Question 1

An increase in the price level will

Accepted Answer

A) shift the aggregate demand curve to the right 
B) shift the aggregate demand curve to the left 
C) increase the level of aggregate quantity demanded 
D) decrease the level of aggregate quantity demanded 
E) have no effect at all on aggregate demand 
A) shift the aggregate demand curve to the right 
B) shift the aggregate demand curve to the left 
C) increase the level of aggregate quantity demanded 
D) decrease the level of aggregate quantity demanded 
E) have no effect at all on aggregate demand D

Question 2

If the marginal propensity to consume in your classmate's nation is 3/5 and the marginal propensity to save in your country is 1/10, which of the following must be true?

Accepted Answer

A) The spending multiplier is larger in your classmate's nation than in your country. 
B) The spending multiplier is smaller in your classmate's nation than in your country. 
C) Autonomous consumption is higher in your classmate's nation than in your country. 
D) Autonomous consumption is lower in your classmate's nation than in your country. 
E) Total consumption is lower in your classmate's nation than in your country. 
A) The spending multiplier is larger in your classmate's nation than in your country. 
B) The spending multiplier is smaller in your classmate's nation than in your country. 
C) Autonomous consumption is higher in your classmate's nation than in your country. 
D) Autonomous consumption is lower in your classmate's nation than in your country. 
E) Total consumption is lower in your classmate's nation than in your country. B

Question 3

What is the effect of an increase in the price level?

Accepted Answer

A) The real value of dollar-denominated assets will rise. 
B) The aggregate expenditure line will shift upward. 
C) The equilibrium level of output demanded will fall. 
D) There will be downward movement along a particular aggregate demand curve. 
E) The aggregate demand curve will shift rightward. 
A) The real value of dollar-denominated assets will rise. 
B) The aggregate expenditure line will shift upward. 
C) The equilibrium level of output demanded will fall. 
D) There will be downward movement along a particular aggregate demand curve. 
E) The aggregate demand curve will shift rightward. C

Question 4

Aggregate expenditure means total or combined spending.

Accepted Answer

A) True 
 B)False

Question 5

If households save $40 billion less at each level of income and the MPC = 0.8, the aggregate expenditure line will

Accepted Answer

A) not be affected 
B) shift upward by $40 billion 
C) shift downward by $40 billion 
D) shift upward by $200 billion because of the multiplier 
E) shift downward by $200 billion because of the multiplier 
A) not be affected 
B) shift upward by $40 billion 
C) shift downward by $40 billion 
D) shift upward by $200 billion because of the multiplier 
E) shift downward by $200 billion because of the multiplier

Question 6

Exhibit 10-5  
-In Exhibit 10-5, assume the economy is in equilibrium with real GDP of $5 trillion dollars. If aggregate expenditure (AE) increases by $1 trillion, we would expect the economy's equilibrium real GDP to

Accepted Answer

A) increase by $1 trillion 
B) increase by more than $1 trillion 
C) increase by less than $1 trillion 
D) decrease by $1 trillion 
E) remain unchanged 
A) increase by $1 trillion 
B) increase by more than $1 trillion 
C) increase by less than $1 trillion 
D) decrease by $1 trillion 
E) remain unchanged

Question 7

Exhibit 10-6  
-According to the graph in Exhibit 10-6, if the price level increases, the new equilibrium level of real GDP must be

Accepted Answer

A) less than $20 
B) less than $100 
C) zero 
D) greater than $100 
E) greater than $200 
A) less than $20 
B) less than $100 
C) zero 
D) greater than $100 
E) greater than $200

Question 8

The aggregate demand curve slopes downward to the right, reflecting a relationship between the price level and

Accepted Answer

A) real GDP 
B) interest rates 
C) the saving rate 
D) the investment level 
E) the consumption level 
A) real GDP 
B) interest rates 
C) the saving rate 
D) the investment level 
E) the consumption level

Question 9

If autonomous consumption rises by $0.8 trillion and the marginal propensity to consume (MPC) equals 3/4, the equilibrium level of output demanded will rise by

