Question 1

For each one dollar increase in real GDP, aggregate planned expenditure

Accepted Answer

A)  is unaffected. 
B)  increases by one dollar. 
C)  increases by less than a dollar. 
D)  increases by more than a dollar. 
E)  increases only if autonomous expenditure increases. 
A)  is unaffected. 
B)  increases by one dollar. 
C)  increases by less than a dollar. 
D)  increases by more than a dollar. 
E)  increases only if autonomous expenditure increases.

Question 2

In an economy with no income taxes or imports, if the expenditure multiplier is 5, what does the MPC equal?

Accepted Answer

A)  0.5 
B)  0.4 
C)  0.8 
D)  0.2 
E)  0.9 
A)  0.5 
B)  0.4 
C)  0.8 
D)  0.2 
E)  0.9

Question 3

The ________ the marginal tax rate, the ________ the effect on aggregate expenditure from a change in investment

Accepted Answer

A)  larger; smaller 
B)  larger; larger 
C)  smaller; smaller 
D)  smaller; larger 
E)  More information about the effect on GDP is needed to answer the question. 
A)  larger; smaller 
B)  larger; larger 
C)  smaller; smaller 
D)  smaller; larger 
E)  More information about the effect on GDP is needed to answer the question.

Question 4

If disposable income increases from $5 trillion to $6 trillion and, as a result, consumption expenditure increases from $7 trillion to $7.8 trillion, the MPC is

Accepted Answer

A)  1.0. 
B)  0.8. 
C)  5 ÷ 7 = 0.71. 
D)  6 ÷ 7.8 = 0.77. 
E)  6 ÷ 7 = 0.86. 
A)  1.0. 
B)  0.8. 
C)  5 ÷ 7 = 0.71. 
D)  6 ÷ 7.8 = 0.77. 
E)  6 ÷ 7 = 0.86.

Question 5

The figure above shows two aggregate expenditure lines.
-In the figure above, if the marginal propensity to import increased, the aggregate expenditure lines would ________ and the multiplier would ________ in value.

Accepted Answer

A)  become steeper; rise 
B)  become less steep; fall 
C)  become less steep; rise 
D)  not change; rise 
E)  not change; fall 
A)  become steeper; rise 
B)  become less steep; fall 
C)  become less steep; rise 
D)  not change; rise 
E)  not change; fall

Question 6

Suppose the economy has no income taxes or imports.How is the size of the expenditure multiplier related to the marginal propensity to consume?
 What is the multiplier if the MPC equals 0.25?
 If the MPC equals 0.50?
 If the MPC equals 0.90?

Accepted Answer

The multiplier equals @#LAT-DLM& , so the larger t

Question 7

If exports increase, then the aggregate expenditure curve shifts ________ and equilibrium expenditure ________.

Accepted Answer

A)  upward; decreases 
B)  upward; increases 
C)  downward; decreases 
D)  downward; increases 
E)  upward; does not change 
A)  upward; decreases 
B)  upward; increases 
C)  downward; decreases 
D)  downward; increases 
E)  upward; does not change

Question 8

$$\begin{array} { c c c c c c } 
\begin{array} { c } 
\text { RealGDP, } Y \
\text { (trillions of }
\end{array} & \begin{array} { c } 
\text { Consumption } \
\text { expenditure, C }
\end{array} & \begin{array} { c } 
\text { Government } \
\text { (trillions of } \
\text { (trillions of }
\end{array} & \begin{array} { c } 
\text { expenditure, } G \
\text { (trillions of }
\end{array} & \begin{array} { c } 
\text { Exports, } X \
\text { (trillions of }
\end{array} & \begin{array} { c } 
\text { Imports, } M \
\text { (trillions of }
\end{array} \
2005 \text { dollars) } & 2005 \text { dollars) } & 2005 \text { dollars) } & \text { 2005 dollars) } & \text { 2005 dollars) } & 2005 \text { dollars) } \
\hline 0.00 & 0.00 & 1.50 & 1.25 & 1.00 & 0.00 \
2.00 & 1.75 & 1.50 & 1.25 & 1.00 & 0.50 \
4.00 & 3.50 & 1.50 & 1.25 & 1.00 & 1.00 \
6.00 & 5.25 & 1.50 & 1.25 & 1.00 & 1.50 \
8.00 & 7.00 & 1.50 & 1.25 & 1.00 & 2.00
\end{array}$$
-The above table presents data from the nation of Pacifica.Aggregate planned expenditure equals $7.5 trillion when real GDP equals

Accepted Answer

A)  $4.0 trillion. 
B)  $6.0 trillion. 
C)  $7.5 trillion. 
D)  $8.0 trillion. 
E)  $8.5 trillion. 
A)  $4.0 trillion. 
B)  $6.0 trillion. 
C)  $7.5 trillion. 
D)  $8.0 trillion. 
E)  $8.5 trillion.

Question 9

"If the marginal tax rate is high enough, the expenditure multiplier can be negative." Is the previous statement correct or incorrect?

