Question 1

In the aggregate expenditure (AE) model, the economy is driven to its equilibrium by changes in

Accepted Answer

A)  government expenditures on goods and services that are the result of changes in real GDP. 
B)  induced expenditures that are the result of changes in real GDP. 
C)  investment that are the result of changes in real GDP. 
D)  autonomous expenditures that are the result of changes in real GDP. 
E)  net taxes that are the result of changes in real GDP. 
A)  government expenditures on goods and services that are the result of changes in real GDP. 
B)  induced expenditures that are the result of changes in real GDP. 
C)  investment that are the result of changes in real GDP. 
D)  autonomous expenditures that are the result of changes in real GDP. 
E)  net taxes that are the result of changes in real GDP.

Question 2

Discuss the link between real GDP and imports.

Accepted Answer

Imports are one of two components that a

Question 3

-In the above figure, equilibrium expenditure is equal to

Accepted Answer

A)  $5 trillion. 
B)  $6 trillion. 
C)  $9 trillion. 
D)  $3 trillion. 
E)  $4 trillion. 
A)  $5 trillion. 
B)  $6 trillion. 
C)  $9 trillion. 
D)  $3 trillion. 
E)  $4 trillion.

Question 4

An increase in the price level shifts the AE curve

Accepted Answer

A)  upward and shifts the AD curve leftward. 
B)  upward and shifts the AD curve rightward. 
C)  downward and does not shift the AD curve. 
D)  downward and shifts the AD curve leftward. 
E)  downward and shifts the AD curve rightward. 
A)  upward and shifts the AD curve leftward. 
B)  upward and shifts the AD curve rightward. 
C)  downward and does not shift the AD curve. 
D)  downward and shifts the AD curve leftward. 
E)  downward and shifts the AD curve rightward.

Question 5

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

Accepted Answer

A)  $700 billion. 
B)  less than $700 billion. 
C)  more than $700 billion. 
D)  at the equilibrium level. 
E)  Both answers A and C are correct. 
A)  $700 billion. 
B)  less than $700 billion. 
C)  more than $700 billion. 
D)  at the equilibrium level. 
E)  Both answers A and C are correct.

Question 6

Which of the following variables is fixed in the aggregate expenditure model?

Accepted Answer

A)  price level 
B)  consumption 
C)  output 
D)  investment 
E)  real GDP 
A)  price level 
B)  consumption 
C)  output 
D)  investment 
E)  real GDP

Question 7

As a result of an initial increase in investment of $200 billion, real GDP increased by $800 billion.Given this information, the expenditure multiplier equals

Accepted Answer

A)  6. 
B)  2. 
C)  4. 
D)  1/4. 
E)  $800 billion. 
A)  6. 
B)  2. 
C)  4. 
D)  1/4. 
E)  $800 billion.

Question 8

What does the marginal propensity to consume measure and how is it related to the consumption function?

Accepted Answer

The marginal propensity to consume, or M

Question 9

The amount of consumption expenditure that takes place when income is zero is

Accepted Answer

A)  equal to zero. 
B)  equal to saving. 
C)  called autonomous consumption. 
D)  called induced consumption. 
E)  called zero-based consumption. 
A)  equal to zero. 
B)  equal to saving. 
C)  called autonomous consumption. 
D)  called induced consumption. 
E)  called zero-based consumption.

Question 10

List and explain factors that determine the size of the expenditure multiplier in the expenditure model when prices are constant.

Accepted Answer

The size of the expenditure multiplier d

Question 11

Which of the following is true?

Accepted Answer

A)  Actual aggregate expenditure does not always equal real GDP. 
B)  Aggregate planned expenditure always equals real GDP. 
C)  Actual aggregate expenditure always equals real GDP. 
D)  Aggregate planned expenditure and actual aggregate expenditures both are always equal to real GDP. 
E)  Actual aggregate expenditure cannot be measured. 
A)  Actual aggregate expenditure does not always equal real GDP. 
B)  Aggregate planned expenditure always equals real GDP. 
C)  Actual aggregate expenditure always equals real GDP. 
D)  Aggregate planned expenditure and actual aggregate expenditures both are always equal to real GDP. 
E)  Actual aggregate expenditure cannot be measured.

