Question 1

The part of consumption that is determined by income is referred to as autonomous consumption.

Accepted Answer

A) True 
 B)False

Question 2

Government purchases

Accepted Answer

A)  are only weakly related to aggregate income 
B)  include spending on goods and services plus transfer payments 
C)  are inversely related to aggregate income 
D)  are inversely related to the price level 
E)  are inversely related to the interest rate 
A)  are only weakly related to aggregate income 
B)  include spending on goods and services plus transfer payments 
C)  are inversely related to aggregate income 
D)  are inversely related to the price level 
E)  are inversely related to the interest rate

Question 3

Which of the following would unambiguously increase consumption spending?

Accepted Answer

A)  an increase in real disposable income coupled with a decrease in real wealth 
B)  an increase in real wealth coupled with more pessimistic expectations regarding future income 
C)  a decrease in real disposable income coupled with a decrease in the interest rate 
D)  a decrease in the interest rate coupled with an increase in real wealth 
E)  increased pessimism regarding future income coupled with an increase in the interest rate 
A)  an increase in real disposable income coupled with a decrease in real wealth 
B)  an increase in real wealth coupled with more pessimistic expectations regarding future income 
C)  a decrease in real disposable income coupled with a decrease in the interest rate 
D)  a decrease in the interest rate coupled with an increase in real wealth 
E)  increased pessimism regarding future income coupled with an increase in the interest rate

Question 4

All of the following would shift the consumption-income line except

Accepted Answer

A)  an increase in taxes that causes the marginal propensity to consume to change 
B)  an increase in taxes that changes autonomous spending 
C)  a change in expectations of future income 
D)  a change in wealth 
E)  none of the above 
A)  an increase in taxes that causes the marginal propensity to consume to change 
B)  an increase in taxes that changes autonomous spending 
C)  a change in expectations of future income 
D)  a change in wealth 
E)  none of the above

Question 5

A recession occurs only if there are two consecutive quarters of declining real GDP.

Accepted Answer

A) True 
 B)False

Question 6

The marginal propensity to consume tells us the intercept of the consumption function.

Accepted Answer

A) True 
 B)False

Question 7

To construct a graph that would enable us to find equilibrium GDP,we would need to plot

Accepted Answer

A)  the consumption-income line 
B)  a line showing the sum of consumption and investment at each income level 
C)  the investment spending line 
D)  the consumption-income line and the government expenditures line 
E)  an aggregate expenditure line and the 45-degree line from the origin 
A)  the consumption-income line 
B)  a line showing the sum of consumption and investment at each income level 
C)  the investment spending line 
D)  the consumption-income line and the government expenditures line 
E)  an aggregate expenditure line and the 45-degree line from the origin

Question 8

A spending shock is a change in spending that ultimately affects the entire economy.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following would shift the aggregate expenditure line upward?

Accepted Answer

A)  an increase in labor supply 
B)  a decrease in labor demand 
C)  a decrease in government spending 
D)  a decrease in net exports 
E)  an increase in autonomous consumption spending 
A)  an increase in labor supply 
B)  a decrease in labor demand 
C)  a decrease in government spending 
D)  a decrease in net exports 
E)  an increase in autonomous consumption spending

Question 10

Which of the following is an important assumption in the short-run macro model?

Accepted Answer

A)  Government spending depends on income. 
B)  Output does not change. 
C)  Firms do not maintain inventories. 
D)  Investment depends on income. 
E)  Prices do not change. 
A)  Government spending depends on income. 
B)  Output does not change. 
C)  Firms do not maintain inventories. 
D)  Investment depends on income. 
E)  Prices do not change.

Question 11

Which of the following describes the relationship between the change in inventories and aggregate expenditure?

Accepted Answer

A)  Aggregate expenditure equals the change in inventories minus GDP. 
B)  The change in inventories equals GDP divided by aggregate expenditures. 
C)  Aggregate expenditures equals GDP divided by the change in inventories. 
D)  Aggregate expenditures equals GDP minus the change in inventories. 
E)  The change in inventories equals GDP multiplied by aggregate expenditure. 
A)  Aggregate expenditure equals the change in inventories minus GDP. 
B)  The change in inventories equals GDP divided by aggregate expenditures. 
C)  Aggregate expenditures equals GDP divided by the change in inventories. 
D)  Aggregate expenditures equals GDP minus the change in inventories. 
E)  The change in inventories equals GDP multiplied by aggregate expenditure.

Question 12

-Use the graph shown in Figure 11-5 to determine equilibrium in the economy.

Accepted Answer

A)  $1,000 
B)  $2,000 
C)  $3,000 
D)  $3,250 
E)  There is no equilibrium in this economy. 
A)  $1,000 
B)  $2,000 
C)  $3,000 
D)  $3,250 
E)  There is no equilibrium in this economy.

