Question 1

An increase in household debt will lead to an increase in consumption expenditures.

Accepted Answer

A) True 
 B)False

Question 2

Explain the concept of autonomous consumption.

Accepted Answer

Autonomous consumption is cons

Question 3

If government spending increased by $50 billion and the MPC within the economy was 0.8,what would be the total impact on real GDP?

Accepted Answer

A)  $62.5 billion decrease 
B)  $62.5 billion increase 
C)  $250 billion decrease 
D)  $250 billion increase 
A)  $62.5 billion decrease 
B)  $62.5 billion increase 
C)  $250 billion decrease 
D)  $250 billion increase

Question 4

The Keynesian-cross model is a complete macroeconomic model.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following allows us to determine the value of average consumption spending?

Accepted Answer

A)  leading economic indicators 
B)  representative household analysis 
C)  indexing 
D)  ratio analysis 
A)  leading economic indicators 
B)  representative household analysis 
C)  indexing 
D)  ratio analysis

Question 6

Keynes emphasized the idea that wages and prices adjusted very rapidly bringing an economy back to the full employment level of output.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is the primary determinant of aggregate demand in the simplest Keynesian expenditure model?

Accepted Answer

A)  consumption spending 
B)  net exports 
C)  investments 
D)  government purchases 
A)  consumption spending 
B)  net exports 
C)  investments 
D)  government purchases

Question 8

If consumption were a direct function of disposable income,how would a decrease in personal taxes or an increase in transfer payments affect consumption?

Accepted Answer

Consumption would increase if personal t

Question 9

When all the factors of aggregate expenditure are influenced by income,the multiplier is no longer solely a function of the marginal propensity of consumption.

Accepted Answer

A) True 
 B)False

Question 10

A given change in disposable income would have the smallest effect on aggregate demand with which of the following marginal propensities to consume?

Accepted Answer

A)  0.2 
B)  0.4 
C)  0.6 
D)  0.8 
A)  0.2 
B)  0.4 
C)  0.6 
D)  0.8

Question 11

Exhibit 23-1   Refer to Exhibit 23-1.Which of the following would tend to move consumer spending from A to B?

Accepted Answer

A)  increase in debt 
B)  decrease in interest rates 
C)  increase in consumer confidence 
D)  increase in real wealth 
A)  increase in debt 
B)  decrease in interest rates 
C)  increase in consumer confidence 
D)  increase in real wealth

Question 12

For an economy in equilibrium,the Keynesian model suggests that the plot of aggregate expenditure against RGDP:

Accepted Answer

A)  is a vertical line. 
B)  has slope lesser than 1. 
C)  has slope equal to 1. 
D)  is a horizontal line. 
A)  is a vertical line. 
B)  has slope lesser than 1. 
C)  has slope equal to 1. 
D)  is a horizontal line.

Question 13

Which of the following changes in taxes would lead to the greatest increase in consumption?

Accepted Answer

A)  a $20,000 decrease in taxes, if MPC equals 0.5 
B)  a $12,000 decrease in taxes, if MPC equals 0.75 
C)  a $15,000 decrease in taxes, if MPC equals 0.6 
D)  a $30,000 decrease in taxes, if MPC equals 0.25 
A)  a $20,000 decrease in taxes, if MPC equals 0.5 
B)  a $12,000 decrease in taxes, if MPC equals 0.75 
C)  a $15,000 decrease in taxes, if MPC equals 0.6 
D)  a $30,000 decrease in taxes, if MPC equals 0.25

Question 14

The value of the expenditure multiplier depends on the marginal propensity to consume.

Accepted Answer

A) True 
 B)False

Question 15

The Keynesian-cross model is based on the idea that the ____ must equal total output.

Accepted Answer

A)  components of consumption 
B)  components of aggregate supply 
C)  components of aggregate demand 
D)  net exports 
A)  components of consumption 
B)  components of aggregate supply 
C)  components of aggregate demand 
D)  net exports

Question 16

Consumption expenditure tends to increase when consumers have higher levels of debt.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following observations concerning the Keynesian model is not true?

