Question 1

Favorable expectations about future sales will cause higher investment,ceteris paribus.
Businesses will be more inclined to invest when it seems likely to pay off financially.

Accepted Answer

A) True 
 B)False

Question 2

Suppose the MPC in an economy is 0.9.The APC is initially 0.95 and disposable income is $4 billion.If disposable income increases to $14 billion,what is the new level of consumption?

Accepted Answer

A) $13.3 billion. 
B) $12.8 billion. 
C) $9 billion. 
D) $12.6 billion. 
A) $13.3 billion. 
B) $12.8 billion. 
C) $9 billion. 
D) $12.6 billion.

Question 3

$$\begin{array}{l}
\begin{array} { | c | c | } 
\hline \begin{array} { c } 
\text { Disposable Income } \
\text { (Billions of dollars per year) }
\end{array} & \begin{array} { c } 
\text { Total Consumption } \
\text { (Billions of dollars per year) }
\end{array} \
\hline \$ 0 & \$ 50 \
\hline 200 & 210 \
\hline
\end{array}\
\text { Table } 9.1
\end{array}$$ What is the marginal propensity to save in Table 9.1?

Accepted Answer

A) 0.05. 
B) 0.80. 
C) 0.20. 
D) 0.24. 
A) 0.05. 
B) 0.80. 
C) 0.20. 
D) 0.24.

Question 4

What is investment spending,and what are the factors that impact investment demand? Explain.

Accepted Answer

Investment is expenditures on new plants

Question 5

In Figure 9.6,if full employment occurs at QB, then aggregate demand is

Accepted Answer

A) Too great,causing cyclical unemployment. 
B) Too great,causing demand-pull inflation. 
C) Too small,causing cyclical unemployment. 
D) Just right,causing no cyclical unemployment. 
A) Too great,causing cyclical unemployment. 
B) Too great,causing demand-pull inflation. 
C) Too small,causing cyclical unemployment. 
D) Just right,causing no cyclical unemployment.

Question 6

Complete Table 9.2.(Data are expressed in billions of dollars.) $\begin{array}{cccc}
\text { Full Employment } & \text { Consumers } & \text { Investors Desire } & \text { Total Private } \
\text { Income (Output) } & \text { Desire to Spend } & \text { to Spend } & \text { Spending }&\text { Total Saving }\\hline
\$ 500 & \$ 300 & \$ 250&\$\_\_\_&\$\_\_\_ \
600 & 375 & 250&\$\_\_\_&\$\_\_\_ \
700 & 450 & 250&\$\_\_\_&\$\_\_\_ \
800 & 525 & 250&\$\_\_\_&\$\_\_\_
\end{array}$

$\text { Table } 9.2$ If the full-employment level of income (YF)in Table 9.2 is $800 billion,

Accepted Answer

A) The economy is in equilibrium. 
B) There is a recessionary gap of $25 billion. 
C) There is an inflationary gap of $250 billion. 
D) There is a recessionary gap of $275 billion. 
A) The economy is in equilibrium. 
B) There is a recessionary gap of $25 billion. 
C) There is an inflationary gap of $250 billion. 
D) There is a recessionary gap of $275 billion.

Question 7

If wealth rises,

Accepted Answer

A) There will be a movement to the left along the AD curve. 
B) There will be a movement to the right along the AD curve. 
C) The AD curve will shift to the left. 
D) The AD curve will shift to the right. 
A) There will be a movement to the left along the AD curve. 
B) There will be a movement to the right along the AD curve. 
C) The AD curve will shift to the left. 
D) The AD curve will shift to the right.

Question 8

If the investment demand curve shifts to the left,then

Accepted Answer

A) The AD curve will shift to the left. 
B) The AD curve will shift to the right. 
C) The AD curve will not be affected. 
D) There will be upward movement along the AD curve. 
A) The AD curve will shift to the left. 
B) The AD curve will shift to the right. 
C) The AD curve will not be affected. 
D) There will be upward movement along the AD curve.

Question 9

The MPC indicates the portion of

Accepted Answer

A) An additional dollar of disposable income that will be saved. 
B) An additional dollar of disposable income that will be spent. 
C) Total income that will be saved. 
D) Total income that will be spent. 
A) An additional dollar of disposable income that will be saved. 
B) An additional dollar of disposable income that will be spent. 
C) Total income that will be saved. 
D) Total income that will be spent.

