Question 1

The marginal propensity to consume is defined as

Accepted Answer

A) consumption divided by disposable income. 
B) disposable income divided by consumption. 
C) the change in consumption divided by the change in disposable income. 
D) the change in disposable income divided by the change in consumption. 
A) consumption divided by disposable income. 
B) disposable income divided by consumption. 
C) the change in consumption divided by the change in disposable income. 
D) the change in disposable income divided by the change in consumption.

Question 2

U.S.net export spending rises when

Accepted Answer

A) the price level in the United States rises relative to the price level in other countries. 
B) the growth rate of U.S.GDP is slower than the growth rate of GDP in other countries. 
C) the value of the U.S.dollar increases relative to other currencies. 
D) the inflation rate is higher in the United States relative to other countries. 
A) the price level in the United States rises relative to the price level in other countries. 
B) the growth rate of U.S.GDP is slower than the growth rate of GDP in other countries. 
C) the value of the U.S.dollar increases relative to other currencies. 
D) the inflation rate is higher in the United States relative to other countries.

Question 3

Into which category of aggregate expenditure would each of the following transactions fall?
a.Sandra MacMillian purchases a new Ford Focus.
b.The city of Richardson buys 5 new garbage trucks.
c.Adrian Garcia buys a newly constructed townhome.
d.A consumer in Latvia orders an iPhone from Apple.
e.Ford Motor Company buys 300 new iPhones from Apple.

Accepted Answer

a.Consumption b.Gove

Question 4

If planned aggregate expenditure is above potential GDP and planned aggregate expenditure equals GDP,then

Accepted Answer

A) actual inventory investment will be less than planned inventory investment. 
B) actual inventory investment will be greater than planned inventory investment. 
C) the economy is in an expansion. 
D) the economy is at full employment. 
A) actual inventory investment will be less than planned inventory investment. 
B) actual inventory investment will be greater than planned inventory investment. 
C) the economy is in an expansion. 
D) the economy is at full employment.

Question 5

Table 12-13
  
-Refer to Table 12-13.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 $50 billion,what will happen to equilibrium GDP?

Accepted Answer

a.Equilibrium real GDP is determined whe

Question 6

When aggregate expenditure is more than GDP,which of the following is true?

Accepted Answer

A) There was an unplanned decrease in inventories. 
B) Firms spent less on capital goods than they planned. 
C) Households bought fewer new homes than they planned. 
D) All of the above must be true when aggregate expenditure is more than GDP. 
A) There was an unplanned decrease in inventories. 
B) Firms spent less on capital goods than they planned. 
C) Households bought fewer new homes than they planned. 
D) All of the above must be true when aggregate expenditure is more than GDP.

Question 7

When Jack's income increases by $1,000,he spends an additional $850 dollars.This implies that his marginal propensity to save is 0.85.

Accepted Answer

A) True 
 B)False

Question 8

What is the difference between aggregate expenditure and consumption spending?

Accepted Answer

Aggregate expenditure represents the tot

Question 9

The five most important variables that determine the level of consumption are

Accepted Answer

A) disposable income,wealth,expected future income,price level,and interest rate. 
B) wealth,savings account balances,checking account balances,stock portfolio balances,and bond portfolio balances. 
C) government purchases,interest rates,income,taxes,and transfers. 
D) government purchases,saving account balances,wealth,interest rates,portfolio balances. 
A) disposable income,wealth,expected future income,price level,and interest rate. 
B) wealth,savings account balances,checking account balances,stock portfolio balances,and bond portfolio balances. 
C) government purchases,interest rates,income,taxes,and transfers. 
D) government purchases,saving account balances,wealth,interest rates,portfolio balances.

Question 10

The difference between GDP and net taxes is

Accepted Answer

A) personal income. 
B) actual investment spending. 
C) disposable income. 
D) unplanned investment spending. 
A) personal income. 
B) actual investment spending. 
C) disposable income. 
D) unplanned investment spending.

Question 11

If economists forecast a decrease in aggregate expenditure,which of the following is likely to occur?

Accepted Answer

A) GDP will rise. 
B) GDP will fall. 
C) Wages will rise. 
D) Inventories will fall. 
A) GDP will rise. 
B) GDP will fall. 
C) Wages will rise. 
D) Inventories will fall.

Question 12

If the MPC is 0.95,then a $10 million increase in disposable income will

Accepted Answer

A) increase consumption by $200 million. 
B) increase consumption by $9.5 million. 
C) decrease consumption by $105 million 
D) increase consumption by $950 million. 
A) increase consumption by $200 million. 
B) increase consumption by $9.5 million. 
C) decrease consumption by $105 million 
D) increase consumption by $950 million.

Question 13

An unplanned decrease in inventories results in

Accepted Answer

A) a decrease in planned investment. 
B) an increase in planned investment. 
C) actual investment that is greater than planned investment. 
D) actual investment that is less than planned investment. 
A) a decrease in planned investment. 
B) an increase in planned investment. 
C) actual investment that is greater than planned investment. 
D) actual investment that is less than planned investment.

Question 14

If the marginal propensity to consume is 0.75,the marginal propensity to save is

Accepted Answer

A) 0.25. 
B) 0.5. 
C) 1. 
D) 3. 
A) 0.25. 
B) 0.5. 
C) 1. 
D) 3.

