Question 1

That fraction of a change in disposable income that is consumed is called

Accepted Answer

A)  autonomous consumption 
B)  induced consumption 
C)  the multiplier 
D)  the marginal propensity to consume 
E)  the marginal propensity to save 
A)  autonomous consumption 
B)  induced consumption 
C)  the multiplier 
D)  the marginal propensity to consume 
E)  the marginal propensity to save

Question 2

A decrease 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 and to the left along the aggregate demand curve 
D)  result in a movement down and 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 and to the left along the aggregate demand curve 
D)  result in a movement down and to the right along the aggregate demand curve 
E)  have no effect on the aggregate quantity demanded

Question 3

The simple multiplier

Accepted Answer

A)  when divided by consumption spending equals saving 
B)  is defined as 1.0 divided by the marginal propensity to save 
C)  is defined as 1.0 divided by the marginal propensity to consume 
D)  is equal to the MPS plus the MPC 
E)  is equal to the MPS minus the MPC 
A)  when divided by consumption spending equals saving 
B)  is defined as 1.0 divided by the marginal propensity to save 
C)  is defined as 1.0 divided by the marginal propensity to consume 
D)  is equal to the MPS plus the MPC 
E)  is equal to the MPS minus the MPC

Question 4

In an economy without a government and without international transactions,aggregate expenditure at each level of income is equal to

Accepted Answer

A)  consumption plus saving 
B)  planned investment plus saving 
C)  disposable income plus the price level 
D)  consumption plus planned investment 
E)  planned investment minus saving 
A)  consumption plus saving 
B)  planned investment plus saving 
C)  disposable income plus the price level 
D)  consumption plus planned investment 
E)  planned investment minus saving

Question 5

Only a change in the price level can cause shifts in both the aggregate expenditure line and the aggregate demand curve.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

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

Question 7

The equilibrium quantity of aggregate output occurs when

Accepted Answer

A)  the economy reaches the full employment of labor 
B)  planned aggregate expenditure equals income generated from production 
C)  actual aggregate expenditures equal real GDP 
D)  inventories of goods and services are increasing 
E)  inventories of goods and services are decreasing 
A)  the economy reaches the full employment of labor 
B)  planned aggregate expenditure equals income generated from production 
C)  actual aggregate expenditures equal real GDP 
D)  inventories of goods and services are increasing 
E)  inventories of goods and services are decreasing

Question 8

Which of the following is not included in the aggregate expenditure line?

Accepted Answer

A)  C 
B)  P 
C)  I 
D)  G 
E)  (X-M) 
A)  C 
B)  P 
C)  I 
D)  G 
E)  (X-M)

Question 9

Which of the following would cause a leftward shift of the aggregate demand curve?

Accepted Answer

A)  an increase in planned investment 
B)  a drop in the price level 
C)  a rise in the price level 
D)  an increase in autonomous consumption 
E)  anything that causes an upward shift in the saving function 
A)  an increase in planned investment 
B)  a drop in the price level 
C)  a rise in the price level 
D)  an increase in autonomous consumption 
E)  anything that causes an upward shift in the saving function

Question 10

Which of the following is not true about a change in the price level?

Accepted Answer

A)  It will shift the aggregate demand curve. 
B)  It will shift the aggregate expenditure curve. 
C)  It will result in a new value of equilibrium real GDP demanded. 
D)  It will change the real value of dollar-denominated assets. 
E)  It will shift the consumption function. 
A)  It will shift the aggregate demand curve. 
B)  It will shift the aggregate expenditure curve. 
C)  It will result in a new value of equilibrium real GDP demanded. 
D)  It will change the real value of dollar-denominated assets. 
E)  It will shift the consumption function.

Question 11

If the multiplier is 4,a $10 billion increase in autonomous investment will cause a

Accepted Answer

A)  $10 billion increase in equilibrium investment 
B)  $40 billion increase in equilibrium investment 
C)  $40 billion increase in equilibrium real GDP demanded 
D)  $400 billion increase in equilibrium real GDP demanded 
E)  $40 billion increase in consumption spending 
A)  $10 billion increase in equilibrium investment 
B)  $40 billion increase in equilibrium investment 
C)  $40 billion increase in equilibrium real GDP demanded 
D)  $400 billion increase in equilibrium real GDP demanded 
E)  $40 billion increase in consumption spending

