Question 1

How do firms respond to unplanned inventory changes?
 What is the effect on their production and GDP?

Accepted Answer

If inventories are above their target le

Question 2

When the price level increases, aggregate planned expenditure decreases, which leads to

Accepted Answer

A)  a rightward shift of the aggregate demand curve. 
B)  a leftward shift of the aggregate demand curve. 
C)  an upward movement along the aggregate demand curve. 
D)  a downward movement along the aggregate demand curve. 
E)  neither a movement along nor a shift of the aggregate demand curve. 
A)  a rightward shift of the aggregate demand curve. 
B)  a leftward shift of the aggregate demand curve. 
C)  an upward movement along the aggregate demand curve. 
D)  a downward movement along the aggregate demand curve. 
E)  neither a movement along nor a shift of the aggregate demand curve.

Question 3

The President proposes a reduction of personal income marginal tax rates in the United States.When marginal tax rates are reduced, there is

Accepted Answer

A)  an increase in the marginal propensity to consume. 
B)  an increase in the magnitude of the expenditure multiplier. 
C)  a decrease in the marginal propensity to consume. 
D)  a decrease in the magnitude of the expenditure multiplier. 
E)  no change in the slope of the AE line. 
A)  an increase in the marginal propensity to consume. 
B)  an increase in the magnitude of the expenditure multiplier. 
C)  a decrease in the marginal propensity to consume. 
D)  a decrease in the magnitude of the expenditure multiplier. 
E)  no change in the slope of the AE line.

Question 4

When disposal income is $5.0 trillion, consumption expenditure is $4.5 trillion.When disposal income is $6.0 trillion, consumption expenditure is $5.0 trillion.What is the marginal propensity to consume?

Accepted Answer

The marginal propensity to consume is th

Question 5

$$\begin{array} { c c c c c c } 
\begin{array} { c } 
\text { RealGDP, } Y \
\text { (trillions of }
\end{array} & \begin{array} { c } 
\text { Consumption } \
\text { expenditure, C }
\end{array} & \begin{array} { c } 
\text { Government } \
\text { (trillions of } \
\text { (trillions of }
\end{array} & \begin{array} { c } 
\text { expenditure, } G \
\text { (trillions of }
\end{array} & \begin{array} { c } 
\text { Exports, } X \
\text { (trillions of }
\end{array} & \begin{array} { c } 
\text { Imports, } M \
\text { (trillions of }
\end{array} \
2005 \text { dollars) } & 2005 \text { dollars) } & 2005 \text { dollars) } & \text { 2005 dollars) } & \text { 2005 dollars) } & 2005 \text { dollars) } \
\hline 0.00 & 0.00 & 1.75 & 1.00 & 0.75 & 0.00 \
3.00 & 2.00 & 1.75 & 1.00 & 0.75 & 0.75 \
6.00 & 4.00 & 1.75 & 1.00 & 0.75 & 1.50 \
9.00 & 6.00 & 1.75 & 1.00 & 0.75 & 2.25 \
12.00 & 8.00 & 1.75 & 1.00 & 0.75 & 3.00
\end{array}$$
-The above table gives data for the nation of Mojo.At what level of real GDP is the economy at equilibrium expenditure?

Accepted Answer

A)  $3.0 trillion 
B)  $6.0 trillion 
C)  $9.0 trillion 
D)  $12.0 trillion 
E)  more than $12.0 trillion. 
A)  $3.0 trillion 
B)  $6.0 trillion 
C)  $9.0 trillion 
D)  $12.0 trillion 
E)  more than $12.0 trillion.

Question 6

When aggregate planned expenditure ________ real GDP, there are unplanned ________ in inventories, and firms ________ production, therefore decreasing real GDP.

