Question 1

When disposable income is zero, consumption expenditure is

Accepted Answer

A)  equal to autonomous consumption. 
B)  also zero. 
C)  negative. 
D)  equal to induced consumption expenditure. 
E)  None of the above answers is correct. 
A)  equal to autonomous consumption. 
B)  also zero. 
C)  negative. 
D)  equal to induced consumption expenditure. 
E)  None of the above answers is correct.

Question 2

If the marginal propensity to consume is very close to zero, then the expenditure multiplier

Accepted Answer

A)  is very close to zero. 
B)  is very close to one. 
C)  is very large. 
D)  cannot be calculated. 
E)  might be negative if the marginal tax rate is large enough. 
A)  is very close to zero. 
B)  is very close to one. 
C)  is very large. 
D)  cannot be calculated. 
E)  might be negative if the marginal tax rate is large enough.

Question 3

Induced expenditure is any expenditure that

Accepted Answer

A)  is fixed for all levels of real GDP. 
B)  is fixed for all price levels. 
C)  is fixed for all levels of the interest rate. 
D)  changes when real GDP changes. 
E)  changes when the interest rate changes. 
A)  is fixed for all levels of real GDP. 
B)  is fixed for all price levels. 
C)  is fixed for all levels of the interest rate. 
D)  changes when real GDP changes. 
E)  changes when the interest rate changes.

Question 4

Moving along the aggregate expenditure (AE) curve, when real GDP increases, aggregate planned expenditures increase

Accepted Answer

A)  by more than real GDP. 
B)  by the same amount as does real GDP. 
C)  by less than real GDP. 
D)  proportionately with real GDP. 
E)  by the same percentage as does real GDP. 
A)  by more than real GDP. 
B)  by the same amount as does real GDP. 
C)  by less than real GDP. 
D)  proportionately with real GDP. 
E)  by the same percentage as does real GDP.

Question 5

An increase in the price level shifts the aggregate planned expenditure curve downward and results in a movement along the aggregate demand curve.Why does an increase in the price level result in a shift in the aggregate planned expenditure curve rather than a movement along it?

Accepted Answer

The increase in the price level shifts t

Question 6

During 2015, a country reports aggregate planned expenditures of $5 trillion and an actual real GDP of $4 trillion.During 2015,

Accepted Answer

A)  inventories are less than planned. 
B)  inventories are greater than planned. 
C)  inventories are unaffected. 
D)  actual aggregate expenditures are greater than real GDP. 
E)  actual aggregate expenditures are less than real GDP. 
A)  inventories are less than planned. 
B)  inventories are greater than planned. 
C)  inventories are unaffected. 
D)  actual aggregate expenditures are greater than real GDP. 
E)  actual aggregate expenditures are less than real GDP.

Question 7

If aggregate planned expenditure equals GDP, then

Accepted Answer

A)  there must be no change in firms' inventories. 
B)  the change in firms' inventories must be positive. 
C)  the change in firms' inventories must be equal to the planned change. 
D)  the change in firms' inventories must be negative. 
E)  actual aggregate expenditure might be greater than, equal to, or less than real GDP. 
A)  there must be no change in firms' inventories. 
B)  the change in firms' inventories must be positive. 
C)  the change in firms' inventories must be equal to the planned change. 
D)  the change in firms' inventories must be negative. 
E)  actual aggregate expenditure might be greater than, equal to, or less than real GDP.

Question 8

Increases in autonomous expenditure induce ________ in aggregate expenditure thereby making the multiplier ________.

Accepted Answer

A)  further increases; greater than one 
B)  further increases; less than one 
C)  a decrease; greater than one 
D)  a decrease; less than one 
E)  further increases; unnecessary 
A)  further increases; greater than one 
B)  further increases; less than one 
C)  a decrease; greater than one 
D)  a decrease; less than one 
E)  further increases; unnecessary

Question 9

If the level of real GDP is $4 trillion while aggregate planned expenditure is $5 trillion, then

Accepted Answer

A)  aggregate planned expenditure decreases to reach the equilibrium of $4 trillion. 
B)  inventories rise more than planned, leading firms to cut production. 
C)  inventories fall more than planned, leading firms to increase production. 
D)  real GDP increases and planned expenditure decreases reaching equilibrium in the middle. 
E)  inventories rise more than planned, leading firms to increase production. 
A)  aggregate planned expenditure decreases to reach the equilibrium of $4 trillion. 
B)  inventories rise more than planned, leading firms to cut production. 
C)  inventories fall more than planned, leading firms to increase production. 
D)  real GDP increases and planned expenditure decreases reaching equilibrium in the middle. 
E)  inventories rise more than planned, leading firms to increase production.

