Question 1

Which of the following would NOT occur if the price level changes?

Accepted Answer

A)  a shift in the aggregate demand curve 
B)  a shift in the aggregate expenditure curve 
C)  a new value for equilibrium real GDP demanded 
D)  a change in the real value of dollar-denominated assets 
A)  a shift in the aggregate demand curve 
B)  a shift in the aggregate expenditure curve 
C)  a new value for equilibrium real GDP demanded 
D)  a change in the real value of dollar-denominated assets

Question 2

As disposable income increases, how is consumption spending affected?

Accepted Answer

A)  Consumption spending increases by the same amount as disposable income increases. 
B)  Consumption spending decreases by the same amount as disposable income increases. 
C)  Consumption spending increases by less than the increase in disposable income. 
D)  Consumption spending decreases by less than the increase in disposable income. 
A)  Consumption spending increases by the same amount as disposable income increases. 
B)  Consumption spending decreases by the same amount as disposable income increases. 
C)  Consumption spending increases by less than the increase in disposable income. 
D)  Consumption spending decreases by less than the increase in disposable income.

Question 3

$$\begin{array} { c c c } 
\hline \begin{array} { c } 
\text { Real } \
\text { GDP } \
( \$ )
\end{array} & \begin{array} { c } 
\text { Consumption } \
( \$ )
\end{array} & \begin{array} { c } 
\text { Planned } \
\text { investment } \
( \$ )
\end{array} \
\hline 0 & 140 & 100 \
100 & 220 & 100 \
200 & 300 & 100 \
300 & 380 & 100 \
400 & 460 & 100 \
500 & 540 & 100 \
600 & 620 & 100 \
700 & 700 & 100 \
800 & 780 & 100 \
900 & 860 & 100 \
1,000 & 940 & 100 \
1,100 & 1,020 & 100 \
1,200 & 1,100 & 100 \
1,300 & 1,180 & 100 \
\hline
\end{array}$$
-Refer to the table in the exhibit.What is the MPC in the economy represented?

Accepted Answer

A)  0 
B)  0.2 
C)  0.8 
D)  0.9 
A)  0 
B)  0.2 
C)  0.8 
D)  0.9

Question 4

What do economists assume is the fundamental motive of investors?

Accepted Answer

A)  to maximize profit 
B)  to maximize income 
C)  to maximize the firm's growth 
D)  to maximize savings 
A)  to maximize profit 
B)  to maximize income 
C)  to maximize the firm's growth 
D)  to maximize savings

Question 5

How is a household's net wealth calculated?

Accepted Answer

A)  as the household's current income minus the value of its liabilities 
B)  as the household's assets minus its tax liabilities 
C)  as the household's assets minus its liabilities 
D)  as the household's assets minus its income 
A)  as the household's current income minus the value of its liabilities 
B)  as the household's assets minus its tax liabilities 
C)  as the household's assets minus its liabilities 
D)  as the household's assets minus its income

Question 6

What would be the result of a decrease in autonomous saving?

Accepted Answer

A)  an upward shift of the aggregate expenditure line 
B)  an upward shift of the 45-degree line 
C)  a decrease in the equilibrium level of real GDP demanded 
D)  an increase in the level of autonomous consumption 
A)  an upward shift of the aggregate expenditure line 
B)  an upward shift of the 45-degree line 
C)  a decrease in the equilibrium level of real GDP demanded 
D)  an increase in the level of autonomous consumption

Question 7

Which of the following is assumed constant along the aggregate expenditure line?

Accepted Answer

A)  the price level 
B)  consumption 
C)  unintended inventory adjustment 
D)  actual investment 
A)  the price level 
B)  consumption 
C)  unintended inventory adjustment 
D)  actual investment

Question 8

Suppose an economy has no government and no international transactions.What is aggregate expenditure at each level of income equal to?

Accepted Answer

A)  consumption plus saving 
B)  planned investment plus saving 
C)  planned investment minus savings 
D)  consumption plus planned investment 
A)  consumption plus saving 
B)  planned investment plus saving 
C)  planned investment minus savings 
D)  consumption plus planned investment

Question 9

Which of the following would cause a rightward shift of the aggregate demand curve?

Accepted Answer

A)  an increase in planned investment 
B)  a drop in the price level 
C)  a rise in the price level 
D)  a decrease in autonomous consumption 
A)  an increase in planned investment 
B)  a drop in the price level 
C)  a rise in the price level 
D)  a decrease in autonomous consumption

Question 10

Which of the following is NOT a characteristic of the government purchase function?

Accepted Answer

A)  Government purchases are autonomous with respect to current income. 
B)  Government purchases exclude transfer payments. 
C)  Government purchases are directly related to government income. 
D)  Government purchases have increased over the last 40 years. 
A)  Government purchases are autonomous with respect to current income. 
B)  Government purchases exclude transfer payments. 
C)  Government purchases are directly related to government income. 
D)  Government purchases have increased over the last 40 years.

