Question 1

Suppose the multiplier is 3.What would be the cause of a $20 billion increase in autonomous consumption?

Accepted Answer

A)  a $20 billion increase in equilibrium consumption 
B)  a $60 billion increase in equilibrium consumption 
C)  a $20 billion increase in equilibrium real GDP demanded 
D)  a $60 billion increase in equilibrium real GDP demanded 
A)  a $20 billion increase in equilibrium consumption 
B)  a $60 billion increase in equilibrium consumption 
C)  a $20 billion increase in equilibrium real GDP demanded 
D)  a $60 billion increase in equilibrium real GDP demanded

Question 2

Suppose business managers become more optimistic 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 3

Which of the following is equal to the simple multiplier?

Accepted Answer

A)  the marginal propensity to save 
B)  the marginal propensity to consume 
C)  the reciprocal of the marginal propensity to save 
D)  the reciprocal of the marginal propensity to consume 
A)  the marginal propensity to save 
B)  the marginal propensity to consume 
C)  the reciprocal of the marginal propensity to save 
D)  the reciprocal of the marginal propensity to consume

Question 4

\(\begin{array}{l}
\text { Schedule for Real GDP, Net Taxes and Government Purchases (Trillions of Dollars) }\
\begin{array}{ccccccccc}
\hline \begin{array}{c}
\text { Real } \
\text { GDP }
\end{array} & \begin{array}{c}
\text { Net } \
\text { taxes }
\end{array} & \begin{array}{c}
\text { Disposable } \
\text { income } \
(Y)
\end{array} & \begin{array}{c}
\text { Consumption } \
(N T)
\end{array} & \begin{array}{c}
\text { Saving } \
(Y-N T)
\end{array} & \begin{array}{c}
\text { Planned } \
\text { investment } \
(S)
\end{array} & \begin{array}{c}
\text { Net } \
\text { exports } \
(N X)
\end{array} & \begin{array}{c}
\text { Government } \
\text { purchases } \
(G)
\end{array} & \begin{array}{c}
\text { Planned } \
\text { aggregate } \
\text { expenditure } \
(C+I+N X+G)
\end{array} \
\hline 3.0 & 0.9 & 2.1 & 2.0 & 0.1 & 0.5 & -0.2 & 0.9 & 3.2 \
3.6 & 0.9 & 2.7 & 2.4 & 0.3 & 0.5 & -0.2 & 0.9 & 3.5 \
4.2 & 0.9 & 3.3 & 2.8 & 0.5 & 0.5 & -0.2 & 0.9 & 4.0 \
4.8 & 0.9 & 3.9 & 3.2 & 0.7 & 0.5 & -0.2 & 0.9 & 4.4 \
5.4 & 0.9 & 4.5 & 3.6 & 0.9 & 0.5 & -0.2 & 0.9 & 4.8 \
\hline
\end{array}
\end{array}\)
-Refer to the table in the exhibit.What is the state of the government's budget?

Accepted Answer

A)  The government's budget is in surplus. 
B)  The government's budget is in deficit. 
C)  The government's budget is in balance. 
D)  The data are insufficient for determining the state of the government's budget. 
A)  The government's budget is in surplus. 
B)  The government's budget is in deficit. 
C)  The government's budget is in balance. 
D)  The data are insufficient for determining the state of the government's budget.

Question 5

Suppose Herbert spends two-thirds of any extra income he receives.And suppose that Herbert engages in new autonomous spending of $10, which causes equilibrium to increase.What is the amount of the equilibrium increase?

Accepted Answer

A)  $6.67 
B)  $15.00 
C)  $16.67 
D)  $30.00 
A)  $6.67 
B)  $15.00 
C)  $16.67 
D)  $30.00

Question 6

Which of the following will cause the economy to contract?

Accepted Answer

A)  if leakages exceed injections 
B)  if injections exceed leakages 
C)  if expenditures exceed output 
D)  if investment exceeds saving 
A)  if leakages exceed injections 
B)  if injections exceed leakages 
C)  if expenditures exceed output 
D)  if investment exceeds saving

Question 7

Other things constant, how would a smaller marginal propensity to save affect the multiplier?

Accepted Answer

A)  The multiplier would increase. 
B)  The multiplier would remain the same. 
C)  The multiplier would become smaller. 
D)  The multiplier would be negative. 
A)  The multiplier would increase. 
B)  The multiplier would remain the same. 
C)  The multiplier would become smaller. 
D)  The multiplier would be negative.

Question 8

Suppose the price level increases.What will be the likely effect on dollar-denominated assets?

Accepted Answer

A)  The real value of dollar-denominated assets will fall. 
B)  The real value of dollar-denominated assets will rise. 
C)  The real value of dollar-denominated assets will remain the same. 
D)  The real value of dollar-denominated assets will become negative. 
A)  The real value of dollar-denominated assets will fall. 
B)  The real value of dollar-denominated assets will rise. 
C)  The real value of dollar-denominated assets will remain the same. 
D)  The real value of dollar-denominated assets will become negative.