Question 10

If the slope of the aggregate expenditure curve is 0.5, then the expenditure multiplier equals

Accepted Answer

A)  5. 
B)  4. 
C)  3. 
D)  2. 
E)  0.5. 
A)  5. 
B)  4. 
C)  3. 
D)  2. 
E)  0.5.

Question 11

Which of the following situations leads to an unplanned increase in inventories of $2.0 trillion?

Accepted Answer

A)  real GDP = $5.0 trillion and aggregate planned expenditures = $7.0 trillion 
B)  real GDP = $5.0 trillion and aggregate planned expenditures = $5.0 trillion 
C)  real GDP = $6.0 trillion and aggregate planned expenditures = $4.0 trillion 
D)  real GDP = $8.0 trillion and aggregate planned expenditures = $5.0 trillion 
E)  More information is needed about planned investment and actual investment. 
A)  real GDP = $5.0 trillion and aggregate planned expenditures = $7.0 trillion 
B)  real GDP = $5.0 trillion and aggregate planned expenditures = $5.0 trillion 
C)  real GDP = $6.0 trillion and aggregate planned expenditures = $4.0 trillion 
D)  real GDP = $8.0 trillion and aggregate planned expenditures = $5.0 trillion 
E)  More information is needed about planned investment and actual investment.

Question 12

Points where the aggregate expenditure (AE) curve lie above the 45∘ line are points where aggregate planned expenditure is

Accepted Answer

A)  greater than real GDP. 
B)  less than real GDP. 
C)  equal to real GDP. 
D)  the inverse of real GDP. 
E)  not related to real GDP. 
A)  greater than real GDP. 
B)  less than real GDP. 
C)  equal to real GDP. 
D)  the inverse of real GDP. 
E)  not related to real GDP.

Question 13

If an economy experiences a $0.8 trillion increase in investment resulting in an increase in real GDP from $10 trillion to $12 trillion
a. what is the change in equilibrium expenditure
b. what is the change in autonomous expenditure
c. what is the multiplier
d. how would an increase in the marginal tax rate effect the multiplier

Accepted Answer

a. The change in equilibrium expenditure

Question 14

Unplanned inventories increase when

Accepted Answer

A)  real GDP is less than aggregate planned expenditure. 
B)  actual aggregate expenditure is greater than aggregate planned expenditure. 
C)  actual aggregate expenditure is equal to GDP. 
D)  aggregate planned expenditure is less than GDP. 
E)  actual aggregate expenditure is less than GDP. 
A)  real GDP is less than aggregate planned expenditure. 
B)  actual aggregate expenditure is greater than aggregate planned expenditure. 
C)  actual aggregate expenditure is equal to GDP. 
D)  aggregate planned expenditure is less than GDP. 
E)  actual aggregate expenditure is less than GDP.

Question 15

The AE curve illustrates the relationship between

Accepted Answer

A)  aggregate planned expenditure and real GDP. 
B)  real GDP and actual expenditure. 
C)  real GDP and the interest rate. 
D)  the interest rate and aggregate planned expenditure. 
E)  the quantity of real GDP demanded and the price level. 
A)  aggregate planned expenditure and real GDP. 
B)  real GDP and actual expenditure. 
C)  real GDP and the interest rate. 
D)  the interest rate and aggregate planned expenditure. 
E)  the quantity of real GDP demanded and the price level.

Question 16

When the real interest rate rises, there is

Accepted Answer

A)  an upward movement along the consumption function. 
B)  a downward movement along the consumption function. 
C)  an upward shift of the consumption function. 
D)  a downward shift of the consumption function. 
E)  neither a shift of the consumption function or a movement along the consumption function. 
A)  an upward movement along the consumption function. 
B)  a downward movement along the consumption function. 
C)  an upward shift of the consumption function. 
D)  a downward shift of the consumption function. 
E)  neither a shift of the consumption function or a movement along the consumption function.

Question 17

What is the relationship between the aggregate planned expenditure curve and the aggregate demand curve?
 Explain the relationship.

