Question 1

If the full employment level of income is $1200 billion and the present level of income is $1000 billion

Accepted Answer

A) an inflationary gap exists 
B) autonomous expenditure is too low for a full employment equilibrium 
C) autonomous expenditure is too high for a full employment equilibrium 
D) a decrease in autonomous expenditure is required 
E) government purchases of goods and services should be reduced 
A) an inflationary gap exists 
B) autonomous expenditure is too low for a full employment equilibrium 
C) autonomous expenditure is too high for a full employment equilibrium 
D) a decrease in autonomous expenditure is required 
E) government purchases of goods and services should be reduced

Question 2

If autonomous consumption rises by $0.8 trillion and the marginal propensity to consume (MPC) equals 3/4, the equilibrium level of output demanded will rise by

Accepted Answer

A) $0.2 trillion 
B) $0.6 trillion 
C) $1.07 trillion 
D) $2.4 trillion 
E) $3.2 trillion 
A) $0.2 trillion 
B) $0.6 trillion 
C) $1.07 trillion 
D) $2.4 trillion 
E) $3.2 trillion

Question 3

Which of the following is illustrated by the distance between the aggregate expenditure line and the 45-degree line at each level of real GDP?

Accepted Answer

A) saving 
B) unplanned inventory change 
C) planned investment 
D) marginal propensity to save 
E) marginal propensity to consume 
A) saving 
B) unplanned inventory change 
C) planned investment 
D) marginal propensity to save 
E) marginal propensity to consume

Question 4

The larger the MPS, the smaller the multiplier effect.

Accepted Answer

A) True 
 B)False

Question 5

If the marginal propensity to consume is 4/5, the simple multiplier is

Accepted Answer

A) 1/6 
B) 6 
C) 5/6 
D) 6/5 
E) 5 
A) 1/6 
B) 6 
C) 5/6 
D) 6/5 
E) 5

Question 6

Which is true regarding the marginal propensity to consume and the multiplier?

Accepted Answer

A) The lower the MPC, the higher the multiplier. 
B) The higher the MPC, the lower the multiplier. 
C) The MPC equals the multiplier. 
D) The sum of the MPC and the multiplier equals 1. 
E) The lower the MPC, the lower the multiplier. 
A) The lower the MPC, the higher the multiplier. 
B) The higher the MPC, the lower the multiplier. 
C) The MPC equals the multiplier. 
D) The sum of the MPC and the multiplier equals 1. 
E) The lower the MPC, the lower the multiplier.

Question 7

If the price level rises,

Accepted Answer

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

Question 8

If households save $30 billion more at each level of income and the MPC = 0.9, the aggregate expenditure line will

Accepted Answer

A) not be affected 
B) shift upward by $30 billion 
C) shift downward by $30 billion 
D) shift upward by $300 billion because of the multiplier 
E) shift downward by $300 billion because of the multiplier 
A) not be affected 
B) shift upward by $30 billion 
C) shift downward by $30 billion 
D) shift upward by $300 billion because of the multiplier 
E) shift downward by $300 billion because of the multiplier

Question 9

Exhibit 10-7
 
-Assume the United States' aggregate expenditure line started at AE(1) in Exhibit 10-7. When the real estate market crashed, its aggregate expenditure would have changed to

Accepted Answer

A) AE(1) 
B) AE(2) 
C) AE(3) 
D) AE(4) 
E) We cannot answer without knowing what happened to consumption 
A) AE(1) 
B) AE(2) 
C) AE(3) 
D) AE(4) 
E) We cannot answer without knowing what happened to consumption

Question 10

A primary determinant of consumption spending is new wealth.

Accepted Answer

A) True 
 B)False

Question 11

If the price level decreases,

Accepted Answer

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

Question 12

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 13

Suppose that the multiplier is 4, autonomous investment rises by $50 billion, and autonomous consumption falls by $50 billion at the same time. Which of the following is true?

Accepted Answer

A) Equilibrium GDP demanded will be the same, but the type of goods produced will be different. 
B) Equilibrium GDP demanded will increase by $200 billion. 
C) Equilibrium GDP demanded will decrease by $200 billion. 
D) Equilibrium GDP demanded will increase by $400 billion. 
E) Equilibrium GDP demanded will decrease by $400 billion. 
A) Equilibrium GDP demanded will be the same, but the type of goods produced will be different. 
B) Equilibrium GDP demanded will increase by $200 billion. 
C) Equilibrium GDP demanded will decrease by $200 billion. 
D) Equilibrium GDP demanded will increase by $400 billion. 
E) Equilibrium GDP demanded will decrease by $400 billion.

Question 14

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 15

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 16

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 17

If people spend 2/3 of any extra income they receive, new autonomous spending of $10 causes equilibrium to increase by

Accepted Answer

A) $6.67 
B) $16.67 
C) $15.00 
D) $30.00 
E) $45.00 
A) $6.67 
B) $16.67 
C) $15.00 
D) $30.00 
E) $45.00

Question 18

If there are no unintended changes in inventories, the economy is at its equilibrium level of real GDP demanded.

Accepted Answer

A) True 
 B)False

Question 19

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 20

Anything that causes a movement along the aggregate expenditure curve will also cause a shift of the aggregate demand curve.

Accepted Answer

A) True 
 B)False

Exam 11: Aggregate Expenditure and Aggregate Demand

If the full employment level of income is $1200 billion and the present level of income is $1000 billion

If autonomous consumption rises by $0.8 trillion and the marginal propensity to consume (MPC) equals 3/4, the equilibrium level of output demanded will rise by

Which of the following is illustrated by the distance between the aggregate expenditure line and the 45-degree line at each level of real GDP?

The larger the MPS, the smaller the multiplier effect.

If the marginal propensity to consume is 4/5, the simple multiplier is

Which is true regarding the marginal propensity to consume and the multiplier?

If the price level rises,

If households save $30 billion more at each level of income and the MPC = 0.9, the aggregate expenditure line will

Exhibit 10-7 -Assume the United States' aggregate expenditure line started at AE(1) in Exhibit 10-7. When the real estate market crashed, its aggregate expenditure would have changed to

A primary determinant of consumption spending is new wealth.

If the price level decreases,

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

Suppose that the multiplier is 4, autonomous investment rises by $50 billion, and autonomous consumption falls by $50 billion at the same time. Which of the following is true?

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

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

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

If people spend 2/3 of any extra income they receive, new autonomous spending of $10 causes equilibrium to increase by

If there are no unintended changes in inventories, the economy is at its equilibrium level of real GDP demanded.

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

Anything that causes a movement along the aggregate expenditure curve will also cause a shift of the aggregate demand curve.

The Art and Science of Economic Analysis

Understanding Graphs-Appendix

Economic Tools and Economics Systems

Economic Decision Makers

Demand, Supply, and Markets

Introduction to Macroeconomics

Tracking the Us Economy

Unemployment and Inflation

Productivity and Growth

Aaggregate Expenditure and Agregate Demand

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

Economic Development

Filters