Question 10

Demand-pull inflation is caused by

Accepted Answer

A) An increase in aggregate supply. 
B) An increase in resource costs as an economy's production capacity is approached. 
C) An increase in inventories. 
D) Excessive aggregate demand in relation to an economy's production capacity. 
A) An increase in aggregate supply. 
B) An increase in resource costs as an economy's production capacity is approached. 
C) An increase in inventories. 
D) Excessive aggregate demand in relation to an economy's production capacity.

Question 11

With respect to the aggregate demand curve,improved consumer confidence would

Accepted Answer

A) Shift the curve rightward. 
B) Shift the curve leftward. 
C) Move the economy down along the curve. 
D) Move the economy up along the curve. 
A) Shift the curve rightward. 
B) Shift the curve leftward. 
C) Move the economy down along the curve. 
D) Move the economy up along the curve.

Question 12

Which of the following is not a component of aggregate demand?

Accepted Answer

A) Consumption. 
B) Investment. 
C) Productivity. 
D) Net exports. 
A) Consumption. 
B) Investment. 
C) Productivity. 
D) Net exports.

Question 13

The aggregate expenditure curve tells how much market participants desire to spend at different income levels.
The aggregate expenditure curve reflects total spending by consumers,businesses,governments,and foreigners.

Accepted Answer

A) True 
 B)False

Question 14

According to Figure 9.3,which of the following is true?

Accepted Answer

A) Dissaving occurs at disposable income levels above $20 billion. 
B) Consumption is $10 billion when disposable income is zero. 
C) The APC is greater than 1 at disposable income levels above $20 billion. 
D) At a disposable income level of $20 billion,consumption is zero. 
A) Dissaving occurs at disposable income levels above $20 billion. 
B) Consumption is $10 billion when disposable income is zero. 
C) The APC is greater than 1 at disposable income levels above $20 billion. 
D) At a disposable income level of $20 billion,consumption is zero.

Question 15

Which of the following will cause an increase in U.S.gross exports?

Accepted Answer

A) An increase in foreign consumer income. 
B) A decrease in foreign business investment. 
C) An increase in U.S.consumer income. 
D) An increase in U.S.imports. 
A) An increase in foreign consumer income. 
B) A decrease in foreign business investment. 
C) An increase in U.S.consumer income. 
D) An increase in U.S.imports.

Question 16

If the MPC is 0.8 and the APC is 0.9,the MPS equals

Accepted Answer

A) 0.1. 
B) 0.2. 
C) 0.8. 
D) 1.7. 
A) 0.1. 
B) 0.2. 
C) 0.8. 
D) 1.7.

Question 17

The line described by the consumption function C = a + bYD will change its slope when

Accepted Answer

A) The MPC changes. 
B) Consumer confidence changes. 
C) Disposable income changes. 
D) The APS changes. 
A) The MPC changes. 
B) Consumer confidence changes. 
C) Disposable income changes. 
D) The APS changes.

Question 18

A recessionary gap implies that

Accepted Answer

A) Aggregate demand is less than aggregate supply at the full-employment price level. 
B) The unemployment rate is falling. 
C) Aggregate demand exceeds aggregate supply at the full-employment price level. 
D) Inventories are being depleted faster than producers desire. 
A) Aggregate demand is less than aggregate supply at the full-employment price level. 
B) The unemployment rate is falling. 
C) Aggregate demand exceeds aggregate supply at the full-employment price level. 
D) Inventories are being depleted faster than producers desire.

Question 19

A recessionary gap

Accepted Answer

A) Would cause a depletion of inventories. 
B) Would occur if total output were less than aggregate demand. 
C) Is the amount by which the rate of actual spending falls short of full-employment GDP. 
D) Is the amount by which total spending exceeds GDP. 
A) Would cause a depletion of inventories. 
B) Would occur if total output were less than aggregate demand. 
C) Is the amount by which the rate of actual spending falls short of full-employment GDP. 
D) Is the amount by which total spending exceeds GDP.