Accepted Answer

The aggregate demand curve is derived us

Question 18

The size of the expenditure multiplier is influenced by i. the marginal propensity to consume.
Ii) autonomous spending.
Iii) the marginal tax rate.

Accepted Answer

A)  i only 
B)  ii only 
C)  iii only 
D)  ii and iii 
E)  i and iii 
A)  i only 
B)  ii only 
C)  iii only 
D)  ii and iii 
E)  i and iii

Question 19

The expenditure multiplier is typically

Accepted Answer

A)  less than 1 but greater than 0. 
B)  greater than 1. 
C)  equal to 1. 
D)  greater than 10. 
E)  negative. 
A)  less than 1 but greater than 0. 
B)  greater than 1. 
C)  equal to 1. 
D)  greater than 10. 
E)  negative.

Question 20

At $10,000 of disposable income, Audrey's consumption expenditure was $11,000.At $20,000 of disposable income, Audrey's consumption expenditure was $19,000.What is Audrey's marginal propensity to consume?

Accepted Answer

The marginal propensity to consume is th

When disposable income is zero, consumption expenditure is

If the marginal propensity to consume is very close to zero, then the expenditure multiplier

Induced expenditure is any expenditure that

Moving along the aggregate expenditure (AE) curve, when real GDP increases, aggregate planned expenditures increase

An increase in the price level shifts the aggregate planned expenditure curve downward and results in a movement along the aggregate demand curve.Why does an increase in the price level result in a shift in the aggregate planned expenditure curve rather than a movement along it?

During 2015, a country reports aggregate planned expenditures of $5 trillion and an actual real GDP of $4 trillion.During 2015,

If aggregate planned expenditure equals GDP, then

Increases in autonomous expenditure induce in aggregate expenditure thereby making the multiplier .

If the level of real GDP is $4 trillion while aggregate planned expenditure is $5 trillion, then

If the slope of the aggregate expenditure curve is 0.5, then the expenditure multiplier equals

Which of the following situations leads to an unplanned increase in inventories of $2.0 trillion?

Points where the aggregate expenditure (AE) curve lie above the 45∘ line are points where aggregate planned expenditure is

Unplanned inventories increase when

The AE curve illustrates the relationship between

When the real interest rate rises, there is

What is the relationship between the aggregate planned expenditure curve and the aggregate demand curve? Explain the relationship.

The size of the expenditure multiplier is influenced by i. the marginal propensity to consume. Ii) autonomous spending. Iii) the marginal tax rate.

The expenditure multiplier is typically

At $10,000 of disposable income, Audrey's consumption expenditure was $11,000.At $20,000 of disposable income, Audrey's consumption expenditure was $19,000.What is Audrey's marginal propensity to consume?

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

When disposable income is zero, consumption expenditure is

If the marginal propensity to consume is very close to zero, then the expenditure multiplier

Induced expenditure is any expenditure that

Moving along the aggregate expenditure (AE) curve, when real GDP increases, aggregate planned expenditures increase

An increase in the price level shifts the aggregate planned expenditure curve downward and results in a movement along the aggregate demand curve.Why does an increase in the price level result in a shift in the aggregate planned expenditure curve rather than a movement along it?

During 2015, a country reports aggregate planned expenditures of $5 trillion and an actual real GDP of $4 trillion.During 2015,

If aggregate planned expenditure equals GDP, then

Increases in autonomous expenditure induce ________ in aggregate expenditure thereby making the multiplier ________.

If the level of real GDP is $4 trillion while aggregate planned expenditure is $5 trillion, then

If the slope of the aggregate expenditure curve is 0.5, then the expenditure multiplier equals

Which of the following situations leads to an unplanned increase in inventories of $2.0 trillion?

Points where the aggregate expenditure (AE) curve lie above the 45∘ line are points where aggregate planned expenditure is

Unplanned inventories increase when

The AE curve illustrates the relationship between

When the real interest rate rises, there is

What is the relationship between the aggregate planned expenditure curve and the aggregate demand curve? Explain the relationship.

The size of the expenditure multiplier is influenced by i. the marginal propensity to consume. Ii) autonomous spending. Iii) the marginal tax rate.

The expenditure multiplier is typically

At $10,000 of disposable income, Audrey's consumption expenditure was $11,000.At $20,000 of disposable income, Audrey's consumption expenditure was $19,000.What is Audrey's marginal propensity to consume?

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

Increases in autonomous expenditure induce in aggregate expenditure thereby making the multiplier .