Question 1

If planned aggregate expenditure is greater than total production,

Accepted Answer

A)  actual inventories will equal planned inventories. 
B)  firms will experience an unplanned increase in inventories. 
C)  GDP will increase. 
D)  the economy is in equilibrium. 
A)  actual inventories will equal planned inventories. 
B)  firms will experience an unplanned increase in inventories. 
C)  GDP will increase. 
D)  the economy is in equilibrium.

Question 2

Figure 23-3  
-Refer to Figure 23-3. Suppose that investment spending decreases by $5 million, decreasing aggregate expenditure and decreasing real GDP from GDP2 to GDP1. If the MPC is 0.8, then what is the change in GDP?

Accepted Answer

A)  -$4 million 
B)  -$5 million 
C)  -$25 million 
D)  -$40 million 
A)  -$4 million 
B)  -$5 million 
C)  -$25 million 
D)  -$40 million

Question 3

MPC + MPS =

Accepted Answer

A)  0. 
B)  0.5. 
C)  1. 
D)  100. 
A)  0. 
B)  0.5. 
C)  1. 
D)  100.

Question 4

The ratio of the increase in equilibrium real GDP to the increase in autonomous expenditure is called the

Accepted Answer

A)  MPC. 
B)  multiplier. 
C)  MPS. 
D)  consumption function. 
A)  MPC. 
B)  multiplier. 
C)  MPS. 
D)  consumption function.

Question 5

If the multiplier is 10, the marginal propensity to consume must be 0.1.

Accepted Answer

A) True 
 B)False

Question 6

What are the four categories of aggregate expenditure?

Accepted Answer

The four categories are consum

Question 7

If an increase in autonomous consumption spending of $10 million results in a $50 million increase in equilibrium real GDP, then

Accepted Answer

A)  the MPC is 0.5. 
B)  the MPC is 0.75. 
C)  the MPC is 0.8. 
D)  the MPC is 0.9. 
A)  the MPC is 0.5. 
B)  the MPC is 0.75. 
C)  the MPC is 0.8. 
D)  the MPC is 0.9.

Question 8

________ in taxes will decrease consumption spending, and ________ in transfer payments will increase consumption spending.

Accepted Answer

A)  An increase; an increase 
B)  A decrease; an increase 
C)  An increase; a decrease 
D)  A decrease; a decrease 
A)  An increase; an increase 
B)  A decrease; an increase 
C)  An increase; a decrease 
D)  A decrease; a decrease

Question 9

What is the main reason for changes in GDP in the short run?

Accepted Answer

The main reason for changes in

Question 10

Concerned that its dependence on sales of microprocessors to computer firms would make it vulnerable to sharp sales declines during the recession of 2007-2009, Intel began to develop memory chips that could be used in portable consumer electronic devices such as tablets and smartphones. One reason that Intel chose to branch out from producing microprocessors for computers is that

Accepted Answer

A)  sales of computers have been declining over the past decade. 
B)  technology with respect to microprocessor production was no longer advancing at a rate where Intel's new products were still wanted by computer manufacturers. 
C)  Intel had lost a majority of its market share in microprocessor production to foreign competition. 
D)  computers are durable goods and spending on computers follows the business cycle. 
A)  sales of computers have been declining over the past decade. 
B)  technology with respect to microprocessor production was no longer advancing at a rate where Intel's new products were still wanted by computer manufacturers. 
C)  Intel had lost a majority of its market share in microprocessor production to foreign competition. 
D)  computers are durable goods and spending on computers follows the business cycle.

Question 11

On the 45-degree line diagram, for points that lie above the 45-degree line,

Accepted Answer

A)  planned aggregate expenditure is greater than GDP. 
B)  planned aggregate expenditure is less than GDP. 
C)  planned aggregate expenditure is equal to GDP. 
D)  planned aggregate expenditure is less than aggregate income. 
A)  planned aggregate expenditure is greater than GDP. 
B)  planned aggregate expenditure is less than GDP. 
C)  planned aggregate expenditure is equal to GDP. 
D)  planned aggregate expenditure is less than aggregate income.

Question 12

In a small economy in 2013, aggregate expenditure was $800 million while GDP that year was $850 million. Which of the following can explain the difference between aggregate expenditure and GDP that year?

Accepted Answer

A)  Aggregate expenditure is always less than GDP in developed countries. 
B)  Firm investment in inventories was less than anticipated in 2013. 
C)  Firm investment in inventories was greater than anticipated in 2013. 
D)  Aggregate expenditure is always less than GDP in developing countries. 
A)  Aggregate expenditure is always less than GDP in developed countries. 
B)  Firm investment in inventories was less than anticipated in 2013. 
C)  Firm investment in inventories was greater than anticipated in 2013. 
D)  Aggregate expenditure is always less than GDP in developing countries.

