Question 1

A decrease in the price level will have which of the following effects?

Accepted Answer

A)  The real value of dollar-denominated assets will fall. 
B)  The aggregate expenditure line will shift downward. 
C)  The equilibrium level of output demanded will rise. 
D)  There will be upward movement along a particular aggregate demand curve. 
E)  The aggregate demand curve will shift leftward. 
A)  The real value of dollar-denominated assets will fall. 
B)  The aggregate expenditure line will shift downward. 
C)  The equilibrium level of output demanded will rise. 
D)  There will be upward movement along a particular aggregate demand curve. 
E)  The aggregate demand curve will shift leftward. C

Question 2

If the simple multiplier is 10,the marginal propensity to save is

Accepted Answer

A)  1/10 
B)  9/10 
C)  1/9 
D)  10/9 
E)  9 
A)  1/10 
B)  9/10 
C)  1/9 
D)  10/9 
E)  9 A

Question 3

The aggregate demand curve slopes downward to the right,reflecting a relationship between the price level and

Accepted Answer

A)  real GDP 
B)  interest rates 
C)  the saving rate 
D)  the investment level 
E)  the consumption level 
A)  real GDP 
B)  interest rates 
C)  the saving rate 
D)  the investment level 
E)  the consumption level A

Question 4

If current aggregate expenditure equals current production,the economy is in equilibrium.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following best describes the multiplier?

Accepted Answer

A)  It shows the magnified change in planned aggregate spending that arises from a change in output. 
B)  It shows the magnified change in equilibrium output demanded that arises from a change in income. 
C)  It shows the magnified change in planned aggregate spending that arises from a change in equilibrium output. 
D)  It shows the magnified change in equilibrium output demanded that arises from a change in planned aggregate spending. 
E)  It shows the change in planned aggregate spending that arises from a change in real output. 
A)  It shows the magnified change in planned aggregate spending that arises from a change in output. 
B)  It shows the magnified change in equilibrium output demanded that arises from a change in income. 
C)  It shows the magnified change in planned aggregate spending that arises from a change in equilibrium output. 
D)  It shows the magnified change in equilibrium output demanded that arises from a change in planned aggregate spending. 
E)  It shows the change in planned aggregate spending that arises from a change in real output.

Question 6

If consumer spending increases,other things constant,the aggregate demand curve shifts inward.

Accepted Answer

A) True 
 B)False

Question 7

A decrease in the price level will have which of the following effects?

Accepted Answer

A)  The real value of dollar-denominated assets will rise. 
B)  The aggregate expenditure line will shift downward. 
C)  The equilibrium level of output demanded will fall. 
D)  There will be upward movement along a particular aggregate demand curve. 
E)  The aggregate demand curve will shift leftward. 
A)  The real value of dollar-denominated assets will rise. 
B)  The aggregate expenditure line will shift downward. 
C)  The equilibrium level of output demanded will fall. 
D)  There will be upward movement along a particular aggregate demand curve. 
E)  The aggregate demand curve will shift leftward.

Question 8

An increase in the price level will

Accepted Answer

A)  shift the aggregate expenditure line upward 
B)  shift the aggregate expenditure line downward 
C)  cause a movement up along the aggregate expenditure line 
D)  cause a movement down along the aggregate expenditure line 
E)  have no effect on the aggregate expenditure line or the equilibrium level of real GDP 
A)  shift the aggregate expenditure line upward 
B)  shift the aggregate expenditure line downward 
C)  cause a movement up along the aggregate expenditure line 
D)  cause a movement down along the aggregate expenditure line 
E)  have no effect on the aggregate expenditure line or the equilibrium level of real GDP

Question 9

At the equilibrium level of real GDP,unplanned inventory adjustment equals

Accepted Answer

A)  planned investment 
B)  saving 
C)  zero 
D)  actual investment 
E)  consumption 
A)  planned investment 
B)  saving 
C)  zero 
D)  actual investment 
E)  consumption

Question 10

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 11

The smaller the marginal propensity to save,other things constant,

Accepted Answer

A)  the smaller the marginal propensity to consume 
B)  the larger the multiplier 
C)  the smaller the multiplier 
D)  the flatter the consumption function 
E)  the steeper the saving function 
A)  the smaller the marginal propensity to consume 
B)  the larger the multiplier 
C)  the smaller the multiplier 
D)  the flatter the consumption function 
E)  the steeper the saving function

Question 12

If output exceeds planned aggregate spending,the result is unintended inventory increases.

Accepted Answer

A) True 
 B)False

Question 13

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 14

Suppose that planned investment increases by $200 billion and that the marginal propensity to consume equals 0.80.The aggregate expenditure line will shift upward by __________ at every level of real GDP.

