Question 1

What does the marginal propensity to consume tell us?

Accepted Answer

A) how much of our total income we spend on current consumption 
B) how much additional income is spent on consumption 
C) how much of aggregate expenditures will be allocated to consumption spending 
D) how much induced consumption there is in the economy 
E) the relationship between autonomous and induced consumption 
A) how much of our total income we spend on current consumption 
B) how much additional income is spent on consumption 
C) how much of aggregate expenditures will be allocated to consumption spending 
D) how much induced consumption there is in the economy 
E) the relationship between autonomous and induced consumption

Question 2

Other things being equal, a decrease in an economy's exports will

Accepted Answer

A) increase domestic aggregate expenditures and the equilibrium level of output 
B) decrease domestic aggregate expenditures and the equilibrium level of output 
C) have no impact on domestic aggregate expenditures or output 
D) decrease the marginal propensity to import 
E) change autonomous consumption 
A) increase domestic aggregate expenditures and the equilibrium level of output 
B) decrease domestic aggregate expenditures and the equilibrium level of output 
C) have no impact on domestic aggregate expenditures or output 
D) decrease the marginal propensity to import 
E) change autonomous consumption

Question 3

A fall in the price level will shift the aggregate expenditure curve

Accepted Answer

A) upward and shift the aggregate demand curve to the right 
B) upward and shift the aggregate demand curve to the left 
C) downward and shift the aggregate demand curve to the left 
D) downward and shift the aggregate demand curve to the right 
E) upward and cause a movement along the aggregate demand curve 
A) upward and shift the aggregate demand curve to the right 
B) upward and shift the aggregate demand curve to the left 
C) downward and shift the aggregate demand curve to the left 
D) downward and shift the aggregate demand curve to the right 
E) upward and cause a movement along the aggregate demand curve

Question 4

If the level of autonomous spending decreases at a given price level,

Accepted Answer

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

Question 5

Which of the following best describes aggregate expenditure?

Accepted Answer

A) C + I + G + (X - M) 
B) C + S + G + (X - M) 
C) C + I + G + (X + M) 
D) C + I + T + (X - M) 
E) C + I + T + (X + M) 
A) C + I + G + (X - M) 
B) C + S + G + (X - M) 
C) C + I + G + (X + M) 
D) C + I + T + (X - M) 
E) C + I + T + (X + M)

Question 6

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

Accepted Answer

A) 0 
B) 0.2 
C) 0.8 
D) 0.9 
E) 80 
A) 0 
B) 0.2 
C) 0.8 
D) 0.9 
E) 80

Question 7

At the equilibrium level of real GDP, unplanned inventory adjustment equals

Accepted Answer

A) planned investment 
B) saving 
C) zero 
D) actual investment 
E) consumption 
A) planned investment 
B) saving 
C) zero 
D) actual investment 
E) consumption

Question 8

If the full employment level of income is $1200 billion and the present level of income is $1000 billion

Accepted Answer

A) an inflationary gap exists 
B) autonomous expenditure is too low for a full employment equilibrium 
C) autonomous expenditure is too high for a full employment equilibrium 
D) a decrease in autonomous expenditure is required 
E) government purchases of goods and services should be reduced 
A) an inflationary gap exists 
B) autonomous expenditure is too low for a full employment equilibrium 
C) autonomous expenditure is too high for a full employment equilibrium 
D) a decrease in autonomous expenditure is required 
E) government purchases of goods and services should be reduced

Question 9

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 downward. 
C) The equilibrium level of output demanded will rise. 
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 downward. 
C) The equilibrium level of output demanded will rise. 
D) There will be downward movement along a particular aggregate demand curve. 
E) The aggregate demand curve will shift rightward.

Question 10

Suppose that at a particular level of real GDP, the unintended change in inventories is zero. Which of the following is true?

Accepted Answer

A) That level of real GDP is less than the equilibrium level of real GDP demanded. 
B) That level of real GDP is greater than the equilibrium level of real GDP demanded. 
C) That level of real GDP is the equilibrium level of real GDP demanded. 
D) At that level of real GDP, there is no inflation. 
E) At that level of real GDP, there is no saving. 
A) That level of real GDP is less than the equilibrium level of real GDP demanded. 
B) That level of real GDP is greater than the equilibrium level of real GDP demanded. 
C) That level of real GDP is the equilibrium level of real GDP demanded. 
D) At that level of real GDP, there is no inflation. 
E) At that level of real GDP, there is no saving.