Question 12

If the slope of the aggregate expenditure curve is 0.75, the expenditure multiplier is equal to

Accepted Answer

A)  0.25. 
B)  0.75. 
C)  1.33. 
D)  4.00. 
E)  5.00. 
A)  0.25. 
B)  0.75. 
C)  1.33. 
D)  4.00. 
E)  5.00.

Question 13

Equilibrium expenditure is the level of aggregate expenditure when

Accepted Answer

A)  aggregate production equals real GDP. 
B)  aggregate actual expenditure equals real GDP. 
C)  aggregate planned expenditure equals real GDP. 
D)  aggregate private expenditure equals real GDP. 
E)  planned inventory investment equals zero. 
A)  aggregate production equals real GDP. 
B)  aggregate actual expenditure equals real GDP. 
C)  aggregate planned expenditure equals real GDP. 
D)  aggregate private expenditure equals real GDP. 
E)  planned inventory investment equals zero.

Question 14

If an increase of $10 billion of investment results in an increase in equilibrium expenditure of $40 billion, the expenditure multiplier equals

Accepted Answer

A)  $10 billion × $40 billion = $400 billion. 
B)  $40 billion - $10 billion = $30 billion. 
C)  $40 billion ÷ $10 billion = 4. 
D)  $10 billion ÷ $40 billion = 0.25. 
E)  $10 billion - $40 billion = -$30 billion. 
A)  $10 billion × $40 billion = $400 billion. 
B)  $40 billion - $10 billion = $30 billion. 
C)  $40 billion ÷ $10 billion = 4. 
D)  $10 billion ÷ $40 billion = 0.25. 
E)  $10 billion - $40 billion = -$30 billion.

Question 15

When disposable income is $8 trillion, consumption expenditure is $5 trillion; when disposable income is $5 trillion, consumption expenditure is $3 trillion.The MPC is

Accepted Answer

A)  (5/8 + 3/5) = 1.225. 
B)  (5 + 3) ÷ (8 + 5) = 0.615. 
C)  (5 - 3) ÷ (8 - 5) = 0.667. 
D)  (5 + 3) ÷ (8 - 5) = 2.667. 
E)  (8 - 5) ÷ (5 - 3) = 1.333. 
A)  (5/8 + 3/5) = 1.225. 
B)  (5 + 3) ÷ (8 + 5) = 0.615. 
C)  (5 - 3) ÷ (8 - 5) = 0.667. 
D)  (5 + 3) ÷ (8 - 5) = 2.667. 
E)  (8 - 5) ÷ (5 - 3) = 1.333.

Question 16

When Joe's disposable income is $50,000, his consumption expenditure is $45,000, and when his disposable income is $60,000, his consumption expenditure is $53,000.Joe's marginal propensity to consume is

Accepted Answer

A)  100. 
B)  0.80. 
C)  1.25 
D)  80. 
E)  $8,000. 
A)  100. 
B)  0.80. 
C)  1.25 
D)  80. 
E)  $8,000.

Question 17

The figure above shows three different consumption functions for a nation.
-Which of the following events could result in the consumption function shifting from CF₀ to CF₂?

Accepted Answer

A)  an increase in disposable income 
B)  a decrease in disposable income 
C)  an increase in the real interest rate 
D)  an increase in wealth 
E)  an increase in expected future income 
A)  an increase in disposable income 
B)  a decrease in disposable income 
C)  an increase in the real interest rate 
D)  an increase in wealth 
E)  an increase in expected future income

Question 18

The idea of the multiplier is that a change in ________ expenditure changes real GDP, which then changes ________ expenditure. The change in total expenditure will be larger than the initial change in ________ expenditure.

Accepted Answer

A)  induced; autonomous; induced 
B)  autonomous; induced; induced 
C)  induced; autonomous; autonomous 
D)  induced; induced; autonomous 
E)  autonomous; induced; autonomous 
A)  induced; autonomous; induced 
B)  autonomous; induced; induced 
C)  induced; autonomous; autonomous 
D)  induced; induced; autonomous 
E)  autonomous; induced; autonomous

Question 19

How is it possible for consumption expenditure to be positive even when disposable income is zero?