Accepted Answer

A) $0.2 trillion 
B) $0.6 trillion 
C) $1.07 trillion 
D) $2.4 trillion 
E) $3.2 trillion 
A) $0.2 trillion 
B) $0.6 trillion 
C) $1.07 trillion 
D) $2.4 trillion 
E) $3.2 trillion

Question 10

Exhibit 10-2
  
-In Exhibit 10-2, the equilibrium level of GDP is

Accepted Answer

A) $5.0 trillion 
B) $5.5 trillion 
C) $6.0 trillion 
D) $6.5 trillion 
E) $7.0 trillion 
A) $5.0 trillion 
B) $5.5 trillion 
C) $6.0 trillion 
D) $6.5 trillion 
E) $7.0 trillion

Question 11

If the price level rises,

Accepted Answer

A) the aggregate expenditures line shifts upward; the economy moves downward along the aggregate demand curve 
B) the aggregate expenditures line shifts downward; the economy moves upward along the aggregate demand curve 
C) the aggregate demand curve shifts to the right; the economy moves along the aggregate expenditure line 
D) the aggregate demand curve shifts to the left; the economy moves along the aggregate expenditure line 
E) the aggregate expenditure line shifts upward; the aggregate demand curve shifts to the right 
A) the aggregate expenditures line shifts upward; the economy moves downward along the aggregate demand curve 
B) the aggregate expenditures line shifts downward; the economy moves upward along the aggregate demand curve 
C) the aggregate demand curve shifts to the right; the economy moves along the aggregate expenditure line 
D) the aggregate demand curve shifts to the left; the economy moves along the aggregate expenditure line 
E) the aggregate expenditure line shifts upward; the aggregate demand curve shifts to the right

Question 12

If the price level increases, other things constant, consumption spending

Accepted Answer

A) increases because real income rises 
B) decreases because real income rises 
C) increases because the real value of wealth increases 
D) decreases because the real value of wealth decreases 
E) increases because nominal income increases 
A) increases because real income rises 
B) decreases because real income rises 
C) increases because the real value of wealth increases 
D) decreases because the real value of wealth decreases 
E) increases because nominal income increases

Question 13

Movement along the aggregate expenditure curve is caused by a change in the level of income.

Accepted Answer

A) True 
 B)False

Question 14

To simplify the aggregate expenditure model, we assume that there is no

Accepted Answer

A) consumption 
B) income 
C) government purchases 
D) net private investment 
E) capital depreciation nor business saving 
A) consumption 
B) income 
C) government purchases 
D) net private investment 
E) capital depreciation nor business saving

Question 15

Exhibit 10-1
  
-In Exhibit 10-1, given that leakages must equal injections in equilibrium, which of the following is true?

Accepted Answer

A) S + NT + NX = G + I 
B) S = I 
C) C + S = G + I 
D) S + NT = NX + G + I 
E) the answer is indeterminate 
A) S + NT + NX = G + I 
B) S = I 
C) C + S = G + I 
D) S + NT = NX + G + I 
E) the answer is indeterminate

Question 16

The simple spending multiplier is like

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 
E) having too many chefs in the kitchen 
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 
E) having too many chefs in the kitchen

Question 17

A decrease in the price level will

Accepted Answer

A) shift the aggregate expenditure line upward 
B) shift the aggregate expenditure line downward 
C) cause a movement up along the aggregate expenditure line 
D) cause a movement down along the aggregate expenditure line 
E) have no effect on the aggregate expenditure or the equilibrium level of real GDP 
A) shift the aggregate expenditure line upward 
B) shift the aggregate expenditure line downward 
C) cause a movement up along the aggregate expenditure line 
D) cause a movement down along the aggregate expenditure line 
E) have no effect on the aggregate expenditure or the equilibrium level of real GDP

Question 18

Suppose that a pair of graphs represents a situation in which both the aggregate expenditure line and the aggregate demand curve have shifted. You can conclude that the shift of the aggregate expenditure line was caused by a change in

Accepted Answer

A) disposable income 
B) the price level 
C) the level of income 
D) autonomous investment 
E) the level of real GDP 
A) disposable income 
B) the price level 
C) the level of income 
D) autonomous investment 
E) the level of real GDP

Question 19

Suppose that the multiplier is 4, autonomous investment rises by $50 billion, and autonomous consumption falls by $50 billion at the same time. Which of the following is true?