Accepted Answer

A)  $40 billion 
B)  $160 billion 
C)  $200 billion 
D)  $250 billion 
E)  $1,000 billion 
A)  $40 billion 
B)  $160 billion 
C)  $200 billion 
D)  $250 billion 
E)  $1,000 billion

Question 15

Suppose that planned autonomous investment increases by $200 billion and that the marginal propensity to consume equals 0.80.The equilibrium level of real GDP will increase by

Accepted Answer

A)  $40 billion 
B)  $160 billion 
C)  $200 billion 
D)  $250 billion 
E)  $1,000 billion 
A)  $40 billion 
B)  $160 billion 
C)  $200 billion 
D)  $250 billion 
E)  $1,000 billion

Question 16

If planned spending exceeds planned output,the result is

Accepted Answer

A)  unintended inventory increases 
B)  a reduction in GDP 
C)  a decrease in imports 
D)  an increase in government purchases 
E)  unintended inventory reductions 
A)  unintended inventory increases 
B)  a reduction in GDP 
C)  a decrease in imports 
D)  an increase in government purchases 
E)  unintended inventory reductions

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

Increases in the marginal propensity to consume,other things constant,

Accepted Answer

A)  increase the value of the multiplier 
B)  decrease the value of the multiplier 
C)  never change the value of the multiplier 
D)  shift the aggregate expenditure curve downward 
E)  cause a downward movement along an aggregate expenditure curve 
A)  increase the value of the multiplier 
B)  decrease the value of the multiplier 
C)  never change the value of the multiplier 
D)  shift the aggregate expenditure curve downward 
E)  cause a downward movement along an aggregate expenditure curve

Question 19

If the spending multiplier is greater than 1.0,a $200 billion increase in autonomous investment will cause

Accepted Answer

A)  equilibrium investment to increase by less than $200 billion 
B)  equilibrium investment to decrease by more than $200 billion 
C)  equilibrium real GDP demanded to increase by more than $200 billion 
D)  equilibrium real GDP demanded to decrease by less than $200 billion 
E)  equilibrium saving to decrease by more than $200 billion 
A)  equilibrium investment to increase by less than $200 billion 
B)  equilibrium investment to decrease by more than $200 billion 
C)  equilibrium real GDP demanded to increase by more than $200 billion 
D)  equilibrium real GDP demanded to decrease by less than $200 billion 
E)  equilibrium saving to decrease by more than $200 billion

Question 20

In the simple aggregate expenditures model,planned investment is

Accepted Answer

A)  a function of disposable income 
B)  a function of profit expectations 
C)  a function of the interest rate 
D)  autonomous 
E)  all of the above 
A)  a function of disposable income 
B)  a function of profit expectations 
C)  a function of the interest rate 
D)  autonomous 
E)  all of the above

Exam 10: Aggregate Expenditure and Aggregate Demand

A decrease in the price level will have which of the following effects?

If the simple multiplier is 10,the marginal propensity to save is

The aggregate demand curve slopes downward to the right,reflecting a relationship between the price level and

If current aggregate expenditure equals current production,the economy is in equilibrium.

Which of the following best describes the multiplier?

If consumer spending increases,other things constant,the aggregate demand curve shifts inward.

A decrease in the price level will have which of the following effects?

An increase in the price level will

At the equilibrium level of real GDP,unplanned inventory adjustment equals

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

The smaller the marginal propensity to save,other things constant,

If output exceeds planned aggregate spending,the result is unintended inventory increases.

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

Suppose that planned investment increases by $200 billion and that the marginal propensity to consume equals 0.80.The aggregate expenditure line will shift upward by __________ at every level of real GDP.

Suppose that planned autonomous investment increases by $200 billion and that the marginal propensity to consume equals 0.80.The equilibrium level of real GDP will increase by

If planned spending exceeds planned output,the result is

An increase in autonomous investment will

Increases in the marginal propensity to consume,other things constant,

If the spending multiplier is greater than 1.0,a $200 billion increase in autonomous investment will cause

In the simple aggregate expenditures model,planned investment is

The Art and Science of Economic Analysis

Economic Tools and Economics Systems

Economic Decision Makers

Demand, Supply, and Markets

Introduction to Macroeconomics

Productivity and Growth

Tracking the US Economy

Unemployment and Inflation

Aggregate Expenditure

Aggregate Supply

Fiscal Policy

Federal Budgets and Public Policy

Money and the Financial System

Banking and the Money Supply

Monetary Theory and Policy

Macro Policy Debate: Active or Passive

International Trade

International Finance

Developing and Transitional Economies

Understanding Graphs

National Income Accounts

Variable Net Exports

Variable Net Exports Revisited

The Algebra of Income and Expenditure

The Algebra of Demand-Side Equilibrium

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