Question 1

If planned spending exceeds planned output, the result is

Accepted Answer

A) unintended inventory increases 
B) a reduction in GDP 
C) a decrease in imports 
D) an increase in government purchases 
E) unintended inventory reductions 
A) unintended inventory increases 
B) a reduction in GDP 
C) a decrease in imports 
D) an increase in government purchases 
E) unintended inventory reductions

Question 2

A decrease in planned investment would shift the

Accepted Answer

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

Question 3

As the U.S. price level rises relative to price levels in other countries, what would happen in the U.S.?

Accepted Answer

A) consumption and net exports would decline 
B) consumption and net exports would increase 
C) consumption would increase and net exports would decrease 
D) consumption would decrease and net exports would increase 
E) consumption and net exports would remain constant 
A) consumption and net exports would decline 
B) consumption and net exports would increase 
C) consumption would increase and net exports would decrease 
D) consumption would decrease and net exports would increase 
E) consumption and net exports would remain constant

Question 4

The simple multiplier equals

Accepted Answer

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

Question 5

A decrease in the price level will have which of the following effects?

Accepted Answer

A) The real value of dollar-denominated assets will fall. 
B) The aggregate expenditure line will shift downward. 
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 leftward. 
A) The real value of dollar-denominated assets will fall. 
B) The aggregate expenditure line will shift downward. 
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 leftward.

Question 6

If consumer spending increases, other things constant, the aggregate demand curve shifts inward.

Accepted Answer

A) True 
 B)False

Question 7

If an economy is in equilibrium when net taxes = $50 trillion, saving = $40 trillion, government purchases = $50 trillion, exports = $30 trillion, and imports = $10 trillion, then planned investment spending must equal

Accepted Answer

A) zero 
B) $50 
C) $10 
D) $20 
E) the answer is indeterminate 
A) zero 
B) $50 
C) $10 
D) $20 
E) the answer is indeterminate

Question 8

An increase 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 line 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 line or the equilibrium level of real GDP

Question 9

Job losses soon after the September 11 attacks could be viewed as just part of the first round of reduced aggregate expenditure. The second round occurred when

Accepted Answer

A) government starting spending more on national security 
B) people who lost jobs or feared they would lose their jobs started spending less 
C) businesses invested in back-up data centers in case their main computers were attacked 
D) consumers went back to shopping at the urging of government officials 
E) All of the answers are correct 
A) government starting spending more on national security 
B) people who lost jobs or feared they would lose their jobs started spending less 
C) businesses invested in back-up data centers in case their main computers were attacked 
D) consumers went back to shopping at the urging of government officials 
E) All of the answers are correct

Question 10

Consumption plus saving equals disposable income at every level of real GDP demanded.

Accepted Answer

A) True 
 B)False

Question 11

A decrease in the price level will have which of the following effects?

Accepted Answer

A) The real value of dollar-denominated assets will fall. 
B) The aggregate expenditure line will shift downward. 
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 leftward. 
A) The real value of dollar-denominated assets will fall. 
B) The aggregate expenditure line will shift downward. 
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 leftward.

Question 12

Suppose that planned autonomous investment increases by $200 billion and that the marginal propensity to consume equals 0.80. The equilibrium level of real GDP will increase by

Accepted Answer

A) $40 billion 
B) $160 billion 
C) $200 billion 
D) $250 billion 
E) $1,000 billion 
A) $40 billion 
B) $160 billion 
C) $200 billion 
D) $250 billion 
E) $1,000 billion

Question 13

The economy will contract (shrink) if

Accepted Answer

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

Question 14

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 flatter the saving 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 flatter the saving function 
E) the steeper the saving function

Question 15

If the multiplier is 4, a $10 billion increase in autonomous investment will cause a

Accepted Answer

A) $10 billion increase in equilibrium investment 
B) $40 billion increase in equilibrium investment 
C) $40 billion increase in equilibrium real GDP demanded 
D) $400 billion increase in equilibrium real GDP demanded 
E) $40 billion increase in consumption spending 
A) $10 billion increase in equilibrium investment 
B) $40 billion increase in equilibrium investment 
C) $40 billion increase in equilibrium real GDP demanded 
D) $400 billion increase in equilibrium real GDP demanded 
E) $40 billion increase in consumption spending

Question 16

If autonomous investment decreases by $60 billion, equilibrium real GDP demanded will

Accepted Answer

A) increase by $60 billion 
B) decrease by $60 billion 
C) decrease by ($60 billion) *MPC 
D) decrease by $60 billion * (1 - MP
C)  
E) decrease by $60 billion/MPS 
A) increase by $60 billion 
B) decrease by $60 billion 
C) decrease by ($60 billion) *MPC 
D) decrease by $60 billion * (1 - MP
C)  
E) decrease by $60 billion/MPS

Question 17

Which of the following would cause a rightward shift of the aggregate demand curve?

Accepted Answer

A) an increase in planned investment 
B) a drop in the price level 
C) a rise in the price level 
D) a decrease in autonomous consumption 
E) anything that causes an upward shift in the saving function 
A) an increase in planned investment 
B) a drop in the price level 
C) a rise in the price level 
D) a decrease in autonomous consumption 
E) anything that causes an upward shift in the saving function

Question 18

A decrease in the price level will have which of the following effects?

Accepted Answer

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

Question 19

The aggregate expenditure line shows

Accepted Answer

A) real GDP on the horizontal axis and aggregate expenditure on the vertical axis 
B) aggregate expenditure on the horizontal axis and real GDP on the vertical axis 
C) consumption on the horizontal axis and aggregate expenditure on the vertical axis 
D) aggregate expenditure on the horizontal axis and consumption on the vertical axis 
E) investment on the horizontal axis and aggregate expenditure on the vertical axis 
A) real GDP on the horizontal axis and aggregate expenditure on the vertical axis 
B) aggregate expenditure on the horizontal axis and real GDP on the vertical axis 
C) consumption on the horizontal axis and aggregate expenditure on the vertical axis 
D) aggregate expenditure on the horizontal axis and consumption on the vertical axis 
E) investment on the horizontal axis and aggregate expenditure on the vertical axis

Question 20

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

Accepted Answer

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

Exam 10: Aggregate Expenditure and Aggregate Demand

If planned spending exceeds planned output, the result is

A decrease in planned investment would shift the

As the U.S. price level rises relative to price levels in other countries, what would happen in the U.S.?

The simple multiplier equals

A decrease in the price level will have which of the following effects?

If consumer spending increases, other things constant, the aggregate demand curve shifts inward.

If an economy is in equilibrium when net taxes = $50 trillion, saving = $40 trillion, government purchases = $50 trillion, exports = $30 trillion, and imports = $10 trillion, then planned investment spending must equal

An increase in the price level will

Job losses soon after the September 11 attacks could be viewed as just part of the first round of reduced aggregate expenditure. The second round occurred when

Consumption plus saving equals disposable income at every level of real GDP demanded.

A decrease in the price level will have which of the following effects?

Suppose that planned autonomous investment increases by $200 billion and that the marginal propensity to consume equals 0.80. The equilibrium level of real GDP will increase by

The economy will contract (shrink) if

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

If the multiplier is 4, a $10 billion increase in autonomous investment will cause a

If autonomous investment decreases by $60 billion, equilibrium real GDP demanded will

Which of the following would cause a rightward shift of the aggregate demand curve?

A decrease in the price level will have which of the following effects?

The aggregate expenditure line shows

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

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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