Question 13

At macroeconomic equilibrium,

Accepted Answer

A)  total investment equals total inventories. 
B)  total spending equals total production. 
C)  total consumption equals total production. 
D)  total taxes equal total transfers. 
A)  total investment equals total inventories. 
B)  total spending equals total production. 
C)  total consumption equals total production. 
D)  total taxes equal total transfers.

Question 14

Higher interest rates increase both consumption and investment spending.

Accepted Answer

A) True 
 B)False

Question 15

Given the equations for C, I, G, and NX below, what is the marginal propensity to consume? C = 2,000 + 0.9Y
I = 2,500
G = 3,000
NX = 400

Accepted Answer

A)  -0.1 
B)  0.1 
C)  0.9 
D)  2000 
A)  -0.1 
B)  0.1 
C)  0.9 
D)  2000

Question 16

If the marginal propensity to save is 0.1, then a $10 million decrease in disposable income will

Accepted Answer

A)  increase consumption by $9 million. 
B)  increase consumption by $1 million. 
C)  decrease consumption by $9 million. 
D)  decrease consumption by $1 million. 
A)  increase consumption by $9 million. 
B)  increase consumption by $1 million. 
C)  decrease consumption by $9 million. 
D)  decrease consumption by $1 million.

Question 17

Figure 23-4  
-Refer to Figure 23-4. Potential GDP equals $500 billion. The economy is currently producing GDP1 which is equal to $450 billion. If the MPC is 0.8, then how much must autonomous spending change for the economy to move to potential GDP?

Accepted Answer

A)  -$40 billion 
B)  -$10 billion 
C)  $10 billion 
D)  $40 billion 
A)  -$40 billion 
B)  -$10 billion 
C)  $10 billion 
D)  $40 billion

Question 18

If an increase in investment spending of $20 million results in a $200 million increase in equilibrium real GDP, then

Accepted Answer

A)  the multiplier is 0.1. 
B)  the multiplier is 1. 
C)  the multiplier is 10. 
D)  the multiplier is 100. 
A)  the multiplier is 0.1. 
B)  the multiplier is 1. 
C)  the multiplier is 10. 
D)  the multiplier is 100.

Question 19

When Jack's income increases by $1,000, he spends an additional $850 dollars. This implies that his marginal propensity to consume is 0.85.

Accepted Answer

A) True 
 B)False

Question 20

If aggregate expenditure is less than GDP, then inventories rise and GDP falls.

Accepted Answer

A) True 
 B)False

Exam 23: Aggregate Expenditure and Output in the Short Run

If planned aggregate expenditure is greater than total production,

Figure 23-3 -Refer to Figure 23-3. Suppose that investment spending decreases by $5 million, decreasing aggregate expenditure and decreasing real GDP from GDP2 to GDP1. If the MPC is 0.8, then what is the change in GDP?

MPC + MPS =

The ratio of the increase in equilibrium real GDP to the increase in autonomous expenditure is called the

If the multiplier is 10, the marginal propensity to consume must be 0.1.

What are the four categories of aggregate expenditure?

If an increase in autonomous consumption spending of $10 million results in a $50 million increase in equilibrium real GDP, then

________ in taxes will decrease consumption spending, and ________ in transfer payments will increase consumption spending.

What is the main reason for changes in GDP in the short run?

On the 45-degree line diagram, for points that lie above the 45-degree line,

In a small economy in 2013, aggregate expenditure was $800 million while GDP that year was $850 million. Which of the following can explain the difference between aggregate expenditure and GDP that year?

At macroeconomic equilibrium,

Higher interest rates increase both consumption and investment spending.

Given the equations for C, I, G, and NX below, what is the marginal propensity to consume? C = 2,000 + 0.9Y I = 2,500 G = 3,000 NX = 400

If the marginal propensity to save is 0.1, then a $10 million decrease in disposable income will

Figure 23-4 -Refer to Figure 23-4. Potential GDP equals $500 billion. The economy is currently producing GDP1 which is equal to $450 billion. If the MPC is 0.8, then how much must autonomous spending change for the economy to move to potential GDP?

If an increase in investment spending of $20 million results in a $200 million increase in equilibrium real GDP, then

When Jack's income increases by $1,000, he spends an additional $850 dollars. This implies that his marginal propensity to consume is 0.85.

If aggregate expenditure is less than GDP, then inventories rise and GDP falls.

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Demand and Aggregate Supply Analysis

Money, Banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, Unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

in taxes will decrease consumption spending, and in transfer payments will increase consumption spending.