Accepted Answer

Consumption expenditure can be positive

Question 20

The ________ the marginal tax rate, the ________ the expenditure multiplier.

Accepted Answer

A)  smaller; smaller 
B)  smaller; larger 
C)  larger; larger 
D)  larger; more negative 
E)  None of the above is correct, because the expenditure multiplier is not related to the marginal tax rate. 
A)  smaller; smaller 
B)  smaller; larger 
C)  larger; larger 
D)  larger; more negative 
E)  None of the above is correct, because the expenditure multiplier is not related to the marginal tax rate.

In the aggregate expenditure (AE) model, the economy is driven to its equilibrium by changes in

Discuss the link between real GDP and imports.

-In the above figure, equilibrium expenditure is equal to

An increase in the price level shifts the AE curve

Which of the following variables is fixed in the aggregate expenditure model?

As a result of an initial increase in investment of $200 billion, real GDP increased by $800 billion.Given this information, the expenditure multiplier equals

What does the marginal propensity to consume measure and how is it related to the consumption function?

The amount of consumption expenditure that takes place when income is zero is

List and explain factors that determine the size of the expenditure multiplier in the expenditure model when prices are constant.

Which of the following is true?

If the slope of the aggregate expenditure curve is 0.75, the expenditure multiplier is equal to

Equilibrium expenditure is the level of aggregate expenditure when

If an increase of $10 billion of investment results in an increase in equilibrium expenditure of $40 billion, the expenditure multiplier equals

When disposable income is $8 trillion, consumption expenditure is $5 trillion; when disposable income is $5 trillion, consumption expenditure is $3 trillion.The MPC is

When Joe's disposable income is $50,000, his consumption expenditure is $45,000, and when his disposable income is $60,000, his consumption expenditure is $53,000.Joe's marginal propensity to consume is

The figure above shows three different consumption functions for a nation. -Which of the following events could result in the consumption function shifting from CF₀ to CF₂?

The idea of the multiplier is that a change in expenditure changes real GDP, which then changes expenditure. The change in total expenditure will be larger than the initial change in expenditure.

How is it possible for consumption expenditure to be positive even when disposable income is zero?

The the marginal tax rate, the the expenditure multiplier.

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 aggregate expenditure (AE) model, the economy is driven to its equilibrium by changes in

Discuss the link between real GDP and imports.

-In the above figure, equilibrium expenditure is equal to

An increase in the price level shifts the AE curve

Which of the following variables is fixed in the aggregate expenditure model?

As a result of an initial increase in investment of $200 billion, real GDP increased by $800 billion.Given this information, the expenditure multiplier equals

What does the marginal propensity to consume measure and how is it related to the consumption function?

The amount of consumption expenditure that takes place when income is zero is

List and explain factors that determine the size of the expenditure multiplier in the expenditure model when prices are constant.

Which of the following is true?

If the slope of the aggregate expenditure curve is 0.75, the expenditure multiplier is equal to

Equilibrium expenditure is the level of aggregate expenditure when

If an increase of $10 billion of investment results in an increase in equilibrium expenditure of $40 billion, the expenditure multiplier equals

When disposable income is $8 trillion, consumption expenditure is $5 trillion; when disposable income is $5 trillion, consumption expenditure is $3 trillion.The MPC is

When Joe's disposable income is $50,000, his consumption expenditure is $45,000, and when his disposable income is $60,000, his consumption expenditure is $53,000.Joe's marginal propensity to consume is

The figure above shows three different consumption functions for a nation. -Which of the following events could result in the consumption function shifting from CF₀ to CF₂?

The idea of the multiplier is that a change in ________ expenditure changes real GDP, which then changes ________ expenditure. The change in total expenditure will be larger than the initial change in ________ expenditure.

How is it possible for consumption expenditure to be positive even when disposable income is zero?

The ________ the marginal tax rate, the ________ the expenditure multiplier.

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

The idea of the multiplier is that a change in expenditure changes real GDP, which then changes expenditure. The change in total expenditure will be larger than the initial change in expenditure.

The the marginal tax rate, the the expenditure multiplier.