Question 11

Increases in the marginal propensity to consume, other things constant,

Accepted Answer

A) increase the value of the multiplier 
B) decrease the value of the multiplier 
C) never change the value of the multiplier 
D) shift the aggregate expenditure curve downward 
E) cause a downward movement along an aggregate expenditure curve 
A) increase the value of the multiplier 
B) decrease the value of the multiplier 
C) never change the value of the multiplier 
D) shift the aggregate expenditure curve downward 
E) cause a downward movement along an aggregate expenditure curve

Question 12

In the simple aggregate expenditure model, the slope of the aggregate expenditure line depends on

Accepted Answer

A) interest rates 
B) government budget policy 
C) the price level 
D) the marginal propensity to consume 
E) all of the above 
A) interest rates 
B) government budget policy 
C) the price level 
D) the marginal propensity to consume 
E) all of the above

Question 13

Exhibit 10-3  
-Which of the following best describes the situation at point B in Exhibit 10-3?

Accepted Answer

A) consumption expenditures exceeds disposable income 
B) real GDP exceeds aggregate expenditure 
C) aggregate expenditure is exactly equal to real GDP 
D) aggregate expenditure exceeds real GDP 
E) producers are experiencing an unexpected accumulation of inventory 
A) consumption expenditures exceeds disposable income 
B) real GDP exceeds aggregate expenditure 
C) aggregate expenditure is exactly equal to real GDP 
D) aggregate expenditure exceeds real GDP 
E) producers are experiencing an unexpected accumulation of inventory

Question 14

A primary determinant of consumption spending is new wealth.

Accepted Answer

A) True 
 B)False

Question 15

An increase in planned investment would shift the

Accepted Answer

A) aggregate demand curve outward 
B) aggregate demand curve inward 
C) aggregate supply curve outward 
D) aggregate supply curve inward 
E) consumption function upward 
A) aggregate demand curve outward 
B) aggregate demand curve inward 
C) aggregate supply curve outward 
D) aggregate supply curve inward 
E) consumption function upward

Question 16

We can use an aggregate expenditure line to trace out a single aggregate demand curve by

Accepted Answer

A) shifting the 45-degree line 
B) letting changes in autonomous spending shift the aggregate expenditure line 
C) letting changes in the price level shift the aggregate expenditure line 
D) letting changes in the level of income shift the aggregate expenditure line 
E) letting changes in real GDP shift the aggregate expenditure line 
A) shifting the 45-degree line 
B) letting changes in autonomous spending shift the aggregate expenditure line 
C) letting changes in the price level shift the aggregate expenditure line 
D) letting changes in the level of income shift the aggregate expenditure line 
E) letting changes in real GDP shift the aggregate expenditure line

Question 17

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 rise. 
D) There will be upward 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 rise. 
D) There will be upward movement along a particular aggregate demand curve. 
E) The aggregate demand curve will shift rightward.

Question 18

An increase in the U.S. price level, other things constant, would

Accepted Answer

A) increase U.S. exports and decrease U.S. imports 
B) increase U.S. exports and leave U.S. imports unchanged 
C) decrease U.S. exports and increase U.S. imports 
D) decrease U.S. exports and leave U.S. imports unchanged 
E) leave both U.S. exports and U.S. imports unchanged 
A) increase U.S. exports and decrease U.S. imports 
B) increase U.S. exports and leave U.S. imports unchanged 
C) decrease U.S. exports and increase U.S. imports 
D) decrease U.S. exports and leave U.S. imports unchanged 
E) leave both U.S. exports and U.S. imports unchanged

Question 19

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

Accepted Answer

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

Question 20

Anything that causes a movement along the aggregate expenditure curve will also cause a shift of the aggregate demand curve.

Accepted Answer

A) True 
 B)False

Exam 10: Aggregate Expenditure and Aggregate Demand

What does the marginal propensity to consume tell us?

Other things being equal, a decrease in an economy's exports will

A fall in the price level will shift the aggregate expenditure curve

If the level of autonomous spending decreases at a given price level,

Which of the following best describes aggregate expenditure?

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

At the equilibrium level of real GDP, unplanned inventory adjustment equals

If the full employment level of income is $1200 billion and the present level of income is $1000 billion

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

Suppose that at a particular level of real GDP, the unintended change in inventories is zero. Which of the following is true?

Increases in the marginal propensity to consume, other things constant,

In the simple aggregate expenditure model, the slope of the aggregate expenditure line depends on

Exhibit 10-3 -Which of the following best describes the situation at point B in Exhibit 10-3?

A primary determinant of consumption spending is new wealth.

An increase in planned investment would shift the

We can use an aggregate expenditure line to trace out a single aggregate demand curve by

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

An increase in the U.S. price level, other things constant, would

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

Anything that causes a movement along the aggregate expenditure curve will also cause a shift of the aggregate demand curve.

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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