Question 1

The aggregate expenditure model is

Accepted Answer

A) most useful in explaining situations where changes in aggregate expenditures cause the price level to change 
B) not useful in situations where changes in aggregate expenditures cause the price level to change 
C) helpful in explaining situations where the economy is plagued by inflationary pressures 
D) the reciprocal of the aggregate demand model 
E) most useful when we are dealing with an economy dominated by a foreign sector 
A) most useful in explaining situations where changes in aggregate expenditures cause the price level to change 
B) not useful in situations where changes in aggregate expenditures cause the price level to change 
C) helpful in explaining situations where the economy is plagued by inflationary pressures 
D) the reciprocal of the aggregate demand model 
E) most useful when we are dealing with an economy dominated by a foreign sector

Question 2

An increase in the price level will

Accepted Answer

A) shift the aggregate demand curve to the left 
B) shift the aggregate demand curve to the right 
C) result in a movement up to the left along the aggregate demand curve 
D) result in a movement down to the right along the aggregate demand curve 
E) have no effect on the aggregate quantity demanded 
A) shift the aggregate demand curve to the left 
B) shift the aggregate demand curve to the right 
C) result in a movement up to the left along the aggregate demand curve 
D) result in a movement down to the right along the aggregate demand curve 
E) have no effect on the aggregate quantity demanded

Question 3

If current aggregate expenditure equals current production, the economy is in equilibrium.

Accepted Answer

A) True 
 B)False

Question 4

If there are no unintended changes in inventories, the economy is at its equilibrium level of real GDP demanded.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following would result from 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 
E) an increase in the level of autonomous investment 
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 
E) an increase in the level of autonomous investment

Question 6

Exhibit 10-2
  
-At the equilibrium level of GDP in Exhibit 10-2, injections equal

Accepted Answer

A) $1.0 trillion 
B) $1.5 trillion 
C) $1.4 trillion 
D) $1.2 trillion 
E) $1.3 trillion 
A) $1.0 trillion 
B) $1.5 trillion 
C) $1.4 trillion 
D) $1.2 trillion 
E) $1.3 trillion

Question 7

If the multiplier is 3, a $20 billion increase in autonomous consumption will cause a

Accepted Answer

A) $20 billion increase in equilibrium consumption 
B) $60 billion increase in equilibrium consumption 
C) $20 billion increase in equilibrium real GDP demanded 
D) $60 billion increase in equilibrium real GDP demanded 
E) $60 billion decrease in autonomous saving 
A) $20 billion increase in equilibrium consumption 
B) $60 billion increase in equilibrium consumption 
C) $20 billion increase in equilibrium real GDP demanded 
D) $60 billion increase in equilibrium real GDP demanded 
E) $60 billion decrease in autonomous saving

Question 8

Exhibit 10-4
  
-The MPS in the economy represented in Exhibit 10-4 is

Accepted Answer

A) 0 
B) 0.1 
C) 0.2 
D) 0.8 
E) 20 
A) 0 
B) 0.1 
C) 0.2 
D) 0.8 
E) 20

Question 9

During the 2007-2009 recession in the United States, the component of consumption spending that was impacted the most was

Accepted Answer

A) durable goods 
B) nondurable goods 
C) saving 
D) investment 
E) services 
A) durable goods 
B) nondurable goods 
C) saving 
D) investment 
E) services

Question 10

On the aggregate expenditure graph, if autonomous investment decreases by $10 billion,

Accepted Answer

A) the aggregate expenditure line shifts upward by $10 billion 
B) planned saving increases by $10 billion 
C) the aggregate expenditure line shifts downward by $10 billion 
D) planned saving decreases by $10 billion 
E) the equilibrium level of real GDP demanded increases by $10 billion 
A) the aggregate expenditure line shifts upward by $10 billion 
B) planned saving increases by $10 billion 
C) the aggregate expenditure line shifts downward by $10 billion 
D) planned saving decreases by $10 billion 
E) the equilibrium level of real GDP demanded increases by $10 billion

Question 11

Exhibit 10-2
  
-At the equilibrium level of GDP in Exhibit 10-2, leakages equal

Accepted Answer

A) $1.4 trillion 
B) $1.3 trillion 
C) $1.5 trillion 
D) $1.0 trillion 
E) $1.1 trillion 
A) $1.4 trillion 
B) $1.3 trillion 
C) $1.5 trillion 
D) $1.0 trillion 
E) $1.1 trillion

