Question 1

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

Question 2

If investment increases by $100 and, as a result, GDP ultimately increases by $200, the multiplier equals

Accepted Answer

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

Question 3

In an economy without a government and without international transactions, aggregate expenditure at each level of income is equal to

Accepted Answer

A) consumption plus saving 
B) planned investment plus saving 
C) disposable income plus the price level 
D) consumption plus planned investment 
E) planned investment minus saving 
A) consumption plus saving 
B) planned investment plus saving 
C) disposable income plus the price level 
D) consumption plus planned investment 
E) planned investment minus saving

Question 4

Exhibit 10-2
  
-In equilibrium in Exhibit 10-2, S + NT = I + G + (X - M) and is equal to

Accepted Answer

A) $1.1 trillion 
B) $1.2 trillion 
C) $1.3 trillion 
D) $1.4 trillion 
E) $1.5 trillion 
A) $1.1 trillion 
B) $1.2 trillion 
C) $1.3 trillion 
D) $1.4 trillion 
E) $1.5 trillion

Question 5

If the price level decreases, other things constant, people consume

Accepted Answer

A) more because nominal income falls 
B) less because nominal income rises 
C) more because the real value of their wealth increases 
D) more because real income increases 
E) less because real income decreases 
A) more because nominal income falls 
B) less because nominal income rises 
C) more because the real value of their wealth increases 
D) more because real income increases 
E) less because real income decreases

Question 6

If autonomous investment expenditures decline because of higher interest rates

Accepted Answer

A) income increases 
B) the rate of return declines 
C) autonomous consumption declines 
D) aggregate demand increases 
E) aggregate demand decreases 
A) income increases 
B) the rate of return declines 
C) autonomous consumption declines 
D) aggregate demand increases 
E) aggregate demand decreases

Question 7

On the aggregate expenditure graph, if autonomous saving decreases 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 8

Exhibit 10-1
  
-In Exhibit 10-1, the equilibrium level of income is

Accepted Answer

A) $5.4 trillion 
B) where real GDP = total planned expenditures 
C) where disposable income = total planned expenditures 
D) $4.8 trillion 
E) where the government has a balanced budget, which is at each level of income in this example 
A) $5.4 trillion 
B) where real GDP = total planned expenditures 
C) where disposable income = total planned expenditures 
D) $4.8 trillion 
E) where the government has a balanced budget, which is at each level of income in this example

Question 9

We can use an aggregate expenditure line to show how an aggregate demand curve shifts 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 10

The aggregate expenditure line, along with the 45-degree line, determines equilibrium. This model is based on the assumption that

Accepted Answer

A) production is constant 
B) production is constant and at the full employment level of GDP 
C) producers are ready to supply whatever amount of output is demanded at the existing price level 
D) producers will supply more at higher prices than they will at lower prices 
E) producers will supply more at lower prices than they will at higher prices 
A) production is constant 
B) production is constant and at the full employment level of GDP 
C) producers are ready to supply whatever amount of output is demanded at the existing price level 
D) producers will supply more at higher prices than they will at lower prices 
E) producers will supply more at lower prices than they will at higher prices

Question 11

Which of the following is true concerning the relationship between the marginal propensity to consume and the consumption function?

Accepted Answer

A) the larger the MPC, the higher the level of autonomous consumption 
B) the larger the MPC, the steeper the consumption function 
C) the larger the MPC, the larger the MPS 
D) The smaller the MPC, the steeper the consumption function 
E) The larger the MPC, the larger the level of autonomous consumption 
A) the larger the MPC, the higher the level of autonomous consumption 
B) the larger the MPC, the steeper the consumption function 
C) the larger the MPC, the larger the MPS 
D) The smaller the MPC, the steeper the consumption function 
E) The larger the MPC, the larger the level of autonomous consumption

Question 12

Which of the following is not a part of planned aggregate spending?

Accepted Answer

A) consumption 
B) investment 
C) government expenditures 
D) net exports 
E) saving 
A) consumption 
B) investment 
C) government expenditures 
D) net exports 
E) saving

Question 13

Only a change in the price level can cause shifts in both the aggregate expenditure line and the aggregate demand curve.