Question 9

How will a decrease in the price level affect the aggregate demand curve?

Accepted Answer

A)  It will shift the aggregate demand curve to the left. 
B)  It will shift the aggregate demand curve to the right. 
C)  It will result in a movement up and to the left along the aggregate demand curve. 
D)  It will result in a movement down and to the right along the aggregate demand curve. 
A)  It will shift the aggregate demand curve to the left. 
B)  It will shift the aggregate demand curve to the right. 
C)  It will result in a movement up and to the left along the aggregate demand curve. 
D)  It will result in a movement down and to the right along the aggregate demand curve.

Question 10

-Refer to the table in the exhibit.At the equilibrium level of GDP, what does saving equal?

Accepted Answer

A)  $0.3 trillion 
B)  $0.4 trillion 
C)  $0.5 trillion 
D)  $0.6 trillion 
A)  $0.3 trillion 
B)  $0.4 trillion 
C)  $0.5 trillion 
D)  $0.6 trillion

Question 11

Which of the following does NOT characterize what happens at the equilibrium quantity of GDP demanded?

Accepted Answer

A)  Planned investment equals actual investment. 
B)  Planned investment equals saving. 
C)  Planned investment is greater than unintended inventory adjustment. 
D)  Planned injections into the circular flow are less than planned leakages out of the flow. 
A)  Planned investment equals actual investment. 
B)  Planned investment equals saving. 
C)  Planned investment is greater than unintended inventory adjustment. 
D)  Planned injections into the circular flow are less than planned leakages out of the flow.

Question 12

Suppose autonomous investment increases by $100 billion.How will the equilibrium real GDP demanded be affected?

Accepted Answer

A)  It will increase by $100 billion. 
B)  It will increase by ($100 billion)/MPC. 
C)  It will increase by $100 billion × MPC. 
D)  It will increase by $100 billion/MPS. 
A)  It will increase by $100 billion. 
B)  It will increase by ($100 billion)/MPC. 
C)  It will increase by $100 billion × MPC. 
D)  It will increase by $100 billion/MPS.

Question 13

What is the marginal propensity to consume?

Accepted Answer

A)  It is the decrease in disposable income that occurs as a result of an increase in consumption. 
B)  It is the increase in disposable income that occurs as a result of an increase in consumption. 
C)  It is the decrease in consumption that occurs as a result of an increase in disposable income. 
D)  It is the increase in consumption that occurs as a result of an increase in disposable income. 
A)  It is the decrease in disposable income that occurs as a result of an increase in consumption. 
B)  It is the increase in disposable income that occurs as a result of an increase in consumption. 
C)  It is the decrease in consumption that occurs as a result of an increase in disposable income. 
D)  It is the increase in consumption that occurs as a result of an increase in disposable income.

Question 14

Historically, what has happened to consumption spending in Canada as a percentage of income?

Accepted Answer

A)  Consumption spending in Canada as a percentage of income has increased. 
B)  Consumption spending in Canada as a percentage of income has remained approximately the same. 
C)  Consumption spending in Canada as a percentage of income has decreased. 
D)  Consumption spending in Canada as a percentage of income has increased more than income. 
A)  Consumption spending in Canada as a percentage of income has increased. 
B)  Consumption spending in Canada as a percentage of income has remained approximately the same. 
C)  Consumption spending in Canada as a percentage of income has decreased. 
D)  Consumption spending in Canada as a percentage of income has increased more than income.

Question 15

What is the most important determinant of a household's consumption spending?

Accepted Answer

A)  its disposable income 
B)  its total wealth 
C)  the number of persons in the household 
D)  its net wealth 
A)  its disposable income 
B)  its total wealth 
C)  the number of persons in the household 
D)  its net wealth

Question 16

What would be the effect of a decrease in the price level?

Accepted Answer

A)  a downward shift in the aggregate expenditure line 
B)  a rise in the equilibrium level of output demanded 
C)  an upward movement along a particular aggregate demand curve 
D)  a leftward shift in the aggregate demand curve 
A)  a downward shift in the aggregate expenditure line 
B)  a rise in the equilibrium level of output demanded 
C)  an upward movement along a particular aggregate demand curve 
D)  a leftward shift in the aggregate demand curve

Question 17

-Refer to the table in the exhibit.What does the marginal propensity to save (MPS) equal?

Accepted Answer

A)  0.80, or 4/5 
B)  0.60, or 3/5 
C)  0.40, or 2/5 
D)  0.20, or 1/5 
A)  0.80, or 4/5 
B)  0.60, or 3/5 
C)  0.40, or 2/5 
D)  0.20, or 1/5

Question 18

-Refer to the graph in the exhibit.Suppose the price level decreases.What will the new equilibrium level of real GDP be?