Accepted Answer

The statement is incorrect.The

Question 10

If aggregate planned expenditure equals GDP, then firms'

Accepted Answer

A)  inventories exceed planned inventories. 
B)  inventories are less than planned inventories. 
C)  inventories equal planned inventories. 
D)  do not have any inventories. 
E)  actual investment has no relationship to their planned investment. 
A)  inventories exceed planned inventories. 
B)  inventories are less than planned inventories. 
C)  inventories equal planned inventories. 
D)  do not have any inventories. 
E)  actual investment has no relationship to their planned investment.

Question 11

The figure above shows two aggregate expenditure lines.
-In the figure above, what is the size of the multiplier?

Accepted Answer

A)  0.25 
B)  4.0 
C)  $2 trillion 
D)  $0.5 trillion 
E)  More information is needed to determine the size of the multiplier. 
A)  0.25 
B)  4.0 
C)  $2 trillion 
D)  $0.5 trillion 
E)  More information is needed to determine the size of the multiplier.

Question 12

Investment decreases by $300 billion, government expenditure is unchanged, and exports increase by $500 billion. As a result, autonomous expenditure ________, the total expenditure ________, and equilibrium real GDP ________.

Accepted Answer

A)  decreases by $300 billion; decreases; decreases by more than $300 billion 
B)  increases by $500 billion; is unchanged; increases by more than $500 billion 
C)  is unchanged; is unchanged; is unchanged 
D)  increases by $800 billion; increases; increases by more than $800 billion 
E)  increases by $200 billion; increases; increases by more than $200 billion 
A)  decreases by $300 billion; decreases; decreases by more than $300 billion 
B)  increases by $500 billion; is unchanged; increases by more than $500 billion 
C)  is unchanged; is unchanged; is unchanged 
D)  increases by $800 billion; increases; increases by more than $800 billion 
E)  increases by $200 billion; increases; increases by more than $200 billion

Question 13

Jack Nelson, a supervisor in the hardware department at Sears, received a $3,000 increase in his annual disposable income.Suppose his marginal propensity to consume is 0.80.How much of the $3,000 increase will Jack spend on consumption?

Accepted Answer

A)  $2,750 
B)  $2,500 
C)  $2,400 
D)  $2,200 
E)  $3,000. 
A)  $2,750 
B)  $2,500 
C)  $2,400 
D)  $2,200 
E)  $3,000.

Question 14

Which of the following reduces the magnitude of the expenditure multiplier?

Accepted Answer

A)  higher marginal tax rates 
B)  decrease in imports 
C)  decrease in saving 
D)  decrease in government purchases of goods and services 
E)  decrease in the marginal propensity to consume 
A)  higher marginal tax rates 
B)  decrease in imports 
C)  decrease in saving 
D)  decrease in government purchases of goods and services 
E)  decrease in the marginal propensity to consume

Question 15

When the real interest rate falls, the consumption function

Accepted Answer

A)  shifts upward. 
B)  does not shift and there is no movement along the consumption function. 
C)  shifts downward. 
D)  does not shift and there is a movement upward along the consumption function. 
E)  does not shift and there is a movement downward along the consumption function. 
A)  shifts upward. 
B)  does not shift and there is no movement along the consumption function. 
C)  shifts downward. 
D)  does not shift and there is a movement upward along the consumption function. 
E)  does not shift and there is a movement downward along the consumption function.

Question 16

14.5 Chapter Figures
   
The above figure shows a nation's consumption function.
-Using this consumption function, the marginal propensity to consume is

Accepted Answer

A)  0. 
B)  $1.5 trillion. 
C)  $2 trillion. 
D)  1.33. 
E)  0.75. 
A)  0. 
B)  $1.5 trillion. 
C)  $2 trillion. 
D)  1.33. 
E)  0.75.

Question 17

List and explain factors that influence consumption expenditure.

Accepted Answer

Disposable income is an important factor

Question 18

The figure above shows two aggregate expenditure lines.
-In the figure above, if the MPC increased, the aggregate expenditure lines would ________ and the multiplier would ________ in value.

Accepted Answer

A)  become steeper; rise 
B)  become steeper; fall 
C)  become less steep; rise 
D)  not change; rise 
E)  not change; fall 
A)  become steeper; rise 
B)  become steeper; fall 
C)  become less steep; rise 
D)  not change; rise 
E)  not change; fall

Question 19

A country reports that unplanned inventories increased during 2012.The increase in unplanned inventories leads to

Accepted Answer

A)  the government decreasing production, which decreases GDP. 
B)  consumers increasing their consumption expenditure, which increases GDP. 
C)  firms decreasing production, which decreases GDP. 
D)  firms increasing production, which increases GDP. 
E)  actual aggregate expenditure being different than real GDP. 
A)  the government decreasing production, which decreases GDP. 
B)  consumers increasing their consumption expenditure, which increases GDP. 
C)  firms decreasing production, which decreases GDP. 
D)  firms increasing production, which increases GDP. 
E)  actual aggregate expenditure being different than real GDP.

