Question 1

Exhibit 10-2
  
-The marginal propensity to consume (MPC)in Exhibit 10-2 equals

Accepted Answer

A)  0.20 or 1/5 
B)  0.40 or 2/5 
C)  0.80 or 4/5 
D)  0.90 or 9/10 
E)  0.60 or 3/5 
A)  0.20 or 1/5 
B)  0.40 or 2/5 
C)  0.80 or 4/5 
D)  0.90 or 9/10 
E)  0.60 or 3/5

Question 2

Movement along the aggregate demand curve may be caused by a change in autonomous investment spending.

Accepted Answer

A) True 
 B)False

Question 3

If autonomous consumption rises by $0.8 trillion and the marginal propensity to consume (MPC)equals 3/4,the equilibrium level of output demanded will rise by

Accepted Answer

A)  $0.2 trillion 
B)  $0.6 trillion 
C)  $1.07 trillion 
D)  $2.4 trillion 
E)  $3.2 trillion 
A)  $0.2 trillion 
B)  $0.6 trillion 
C)  $1.07 trillion 
D)  $2.4 trillion 
E)  $3.2 trillion

Question 4

What is the effect of an increase in the price level?

Accepted Answer

A)  The real value of dollar-denominated assets will rise. 
B)  The aggregate expenditure line will shift upward. 
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 rightward. 
A)  The real value of dollar-denominated assets will rise. 
B)  The aggregate expenditure line will shift upward. 
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 rightward.

Question 5

In the income-expenditure framework,if planned aggregate expenditures are less than real GDP,

Accepted Answer

A)  then saving must be larger than consumption 
B)  the price level will increase 
C)  inventories will increase 
D)  inventories will decrease 
E)  consumption will decrease 
A)  then saving must be larger than consumption 
B)  the price level will increase 
C)  inventories will increase 
D)  inventories will decrease 
E)  consumption will decrease

Question 6

We can use an aggregate expenditure line to show how an aggregate demand curve shifts by

Accepted Answer

A)  shifting the 45-degree line 
B)  letting changes in autonomous spending shift the aggregate expenditure line 
C)  letting changes in the price level shift the aggregate expenditure line 
D)  letting changes in the level of income shift the aggregate expenditure line 
E)  letting changes in real GDP shift the aggregate expenditure line 
A)  shifting the 45-degree line 
B)  letting changes in autonomous spending shift the aggregate expenditure line 
C)  letting changes in the price level shift the aggregate expenditure line 
D)  letting changes in the level of income shift the aggregate expenditure line 
E)  letting changes in real GDP shift the aggregate expenditure line

Question 7

Which of the following is illustrated by the distance between the aggregate expenditure line and the 45-degree line at each level of real GDP?

Accepted Answer

A)  saving 
B)  unplanned inventory change 
C)  planned investment 
D)  marginal propensity to save 
E)  marginal propensity to consume 
A)  saving 
B)  unplanned inventory change 
C)  planned investment 
D)  marginal propensity to save 
E)  marginal propensity to consume

Question 8

What does the marginal propensity to consume tell us?

Accepted Answer

A)  how much of our total income we spend on current consumption 
B)  how much additional income is spent on consumption 
C)  how much of aggregate expenditures will be allocated to consumption spending 
D)  how much induced consumption there is in the economy 
E)  the relationship between autonomous and induced consumption 
A)  how much of our total income we spend on current consumption 
B)  how much additional income is spent on consumption 
C)  how much of aggregate expenditures will be allocated to consumption spending 
D)  how much induced consumption there is in the economy 
E)  the relationship between autonomous and induced consumption

Question 9

Which of the following would result from a decrease in autonomous saving?