Question 20

If firms become more pessimistic about future sales,then

Accepted Answer

A) The AD curve will shift to the right. 
B) The AD curve will shift to the left. 
C) There will be a rightward movement along the AD curve. 
D) There will be a leftward movement along the AD curve. 
A) The AD curve will shift to the right. 
B) The AD curve will shift to the left. 
C) There will be a rightward movement along the AD curve. 
D) There will be a leftward movement along the AD curve.

Favorable expectations about future sales will cause higher investment,ceteris paribus. Businesses will be more inclined to invest when it seems likely to pay off financially.

Suppose the MPC in an economy is 0.9.The APC is initially 0.95 and disposable income is $4 billion.If disposable income increases to $14 billion,what is the new level of consumption?

Disposable Income (Billions of dollars per year) Total Consumption (Billions of dollars per year) \ 0 \ 50 200 210 Table 9.1 What is the marginal propensity to save in Table 9.1?

What is investment spending,and what are the factors that impact investment demand? Explain.

In Figure 9.6,if full employment occurs at Q_B, then aggregate demand is

If wealth rises,

If the investment demand curve shifts to the left,then

The MPC indicates the portion of

Demand-pull inflation is caused by

With respect to the aggregate demand curve,improved consumer confidence would

Which of the following is not a component of aggregate demand?

The aggregate expenditure curve tells how much market participants desire to spend at different income levels. The aggregate expenditure curve reflects total spending by consumers,businesses,governments,and foreigners.

According to Figure 9.3,which of the following is true?

Which of the following will cause an increase in U.S.gross exports?

If the MPC is 0.8 and the APC is 0.9,the MPS equals

The line described by the consumption function C = a + bY_D will change its slope when

A recessionary gap implies that

A recessionary gap

If firms become more pessimistic about future sales,then

Economics: The Core Issues

The Us Economy: A Global View

Supply and Demand

The Role of Government

National Income Accounting

Unemployment

Inflation

The Business Cycle

Self-Adjustment or Instability

Fiscal Policy

Deficits and Debt

Money and Banks

The Federal Reserve System

Monetary Policy

Supply-Side Policy: Short-Run Options

Growth and Productivity: Long-Run Possibilities

Theory Versus Reality

International Trade

International Finance

Global Poverty

Filters

Exam 9: Aggregate Demand

Favorable expectations about future sales will cause higher investment,ceteris paribus. Businesses will be more inclined to invest when it seems likely to pay off financially.

Suppose the MPC in an economy is 0.9.The APC is initially 0.95 and disposable income is $4 billion.If disposable income increases to $14 billion,what is the new level of consumption?

Disposable Income (Billions of dollars per year) Total Consumption (Billions of dollars per year) \ 0 \ 50 200 210 Table 9.1 What is the marginal propensity to save in Table 9.1?

What is investment spending,and what are the factors that impact investment demand? Explain.

In Figure 9.6,if full employment occurs at QB, then aggregate demand is

If wealth rises,

If the investment demand curve shifts to the left,then

The MPC indicates the portion of

Demand-pull inflation is caused by

With respect to the aggregate demand curve,improved consumer confidence would

Which of the following is not a component of aggregate demand?

The aggregate expenditure curve tells how much market participants desire to spend at different income levels. The aggregate expenditure curve reflects total spending by consumers,businesses,governments,and foreigners.

According to Figure 9.3,which of the following is true?

Which of the following will cause an increase in U.S.gross exports?

If the MPC is 0.8 and the APC is 0.9,the MPS equals

The line described by the consumption function C = a + bYD will change its slope when

A recessionary gap implies that

A recessionary gap

If firms become more pessimistic about future sales,then

Economics: The Core Issues

The Us Economy: A Global View

Supply and Demand

The Role of Government

National Income Accounting

Unemployment

Inflation

The Business Cycle

Self-Adjustment or Instability

Fiscal Policy

Deficits and Debt

Money and Banks

The Federal Reserve System

Monetary Policy

Supply-Side Policy: Short-Run Options

Growth and Productivity: Long-Run Possibilities

Theory Versus Reality

International Trade

International Finance

Global Poverty

Filters

In Figure 9.6,if full employment occurs at Q_B, then aggregate demand is

The line described by the consumption function C = a + bY_D will change its slope when