Question 12

The equilibrium quantity of aggregate output occurs when

Accepted Answer

A) the economy reaches the full employment of labor 
B) planned aggregate expenditure equals income generated from production 
C) actual aggregate expenditures equal real GDP 
D) inventories of goods and services are increasing 
E) inventories of goods and services are decreasing 
A) the economy reaches the full employment of labor 
B) planned aggregate expenditure equals income generated from production 
C) actual aggregate expenditures equal real GDP 
D) inventories of goods and services are increasing 
E) inventories of goods and services are decreasing

Question 13

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

Accepted Answer

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

Question 14

The aggregate demand curve illustrates a relationship between

Accepted Answer

A) interest rates and income levels 
B) the price level and real GDP 
C) the price level and interest rates 
D) income levels and real GDP levels 
E) income levels and nominal income levels 
A) interest rates and income levels 
B) the price level and real GDP 
C) the price level and interest rates 
D) income levels and real GDP levels 
E) income levels and nominal income levels

Question 15

Exhibit 10-2
  
-The marginal propensity to consume (MPC) in Exhibit 10-2 equals

Accepted Answer

A) 0.20 or 1/5 
B) 0.40 or 2/5 
C) 0.80 or 4/5 
D) 0.90 or 9/10 
E) 0.60 or 3/5 
A) 0.20 or 1/5 
B) 0.40 or 2/5 
C) 0.80 or 4/5 
D) 0.90 or 9/10 
E) 0.60 or 3/5

Question 16

The larger the MPC, the greater the multiplier effect.

Accepted Answer

A) True 
 B)False

Question 17

The aggregate expenditure line shows total planned spending at each

Accepted Answer

A) price level 
B) income level 
C) income level, holding the price level constant 
D) price level, holding the level of income constant 
E) interest rate, holding the price level constant 
A) price level 
B) income level 
C) income level, holding the price level constant 
D) price level, holding the level of income constant 
E) interest rate, holding the price level constant

Question 18

Exhibit 10-1
  
-In Exhibit 10-1, the marginal propensity to save equals

Accepted Answer

A) 5/6 
B) 4/5 
C) 3/4 
D) 1/3 
E) 2/3 
A) 5/6 
B) 4/5 
C) 3/4 
D) 1/3 
E) 2/3

Question 19

If an increase in planned investment of $70 billion causes equilibrium output demanded to rise by $280 billion, the value of the marginal propensity to consume is

Accepted Answer

A) 4 
B) 4/3 
C) 1/3 
D) 1/4 
E) 3/4 
A) 4 
B) 4/3 
C) 1/3 
D) 1/4 
E) 3/4

Question 20

The slope of the aggregate expenditure line equals the marginal propensity to consume.

Accepted Answer

A) True 
 B)False

Exam 10: Aggregate Expenditure and Aggregate Demand

The aggregate expenditure model is

An increase in the price level will

If current aggregate expenditure equals current production, the economy is in equilibrium.

If there are no unintended changes in inventories, the economy is at its equilibrium level of real GDP demanded.

Which of the following would result from a decrease in autonomous saving?

Exhibit 10-2 -At the equilibrium level of GDP in Exhibit 10-2, injections equal

If the multiplier is 3, a $20 billion increase in autonomous consumption will cause a

Exhibit 10-4 -The MPS in the economy represented in Exhibit 10-4 is

During the 2007-2009 recession in the United States, the component of consumption spending that was impacted the most was

On the aggregate expenditure graph, if autonomous investment decreases by $10 billion,

Exhibit 10-2 -At the equilibrium level of GDP in Exhibit 10-2, leakages equal

The equilibrium quantity of aggregate output occurs when

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

The aggregate demand curve illustrates a relationship between

Exhibit 10-2 -The marginal propensity to consume (MPC) in Exhibit 10-2 equals

The larger the MPC, the greater the multiplier effect.

The aggregate expenditure line shows total planned spending at each

Exhibit 10-1 -In Exhibit 10-1, the marginal propensity to save equals

If an increase in planned investment of $70 billion causes equilibrium output demanded to rise by $280 billion, the value of the marginal propensity to consume is

The slope of the aggregate expenditure line equals the marginal propensity to consume.

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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