Accepted Answer

A) True 
 B)False

Question 14

Exhibit 10-1
  
-In Exhibit 10-1, the the international sector has

Accepted Answer

A) imports exceeding exports by $200 billion 
B) exports exceeding imports by $200 billion 
C) imports equal to exports 
D) imports equal to $200 billion 
E) exports equal to $200 billion 
A) imports exceeding exports by $200 billion 
B) exports exceeding imports by $200 billion 
C) imports equal to exports 
D) imports equal to $200 billion 
E) exports equal to $200 billion

Question 15

Exhibit 10-2
  
-The marginal propensity to save (MPS) in Exhibit 10-2 equals

Accepted Answer

A) 0.80 or 4/5 
B) 0.60 or 3/5 
C) 0.40 or 2/5 
D) 0.10 or 1/10 
E) 0.20 or 1/5 
A) 0.80 or 4/5 
B) 0.60 or 3/5 
C) 0.40 or 2/5 
D) 0.10 or 1/10 
E) 0.20 or 1/5

Question 16

That fraction of a change in disposable income that is consumed is called

Accepted Answer

A) autonomous consumption 
B) induced consumption 
C) the multiplier 
D) the marginal propensity to consume 
E) the marginal propensity to save 
A) autonomous consumption 
B) induced consumption 
C) the multiplier 
D) the marginal propensity to consume 
E) the marginal propensity to save

Question 17

An increase in autonomous investment will

Accepted Answer

A) shift the aggregate expenditure line upward 
B) shift the aggregate expenditure line downward 
C) result in an upward movement along the aggregate expenditure line 
D) result in a downward movement along the aggregate expenditure line 
E) increase aggregate expenditures only at high levels of income 
A) shift the aggregate expenditure line upward 
B) shift the aggregate expenditure line downward 
C) result in an upward movement along the aggregate expenditure line 
D) result in a downward movement along the aggregate expenditure line 
E) increase aggregate expenditures only at high levels of income

Question 18

A decline in the U.S. price level, other things constant, would

Accepted Answer

A) stimulate U.S. exports, pushing the aggregate demand curve to the right 
B) stimulate U.S. imports, pushing the aggregate demand curve to the right 
C) stimulate U.S. exports but discourage imports, causing a rightward movement along a given aggregate demand curve 
D) discourage U.S. exports but stimulate imports, causing a rightward movement along a given aggregate demand curve 
E) not affect U.S. net exports, so aggregate quantity demanded would remain constant 
A) stimulate U.S. exports, pushing the aggregate demand curve to the right 
B) stimulate U.S. imports, pushing the aggregate demand curve to the right 
C) stimulate U.S. exports but discourage imports, causing a rightward movement along a given aggregate demand curve 
D) discourage U.S. exports but stimulate imports, causing a rightward movement along a given aggregate demand curve 
E) not affect U.S. net exports, so aggregate quantity demanded would remain constant

Question 19

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

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 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 fall. 
B) The aggregate expenditure line will shift upward. 
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 20

Exhibit 10-1
  
-In Exhibit 10-1, the government's budget is

Accepted Answer

A) in surplus 
B) in deficit 
C) in balance 
D) indeterminate from the information given 
E) $0.5 trillion 
A) in surplus 
B) in deficit 
C) in balance 
D) indeterminate from the information given 
E) $0.5 trillion

Exam 10: Aggregate Expenditure and Aggregate Demand

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

If investment increases by $100 and, as a result, GDP ultimately increases by $200, the multiplier equals

In an economy without a government and without international transactions, aggregate expenditure at each level of income is equal to

Exhibit 10-2 -In equilibrium in Exhibit 10-2, S + NT = I + G + (X - M) and is equal to

If the price level decreases, other things constant, people consume

If autonomous investment expenditures decline because of higher interest rates

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

Exhibit 10-1 -In Exhibit 10-1, the equilibrium level of income is

We can use an aggregate expenditure line to show how an aggregate demand curve shifts by

The aggregate expenditure line, along with the 45-degree line, determines equilibrium. This model is based on the assumption that

Which of the following is true concerning the relationship between the marginal propensity to consume and the consumption function?

Which of the following is not a part of planned aggregate spending?

Only a change in the price level can cause shifts in both the aggregate expenditure line and the aggregate demand curve.

Exhibit 10-1 -In Exhibit 10-1, the the international sector has

Exhibit 10-2 -The marginal propensity to save (MPS) in Exhibit 10-2 equals

That fraction of a change in disposable income that is consumed is called

An increase in autonomous investment will

A decline in the U.S. price level, other things constant, would

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

Exhibit 10-1 -In Exhibit 10-1, the government's budget 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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