Question 15

Figure 12-2  
-Refer to Figure 12-2.If the U.S.economy is currently at point K,which of the following could cause it to move to point N?

Accepted Answer

A) The price level in the United States falls relative to the price level in other countries. 
B) Congress abolishes investment tax incentives. 
C) The interest rate rises. 
D) Household wealth declines. 
A) The price level in the United States falls relative to the price level in other countries. 
B) Congress abolishes investment tax incentives. 
C) The interest rate rises. 
D) Household wealth declines.

Question 16

Ceteris paribus,how does an expansion in the United States affect U.S.net exports?

Accepted Answer

As GDP increases in the United States du

Question 17

Which of the following is a reason why increases in the price level result in a decline in aggregate expenditure?

Accepted Answer

A) Price level increases raise real wealth,which causes consumption spending and aggregate expenditure to decline. 
B) Price level increases cause firms and consumers to hold more money,which raises the interest rate.Higher interest rates lower consumption and planned investment expenditures,which lowers aggregate expenditure. 
C) Price level increases in the United States relative to other countries raise net exports,which lowers aggregate expenditure. 
D) As the price level rises,government spending falls,which lowers aggregate expenditure. 
A) Price level increases raise real wealth,which causes consumption spending and aggregate expenditure to decline. 
B) Price level increases cause firms and consumers to hold more money,which raises the interest rate.Higher interest rates lower consumption and planned investment expenditures,which lowers aggregate expenditure. 
C) Price level increases in the United States relative to other countries raise net exports,which lowers aggregate expenditure. 
D) As the price level rises,government spending falls,which lowers aggregate expenditure.

Question 18

An increase in taxes will ________ consumption spending,and a decrease in transfer payments will ________ consumption spending.

Accepted Answer

A) increase; increase 
B) decrease; increase 
C) increase; decrease 
D) decrease; decrease 
A) increase; increase 
B) decrease; increase 
C) increase; decrease 
D) decrease; decrease

Question 19

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

Question 20

The multiplier is calculated as the change in ________ divided by the change in ________.

Accepted Answer

A) real GDP; autonomous expenditure 
B) autonomous expenditure; real GDP 
C) nominal GDP; autonomous expenditure 
D) real GDP; induced spending 
A) real GDP; autonomous expenditure 
B) autonomous expenditure; real GDP 
C) nominal GDP; autonomous expenditure 
D) real GDP; induced spending

The marginal propensity to consume is defined as

U.S.net export spending rises when

If planned aggregate expenditure is above potential GDP and planned aggregate expenditure equals GDP,then

Table 12-13 -Refer to Table 12-13.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 $50 billion,what will happen to equilibrium GDP?

When aggregate expenditure is more than GDP,which of the following is true?

When Jack's income increases by $1,000,he spends an additional $850 dollars.This implies that his marginal propensity to save is 0.85.

What is the difference between aggregate expenditure and consumption spending?

The five most important variables that determine the level of consumption are

The difference between GDP and net taxes is

If economists forecast a decrease in aggregate expenditure,which of the following is likely to occur?

If the MPC is 0.95,then a $10 million increase in disposable income will

An unplanned decrease in inventories results in

If the marginal propensity to consume is 0.75,the marginal propensity to save is

Figure 12-2 -Refer to Figure 12-2.If the U.S.economy is currently at point K,which of the following could cause it to move to point N?

Ceteris paribus,how does an expansion in the United States affect U.S.net exports?

Which of the following is a reason why increases in the price level result in a decline in aggregate expenditure?

An increase in taxes will consumption spending,and a decrease in transfer payments will consumption spending.

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

The multiplier is calculated as the change in divided by the change in .

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: The Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

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 Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, Unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

Exam 12: Aggregate Expenditure and Output in the Short Run

The marginal propensity to consume is defined as

U.S.net export spending rises when

If planned aggregate expenditure is above potential GDP and planned aggregate expenditure equals GDP,then

Table 12-13 -Refer to Table 12-13.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 $50 billion,what will happen to equilibrium GDP?

When aggregate expenditure is more than GDP,which of the following is true?

When Jack's income increases by $1,000,he spends an additional $850 dollars.This implies that his marginal propensity to save is 0.85.

What is the difference between aggregate expenditure and consumption spending?

The five most important variables that determine the level of consumption are

The difference between GDP and net taxes is

If economists forecast a decrease in aggregate expenditure,which of the following is likely to occur?

If the MPC is 0.95,then a $10 million increase in disposable income will

An unplanned decrease in inventories results in

If the marginal propensity to consume is 0.75,the marginal propensity to save is

Figure 12-2 -Refer to Figure 12-2.If the U.S.economy is currently at point K,which of the following could cause it to move to point N?

Ceteris paribus,how does an expansion in the United States affect U.S.net exports?

Which of the following is a reason why increases in the price level result in a decline in aggregate expenditure?

An increase in taxes will ________ consumption spending,and a decrease in transfer payments will ________ consumption spending.

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

The multiplier is calculated as the change in ________ divided by the change in ________.

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: The Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

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 Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, Unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

An increase in taxes will consumption spending,and a decrease in transfer payments will consumption spending.

The multiplier is calculated as the change in divided by the change in .