Question 1

In the simple aggregate expenditures model, planned investment is

Accepted Answer

A) a function of disposable income 
B) a function of profit expectations 
C) a function of the interest rate 
D) autonomous 
E) all of the above 
A) a function of disposable income 
B) a function of profit expectations 
C) a function of the interest rate 
D) autonomous 
E) all of the above

Question 2

In the income-expenditure framework, if planned aggregate expenditures are less than real GDP,

Accepted Answer

A) then saving must be larger than consumption 
B) the price level will increase 
C) inventories will increase 
D) inventories will decrease 
E) consumption will decrease 
A) then saving must be larger than consumption 
B) the price level will increase 
C) inventories will increase 
D) inventories will decrease 
E) consumption will decrease

Question 3

Exhibit 10-2
  
-At the equilibrium level of GDP in Exhibit 10-2, saving equals

Accepted Answer

A) $0.4 trillion 
B) $0.6 trillion 
C) $0.5 trillion 
D) $0.2 trillion 
E) $0.3 trillion 
A) $0.4 trillion 
B) $0.6 trillion 
C) $0.5 trillion 
D) $0.2 trillion 
E) $0.3 trillion

Question 4

If the simple multiplier is 10, the marginal propensity to save is

Accepted Answer

A) 1/10 
B) 9/10 
C) 1/9 
D) 10/9 
E) 9 
A) 1/10 
B) 9/10 
C) 1/9 
D) 10/9 
E) 9

Question 5

If the spending multiplier is greater than 1.0, a $200 billion increase in autonomous investment will cause

Accepted Answer

A) equilibrium investment to increase by less than $200 billion 
B) equilibrium investment to decrease by more than $200 billion 
C) equilibrium real GDP demanded to increase by more than $200 billion 
D) equilibrium real GDP demanded to decrease by less than $200 billion 
E) equilibrium saving to decrease by more than $200 billion 
A) equilibrium investment to increase by less than $200 billion 
B) equilibrium investment to decrease by more than $200 billion 
C) equilibrium real GDP demanded to increase by more than $200 billion 
D) equilibrium real GDP demanded to decrease by less than $200 billion 
E) equilibrium saving to decrease by more than $200 billion

Question 6

Which of the following is not true?

Accepted Answer

A) When planned aggregate expenditure is greater than output, real GDP demanded will rise. 
B) When planned aggregate expenditure is greater than output, real GDP demanded will fall. 
C) When planned aggregate expenditure is increasing, disposable income and consumption are increasing. 
D) When planned aggregate expenditure is increasing, consumption and saving are both increasing. 
E) As long as planned aggregate expenditure is increasing, real GDP demanded does also. 
A) When planned aggregate expenditure is greater than output, real GDP demanded will rise. 
B) When planned aggregate expenditure is greater than output, real GDP demanded will fall. 
C) When planned aggregate expenditure is increasing, disposable income and consumption are increasing. 
D) When planned aggregate expenditure is increasing, consumption and saving are both increasing. 
E) As long as planned aggregate expenditure is increasing, real GDP demanded does also.

Question 7

Exhibit 10-2
  
-In Exhibit 10-2, the government budget

Accepted Answer

A) has a deficit of $1 trillion 
B) has a surplus of $1 trillion 
C) is balanced 
D) has a deficit of $2 trillion 
E) has a surplus of $2 trillion 
A) has a deficit of $1 trillion 
B) has a surplus of $1 trillion 
C) is balanced 
D) has a deficit of $2 trillion 
E) has a surplus of $2 trillion

Question 8

A decrease 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 and to the left along the aggregate demand curve 
D) result in a movement down and 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 and to the left along the aggregate demand curve 
D) result in a movement down and to the right along the aggregate demand curve 
E) have no effect on the aggregate quantity demanded

Question 9

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

Question 10

Which of the following is not true at the equilibrium quantity of GDP demanded?

