Question 1

If planned spending exceeds planned output, the result is

Accepted Answer

A) unintended inventory increases 
B) a reduction in GDP 
C) a decrease in imports 
D) an increase in government purchases 
E) unintended inventory reductions 
A) unintended inventory increases 
B) a reduction in GDP 
C) a decrease in imports 
D) an increase in government purchases 
E) unintended inventory reductions

Question 2

The aggregate demand curve slopes downward to the right, reflecting a relationship between the price level and

Accepted Answer

A) real GDP 
B) interest rates 
C) the saving rate 
D) the investment level 
E) the consumption level 
A) real GDP 
B) interest rates 
C) the saving rate 
D) the investment level 
E) the consumption level

Question 3

Which of the following best describes aggregate expenditure?

Accepted Answer

A) C + I + G + (X - M) 
B) C + S + G + (X - M) 
C) C + I + G + (X + M) 
D) C + I + T + (X - M) 
E) C + I + T + (X + M) 
A) C + I + G + (X - M) 
B) C + S + G + (X - M) 
C) C + I + G + (X + M) 
D) C + I + T + (X - M) 
E) C + I + T + (X + M)

Question 4

If consumer spending increases, other things constant, the aggregate demand curve shifts inward.

Accepted Answer

A) True 
 B)False

Question 5

The economy will contract (shrink) if

Accepted Answer

A) leakages exceed injections 
B) injections exceed leakages 
C) injections equal leakages 
D) expenditures exceed output 
E) investment exceeds saving 
A) leakages exceed injections 
B) injections exceed leakages 
C) injections equal leakages 
D) expenditures exceed output 
E) investment exceeds saving

Question 6

An increase in the price level will

Accepted Answer

A) shift the aggregate expenditure line upward 
B) shift the aggregate expenditure line downward 
C) result in a movement upward along the aggregate expenditure line 
D) result in a movement downward along the aggregate expenditure line 
E) change the slope of the aggregate expenditure line 
A) shift the aggregate expenditure line upward 
B) shift the aggregate expenditure line downward 
C) result in a movement upward along the aggregate expenditure line 
D) result in a movement downward along the aggregate expenditure line 
E) change the slope of the aggregate expenditure line

Question 7

A rise in the price level will shift the aggregate expenditure curve

Accepted Answer

A) upward and shift the aggregate demand curve to the right 
B) upward and shift the aggregate demand curve to the left 
C) downward and shift the aggregate demand curve to the left 
D) downward and shift the aggregate demand curve to the right 
E) downward and cause a movement along the aggregate demand curve 
A) upward and shift the aggregate demand curve to the right 
B) upward and shift the aggregate demand curve to the left 
C) downward and shift the aggregate demand curve to the left 
D) downward and shift the aggregate demand curve to the right 
E) downward and cause a movement along the aggregate demand curve

Question 8

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

Accepted Answer

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

Question 9

Exhibit 10-2
  
-In Exhibit 10-2, the government budget

Accepted Answer

A) has a deficit of $1 trillion 
B) has a surplus of $1 trillion 
C) is balanced 
D) has a deficit of $2 trillion 
E) has a surplus of $2 trillion 
A) has a deficit of $1 trillion 
B) has a surplus of $1 trillion 
C) is balanced 
D) has a deficit of $2 trillion 
E) has a surplus of $2 trillion

Question 10

If the economy is currently at equilibrium at $1 trillion and the MPC is 0.6, a $100 decrease in government purchases of goods and services will result in a new equilibrium at

Accepted Answer

A) $600 billion 
B) $400 billion 
C) $750 billion 
D) $1.4 trillion 
E) $1.6 trillion 
A) $600 billion 
B) $400 billion 
C) $750 billion 
D) $1.4 trillion 
E) $1.6 trillion

Question 11

Exhibit 10-2
  
-The marginal propensity to consume (MPC) in Exhibit 10-2 equals

Accepted Answer

A) 0.20 or 1/5 
B) 0.40 or 2/5 
C) 0.80 or 4/5 
D) 0.90 or 9/10 
E) 0.60 or 3/5 
A) 0.20 or 1/5 
B) 0.40 or 2/5 
C) 0.80 or 4/5 
D) 0.90 or 9/10 
E) 0.60 or 3/5

Question 12

Suppose that planned investment increases by $200 billion and that the marginal propensity to consume equals 0.80. The aggregate expenditure line will shift upward by __________ at every level of real GDP.