Question 13

If income increases by $10,000,government purchases are fixed at $1,000,investment spending is fixed at $2,000,net exports are fixed at $500,and the marginal propensity to consume is 0.70,by how much does aggregate expenditure increase?

Accepted Answer

A)  $700 
B)  $2,000 
C)  $7,000 
D)  $1,000 
E)  $1,400 
A)  $700 
B)  $2,000 
C)  $7,000 
D)  $1,000 
E)  $1,400

Question 14

When unplanned inventory changes are positive,GDP is current at its equilibrium level

Accepted Answer

A) True 
 B)False

Question 15

In the short-run macro model,cyclical unemployment is caused by insufficient spending.

Accepted Answer

A) True 
 B)False

Question 16

If aggregate expenditure is less than GDP,inventories will

Accepted Answer

A)  grow and prices will fall 
B)  grow and GDP will rise 
C)  grow and GDP will fall 
D)  shrink and GDP will rise 
E)  shrink and GDP will fall 
A)  grow and prices will fall 
B)  grow and GDP will rise 
C)  grow and GDP will fall 
D)  shrink and GDP will rise 
E)  shrink and GDP will fall

Question 17

The slope of the consumption function is also known as

Accepted Answer

A)  the consumption ratio 
B)  the average propensity to consume 
C)  autonomous consumption spending 
D)  the marginal propensity to consume 
E)  multiplying propensity to consume 
A)  the consumption ratio 
B)  the average propensity to consume 
C)  autonomous consumption spending 
D)  the marginal propensity to consume 
E)  multiplying propensity to consume

Question 18

In the short-run macro model,adjustment toward equilibrium is facilitated by price changes.

Accepted Answer

A) True 
 B)False

Question 19

If taxes rise $100 billion,disposable income will fall by $100 billion and consumption spending will also fall by $100 billion.

Accepted Answer

A) True 
 B)False

Question 20

Disposable income is best defined as

Accepted Answer

A)  income adjusted for inflation 
B)  nominal income 
C)  the income remaining after bills have been paid 
D)  income after taxes have been paid and transfers received 
E)  income paid in dollars that are worthless 
A)  income adjusted for inflation 
B)  nominal income 
C)  the income remaining after bills have been paid 
D)  income after taxes have been paid and transfers received 
E)  income paid in dollars that are worthless

Exam 23: The Short-Run Macro Model

The part of consumption that is determined by income is referred to as autonomous consumption.

Government purchases

Which of the following would unambiguously increase consumption spending?

All of the following would shift the consumption-income line except

A recession occurs only if there are two consecutive quarters of declining real GDP.

The marginal propensity to consume tells us the intercept of the consumption function.

To construct a graph that would enable us to find equilibrium GDP,we would need to plot

A spending shock is a change in spending that ultimately affects the entire economy.

Which of the following would shift the aggregate expenditure line upward?

Which of the following is an important assumption in the short-run macro model?

Which of the following describes the relationship between the change in inventories and aggregate expenditure?

-Use the graph shown in Figure 11-5 to determine equilibrium in the economy.

If income increases by $10,000,government purchases are fixed at $1,000,investment spending is fixed at $2,000,net exports are fixed at $500,and the marginal propensity to consume is 0.70,by how much does aggregate expenditure increase?

When unplanned inventory changes are positive,GDP is current at its equilibrium level

In the short-run macro model,cyclical unemployment is caused by insufficient spending.

If aggregate expenditure is less than GDP,inventories will

The slope of the consumption function is also known as

In the short-run macro model,adjustment toward equilibrium is facilitated by price changes.

If taxes rise $100 billion,disposable income will fall by $100 billion and consumption spending will also fall by $100 billion.

Disposable income is best defined as

What Is Economics

Scarcity,choice,and Economic Systems

Scarcity, choice, and Economic Systems: Part A

Working With Supply and Demand

Elasticity

Consumer Choice

Production and Cost

How Firms Make Decisions: Profit Maximization

Perfect Competition

Perfect Competition: Part A

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets

labor Markets: Part A

Capital and Financial Markets

Economic Efficiency and the Competitive Ideal

Governments Role in Economic Efficiency

Comparative Advantage and the Gains From International Trade

What Macroeconomics Tries to Explain

Production, income, and Employment

The Price Level and Inflation

The Classical Long-Run Model

Part A: The Classical Model in an Open Economy

Economic Growth and Rising Living Standards

Economic Fluctuations

Fiscal Policy

Money,banks,and the Federal Reserve

The Money Market and Monetary Policy

Feedback Effects From GDP to the Money Market

Aggregate Demand and Aggregate Supply

Inflation and Monetary Policy

Exchange Rates and Macroeconomic Policy

Appendix-finding Equilibrium GDP Algebraically

Appendix: Capital and Leverage

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