Question 1

During a(n)________, many firms experience reduced profits, which reduces ________ and investment spending.

Accepted Answer

A) expansion; business confidence 
B) recession; cash flow 
C) expansion; cash flow 
D) recession; government spending 
E) business cycle; government credibility 
A) expansion; business confidence 
B) recession; cash flow 
C) expansion; cash flow 
D) recession; government spending 
E) business cycle; government credibility

Question 2

Table 8.14  
-Refer to Table 8.14.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 potential GDP is $4,000 billion, is the economy at full employment? If not, what is the condition of the economy?
d.If the economy is not at full employment, by how much should government spending increase so that the economy can move to the full employment level of GDP?

Accepted Answer

a.Equilibrium real GDP is determined whe

Question 3

If planned aggregate expenditure equals GDP, the economy is in macroeconomic equilibrium.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is not a component of aggregate expenditure?

Accepted Answer

A) consumption spending 
B) planned investment spending 
C) actual investment spending 
D) government spending 
E) net exports 
A) consumption spending 
B) planned investment spending 
C) actual investment spending 
D) government spending 
E) net exports

Question 5

What is the formula for the multiplier? Explain why this formula is considered to be too simple.

Accepted Answer

Multiplier = @#IMG-DLM& The formula ignores the ef

Question 6

Table 8.7  
-Refer to Table 8.7.Given the consumption schedule in the table above, the marginal propensity to save is

Accepted Answer

A) 0.3. 
B) 0.4. 
C) 0.5. 
D) 0.6. 
E) 0.8. 
A) 0.3. 
B) 0.4. 
C) 0.5. 
D) 0.6. 
E) 0.8.

Question 7

Given the equations for C, I, G, and NX below, what is the marginal propensity to consume? C = 1,000 + 0.8Y
I = 1,500
G = 1,250
NX = 100

Accepted Answer

A) 0.2 
B) 0.8 
C) 0.9 
D) 1.8 
E) 10 
A) 0.2 
B) 0.8 
C) 0.9 
D) 1.8 
E) 10

Question 8

The key idea of the aggregate expenditure model is that in any particular year, the level of ________ is determined mainly by the level of aggregate expenditure.

Accepted Answer

A) frictional unemployment 
B) export spending 
C) government spending 
D) GDP 
E) structural unemployment 
A) frictional unemployment 
B) export spending 
C) government spending 
D) GDP 
E) structural unemployment

Question 9

At macroeconomic equilibrium

Accepted Answer

A) total investment equals total inventories. 
B) total spending equals total production. 
C) total consumption equals total production. 
D) total taxes equal total transfers. 
E) total exports equal total imports. 
A) total investment equals total inventories. 
B) total spending equals total production. 
C) total consumption equals total production. 
D) total taxes equal total transfers. 
E) total exports equal total imports.

Question 10

The aggregate expenditure model focuses on the short-run relationship between ________ and ________.

Accepted Answer

A) real spending; real GDP 
B) unemployment; inflation 
C) nominal spending; nominal GDP 
D) planned inventories; unplanned inventories 
E) nominal spending; and real savings 
A) real spending; real GDP 
B) unemployment; inflation 
C) nominal spending; nominal GDP 
D) planned inventories; unplanned inventories 
E) nominal spending; and real savings

Question 11

Many American and European politicians argue that limiting international trade will improve GDP. A reason such protectionism is likely to fail is

Accepted Answer

A) such policies will reduce exports by as much or more than imports. 
B) such policies fail to address the government budget deficit. 
C) protectionism does not prevent immigration. 
D) protectionism increases foreign direct investment and technological transfer. 
E) such policies require all countries to coordinate their activities to be effective. 
A) such policies will reduce exports by as much or more than imports. 
B) such policies fail to address the government budget deficit. 
C) protectionism does not prevent immigration. 
D) protectionism increases foreign direct investment and technological transfer. 
E) such policies require all countries to coordinate their activities to be effective.

Question 12

A general formula for the multiplier is

Accepted Answer

A)    . 
B)    . 
C)    . 
D)    . 
E)    
A)    . 
B)    . 
C)    . 
D)    . 
E)

Question 13

The formula for the multiplier is (1 - MPC).

Accepted Answer

A) True 
 B)False

Question 14

Lower interest rates increase both consumption and investment spending.

Accepted Answer

A) True 
 B)False

Question 15

Inventories refer to

Accepted Answer

A) goods which have been presold before they are produced. 
B) goods that have been produced but not yet sold. 
C) goods that have been planned but not yet produced. 
D) goods that have been produced and sold in the same year. 
E) goods that have been sold but are waiting to be picked by customers. 
A) goods which have been presold before they are produced. 
B) goods that have been produced but not yet sold. 
C) goods that have been planned but not yet produced. 
D) goods that have been produced and sold in the same year. 
E) goods that have been sold but are waiting to be picked by customers.

Question 16

If the marginal propensity to consume is 0.6, the marginal propensity to save is

Accepted Answer

A) 0.4. 
B) 0).6. 
C) 1. 
D) 1.5. 
E) 0.8. 
A) 0.4. 
B) 0).6. 
C) 1. 
D) 1.5. 
E) 0.8.

Question 17

On the 45-degree line diagram, for points that lie below the 45-degree line,

Accepted Answer

A) planned aggregate expenditure is greater than GDP. 
B) planned aggregate expenditure is less than GDP. 
C) planned aggregate expenditure is equal to GDP. 
D) planned aggregate expenditure is less than aggregate income. 
E) planned investment is less than unplanned investment. 
A) planned aggregate expenditure is greater than GDP. 
B) planned aggregate expenditure is less than GDP. 
C) planned aggregate expenditure is equal to GDP. 
D) planned aggregate expenditure is less than aggregate income. 
E) planned investment is less than unplanned investment.

