Question 1

The simple spending multiplier is like

Accepted Answer

A)  having a bird in the hand rather than two in the bush 
B)  two wrongs making a right 
C)  the spreading of ripples from a stone thrown in a pond 
D)  getting too much of a good thing 
E)  having too many chefs in the kitchen 
A)  having a bird in the hand rather than two in the bush 
B)  two wrongs making a right 
C)  the spreading of ripples from a stone thrown in a pond 
D)  getting too much of a good thing 
E)  having too many chefs in the kitchen

Question 2

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

Question 3

Aggregate expenditure means total or combined spending.

Accepted Answer

A) True 
 B)False

Question 4

The slope of the aggregate expenditure line equals the marginal propensity to consume.

Accepted Answer

A) True 
 B)False

Question 5

An increase in the price level will

Accepted Answer

A)  shift the aggregate demand curve to the left 
B)  shift the aggregate demand curve to the right 
C)  result in a movement up to the left along the aggregate demand curve 
D)  result in a movement down to the right along the aggregate demand curve 
E)  have no effect on the aggregate quantity demanded 
A)  shift the aggregate demand curve to the left 
B)  shift the aggregate demand curve to the right 
C)  result in a movement up to the left along the aggregate demand curve 
D)  result in a movement down to the right along the aggregate demand curve 
E)  have no effect on the aggregate quantity demanded

Question 6

If the marginal propensity to save is 1/8,the value of the simple multiplier is

Accepted Answer

A)  8 
B)  1/8 
C)  2 
D)  1/2 
E)  4 
A)  8 
B)  1/8 
C)  2 
D)  1/2 
E)  4

Question 7

A rise in the price level will shift the aggregate expenditure curve

Accepted Answer

A)  upward and shift the aggregate demand curve to the right 
B)  upward and shift the aggregate demand curve to the left 
C)  downward and shift the aggregate demand curve to the left 
D)  downward and shift the aggregate demand curve to the right 
E)  downward and cause a movement along the aggregate demand curve 
A)  upward and shift the aggregate demand curve to the right 
B)  upward and shift the aggregate demand curve to the left 
C)  downward and shift the aggregate demand curve to the left 
D)  downward and shift the aggregate demand curve to the right 
E)  downward and cause a movement along the aggregate demand curve

Question 8

Exhibit 10-2
  
-At the equilibrium level of GDP in Exhibit 10-2,leakages equal

Accepted Answer

A)  $1.4 trillion 
B)  $1.3 trillion 
C)  $1.5 trillion 
D)  $1.0 trillion 
E)  $1.1 trillion 
A)  $1.4 trillion 
B)  $1.3 trillion 
C)  $1.5 trillion 
D)  $1.0 trillion 
E)  $1.1 trillion

Question 9

If an economy is in equilibrium when net taxes = $50 trillion,saving = $40 trillion,government purchases = $50 trillion,exports = $30 trillion,and imports = $10 trillion,then planned investment spending must equal

Accepted Answer

A)  zero 
B)  $50 
C)  $10 
D)  $20 
E)  the answer is indeterminate 
A)  zero 
B)  $50 
C)  $10 
D)  $20 
E)  the answer is indeterminate

Question 10

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

Accepted Answer

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

Question 11

Which of the following is true concerning the relationship between the marginal propensity to consume and the consumption function?

Accepted Answer

A)  the larger the MPC,the higher the level of autonomous consumption 
B)  the larger the MPC,the steeper the consumption function 
C)  the larger the MPC,the larger the MPS 
D)  The smaller the MPC,the steeper the consumption function 
E)  The larger the MPC,the larger the level of autonomous consumption 
A)  the larger the MPC,the higher the level of autonomous consumption 
B)  the larger the MPC,the steeper the consumption function 
C)  the larger the MPC,the larger the MPS 
D)  The smaller the MPC,the steeper the consumption function 
E)  The larger the MPC,the larger the level of autonomous consumption

Question 12

The larger the MPC,the greater the multiplier effect.

