase of $100 a month, she spends $90 more dollars on consumption expenditure.Jane's MPC is equal to

If real GDP exceeds aggregate planned expenditure, what happens to firm's unplanned inventories?

In an economy with no income taxes or imports, if the MPC is .75, the expenditure multiplier is

As disposable income planned consumption expenditure .

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

A change in the price level ________ the AE curve and ________ the AD curve.

Consumption expenditure exceeds disposable income

On a graph of the consumption function, where the consumption function is below the 45 degree line, there is

If your MPC is 0.5, then when your disposable income increases by $100, your consumption expenditure increases by

The consumption function shows the relationship between

Discuss the relationship between the business cycle and changes in autonomous expenditures.

The equilibrium level of aggregate planned expenditure is found where

When the multiplier is ________ , an autonomous decrease in investment of $200 billion decreases equilibrium real GDP by $400 billion. When the multiplier is ________ , an autonomous decrease in investment of $200 billion decreases equilibrium real GDP by $800 billion.

An increase in the price level leads to

If the marginal propensity to consume is 0.85 and there are no imports or income taxes, the expenditure multiplier is equal to

Induced expenditure includes

Autonomous expenditure is expenditure that is

During 2010, a country has consumption expenditures of $3.0 trillion, investment expenditures of $1.5 trillion, government expenditure of $1.5 trillion, exports of $1.0 trillion, and imports of $1.5 trillion.Aggregate expenditure for the country is

Explain the basic idea of the expenditure multiplier and the role consumers play in determining its magnitude.

Jane supports herself at college by working in a bookstore earning $300 a month, which she spends entirely every month.If she gets a salary increase of $100 a month, she spends $90 more dollars on consumption expenditure.Jane's MPC is equal to

If real GDP exceeds aggregate planned expenditure, what happens to firm's unplanned inventories?

In an economy with no income taxes or imports, if the MPC is .75, the expenditure multiplier is

As disposable income ________ planned consumption expenditure ________.

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

A change in the price level the AE curve and the AD curve.

When the multiplier is , an autonomous decrease in investment of $200 billion decreases equilibrium real GDP by $400 billion. When the multiplier is , an autonomous decrease in investment of $200 billion decreases equilibrium real GDP by $800 billion.

As disposable income planned consumption expenditure .