Accepted Answer

A) Equilibrium GDP demanded will be the same, but the type of goods produced will be different. 
B) Equilibrium GDP demanded will increase by $200 billion. 
C) Equilibrium GDP demanded will decrease by $200 billion. 
D) Equilibrium GDP demanded will increase by $400 billion. 
E) Equilibrium GDP demanded will decrease by $400 billion. 
A) Equilibrium GDP demanded will be the same, but the type of goods produced will be different. 
B) Equilibrium GDP demanded will increase by $200 billion. 
C) Equilibrium GDP demanded will decrease by $200 billion. 
D) Equilibrium GDP demanded will increase by $400 billion. 
E) Equilibrium GDP demanded will decrease by $400 billion.

Question 20

If the simple multiplier is 8, the marginal propensity to consume is

Accepted Answer

A) 1/8 
B) 1/4 
C) 4/5 
D) 7/8 
E) 8 
A) 1/8 
B) 1/4 
C) 4/5 
D) 7/8 
E) 8

Exam 10: Aggregate Expenditure and Aggregate Demand

An increase in the price level will

If the marginal propensity to consume in your classmate's nation is 3/5 and the marginal propensity to save in your country is 1/10, which of the following must be true?

What is the effect of an increase in the price level?

Aggregate expenditure means total or combined spending.

If households save $40 billion less at each level of income and the MPC = 0.8, the aggregate expenditure line will

Exhibit 10-5 -In Exhibit 10-5, assume the economy is in equilibrium with real GDP of $5 trillion dollars. If aggregate expenditure (AE) increases by $1 trillion, we would expect the economy's equilibrium real GDP to

Exhibit 10-6 -According to the graph in Exhibit 10-6, if the price level increases, the new equilibrium level of real GDP must be

The aggregate demand curve slopes downward to the right, reflecting a relationship between the price level and

If autonomous consumption rises by $0.8 trillion and the marginal propensity to consume (MPC) equals 3/4, the equilibrium level of output demanded will rise by

Exhibit 10-2 -In Exhibit 10-2, the equilibrium level of GDP is

If the price level rises,

If the price level increases, other things constant, consumption spending

Movement along the aggregate expenditure curve is caused by a change in the level of income.

To simplify the aggregate expenditure model, we assume that there is no

Exhibit 10-1 -In Exhibit 10-1, given that leakages must equal injections in equilibrium, which of the following is true?

The simple spending multiplier is like

A decrease in the price level will

Suppose that a pair of graphs represents a situation in which both the aggregate expenditure line and the aggregate demand curve have shifted. You can conclude that the shift of the aggregate expenditure line was caused by a change in

Suppose that the multiplier is 4, autonomous investment rises by $50 billion, and autonomous consumption falls by $50 billion at the same time. Which of the following is true?

If the simple multiplier is 8, the marginal propensity to consume is

The Art and Science of Economic Analysis

Economic Tools and Economics Systems

Economic Decision Makers

Demand Supply and Markets

Introduction to Macroeconomics

Tracking the Us Economy

Unemployment and Inflation

Productivity and Growth

Aggregate Expenditure

Aggregate Supply

Fiscal Policy

Federal Budgets and Public Policy

Money and the Financial System

Banking and the Money Supply

The Algebra of Income and Expenditure

Monetary Theory and Policy

Macro Policy Debate: Active or Passive

The Algebra of Demand-Side Equilibrium

International Trade

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National Income Accounts

Understanding Graphs

Variable Net Exports

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