Question 1

If firms sell exactly what they expected to sell, all of the following will be true except

Accepted Answer

A) aggregate expenditure will be greater than GDP. 
B) there is no unplanned change in inventories. 
C) inventories will not change, and GDP and employment will remain stable. 
D) aggregate expenditure will be equal to GDP. 
E) unplanned investment will be zero. 
A) aggregate expenditure will be greater than GDP. 
B) there is no unplanned change in inventories. 
C) inventories will not change, and GDP and employment will remain stable. 
D) aggregate expenditure will be equal to GDP. 
E) unplanned investment will be zero.

Question 2

An increase in the real interest rate will

Accepted Answer

A) cause consumers to spend more and save less. 
B) most likely lower consumers' purchases of durable goods. 
C) most likely lower the reward to savings. 
D) most likely lower the cost of borrowing. 
E) most likely transfer wealth from lenders to borrowers. 
A) cause consumers to spend more and save less. 
B) most likely lower consumers' purchases of durable goods. 
C) most likely lower the reward to savings. 
D) most likely lower the cost of borrowing. 
E) most likely transfer wealth from lenders to borrowers.

Question 3

If the economy is currently in equilibrium at a level of GDP that is below potential GDP, which of the following would move the economy back to potential GDP?

Accepted Answer

A) an increase in wealth 
B) an increase in interest rates 
C) a decrease in business confidence 
D) an increase in the value of the dollar relative to other currencies 
E) a decrease in government spending 
A) an increase in wealth 
B) an increase in interest rates 
C) a decrease in business confidence 
D) an increase in the value of the dollar relative to other currencies 
E) a decrease in government spending

Question 4

What are the five main determinants of consumption spending? Which of these is the most important?

Accepted Answer

The five main determinants of consumptio

Question 5

Consumption is $5 million, planned investment spending is $8 million, government purchases are $10 million, and net exports are equal to $2 million.If GDP during the same time period is equal to $23 million, what unplanned changes in inventories occurred?

Accepted Answer

A) There was an unplanned increase in inventories equal to $2 million. 
B) There was no unplanned change in inventories. 
C) There was an unplanned decrease in inventories equal to $2 million. 
D) There was an unplanned decrease in inventories equal to $19 million. 
E) There was an unplanned decrease in inventories equal to $3 million. 
A) There was an unplanned increase in inventories equal to $2 million. 
B) There was no unplanned change in inventories. 
C) There was an unplanned decrease in inventories equal to $2 million. 
D) There was an unplanned decrease in inventories equal to $19 million. 
E) There was an unplanned decrease in inventories equal to $3 million.

Question 6

An increase in the price level in Canada will shift the aggregate expenditure line upward.

Accepted Answer

A) True 
 B)False

Question 7

If an increase in investment spending of $20 million results in a $200 million increase in equilibrium real GDP, then

Accepted Answer

A) the multiplier is 0.1. 
B) the multiplier is 1. 
C) the multiplier is 10. 
D) the multiplier is 100. 
E) the multiplier is 180. 
A) the multiplier is 0.1. 
B) the multiplier is 1. 
C) the multiplier is 10. 
D) the multiplier is 100. 
E) the multiplier is 180.

Question 8

Assume disposable income increases by 10000 and consumption increases by 8500, what is the value of MPC

Accepted Answer

A) 0.85 
B) 0.9 
C) 0.95 
D) 0.5 
E) 0.15 
A) 0.85 
B) 0.9 
C) 0.95 
D) 0.5 
E) 0.15

Question 9

The ratio of the increase in equilibrium real GDP to the increase in autonomous expenditure is called the

Accepted Answer

A) MPC. 
B) multiplier. 
C) MPS. 
D) consumption function. 
E) macroeconomic equilibrium. 
A) MPC. 
B) multiplier. 
C) MPS. 
D) consumption function. 
E) macroeconomic equilibrium.

Question 10

If disposable income falls by $40 billion and consumption falls by $30 billion, then the slope of the consumption function is

Accepted Answer

A) 1.33. 
B) 0.75. 
C) 0.4. 
D) 0.3. 
E) 0.25. 
A) 1.33. 
B) 0.75. 
C) 0.4. 
D) 0.3. 
E) 0.25.

Question 11

Higher interest rates increase both consumption and investment spending.

Accepted Answer

A) True 
 B)False

Question 12

The larger the MPC, the larger the value of the multiplier.

Accepted Answer

A) True 
 B)False

Question 13

Table 8.15  
-Refer to Table 8.15.Using the table above, answer the following questions.The numbers in the table are in billions of dollars.
a.What is the equilibrium level of real GDP?
b.What is the MPC?
c.If investment spending declines by $10 billion, what will happen to equilibrium GDP?