Question 18

Economists Andy Kwan and John Cotsomitis' work indicates the fall in consumption spending during the 2008-2009 recession would have been caused, in large part, by

Accepted Answer

A) lower housing wealth. 
B) higher interest rates. 
C) lower planned investment. 
D) a fall in consumer confidence. 
E) insufficient government stimulus spending. 
A) lower housing wealth. 
B) higher interest rates. 
C) lower planned investment. 
D) a fall in consumer confidence. 
E) insufficient government stimulus spending.

Question 19

A decrease in the price level in Canada will have what effect on the aggregate expenditure line?

Accepted Answer

A) Aggregate expenditure will shift downward. 
B) Aggregate expenditure will become steeper. 
C) Aggregate expenditure will shift upward. 
D) Aggregate expenditure will shift upward and become less steep. 
E) Aggregate expenditure will not be affected by an increase in the price level in the United States. 
A) Aggregate expenditure will shift downward. 
B) Aggregate expenditure will become steeper. 
C) Aggregate expenditure will shift upward. 
D) Aggregate expenditure will shift upward and become less steep. 
E) Aggregate expenditure will not be affected by an increase in the price level in the United States.

Question 20

Which of the following correctly describes how an increase in the price level affects consumption spending?

Accepted Answer

A) An increase in the price level raises real wealth, which causes consumption to increase. 
B) An increase in the price level decreases the amount of money a household needs to buy goods and raises the interest rate, which causes consumption to increase. 
C) An increase in the price level increases the amount of money a household needs to buy goods and raises the interest rate, which causes consumption to increase. 
D) An increase in the price level lowers real wealth, which causes consumption to decrease. 
E) An increase in the price level, lowers the nominal interest rate which increases purchases of consumer durables. 
A) An increase in the price level raises real wealth, which causes consumption to increase. 
B) An increase in the price level decreases the amount of money a household needs to buy goods and raises the interest rate, which causes consumption to increase. 
C) An increase in the price level increases the amount of money a household needs to buy goods and raises the interest rate, which causes consumption to increase. 
D) An increase in the price level lowers real wealth, which causes consumption to decrease. 
E) An increase in the price level, lowers the nominal interest rate which increases purchases of consumer durables.

During a(n), many firms experience reduced profits, which reduces and investment spending.

If planned aggregate expenditure equals GDP, the economy is in macroeconomic equilibrium.

Which of the following is not a component of aggregate expenditure?

What is the formula for the multiplier? Explain why this formula is considered to be too simple.

Table 8.7 -Refer to Table 8.7.Given the consumption schedule in the table above, the marginal propensity to save is

Given the equations for C, I, G, and NX below, what is the marginal propensity to consume? C = 1,000 + 0.8Y I = 1,500 G = 1,250 NX = 100

The key idea of the aggregate expenditure model is that in any particular year, the level of ________ is determined mainly by the level of aggregate expenditure.

At macroeconomic equilibrium

The aggregate expenditure model focuses on the short-run relationship between and .

Many American and European politicians argue that limiting international trade will improve GDP. A reason such protectionism is likely to fail is

A general formula for the multiplier is

The formula for the multiplier is (1 - MPC).

Lower interest rates increase both consumption and investment spending.

Inventories refer to

If the marginal propensity to consume is 0.6, the marginal propensity to save is

On the 45-degree line diagram, for points that lie below the 45-degree line,

Economists Andy Kwan and John Cotsomitis' work indicates the fall in consumption spending during the 2008-2009 recession would have been caused, in large part, by

A decrease in the price level in Canada will have what effect on the aggregate expenditure line?

Which of the following correctly describes how an increase in the price level affects consumption spending?

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

Exam 8: Aggregate Expenditure and Output in the Short Run

During a(n)________, many firms experience reduced profits, which reduces ________ and investment spending.

If planned aggregate expenditure equals GDP, the economy is in macroeconomic equilibrium.

Which of the following is not a component of aggregate expenditure?

What is the formula for the multiplier? Explain why this formula is considered to be too simple.

Table 8.7 -Refer to Table 8.7.Given the consumption schedule in the table above, the marginal propensity to save is

Given the equations for C, I, G, and NX below, what is the marginal propensity to consume? C = 1,000 + 0.8Y I = 1,500 G = 1,250 NX = 100

The key idea of the aggregate expenditure model is that in any particular year, the level of ________ is determined mainly by the level of aggregate expenditure.

At macroeconomic equilibrium

The aggregate expenditure model focuses on the short-run relationship between ________ and ________.

Many American and European politicians argue that limiting international trade will improve GDP. A reason such protectionism is likely to fail is

A general formula for the multiplier is

The formula for the multiplier is (1 - MPC).

Lower interest rates increase both consumption and investment spending.

Inventories refer to

If the marginal propensity to consume is 0.6, the marginal propensity to save is

On the 45-degree line diagram, for points that lie below the 45-degree line,

Economists Andy Kwan and John Cotsomitis' work indicates the fall in consumption spending during the 2008-2009 recession would have been caused, in large part, by

A decrease in the price level in Canada will have what effect on the aggregate expenditure line?

Which of the following correctly describes how an increase in the price level affects consumption spending?

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

During a(n), many firms experience reduced profits, which reduces and investment spending.

The aggregate expenditure model focuses on the short-run relationship between and .