Question 1

On the aggregate expenditure graph, if autonomous saving increases by $15 billion,

Accepted Answer

A) the aggregate expenditure line shifts upward by $15 billion 
B) planned investment increases by $15 billion 
C) the aggregate expenditure line shifts downward by $15 billion 
D) planned investment decreases by $15 billion 
E) the equilibrium level of real GDP demanded decreases by $15 billion 
A) the aggregate expenditure line shifts upward by $15 billion 
B) planned investment increases by $15 billion 
C) the aggregate expenditure line shifts downward by $15 billion 
D) planned investment decreases by $15 billion 
E) the equilibrium level of real GDP demanded decreases by $15 billion

Question 2

The smaller the marginal propensity to save, other things constant,

Accepted Answer

A) the smaller the marginal propensity to consume 
B) the larger the marginal propensity to consume 
C) the smaller the multiplier 
D) the flatter the consumption function 
E) the steeper the saving function 
A) the smaller the marginal propensity to consume 
B) the larger the marginal propensity to consume 
C) the smaller the multiplier 
D) the flatter the consumption function 
E) the steeper the saving function

Question 3

A decrease 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

Question 4

The loss of jobs as a result of the September 11, 2001, attack in New York

Accepted Answer

A) affected all sectors of the economy because of the multiplier effect 
B) affected only the airline and travel industries 
C) had little effect on the national economy 
D) was concentrated in New York City 
E) explains why job losses are larger within a state than for the nation as a whole 
A) affected all sectors of the economy because of the multiplier effect 
B) affected only the airline and travel industries 
C) had little effect on the national economy 
D) was concentrated in New York City 
E) explains why job losses are larger within a state than for the nation as a whole

Question 5

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

Question 6

If the price level decreases,

Accepted Answer

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

Question 7

If the marginal propensity to consume equals 0.9, the multiplier is

Accepted Answer

A) 1 
B) 2 
C) 5 
D) 10 
E) 12 
A) 1 
B) 2 
C) 5 
D) 10 
E) 12

Question 8

On the aggregate expenditure graph, if autonomous investment increases by $20 billion,

Accepted Answer

A) the aggregate expenditure line shifts upward by $20 billion 
B) planned saving increases by $20 billion 
C) the aggregate expenditure line shifts downward by $20 billion 
D) planned saving decreases by $20 billion 
E) the equilibrium level of real GDP demanded increases by $20 billion 
A) the aggregate expenditure line shifts upward by $20 billion 
B) planned saving increases by $20 billion 
C) the aggregate expenditure line shifts downward by $20 billion 
D) planned saving decreases by $20 billion 
E) the equilibrium level of real GDP demanded increases by $20 billion

Question 9

The economy will expand if

Accepted Answer

A) leakages exceed injections 
B) injections exceed leakages 
C) leakages equal injections 
D) expenditures are less than output 
E) saving exceeds investment 
A) leakages exceed injections 
B) injections exceed leakages 
C) leakages equal injections 
D) expenditures are less than output 
E) saving exceeds investment

Question 10

When the real estate market in the United States crashed in 2006, it caused a significant decline in net wealth.

Accepted Answer

A) True 
 B)False

Question 11

Which is true regarding the marginal propensity to consume and the multiplier?

Accepted Answer

A) The lower the MPC, the higher the multiplier. 
B) The higher the MPC, the lower the multiplier. 
C) The MPC equals the multiplier. 
D) The sum of the MPC and the multiplier equals 1. 
E) The lower the MPC, the lower the multiplier. 
A) The lower the MPC, the higher the multiplier. 
B) The higher the MPC, the lower the multiplier. 
C) The MPC equals the multiplier. 
D) The sum of the MPC and the multiplier equals 1. 
E) The lower the MPC, the lower the multiplier.