Accepted Answer

a.Equilibrium real GDP is determined whe

Question 14

Planned aggregate expenditure is equal to

Accepted Answer

A) consumption spending only. 
B) consumption spending plus planned investment spending. 
C) planned investment spending only. 
D) consumption spending plus planned investment spending plus government purchases plus net exports. 
E) consumption spending plus planned investment spending plus government purchases minus taxes. 
A) consumption spending only. 
B) consumption spending plus planned investment spending. 
C) planned investment spending only. 
D) consumption spending plus planned investment spending plus government purchases plus net exports. 
E) consumption spending plus planned investment spending plus government purchases minus taxes.

Question 15

Equations for C, I, G, and NX are given below.If the equilibrium level of GDP is $32,000, what will the new equilibrium level of GDP be if government spending increases to 2,000? C = 5,000 + (MPC)Y
I = 1,500
G = 2,000
NX = -500

Accepted Answer

A) $32,500 
B) $34,000 
C) $38,000 
D) $42,000 
E) Not enough information is given to answer the question. 
A) $32,500 
B) $34,000 
C) $38,000 
D) $42,000 
E) Not enough information is given to answer the question.

Question 16

Figure 8.6   Alt text for Figure 8.6: In figure 8.6, a graph depicting potential GDP.
Long description for Figure 8.6: The x-axis is labelled, real GDP, Y (billions of 2007 dollars), with values GDP1 and GDP2 marked.The y-axis is labelled, real aggregate expenditure, AE (billions of 2007 dollars).Line AE1, begins a little less than half way along the x-axis and slopes up to the end of the x-axis.Line AE2, begins at a point half way along the x-axis and slopes up to the top right corner.Line AE2 is to the left of AE1 and is on a similar path as line AE1.Line Y = AE, originates at the vertex and slopes up to the top right corner.Line Y = AE meets line AE1 at point K, half way along both lines.Line Y = AE meets line AE2 at point N, plotted close to the right end of line AE2.Point J is plotted a little less than half way along line AE1, to the left of point K.Point L is plotted close to the right end of line AE1, to the right of point K.Point K is connected to its x-coordinate, GDP1, with a dotted line.A straight line, representing potential GDP, is drawn joining points N and L with their x-coordinate, GDP2, such that it is parallel to the point K to GDP1 with a dotted line.
-Refer to Figure 8.6.Potential GDP equals $100 billion.The economy is currently producing GDP1 which is equal to $90 billion.If the MPC is 0.8, then how much must autonomous spending change for the economy to move to potential GDP?

Accepted Answer

A) -$18 billion 
B) -$2 billion 
C) $2 billion 
D) $18 billion 
A) -$18 billion 
B) -$2 billion 
C) $2 billion 
D) $18 billion

Question 17

If the consumption function is defined as C = 7,250 + 0.8Y, what is the autonomous level of consumption expenditure?

Accepted Answer

A) $1,425 
B) $5,800 
C) $7,250 
D) $9,062.50 
E) $9,700 
A) $1,425 
B) $5,800 
C) $7,250 
D) $9,062.50 
E) $9,700

Question 18

Figure 8.7   Alt text for Figure 8.7: In figure 8.7, a graph comparing real GDP and real aggregate expenditure.
Long description for Figure 8.7: The x-axis is labelled, real GDP, Y (trillions of 2002 dollars).The y-axis is labelled, real aggregate expenditure, AE (trillions of 2002 dollars).Line AE1, begins a little less than half way along the x-axis and slopes up to the end of the x-axis.Line AE2, is to the right of AE1 and is on a similar path as line AE1, sloping up to the top right corner.Line Y = AE, originates at the vertex and slopes up to the top right corner.Line Y = AE meets line AE2 at point K, half way along both the lines, and meets line AE1 at point N, plotted close to the right end of line AE1.Point J is plotted a little less than half way along line AE2, to the left of point K.Point L is marked close to the right end of line AE2, to the right of point K.
-Refer to Figure 8.7.Suppose that investment spending decreases by $5 million, decreasing aggregate expenditure and decreasing real GDP from GDP2 to GDP1.If the MPC is 0.8, then what is the change in GDP?

Accepted Answer

A) -$4 million 
B) -$5 million 
C) -$25 million 
D) -$40 million 
E) -$50 million 
A) -$4 million 
B) -$5 million 
C) -$25 million 
D) -$40 million 
E) -$50 million

Question 19

A decrease in the real interest rate will

Accepted Answer

A) cause consumers to spend less and save more. 
B) most likely increase consumer purchases of durable goods. 
C) most likely increase the reward to savings. 
D) most likely increase the cost of borrowing. 
E) most likely transfer wealth from borrowers to lenders. 
A) cause consumers to spend less and save more. 
B) most likely increase consumer purchases of durable goods. 
C) most likely increase the reward to savings. 
D) most likely increase the cost of borrowing. 
E) most likely transfer wealth from borrowers to lenders.