Accepted Answer

A) $40 billion 
B) $160 billion 
C) $200 billion 
D) $250 billion 
E) $1,000 billion 
A) $40 billion 
B) $160 billion 
C) $200 billion 
D) $250 billion 
E) $1,000 billion

Question 13

When current real production of goods and services (real GDP) is greater than planned aggregate expenditure

Accepted Answer

A) inventories of goods and services are rising 
B) firms will increase production to replenish depleted inventories 
C) businesses and households will increase planned aggregate spending because it is in their interest to promote employment 
D) the price level will automatically rise to restore equilibrium in the economy 
E) leakages must equal planned injections 
A) inventories of goods and services are rising 
B) firms will increase production to replenish depleted inventories 
C) businesses and households will increase planned aggregate spending because it is in their interest to promote employment 
D) the price level will automatically rise to restore equilibrium in the economy 
E) leakages must equal planned injections

Question 14

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 15

Exhibit 10-4
  
-The MPC in the economy represented in Exhibit 10-4 is

Accepted Answer

A) 0 
B) 0.2 
C) 0.8 
D) 0.9 
E) 80 
A) 0 
B) 0.2 
C) 0.8 
D) 0.9 
E) 80

Question 16

A decrease in the price level will have which of the following effects?

Accepted Answer

A) The real value of dollar-denominated assets will fall. 
B) The aggregate expenditure line will shift downward. 
C) The equilibrium level of output demanded will rise. 
D) There will be upward movement along a particular aggregate demand curve. 
E) The aggregate demand curve will shift leftward. 
A) The real value of dollar-denominated assets will fall. 
B) The aggregate expenditure line will shift downward. 
C) The equilibrium level of output demanded will rise. 
D) There will be upward movement along a particular aggregate demand curve. 
E) The aggregate demand curve will shift leftward.

Question 17

The slope of the aggregate expenditure line equals the marginal propensity to consume.

Accepted Answer

A) True 
 B)False

Question 18

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 19

We can use an aggregate expenditure line to show how an aggregate demand curve shifts by

Accepted Answer

A) shifting the 45-degree line 
B) letting changes in autonomous spending shift the aggregate expenditure line 
C) letting changes in the price level shift the aggregate expenditure line 
D) letting changes in the level of income shift the aggregate expenditure line 
E) letting changes in real GDP shift the aggregate expenditure line 
A) shifting the 45-degree line 
B) letting changes in autonomous spending shift the aggregate expenditure line 
C) letting changes in the price level shift the aggregate expenditure line 
D) letting changes in the level of income shift the aggregate expenditure line 
E) letting changes in real GDP shift the aggregate expenditure line

Question 20

In the simple aggregate expenditure model, the slope of the aggregate expenditure line depends on

Accepted Answer

A) interest rates 
B) government budget policy 
C) the price level 
D) the marginal propensity to consume 
E) all of the above 
A) interest rates 
B) government budget policy 
C) the price level 
D) the marginal propensity to consume 
E) all of the above

Exam 11: Aggregate Expenditure and Aggregate Demand

If planned spending exceeds planned output, the result is

The aggregate demand curve slopes downward to the right, reflecting a relationship between the price level and

Which of the following best describes aggregate expenditure?

If consumer spending increases, other things constant, the aggregate demand curve shifts inward.

The economy will contract (shrink) if

An increase in the price level will

A rise in the price level will shift the aggregate expenditure curve

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

Exhibit 10-2 -In Exhibit 10-2, the government budget

If the economy is currently at equilibrium at $1 trillion and the MPC is 0.6, a $100 decrease in government purchases of goods and services will result in a new equilibrium at

Exhibit 10-2 -The marginal propensity to consume (MPC) in Exhibit 10-2 equals

Suppose that planned investment increases by $200 billion and that the marginal propensity to consume equals 0.80. The aggregate expenditure line will shift upward by __________ at every level of real GDP.

When current real production of goods and services (real GDP) is greater than planned aggregate expenditure

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

Exhibit 10-4 -The MPC in the economy represented in Exhibit 10-4 is

A decrease in the price level will have which of the following effects?

The slope of the aggregate expenditure line equals the marginal propensity to consume.

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

We can use an aggregate expenditure line to show how an aggregate demand curve shifts by

In the simple aggregate expenditure model, the slope of the aggregate expenditure line depends on

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