Accepted Answer

A)  is less than; increases; decrease 
B)  exceeds; decreases; decrease 
C)  is less than; increases; increase 
D)  exceeds; increases; increase 
E)  is less than; decreases; decrease 
A)  is less than; increases; decrease 
B)  exceeds; decreases; decrease 
C)  is less than; increases; increase 
D)  exceeds; increases; increase 
E)  is less than; decreases; decrease

Question 7

A country reports that it has an unplanned inventory increase of $1.0 trillion.Discuss how the economy adjusts until it reaches an unplanned inventory change of $0.0 trillion.

Accepted Answer

When unplanned inventory changes are pos

Question 8

The expenditure multiplier occurs because

Accepted Answer

A)  a change in autonomous expenditure causes real GDP to change in the opposite direction. 
B)  government expenditure on goods and services change by a proportional amount to government taxes. 
C)  a change in autonomous expenditures changes households' incomes. 
D)  any change in real GDP must also change the price level. 
E)  a change in households' incomes changes autonomous expenditure. 
A)  a change in autonomous expenditure causes real GDP to change in the opposite direction. 
B)  government expenditure on goods and services change by a proportional amount to government taxes. 
C)  a change in autonomous expenditures changes households' incomes. 
D)  any change in real GDP must also change the price level. 
E)  a change in households' incomes changes autonomous expenditure.

Question 9

$$\begin{array} { c c } 
\begin{array} { c } 
\text { Real GDP } \
\text { (billions of 2005 dollars) }
\end{array} & \begin{array} { c } 
\text { Aggregate expenditure } \
\text { (billions of 2005 dollars) }
\end{array} \
\hline 10 & 10.50 \
11 & 11.25 \
12 & 12.00 \
13 & 12.75 \
14 & 13.50 \
15 & 14.25
\end{array}$$
-The above table gives real GDP and the aggregate expenditure schedule.When real GDP is $15 billion, the amount of unplanned investment is

Accepted Answer

A)  $0.75 billion 
B)  $14.25 billion 
C)  $29.25 billion 
D)  $15 billion 
E)  unknown 
A)  $0.75 billion 
B)  $14.25 billion 
C)  $29.25 billion 
D)  $15 billion 
E)  unknown

Question 10

When disposable income increases,

Accepted Answer

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

Question 11

Compare and contrast Say's views of the macroeconomy with that of Keynes.What do each have to say about the economy in relationship to its potential level of real GDP?

Accepted Answer

Jean-Baptiste Say, a prominent French ec

Question 12

Suppose an economy has no income taxes or imports.If the MPC is 0.75, what does the expenditure multiplier equal?

Accepted Answer

The expenditure mult

Question 13

When disposable income increases from $9 trillion to $10 trillion, consumption expenditure increases from $6 trillion to $6.8 trillion.The MPC is

Accepted Answer

A)  1.00. 
B)  0.80. 
C)  0.60. 
D)  0.68. 
E)  $6.8 trillion. 
A)  1.00. 
B)  0.80. 
C)  0.60. 
D)  0.68. 
E)  $6.8 trillion.

Question 14

Using the aggregate expenditure model, the equilibrium level of the aggregate expenditure can occur when the economy is producing

Accepted Answer

A)  only at full employment. 
B)  only at above full employment. 
C)  only at below full employment. 
D)  at full employment, above full employment, or below full employment. 
E)  at either below full employment or at full employment but never at above full employment. 
A)  only at full employment. 
B)  only at above full employment. 
C)  only at below full employment. 
D)  at full employment, above full employment, or below full employment. 
E)  at either below full employment or at full employment but never at above full employment.

Question 15

If actual aggregate expenditure equals aggregate planned expenditure, then

Accepted Answer

A)  there is never any change in firms' inventories. 
B)  unplanned inventory changes are positive. 
C)  firms obtain the desired change in their inventories. 
D)  unplanned inventory changes are negative. 
E)  actual aggregate expenditure might be greater than, equal to, or less than real GDP. 
A)  there is never any change in firms' inventories. 
B)  unplanned inventory changes are positive. 
C)  firms obtain the desired change in their inventories. 
D)  unplanned inventory changes are negative. 
E)  actual aggregate expenditure might be greater than, equal to, or less than real GDP.