Accepted Answer

A)  It is helpful in explaining the events that unfolded in the 1930s. 
B)  It is less useful in explaining today's economy. 
C)  It explains the stagflation of the 1970s. 
D)  It does not incorporate possible shifts in the aggregate supply curve. 
A)  It is helpful in explaining the events that unfolded in the 1930s. 
B)  It is less useful in explaining today's economy. 
C)  It explains the stagflation of the 1970s. 
D)  It does not incorporate possible shifts in the aggregate supply curve.

Question 18

Unplanned inventory decreases prompt firms to cut back on production until equilibrium output is restored.

Accepted Answer

A) True 
 B)False

Question 19

Keynes believed that the economy could stay in period of unemployment for a long time period without self-correcting.

Accepted Answer

A) True 
 B)False

Question 20

If autonomous expenditures increased by $10 billion,what is the change in aggregate demand at a given price level if the MPC to consume is 0.8?

Accepted Answer

A)  increase by $50 billion 
B)  increase by $100 billion 
C)  decrease by $100 billion 
D)  decrease by $10 billion 
A)  increase by $50 billion 
B)  increase by $100 billion 
C)  decrease by $100 billion 
D)  decrease by $10 billion

Exam 23: The Aggregate Expenditure Model

An increase in household debt will lead to an increase in consumption expenditures.

Explain the concept of autonomous consumption.

If government spending increased by $50 billion and the MPC within the economy was 0.8,what would be the total impact on real GDP?

The Keynesian-cross model is a complete macroeconomic model.

Which of the following allows us to determine the value of average consumption spending?

Keynes emphasized the idea that wages and prices adjusted very rapidly bringing an economy back to the full employment level of output.

Which of the following is the primary determinant of aggregate demand in the simplest Keynesian expenditure model?

If consumption were a direct function of disposable income,how would a decrease in personal taxes or an increase in transfer payments affect consumption?

When all the factors of aggregate expenditure are influenced by income,the multiplier is no longer solely a function of the marginal propensity of consumption.

A given change in disposable income would have the smallest effect on aggregate demand with which of the following marginal propensities to consume?

Exhibit 23-1 Refer to Exhibit 23-1.Which of the following would tend to move consumer spending from A to B?

For an economy in equilibrium,the Keynesian model suggests that the plot of aggregate expenditure against RGDP:

Which of the following changes in taxes would lead to the greatest increase in consumption?

The value of the expenditure multiplier depends on the marginal propensity to consume.

The Keynesian-cross model is based on the idea that the ____ must equal total output.

Consumption expenditure tends to increase when consumers have higher levels of debt.

Which of the following observations concerning the Keynesian model is not true?

Unplanned inventory decreases prompt firms to cut back on production until equilibrium output is restored.

Keynes believed that the economy could stay in period of unemployment for a long time period without self-correcting.

If autonomous expenditures increased by $10 billion,what is the change in aggregate demand at a given price level if the MPC to consume is 0.8?

The Role and Method of Economics

Economics: Eight Powerful Ideas

Scarcity, Trade-Offs, and Production Possibilities

Demand, Supply, and Market Equilibrium

Markets in Motion and Price Controls

Elasticities

Market Efficiency and Welfare

Market Failure

Public Finance and Public Choice

Consumer Choice Theory

The Firm: Production and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Product Differentiation

Oligopoly and Strategic Behavior

The Markets for Labor, Capital, and Land

Income, Poverty, and Health Care

Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Measuring Economic Performance

Economic Growth in the Global Economy

Financial Markets, Saving, and Investment

Aggregate Demand and Aggregate Supply

Monetary Institutions

The Federal Reserve System and Monetary Policy

Issues in Macroeconomic Theory and Policy

International Trade

International Finance

Filters