Question 20

How does a decrease in government spending affect the aggregate expenditure line?

Accepted Answer

A) It shifts the aggregate expenditure line upward. 
B) It shifts the aggregate expenditure line downward. 
C) It increases the slope of the aggregate expenditure line. 
D) It decreases the slope of the aggregate expenditure line. 
E) It has no effect on the aggregate expenditure line. 
A) It shifts the aggregate expenditure line upward. 
B) It shifts the aggregate expenditure line downward. 
C) It increases the slope of the aggregate expenditure line. 
D) It decreases the slope of the aggregate expenditure line. 
E) It has no effect on the aggregate expenditure line.

If firms sell exactly what they expected to sell, all of the following will be true except

An increase in the real interest rate will

If the economy is currently in equilibrium at a level of GDP that is below potential GDP, which of the following would move the economy back to potential GDP?

What are the five main determinants of consumption spending? Which of these is the most important?

Consumption is $5 million, planned investment spending is $8 million, government purchases are $10 million, and net exports are equal to $2 million.If GDP during the same time period is equal to $23 million, what unplanned changes in inventories occurred?

An increase in the price level in Canada will shift the aggregate expenditure line upward.

If an increase in investment spending of $20 million results in a $200 million increase in equilibrium real GDP, then

Assume disposable income increases by 10000 and consumption increases by 8500, what is the value of MPC

The ratio of the increase in equilibrium real GDP to the increase in autonomous expenditure is called the

If disposable income falls by $40 billion and consumption falls by $30 billion, then the slope of the consumption function is

Higher interest rates increase both consumption and investment spending.

The larger the MPC, the larger the value of the multiplier.

Table 8.15 -Refer to Table 8.15.Using the table above, answer the following questions.The numbers in the table are in billions of dollars. a.What is the equilibrium level of real GDP? b.What is the MPC? c.If investment spending declines by $10 billion, what will happen to equilibrium GDP?

Planned aggregate expenditure is equal to

Equations for C, I, G, and NX are given below.If the equilibrium level of GDP is $32,000, what will the new equilibrium level of GDP be if government spending increases to 2,000? C = 5,000 + (MPC)Y I = 1,500 G = 2,000 NX = -500

If the consumption function is defined as C = 7,250 + 0.8Y, what is the autonomous level of consumption expenditure?

A decrease in the real interest rate will

How does a decrease in government spending affect the aggregate expenditure line?

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: The Interaction of Supply and Demand

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, The Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Demand and Aggregate Supply Analysis

Money, Banks, and the Bank of Canada

Monetary Policy

Fiscal Policy

Inflation, Unemployment, and Bank of Canada Policy

Macroeconomics in an Open Economy

The International Financial System

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Exam 8: Aggregate Expenditure and Output in the Short Run

If firms sell exactly what they expected to sell, all of the following will be true except

An increase in the real interest rate will

If the economy is currently in equilibrium at a level of GDP that is below potential GDP, which of the following would move the economy back to potential GDP?

What are the five main determinants of consumption spending? Which of these is the most important?

Consumption is $5 million, planned investment spending is $8 million, government purchases are $10 million, and net exports are equal to $2 million.If GDP during the same time period is equal to $23 million, what unplanned changes in inventories occurred?

An increase in the price level in Canada will shift the aggregate expenditure line upward.

If an increase in investment spending of $20 million results in a $200 million increase in equilibrium real GDP, then

Assume disposable income increases by 10000 and consumption increases by 8500, what is the value of MPC

The ratio of the increase in equilibrium real GDP to the increase in autonomous expenditure is called the

If disposable income falls by $40 billion and consumption falls by $30 billion, then the slope of the consumption function is

Higher interest rates increase both consumption and investment spending.

The larger the MPC, the larger the value of the multiplier.

Table 8.15 -Refer to Table 8.15.Using the table above, answer the following questions.The numbers in the table are in billions of dollars. a.What is the equilibrium level of real GDP? b.What is the MPC? c.If investment spending declines by $10 billion, what will happen to equilibrium GDP?

Planned aggregate expenditure is equal to

Equations for C, I, G, and NX are given below.If the equilibrium level of GDP is $32,000, what will the new equilibrium level of GDP be if government spending increases to 2,000? C = 5,000 + (MPC)Y I = 1,500 G = 2,000 NX = -500

If the consumption function is defined as C = 7,250 + 0.8Y, what is the autonomous level of consumption expenditure?

A decrease in the real interest rate will

How does a decrease in government spending affect the aggregate expenditure line?

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: The Interaction of Supply and Demand

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, The Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Demand and Aggregate Supply Analysis

Money, Banks, and the Bank of Canada

Monetary Policy

Fiscal Policy

Inflation, Unemployment, and Bank of Canada Policy

Macroeconomics in an Open Economy

The International Financial System

Filters