Question 11

Suppose households save $40 billion less at each level of income, and the MPC = 0.8.How will the aggregate expenditure line will be affected?

Accepted Answer

A)  It will shift upward by $40 billion. 
B)  It will shift downward by $40 billion. 
C)  It will shift upward by $200 billion because of the multiplier. 
D)  It will shift downward by $200 billion because of the multiplier. 
A)  It will shift upward by $40 billion. 
B)  It will shift downward by $40 billion. 
C)  It will shift upward by $200 billion because of the multiplier. 
D)  It will shift downward by $200 billion because of the multiplier.

Question 12

Which of the following does NOT happen when planned aggregate expenditure is greater than output?

Accepted Answer

A)  Real GDP demanded rises. 
B)  Real GDP demanded falls. 
C)  Real GDP demanded stays the same. 
D)  Real GDP demanded first rises, and then falls. 
A)  Real GDP demanded rises. 
B)  Real GDP demanded falls. 
C)  Real GDP demanded stays the same. 
D)  Real GDP demanded first rises, and then falls.

Question 13

Suppose autonomous investment decreases by $60 billion.How will the equilibrium real GDP demanded be affected?

Accepted Answer

A)  It will increase by $60 billion. 
B)  It will decrease by $60 billion. 
C)  It will decrease by $60 billion × MPC. 
D)  It will decrease by $60 billion/MPS. 
A)  It will increase by $60 billion. 
B)  It will decrease by $60 billion. 
C)  It will decrease by $60 billion × MPC. 
D)  It will decrease by $60 billion/MPS.

Question 14

\(\begin{array}{l}
\text { Schedule for Real GDP, Net Taxes and Government Purchases (Trillions of Dollars) }\
\begin{array}{ccccccccc}
\hline \begin{array}{c}
\text { Real } \
\text { GDP }
\end{array} & \begin{array}{c}
\text { Net } \
\text { taxes }
\end{array} & \begin{array}{c}
\text { Disposable } \
\text { income } \
(Y)
\end{array} & \begin{array}{c}
\text { Consumption } \
(N T)
\end{array} & \begin{array}{c}
\text { Saving } \
(Y-N T)
\end{array} & \begin{array}{c}
\text { Planned } \
\text { investment } \
(S)
\end{array} & \begin{array}{c}
\text { Net } \
\text { exports } \
(N X)
\end{array} & \begin{array}{c}
\text { Government } \
\text { purchases } \
(G)
\end{array} & \begin{array}{c}
\text { Planned } \
\text { aggregate } \
\text { expenditure } \
(C+I+N X+G)
\end{array} \
\hline 3.0 & 0.9 & 2.1 & 2.0 & 0.1 & 0.5 & -0.2 & 0.9 & 3.2 \
3.6 & 0.9 & 2.7 & 2.4 & 0.3 & 0.5 & -0.2 & 0.9 & 3.5 \
4.2 & 0.9 & 3.3 & 2.8 & 0.5 & 0.5 & -0.2 & 0.9 & 4.0 \
4.8 & 0.9 & 3.9 & 3.2 & 0.7 & 0.5 & -0.2 & 0.9 & 4.4 \
5.4 & 0.9 & 4.5 & 3.6 & 0.9 & 0.5 & -0.2 & 0.9 & 4.8 \
\hline
\end{array}
\end{array}\)
-Refer to the table in the exhibit.Which variables are autonomous?

Accepted Answer

A)  Only saving and consumption are autonomous. 
B)  Only net taxes and government purchases are autonomous. 
C)  Only net exports and government purchases are autonomous. 
D)  Investment, net exports, net taxes, and government purchases are autonomous. 
A)  Only saving and consumption are autonomous. 
B)  Only net taxes and government purchases are autonomous. 
C)  Only net exports and government purchases are autonomous. 
D)  Investment, net exports, net taxes, and government purchases are autonomous.

Question 15

If the MPS is 0.25, what is the simple multiplier?

Accepted Answer

A)  4 
B)  5 
C)  25 
D)  75 
A)  4 
B)  5 
C)  25 
D)  75

Question 16

How would an economist use an aggregate expenditure line to trace out a single aggregate demand curve?

Accepted Answer

A)  by letting changes in autonomous spending shift the aggregate expenditure line 
B)  by letting changes in the price level shift the aggregate expenditure line 
C)  by letting changes in the level of income shift the aggregate expenditure line 
D)  by letting changes in real GDP shift the aggregate expenditure line 
A)  by letting changes in autonomous spending shift the aggregate expenditure line 
B)  by letting changes in the price level shift the aggregate expenditure line 
C)  by letting changes in the level of income shift the aggregate expenditure line 
D)  by letting changes in real GDP shift the aggregate expenditure line

Question 17

Suppose business managers become more pessimistic about future sales and profits.How will this affect the autonomous investment function?