Question 12

Exhibit 10-2
  
-In equilibrium in Exhibit 10-2,S + NT = I + G + (X - M)and is equal to

Accepted Answer

A)  $1.1 trillion 
B)  $1.2 trillion 
C)  $1.3 trillion 
D)  $1.4 trillion 
E)  $1.5 trillion 
A)  $1.1 trillion 
B)  $1.2 trillion 
C)  $1.3 trillion 
D)  $1.4 trillion 
E)  $1.5 trillion

Question 13

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

Accepted Answer

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

Question 14

Suppose that a pair of graphs represents a situation in which the aggregate expenditure line has shifted but the aggregate demand curve has not.The shift of the aggregate expenditure line was caused by a change in

Accepted Answer

A)  the marginal propensity to consume 
B)  the price level 
C)  autonomous investment 
D)  autonomous saving 
E)  disposable income 
A)  the marginal propensity to consume 
B)  the price level 
C)  autonomous investment 
D)  autonomous saving 
E)  disposable income

Question 15

Exhibit 10-5  
-According to the graph in Exhibit 10-5,if the price level increases,the new equilibrium level of real GDP must be

Accepted Answer

A)  less than $20 
B)  less than $100 
C)  zero 
D)  greater than $100 
E)  greater than $200 
A)  less than $20 
B)  less than $100 
C)  zero 
D)  greater than $100 
E)  greater than $200

Question 16

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

Accepted Answer

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

Question 17

The aggregate expenditure line shows total planned spending at each

Accepted Answer

A)  price level 
B)  income level 
C)  income level,holding the price level constant 
D)  price level,holding the level of income constant 
E)  interest rate,holding the price level constant 
A)  price level 
B)  income level 
C)  income level,holding the price level constant 
D)  price level,holding the level of income constant 
E)  interest rate,holding the price level constant

Question 18

As the U.S.price level rises relative to price levels in other countries,what would happen in the U.S.?

Accepted Answer

A)  consumption and net exports would decline 
B)  consumption and net exports would increase 
C)  consumption would increase and net exports would decrease 
D)  consumption would decrease and net exports would increase 
E)  consumption and net exports would remain constant 
A)  consumption and net exports would decline 
B)  consumption and net exports would increase 
C)  consumption would increase and net exports would decrease 
D)  consumption would decrease and net exports would increase 
E)  consumption and net exports would remain constant

Question 19

If households save $40 billion less at each level of income and the MPC = 0.8,the aggregate expenditure line will

Accepted Answer

A)  not be affected 
B)  shift upward by $40 billion 
C)  shift downward by $40 billion 
D)  shift upward by $200 billion because of the multiplier 
E)  shift downward by $200 billion because of the multiplier 
A)  not be affected 
B)  shift upward by $40 billion 
C)  shift downward by $40 billion 
D)  shift upward by $200 billion because of the multiplier 
E)  shift downward by $200 billion because of the multiplier

Question 20

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

Accepted Answer

A)  the price level will fall 
B)  consumption must fall 
C)  inventories will increase 
D)  inventories will decrease 
E)  consumption will decrease 
A)  the price level will fall 
B)  consumption must fall 
C)  inventories will increase 
D)  inventories will decrease 
E)  consumption will decrease

Exam 10: Aggregate Expenditure and Aggregate Demand

That fraction of a change in disposable income that is consumed is called

A decrease in the price level will

The simple multiplier

In an economy without a government and without international transactions,aggregate expenditure at each level of income is equal to

Only a change in the price level can cause shifts in both the aggregate expenditure line and the aggregate demand curve.

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

The equilibrium quantity of aggregate output occurs when

Which of the following is not included in the aggregate expenditure line?

Which of the following would cause a leftward shift of the aggregate demand curve?

Which of the following is not true about a change in the price level?

If the multiplier is 4,a $10 billion increase in autonomous investment will cause a

Exhibit 10-2 -In equilibrium in Exhibit 10-2,S + NT = I + G + (X - M)and is equal to

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

Suppose that a pair of graphs represents a situation in which the aggregate expenditure line has shifted but the aggregate demand curve has not.The shift of the aggregate expenditure line was caused by a change in

Exhibit 10-5 -According to the graph in Exhibit 10-5,if the price level increases,the new equilibrium level of real GDP must be

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

The aggregate expenditure line shows total planned spending at each

As the U.S.price level rises relative to price levels in other countries,what would happen in the U.S.?

If households save $40 billion less at each level of income and the MPC = 0.8,the aggregate expenditure line will

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

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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