Question 20

If the real interest rate increases, there is

Accepted Answer

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

For each one dollar increase in real GDP, aggregate planned expenditure

In an economy with no income taxes or imports, if the expenditure multiplier is 5, what does the MPC equal?

The the marginal tax rate, the the effect on aggregate expenditure from a change in investment

If disposable income increases from $5 trillion to $6 trillion and, as a result, consumption expenditure increases from $7 trillion to $7.8 trillion, the MPC is

The figure above shows two aggregate expenditure lines. -In the figure above, if the marginal propensity to import increased, the aggregate expenditure lines would and the multiplier would in value.

Suppose the economy has no income taxes or imports.How is the size of the expenditure multiplier related to the marginal propensity to consume? What is the multiplier if the MPC equals 0.25? If the MPC equals 0.50? If the MPC equals 0.90?

If exports increase, then the aggregate expenditure curve shifts and equilibrium expenditure .

"If the marginal tax rate is high enough, the expenditure multiplier can be negative." Is the previous statement correct or incorrect?

If aggregate planned expenditure equals GDP, then firms'

The figure above shows two aggregate expenditure lines. -In the figure above, what is the size of the multiplier?

Investment decreases by $300 billion, government expenditure is unchanged, and exports increase by $500 billion. As a result, autonomous expenditure , the total expenditure , and equilibrium real GDP .

Jack Nelson, a supervisor in the hardware department at Sears, received a $3,000 increase in his annual disposable income.Suppose his marginal propensity to consume is 0.80.How much of the $3,000 increase will Jack spend on consumption?

Which of the following reduces the magnitude of the expenditure multiplier?

When the real interest rate falls, the consumption function

14.5 Chapter Figures The above figure shows a nation's consumption function. -Using this consumption function, the marginal propensity to consume is

List and explain factors that influence consumption expenditure.

The figure above shows two aggregate expenditure lines. -In the figure above, if the MPC increased, the aggregate expenditure lines would and the multiplier would in value.

A country reports that unplanned inventories increased during 2012.The increase in unplanned inventories leads to

If the real interest rate increases, there is

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

For each one dollar increase in real GDP, aggregate planned expenditure

In an economy with no income taxes or imports, if the expenditure multiplier is 5, what does the MPC equal?

The ________ the marginal tax rate, the ________ the effect on aggregate expenditure from a change in investment

If disposable income increases from $5 trillion to $6 trillion and, as a result, consumption expenditure increases from $7 trillion to $7.8 trillion, the MPC is

The figure above shows two aggregate expenditure lines. -In the figure above, if the marginal propensity to import increased, the aggregate expenditure lines would ________ and the multiplier would ________ in value.

Suppose the economy has no income taxes or imports.How is the size of the expenditure multiplier related to the marginal propensity to consume? What is the multiplier if the MPC equals 0.25? If the MPC equals 0.50? If the MPC equals 0.90?

If exports increase, then the aggregate expenditure curve shifts ________ and equilibrium expenditure ________.

"If the marginal tax rate is high enough, the expenditure multiplier can be negative." Is the previous statement correct or incorrect?

If aggregate planned expenditure equals GDP, then firms'

The figure above shows two aggregate expenditure lines. -In the figure above, what is the size of the multiplier?

Investment decreases by $300 billion, government expenditure is unchanged, and exports increase by $500 billion. As a result, autonomous expenditure ________, the total expenditure ________, and equilibrium real GDP ________.

Jack Nelson, a supervisor in the hardware department at Sears, received a $3,000 increase in his annual disposable income.Suppose his marginal propensity to consume is 0.80.How much of the $3,000 increase will Jack spend on consumption?

Which of the following reduces the magnitude of the expenditure multiplier?

When the real interest rate falls, the consumption function

14.5 Chapter Figures The above figure shows a nation's consumption function. -Using this consumption function, the marginal propensity to consume is

List and explain factors that influence consumption expenditure.

The figure above shows two aggregate expenditure lines. -In the figure above, if the MPC increased, the aggregate expenditure lines would ________ and the multiplier would ________ in value.

A country reports that unplanned inventories increased during 2012.The increase in unplanned inventories leads to

If the real interest rate increases, there is

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 the marginal tax rate, the the effect on aggregate expenditure from a change in investment

The figure above shows two aggregate expenditure lines. -In the figure above, if the marginal propensity to import increased, the aggregate expenditure lines would and the multiplier would in value.

If exports increase, then the aggregate expenditure curve shifts and equilibrium expenditure .

Investment decreases by $300 billion, government expenditure is unchanged, and exports increase by $500 billion. As a result, autonomous expenditure , the total expenditure , and equilibrium real GDP .

The figure above shows two aggregate expenditure lines. -In the figure above, if the MPC increased, the aggregate expenditure lines would and the multiplier would in value.