Question 16

In Germany, expected future income increased during 2010.This increase lead to

Accepted Answer

A)  a movement upward along the consumption function. 
B)  a movement downward along the consumption function. 
C)  an upward shift of the consumption function. 
D)  a downward shift of the consumption function. 
E)  no movement along the consumption function and no shift of the consumption function. 
A)  a movement upward along the consumption function. 
B)  a movement downward along the consumption function. 
C)  an upward shift of the consumption function. 
D)  a downward shift of the consumption function. 
E)  no movement along the consumption function and no shift of the consumption function.

Question 17

$$\begin{array} { c c c c c c } 
\begin{array} { c } 
\text { RealGDP, } Y \
\text { (trillions of }
\end{array} & \begin{array} { c } 
\text { Consumption } \
\text { expenditure, C }
\end{array} & \begin{array} { c } 
\text { Government } \
\text { (trillions of } \
\text { (trillions of }
\end{array} & \begin{array} { c } 
\text { expenditure, } G \
\text { (trillions of }
\end{array} & \begin{array} { c } 
\text { Exports, } X \
\text { (trillions of }
\end{array} & \begin{array} { c } 
\text { Imports, } M \
\text { (trillions of }
\end{array} \
2005 \text { dollars) } & 2005 \text { dollars) } & 2005 \text { dollars) } & \text { 2005 dollars) } & \text { 2005 dollars) } & 2005 \text { dollars) } \
\hline 0.00 & 0.00 & 1.50 & 1.25 & 1.00 & 0.00 \
2.00 & 1.75 & 1.50 & 1.25 & 1.00 & 0.50 \
4.00 & 3.50 & 1.50 & 1.25 & 1.00 & 1.00 \
6.00 & 5.25 & 1.50 & 1.25 & 1.00 & 1.50 \
8.00 & 7.00 & 1.50 & 1.25 & 1.00 & 2.00
\end{array}$$
-The above table presents data from the nation of Pacifica.When real GDP equals $2.0 trillion, aggregate planned expenditure equals

Accepted Answer

A)  $3.75 trillion. 
B)  $5.00 trillion. 
C)  $5.50 trillion. 
D)  $6.00 trillion. 
E)  $4.00 trillion. 
A)  $3.75 trillion. 
B)  $5.00 trillion. 
C)  $5.50 trillion. 
D)  $6.00 trillion. 
E)  $4.00 trillion.

Question 18

Explain why the expenditure multiplier is greater than 1.

Accepted Answer

The expenditure multiplier is greater th

Question 19

If a country has an expenditure multiplier of 10, the slope of its aggregate planned expenditure (AE) curve is

Accepted Answer

A)  .10. 
B)  .50. 
C)  .90. 
D)  10.00. 
E)  .80. 
A)  .10. 
B)  .50. 
C)  .90. 
D)  10.00. 
E)  .80.

Question 20

If autonomous spending decreases, then

Accepted Answer

A)  equilibrium expenditure decreases by the same amount. 
B)  the expenditure multiplier means that equilibrium expenditure decreases by a larger amount. 
C)  equilibrium expenditure does not change. 
D)  the expenditure multiplier means that equilibrium expenditure increases by a larger amount. 
E)  the expenditure multiplier means that equilibrium expenditure increases by a smaller amount. 
A)  equilibrium expenditure decreases by the same amount. 
B)  the expenditure multiplier means that equilibrium expenditure decreases by a larger amount. 
C)  equilibrium expenditure does not change. 
D)  the expenditure multiplier means that equilibrium expenditure increases by a larger amount. 
E)  the expenditure multiplier means that equilibrium expenditure increases by a smaller amount.