Accepted Answer

A)  $100 
A)  $100

Question 19

Suppose the price level rises.How would this affect the aggregate expenditure line and the aggregate demand curve?

Accepted Answer

A)  The aggregate expenditure line would shift upward, and the economy would move downward along the aggregate demand curve. 
B)  The aggregate expenditure line would shift downward, and the economy would move upward along the aggregate demand curve. 
C)  The aggregate demand curve would shift to the right, and the economy would move along the aggregate expenditure line. 
D)  The aggregate demand curve would shift to the left, and the economy would move along the aggregate expenditure line. 
A)  The aggregate expenditure line would shift upward, and the economy would move downward along the aggregate demand curve. 
B)  The aggregate expenditure line would shift downward, and the economy would move upward along the aggregate demand curve. 
C)  The aggregate demand curve would shift to the right, and the economy would move along the aggregate expenditure line. 
D)  The aggregate demand curve would shift to the left, and the economy would move along the aggregate expenditure line.

Question 20

Which of the following would be an effect of a decline in the Canadian price level, other things constant?

Accepted Answer

A)  It would stimulate Canadian exports, pushing the aggregate demand curve to the right. 
B)  It would stimulate Canadian imports, pushing the aggregate demand curve to the right. 
C)  It would stimulate Canadian exports but discourage imports, causing a rightward movement along a given aggregate demand curve. 
D)  It would discourage Canadian exports but stimulate imports, causing a rightward movement along a given aggregate demand curve. 
A)  It would stimulate Canadian exports, pushing the aggregate demand curve to the right. 
B)  It would stimulate Canadian imports, pushing the aggregate demand curve to the right. 
C)  It would stimulate Canadian exports but discourage imports, causing a rightward movement along a given aggregate demand curve. 
D)  It would discourage Canadian exports but stimulate imports, causing a rightward movement along a given aggregate demand curve.

Suppose the multiplier is 3.What would be the cause of a $20 billion increase in autonomous consumption?

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

Which of the following is equal to the simple multiplier?

Suppose Herbert spends two-thirds of any extra income he receives.And suppose that Herbert engages in new autonomous spending of $10, which causes equilibrium to increase.What is the amount of the equilibrium increase?

Which of the following will cause the economy to contract?

Other things constant, how would a smaller marginal propensity to save affect the multiplier?

Suppose the price level increases.What will be the likely effect on dollar-denominated assets?

How will a decrease in the price level affect the aggregate demand curve?

-Refer to the table in the exhibit.At the equilibrium level of GDP, what does saving equal?

Which of the following does NOT characterize what happens at the equilibrium quantity of GDP demanded?

Suppose autonomous investment increases by $100 billion.How will the equilibrium real GDP demanded be affected?

What is the marginal propensity to consume?

Historically, what has happened to consumption spending in Canada as a percentage of income?

What is the most important determinant of a household's consumption spending?

What would be the effect of a decrease in the price level?

-Refer to the table in the exhibit.What does the marginal propensity to save (MPS) equal?

-Refer to the graph in the exhibit.Suppose the price level decreases.What will the new equilibrium level of real GDP be?

Suppose the price level rises.How would this affect the aggregate expenditure line and the aggregate demand curve?

Which of the following would be an effect of a decline in the Canadian price level, other things constant?

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

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Exam 10: Aggregate Expenditure and Aggregate Demand

Suppose the multiplier is 3.What would be the cause of a $20 billion increase in autonomous consumption?

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

Which of the following is equal to the simple multiplier?

Suppose Herbert spends two-thirds of any extra income he receives.And suppose that Herbert engages in new autonomous spending of $10, which causes equilibrium to increase.What is the amount of the equilibrium increase?

Which of the following will cause the economy to contract?

Other things constant, how would a smaller marginal propensity to save affect the multiplier?

Suppose the price level increases.What will be the likely effect on dollar-denominated assets?

How will a decrease in the price level affect the aggregate demand curve?

-Refer to the table in the exhibit.At the equilibrium level of GDP, what does saving equal?

Which of the following does NOT characterize what happens at the equilibrium quantity of GDP demanded?

Suppose autonomous investment increases by $100 billion.How will the equilibrium real GDP demanded be affected?

What is the marginal propensity to consume?

Historically, what has happened to consumption spending in Canada as a percentage of income?

What is the most important determinant of a household's consumption spending?

What would be the effect of a decrease in the price level?

-Refer to the table in the exhibit.What does the marginal propensity to save (MPS) equal?

-Refer to the graph in the exhibit.Suppose the price level decreases.What will the new equilibrium level of real GDP be?

Suppose the price level rises.How would this affect the aggregate expenditure line and the aggregate demand curve?

Which of the following would be an effect of a decline in the Canadian price level, other things constant?

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