Accepted Answer

A)  an upward shift of the aggregate expenditure line 
B)  an upward shift of the 45-degree line 
C)  a decrease in the equilibrium level of real GDP demanded 
D)  an increase in the level of autonomous consumption 
E)  an increase in the level of autonomous investment 
A)  an upward shift of the aggregate expenditure line 
B)  an upward shift of the 45-degree line 
C)  a decrease in the equilibrium level of real GDP demanded 
D)  an increase in the level of autonomous consumption 
E)  an increase in the level of autonomous investment

Question 10

When current real production of goods and services (real GDP)is greater than planned aggregate expenditure

Accepted Answer

A)  inventories of goods and services are rising 
B)  firms will increase production to replenish depleted inventories 
C)  businesses and households will increase planned aggregate spending because it is in their interest to promote employment 
D)  the price level will automatically rise to restore equilibrium in the economy 
E)  leakages must equal planned injections 
A)  inventories of goods and services are rising 
B)  firms will increase production to replenish depleted inventories 
C)  businesses and households will increase planned aggregate spending because it is in their interest to promote employment 
D)  the price level will automatically rise to restore equilibrium in the economy 
E)  leakages must equal planned injections

Question 11

Which of the following is not true?

Accepted Answer

A)  When planned aggregate expenditure is greater than output,real GDP demanded will rise. 
B)  When planned aggregate expenditure is greater than output,real GDP demanded will fall. 
C)  When planned aggregate expenditure is increasing,disposable income and consumption are increasing. 
D)  When planned aggregate expenditure is increasing,consumption and saving are both increasing. 
E)  As long as planned aggregate expenditure is increasing,real GDP demanded does also. 
A)  When planned aggregate expenditure is greater than output,real GDP demanded will rise. 
B)  When planned aggregate expenditure is greater than output,real GDP demanded will fall. 
C)  When planned aggregate expenditure is increasing,disposable income and consumption are increasing. 
D)  When planned aggregate expenditure is increasing,consumption and saving are both increasing. 
E)  As long as planned aggregate expenditure is increasing,real GDP demanded does also.

Question 12

What is the effect of an increase in the price level?

Accepted Answer

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

Question 13

In a model with neither income taxes nor international trade,if the marginal propensity to consume in your classmate's nation is 3/5 and the marginal propensity to save in your country is 1/10,which of the following must be true?

Accepted Answer

A)  Increases in government purchases increase real GDP demanded more per dollar in your country than they do in your classmate's country. 
B)  Decreases in government purchases increase real GDP demanded more per dollar in your country than they do in your classmate's country. 
C)  Increases in autonomous saving increase real GDP demanded more per dollar in your country than they do in your classmate's country. 
D)  Real GDP demanded is higher in your country than in your classmate's country. 
E)  Total saving is higher in your classmate's country than in your country. 
A)  Increases in government purchases increase real GDP demanded more per dollar in your country than they do in your classmate's country. 
B)  Decreases in government purchases increase real GDP demanded more per dollar in your country than they do in your classmate's country. 
C)  Increases in autonomous saving increase real GDP demanded more per dollar in your country than they do in your classmate's country. 
D)  Real GDP demanded is higher in your country than in your classmate's country. 
E)  Total saving is higher in your classmate's country than in your country.

Question 14

If the price level increases,other things constant,consumption spending

Accepted Answer

A)  increases because real income rises 
B)  decreases because real income rises 
C)  increases because the real value of wealth increases 
D)  decreases because the real value of wealth decreases 
E)  increases because nominal income increases 
A)  increases because real income rises 
B)  decreases because real income rises 
C)  increases because the real value of wealth increases 
D)  decreases because the real value of wealth decreases 
E)  increases because nominal income increases

Question 15

Exhibit 10-1
  
-In Exhibit 10-1,the government's budget is

Accepted Answer

A)  in surplus 
B)  in deficit 
C)  in balance 
D)  indeterminate from the information given 
E)  $0.5 trillion 
A)  in surplus 
B)  in deficit 
C)  in balance 
D)  indeterminate from the information given 
E)  $0.5 trillion