Accepted Answer

A) True 
 B)False

Question 13

If the level of autonomous spending increases at a given price level,

Accepted Answer

A)  the aggregate expenditure line shifts upward; the economy moves upward along the aggregate demand curve 
B)  the aggregate expenditure line shifts downward; the economy moves upward along the aggregate demand curve 
C)  the aggregate expenditure line shifts upward; the aggregate demand curve shifts to the right 
D)  the aggregate expenditure line shifts downward; the aggregate demand curve shifts to the left 
E)  the aggregate expenditure curve shifts upward; the aggregate demand curve shifts to the left 
A)  the aggregate expenditure line shifts upward; the economy moves upward along the aggregate demand curve 
B)  the aggregate expenditure line shifts downward; the economy moves upward along the aggregate demand curve 
C)  the aggregate expenditure line shifts upward; the aggregate demand curve shifts to the right 
D)  the aggregate expenditure line shifts downward; the aggregate demand curve shifts to the left 
E)  the aggregate expenditure curve shifts upward; the aggregate demand curve shifts to the left

Question 14

If an increase in planned investment of $70 billion causes equilibrium output demanded to rise by $280 billion,the value of the marginal propensity to consume is

Accepted Answer

A)  4 
B)  4/3 
C)  1/3 
D)  1/4 
E)  3/4 
A)  4 
B)  4/3 
C)  1/3 
D)  1/4 
E)  3/4

Question 15

Exhibit 10-2
  
-In Exhibit 10-2,the equilibrium level of GDP is

Accepted Answer

A)  $5.0 trillion 
B)  $5.5 trillion 
C)  $6.0 trillion 
D)  $6.5 trillion 
E)  $7.0 trillion 
A)  $5.0 trillion 
B)  $5.5 trillion 
C)  $6.0 trillion 
D)  $6.5 trillion 
E)  $7.0 trillion

Question 16

If investment increases by $100 and,as a result,GDP ultimately increases by $200,the multiplier equals

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  4 
E)  5 
A)  1 
B)  2 
C)  3 
D)  4 
E)  5

Question 17

Suppose that at a particular level of real GDP,the unintended change in inventories is zero.Which of the following is true?

Accepted Answer

A)  That level of real GDP is less than the equilibrium level of real GDP demanded. 
B)  That level of real GDP is greater than the equilibrium level of real GDP demanded. 
C)  That level of real GDP is the equilibrium level of real GDP demanded. 
D)  At that level of real GDP,there is no inflation. 
E)  At that level of real GDP,there is no saving. 
A)  That level of real GDP is less than the equilibrium level of real GDP demanded. 
B)  That level of real GDP is greater than the equilibrium level of real GDP demanded. 
C)  That level of real GDP is the equilibrium level of real GDP demanded. 
D)  At that level of real GDP,there is no inflation. 
E)  At that level of real GDP,there is no saving.

Question 18

An increase in planned investment would shift the

Accepted Answer

A)  aggregate demand curve outward 
B)  aggregate demand curve inward 
C)  aggregate supply curve outward 
D)  aggregate supply curve inward 
E)  consumption function upward 
A)  aggregate demand curve outward 
B)  aggregate demand curve inward 
C)  aggregate supply curve outward 
D)  aggregate supply curve inward 
E)  consumption function upward

Question 19

An increase in the price level can be indicated by a downward shift of the aggregate expenditure line.

Accepted Answer

A) True 
 B)False

Question 20

An increase in the price level will

Accepted Answer

A)  shift the aggregate demand curve to the right 
B)  shift the aggregate demand curve to the left 
C)  increase the level of aggregate quantity demanded 
D)  decrease the level of aggregate quantity demanded 
E)  have no effect at all on aggregate demand 
A)  shift the aggregate demand curve to the right 
B)  shift the aggregate demand curve to the left 
C)  increase the level of aggregate quantity demanded 
D)  decrease the level of aggregate quantity demanded 
E)  have no effect at all on aggregate demand

Exam 10: Aggregate Expenditure and Aggregate Demand

The simple spending multiplier is like

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

Aggregate expenditure means total or combined spending.

The slope of the aggregate expenditure line equals the marginal propensity to consume.

An increase in the price level will

If the marginal propensity to save is 1/8,the value of the simple multiplier is

A rise in the price level will shift the aggregate expenditure curve

Exhibit 10-2 -At the equilibrium level of GDP in Exhibit 10-2,leakages equal

If an economy is in equilibrium when net taxes = $50 trillion,saving = $40 trillion,government purchases = $50 trillion,exports = $30 trillion,and imports = $10 trillion,then planned investment spending must equal

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

Which of the following is true concerning the relationship between the marginal propensity to consume and the consumption function?

The larger the MPC,the greater the multiplier effect.

If the level of autonomous spending increases at a given price level,

If an increase in planned investment of $70 billion causes equilibrium output demanded to rise by $280 billion,the value of the marginal propensity to consume is

Exhibit 10-2 -In Exhibit 10-2,the equilibrium level of GDP is

If investment increases by $100 and,as a result,GDP ultimately increases by $200,the multiplier equals

Suppose that at a particular level of real GDP,the unintended change in inventories is zero.Which of the following is true?

An increase in planned investment would shift the

An increase in the price level can be indicated by a downward shift of the aggregate expenditure line.

An increase in the price level 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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