Question 12

When current real production of goods and services (real GDP) is greater than planned aggregate expenditure

Accepted Answer

A) inventories of goods and services are rising 
B) firms will increase production to replenish depleted inventories 
C) businesses and households will increase planned aggregate spending because it is in their interest to promote employment 
D) the price level will automatically rise to restore equilibrium in the economy 
E) leakages must equal planned injections 
A) inventories of goods and services are rising 
B) firms will increase production to replenish depleted inventories 
C) businesses and households will increase planned aggregate spending because it is in their interest to promote employment 
D) the price level will automatically rise to restore equilibrium in the economy 
E) leakages must equal planned injections

Question 13

If people spend 2/3 of any extra income they receive, new autonomous spending of $10 causes equilibrium to increase by

Accepted Answer

A) $6.67 
B) $16.67 
C) $15.00 
D) $30.00 
E) $45.00 
A) $6.67 
B) $16.67 
C) $15.00 
D) $30.00 
E) $45.00

Question 14

The larger the MPS, the smaller the multiplier effect.

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

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

Question 16

Which of the following is not included in the aggregate expenditure line?

Accepted Answer

A) C 
B) P 
C) I 
D) G 
E) (X-M) 
A) C 
B) P 
C) I 
D) G 
E) (X-M)

Question 17

The smaller the marginal propensity to save, other things constant,

Accepted Answer

A) the smaller the marginal propensity to consume 
B) the smaller the multiplier 
C) the flatter the consumption function 
D) the steeper the consumption function 
E) the steeper the saving function 
A) the smaller the marginal propensity to consume 
B) the smaller the multiplier 
C) the flatter the consumption function 
D) the steeper the consumption function 
E) the steeper the saving function

Question 18

Movement along the aggregate demand curve may be caused by a change in autonomous investment spending.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following best describes the multiplier?

Accepted Answer

A) It shows the magnified change in planned aggregate spending that arises from a change in output. 
B) It shows the magnified change in equilibrium output demanded that arises from a change in income. 
C) It shows the magnified change in planned aggregate spending that arises from a change in equilibrium output. 
D) It shows the magnified change in equilibrium output demanded that arises from a change in planned aggregate spending. 
E) It shows the change in planned aggregate spending that arises from a change in real output. 
A) It shows the magnified change in planned aggregate spending that arises from a change in output. 
B) It shows the magnified change in equilibrium output demanded that arises from a change in income. 
C) It shows the magnified change in planned aggregate spending that arises from a change in equilibrium output. 
D) It shows the magnified change in equilibrium output demanded that arises from a change in planned aggregate spending. 
E) It shows the change in planned aggregate spending that arises from a change in real output.

Question 20

If the marginal propensity to consume is 4/5, the simple multiplier is

Accepted Answer

A) 1/6 
B) 6 
C) 5/6 
D) 6/5 
E) 5 
A) 1/6 
B) 6 
C) 5/6 
D) 6/5 
E) 5

Exam 10: Aggregate Expenditure and Aggregate Demand

On the aggregate expenditure graph, if autonomous saving increases by $15 billion,

The smaller the marginal propensity to save, other things constant,

A decrease in the price level will

The loss of jobs as a result of the September 11, 2001, attack in New York

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

If the price level decreases,

If the marginal propensity to consume equals 0.9, the multiplier is

On the aggregate expenditure graph, if autonomous investment increases by $20 billion,

The economy will expand if

When the real estate market in the United States crashed in 2006, it caused a significant decline in net wealth.

Which is true regarding the marginal propensity to consume and the multiplier?

When current real production of goods and services (real GDP) is greater than planned aggregate expenditure

If people spend 2/3 of any extra income they receive, new autonomous spending of $10 causes equilibrium to increase by

The larger the MPS, the smaller the multiplier effect.

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

Which of the following is not included in the aggregate expenditure line?

The smaller the marginal propensity to save, other things constant,

Movement along the aggregate demand curve may be caused by a change in autonomous investment spending.

Which of the following best describes the multiplier?

If the marginal propensity to consume is 4/5, the simple multiplier 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

International Finance

Economic Development

National Income Accounts

Understanding Graphs

Variable Net Exports

Variable Net Exports Revisited

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