How do firms respond to unplanned inventory changes? What is the effect on their production and GDP?

When the price level increases, aggregate planned expenditure decreases, which leads to

The President proposes a reduction of personal income marginal tax rates in the United States.When marginal tax rates are reduced, there is

When disposal income is $5.0 trillion, consumption expenditure is $4.5 trillion.When disposal income is $6.0 trillion, consumption expenditure is $5.0 trillion.What is the marginal propensity to consume?

When aggregate planned expenditure real GDP, there are unplanned in inventories, and firms production, therefore decreasing real GDP.

A country reports that it has an unplanned inventory increase of $1.0 trillion.Discuss how the economy adjusts until it reaches an unplanned inventory change of $0.0 trillion.

The expenditure multiplier occurs because

Real GDP (billions of 2005 dollars) Aggregate expenditure (billions of 2005 dollars) 10 10.50 11 11.25 12 12.00 13 12.75 14 13.50 15 14.25 -The above table gives real GDP and the aggregate expenditure schedule.When real GDP is $15 billion, the amount of unplanned investment is

When disposable income increases,

Compare and contrast Say's views of the macroeconomy with that of Keynes.What do each have to say about the economy in relationship to its potential level of real GDP?

Suppose an economy has no income taxes or imports.If the MPC is 0.75, what does the expenditure multiplier equal?

When disposable income increases from $9 trillion to $10 trillion, consumption expenditure increases from $6 trillion to $6.8 trillion.The MPC is

Using the aggregate expenditure model, the equilibrium level of the aggregate expenditure can occur when the economy is producing

If actual aggregate expenditure equals aggregate planned expenditure, then

In Germany, expected future income increased during 2010.This increase lead to

Explain why the expenditure multiplier is greater than 1.

If a country has an expenditure multiplier of 10, the slope of its aggregate planned expenditure (AE) curve is

If autonomous spending decreases, then

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

How do firms respond to unplanned inventory changes? What is the effect on their production and GDP?

When the price level increases, aggregate planned expenditure decreases, which leads to

The President proposes a reduction of personal income marginal tax rates in the United States.When marginal tax rates are reduced, there is

When disposal income is $5.0 trillion, consumption expenditure is $4.5 trillion.When disposal income is $6.0 trillion, consumption expenditure is $5.0 trillion.What is the marginal propensity to consume?

When aggregate planned expenditure ________ real GDP, there are unplanned ________ in inventories, and firms ________ production, therefore decreasing real GDP.

A country reports that it has an unplanned inventory increase of $1.0 trillion.Discuss how the economy adjusts until it reaches an unplanned inventory change of $0.0 trillion.

The expenditure multiplier occurs because

Real GDP (billions of 2005 dollars) Aggregate expenditure (billions of 2005 dollars) 10 10.50 11 11.25 12 12.00 13 12.75 14 13.50 15 14.25 -The above table gives real GDP and the aggregate expenditure schedule.When real GDP is $15 billion, the amount of unplanned investment is

When disposable income increases,

Compare and contrast Say's views of the macroeconomy with that of Keynes.What do each have to say about the economy in relationship to its potential level of real GDP?

Suppose an economy has no income taxes or imports.If the MPC is 0.75, what does the expenditure multiplier equal?

When disposable income increases from $9 trillion to $10 trillion, consumption expenditure increases from $6 trillion to $6.8 trillion.The MPC is

Using the aggregate expenditure model, the equilibrium level of the aggregate expenditure can occur when the economy is producing

If actual aggregate expenditure equals aggregate planned expenditure, then

In Germany, expected future income increased during 2010.This increase lead to

Explain why the expenditure multiplier is greater than 1.

If a country has an expenditure multiplier of 10, the slope of its aggregate planned expenditure (AE) curve is

If autonomous spending decreases, then

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

When aggregate planned expenditure real GDP, there are unplanned in inventories, and firms production, therefore decreasing real GDP.