Accepted Answer

A) aggregate expenditure equals real GDP 
B) planned investment equals actual investment 
C) planned investment equals saving 
D) planned investment is greater than unintended inventory adjustment 
E) planned injections into the circular flow are less than planned leakages out of the flow 
A) aggregate expenditure equals real GDP 
B) planned investment equals actual investment 
C) planned investment equals saving 
D) planned investment is greater than unintended inventory adjustment 
E) planned injections into the circular flow are less than planned leakages out of the flow

Question 11

If the economy is currently at equilibrium at $1 trillion and the MPC is 0.6, a $100 decrease in government purchases of goods and services will result in a new equilibrium at

Accepted Answer

A) $600 billion 
B) $400 billion 
C) $750 billion 
D) $1.4 trillion 
E) $1.6 trillion 
A) $600 billion 
B) $400 billion 
C) $750 billion 
D) $1.4 trillion 
E) $1.6 trillion

Question 12

Which of the following would cause a leftward 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) an increase 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) an increase in autonomous consumption 
E) anything that causes an upward shift in the saving function

Question 13

If the marginal propensity to consume is 3/4, the simple multiplier is

Accepted Answer

A) 3 
B) 7 
C) 4 
D) 25 
E) 3/10 
A) 3 
B) 7 
C) 4 
D) 25 
E) 3/10

Question 14

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

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 fall. 
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 rise. 
B) The aggregate expenditure line will shift downward. 
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 leftward.

Question 15

A rise 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) downward 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) downward and cause a movement along the aggregate demand curve

Question 16

In a model with neither income taxes nor international trade, 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) Increases in government purchases increase real GDP demanded more per dollar in your country than they do in your classmate's country. 
B) Decreases in government purchases increase real GDP demanded more per dollar in your country than they do in your classmate's country. 
C) Increases in autonomous saving increase real GDP demanded more per dollar in your country than they do in your classmate's country. 
D) Real GDP demanded is higher in your country than in your classmate's country. 
E) Total saving is higher in your classmate's country than in your country. 
A) Increases in government purchases increase real GDP demanded more per dollar in your country than they do in your classmate's country. 
B) Decreases in government purchases increase real GDP demanded more per dollar in your country than they do in your classmate's country. 
C) Increases in autonomous saving increase real GDP demanded more per dollar in your country than they do in your classmate's country. 
D) Real GDP demanded is higher in your country than in your classmate's country. 
E) Total saving is higher in your classmate's country than in your country.

Question 17

Which of the following is not true about a change in the price level?

Accepted Answer

A) It will shift the aggregate demand curve. 
B) It will shift the aggregate expenditure curve. 
C) It will result in a new value of equilibrium real GDP demanded. 
D) It will change the real value of dollar-denominated assets. 
E) It will shift the consumption function. 
A) It will shift the aggregate demand curve. 
B) It will shift the aggregate expenditure curve. 
C) It will result in a new value of equilibrium real GDP demanded. 
D) It will change the real value of dollar-denominated assets. 
E) It will shift the consumption function.

Question 18

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

Accepted Answer

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

Question 19

In the income-expenditure framework, if planned aggregate expenditures are greater than real GDP,

Accepted Answer

A) the price level will fall 
B) consumption must fall 
C) inventories will increase 
D) inventories will decrease 
E) consumption will decrease 
A) the price level will fall 
B) consumption must fall 
C) inventories will increase 
D) inventories will decrease 
E) consumption will decrease

Question 20

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

Accepted Answer

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

Exam 10: Aggregate Expenditure and Aggregate Demand

In the simple aggregate expenditures model, planned investment is

In the income-expenditure framework, if planned aggregate expenditures are less than real GDP,

Exhibit 10-2 -At the equilibrium level of GDP in Exhibit 10-2, saving equals

If the simple multiplier is 10, the marginal propensity to save is

If the spending multiplier is greater than 1.0, a $200 billion increase in autonomous investment will cause

Which of the following is not true?

Exhibit 10-2 -In Exhibit 10-2, the government budget

A decrease in the price level will

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

Which of the following is not true at the equilibrium quantity of GDP demanded?

If the economy is currently at equilibrium at $1 trillion and the MPC is 0.6, a $100 decrease in government purchases of goods and services will result in a new equilibrium at

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

If the marginal propensity to consume is 3/4, the simple multiplier is

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

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

In a model with neither income taxes nor international trade, 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?

Which of the following is not true about a change in the price level?

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

In the income-expenditure framework, if planned aggregate expenditures are greater than real GDP,

The smaller 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

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Economic Development

National Income Accounts

Understanding Graphs

Variable Net Exports

Variable Net Exports Revisited

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