Accepted Answer

A)  It will create a rightward movement along the autonomous investment function. 
B)  It will create a leftward movement along the autonomous investment function. 
C)  It will create an upward shift of the autonomous investment function. 
D)  It will create a downward shift of the autonomous investment function. 
A)  It will create a rightward movement along the autonomous investment function. 
B)  It will create a leftward movement along the autonomous investment function. 
C)  It will create an upward shift of the autonomous investment function. 
D)  It will create a downward shift of the autonomous investment function.

Question 18

Which of the following would cause a leftward shift of the aggregate demand curve?

Accepted Answer

A)  an increase in planned investment 
B)  a drop in the price level 
C)  a rise in the price level 
D)  anything that causes an upward shift in the saving function 
A)  an increase in planned investment 
B)  a drop in the price level 
C)  a rise in the price level 
D)  anything that causes an upward shift in the saving function

Question 19

Suppose the marginal propensity to consume is 3/4.What is the simple multiplier?

Accepted Answer

A)  3 
B)  4 
C)  7 
D)  25 
A)  3 
B)  4 
C)  7 
D)  25

Question 20

Which of the following best describes the simple spending multiplier?

Accepted Answer

A)  having a bird in the hand rather than two in the bush 
B)  two wrongs making a right 
C)  the spreading of ripples from a stone thrown in a pond 
D)  getting too much of a good thing 
A)  having a bird in the hand rather than two in the bush 
B)  two wrongs making a right 
C)  the spreading of ripples from a stone thrown in a pond 
D)  getting too much of a good thing

Which of the following would NOT occur if the price level changes?

As disposable income increases, how is consumption spending affected?

What do economists assume is the fundamental motive of investors?

How is a household's net wealth calculated?

What would be the result of a decrease in autonomous saving?

Which of the following is assumed constant along the aggregate expenditure line?

Suppose an economy has no government and no international transactions.What is aggregate expenditure at each level of income equal to?

Which of the following would cause a rightward shift of the aggregate demand curve?

Which of the following is NOT a characteristic of the government purchase function?

Suppose households save $40 billion less at each level of income, and the MPC = 0.8.How will the aggregate expenditure line will be affected?

Which of the following does NOT happen when planned aggregate expenditure is greater than output?

Suppose autonomous investment decreases by $60 billion.How will the equilibrium real GDP demanded be affected?

If the MPS is 0.25, what is the simple multiplier?

How would an economist use an aggregate expenditure line to trace out a single aggregate demand curve?

Suppose business managers become more pessimistic about future sales and profits.How will this affect the autonomous investment function?

Which of the following would cause a leftward shift of the aggregate demand curve?

Suppose the marginal propensity to consume is 3/4.What is the simple multiplier?

Which of the following best describes the simple spending multiplier?

The Art and Science of Economic Analysis

Economic Tools and Economic Systems

Economic Decision Makers

Demand, Supply, and Markets

Algebraic Approach to Demand, Supply, and Equilibrium

Introduction to Macroeconomics

Tracking the Canadian Economy

Unemployment and Inflation

Productivity and Growth

Aggregate Supply

Fiscal Policy

Money and the Financial System

Banking and the Money Supply

Monetary Theory and Policy in an Open Economy

Macro Policy Debate: Active or Passive

International Finance

International Trade

Economic Development

Understanding Graphs

Filters

Exam 10: Aggregate Expenditure and Aggregate Demand

Which of the following would NOT occur if the price level changes?

As disposable income increases, how is consumption spending affected?

What do economists assume is the fundamental motive of investors?

How is a household's net wealth calculated?

What would be the result of a decrease in autonomous saving?

Which of the following is assumed constant along the aggregate expenditure line?

Suppose an economy has no government and no international transactions.What is aggregate expenditure at each level of income equal to?

Which of the following would cause a rightward shift of the aggregate demand curve?

Which of the following is NOT a characteristic of the government purchase function?

Suppose households save $40 billion less at each level of income, and the MPC = 0.8.How will the aggregate expenditure line will be affected?

Which of the following does NOT happen when planned aggregate expenditure is greater than output?

Suppose autonomous investment decreases by $60 billion.How will the equilibrium real GDP demanded be affected?

If the MPS is 0.25, what is the simple multiplier?

How would an economist use an aggregate expenditure line to trace out a single aggregate demand curve?

Suppose business managers become more pessimistic about future sales and profits.How will this affect the autonomous investment function?

Which of the following would cause a leftward shift of the aggregate demand curve?

Suppose the marginal propensity to consume is 3/4.What is the simple multiplier?

Which of the following best describes the simple spending multiplier?

The Art and Science of Economic Analysis

Economic Tools and Economic Systems

Economic Decision Makers

Demand, Supply, and Markets

Algebraic Approach to Demand, Supply, and Equilibrium

Introduction to Macroeconomics

Tracking the Canadian Economy

Unemployment and Inflation

Productivity and Growth

Aggregate Supply

Fiscal Policy

Money and the Financial System

Banking and the Money Supply

Monetary Theory and Policy in an Open Economy

Macro Policy Debate: Active or Passive

International Finance

International Trade

Economic Development

Understanding Graphs

Filters