Question 16

The aggregate expenditure line shows

Accepted Answer

A)  real GDP on the horizontal axis and aggregate expenditure on the vertical axis 
B)  aggregate expenditure on the horizontal axis and real GDP on the vertical axis 
C)  consumption on the horizontal axis and aggregate expenditure on the vertical axis 
D)  aggregate expenditure on the horizontal axis and consumption on the vertical axis 
E)  investment on the horizontal axis and aggregate expenditure on the vertical axis 
A)  real GDP on the horizontal axis and aggregate expenditure on the vertical axis 
B)  aggregate expenditure on the horizontal axis and real GDP on the vertical axis 
C)  consumption on the horizontal axis and aggregate expenditure on the vertical axis 
D)  aggregate expenditure on the horizontal axis and consumption on the vertical axis 
E)  investment on the horizontal axis and aggregate expenditure on the vertical axis

Question 17

The aggregate expenditure line,along with the 45-degree line,determines equilibrium.This model is based on the assumption that

Accepted Answer

A)  production is constant 
B)  production is constant and at the full employment level of GDP 
C)  producers are ready to supply whatever amount of output is demanded at the existing price level 
D)  producers will supply more at higher prices than they will at lower prices 
E)  producers will supply more at lower prices than they will at higher prices 
A)  production is constant 
B)  production is constant and at the full employment level of GDP 
C)  producers are ready to supply whatever amount of output is demanded at the existing price level 
D)  producers will supply more at higher prices than they will at lower prices 
E)  producers will supply more at lower prices than they will at higher prices

Question 18

The aggregate expenditure model is

Accepted Answer

A)  most useful in explaining situations where changes in aggregate expenditures cause the price level to change 
B)  not useful in situations where changes in aggregate expenditures cause the price level to change 
C)  helpful in explaining situations where the economy is plagued by inflationary pressures 
D)  the reciprocal of the aggregate demand model 
E)  most useful when we are dealing with an economy dominated by a foreign sector 
A)  most useful in explaining situations where changes in aggregate expenditures cause the price level to change 
B)  not useful in situations where changes in aggregate expenditures cause the price level to change 
C)  helpful in explaining situations where the economy is plagued by inflationary pressures 
D)  the reciprocal of the aggregate demand model 
E)  most useful when we are dealing with an economy dominated by a foreign sector

Question 19

If there are no unintended changes in inventories,the economy is at its equilibrium level of real GDP demanded.

Accepted Answer

A) True 
 B)False

Question 20

A decrease 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)  decrease aggregate expenditures only at low 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)  decrease aggregate expenditures only at low levels of income

Exam 10: Aggregate Expenditure and Aggregate Demand

Exhibit 10-2 -The marginal propensity to consume (MPC)in Exhibit 10-2 equals

Movement along the aggregate demand curve may be caused by a change in autonomous investment spending.

If autonomous consumption rises by $0.8 trillion and the marginal propensity to consume (MPC)equals 3/4,the equilibrium level of output demanded will rise by

What is the effect of an increase in the price level?

In the income-expenditure framework,if planned aggregate expenditures are less than real GDP,

We can use an aggregate expenditure line to show how an aggregate demand curve shifts by

Which of the following is illustrated by the distance between the aggregate expenditure line and the 45-degree line at each level of real GDP?

What does the marginal propensity to consume tell us?

Which of the following would result from a decrease in autonomous saving?

When current real production of goods and services (real GDP)is greater than planned aggregate expenditure

Which of the following is not true?

What is the effect of an increase in the price level?

In a model with neither income taxes nor international trade,if the marginal propensity to consume in your classmate's nation is 3/5 and the marginal propensity to save in your country is 1/10,which of the following must be true?

If the price level increases,other things constant,consumption spending

Exhibit 10-1 -In Exhibit 10-1,the government's budget is

The aggregate expenditure line shows

The aggregate expenditure line,along with the 45-degree line,determines equilibrium.This model is based on the assumption that

The aggregate expenditure model is

If there are no unintended changes in inventories,the economy is at its equilibrium level of real GDP demanded.

A decrease in autonomous investment will

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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