Question 1

If the simple multiplier is 8, the marginal propensity to consume is

Accepted Answer

A) 1/8 
B) 1/4 
C) 4/5 
D) 7/8 
E) 8 
A) 1/8 
B) 1/4 
C) 4/5 
D) 7/8 
E) 8

Question 2

Increases in the marginal propensity to consume, other things constant,

Accepted Answer

A) increase the value of the multiplier 
B) decrease the value of the multiplier 
C) never change the value of the multiplier 
D) shift the aggregate expenditure curve downward 
E) cause a downward movement along an aggregate expenditure curve 
A) increase the value of the multiplier 
B) decrease the value of the multiplier 
C) never change the value of the multiplier 
D) shift the aggregate expenditure curve downward 
E) cause a downward movement along an aggregate expenditure curve

Question 3

If current aggregate expenditure equals current production, the economy is in equilibrium.

Accepted Answer

A) True 
 B)False

Question 4

The aggregate expenditure line shows total planned spending at each

Accepted Answer

A) price level 
B) income level 
C) income level, holding the price level constant 
D) price level, holding the level of income constant 
E) interest rate, holding the price level constant 
A) price level 
B) income level 
C) income level, holding the price level constant 
D) price level, holding the level of income constant 
E) interest rate, holding the price level constant

Question 5

If autonomous investment expenditures decline because of higher interest rates

Accepted Answer

A) income increases 
B) the rate of return declines 
C) autonomous consumption declines 
D) aggregate demand increases 
E) aggregate demand decreases 
A) income increases 
B) the rate of return declines 
C) autonomous consumption declines 
D) aggregate demand increases 
E) aggregate demand decreases

Question 6

Exhibit 10-3
  
-Which of the following best describes the situation at point B in Exhibit 10-3?

Accepted Answer

A) consumption expenditures exceeds disposable income 
B) producers are experiencing an unexpected loss in inventory 
C) aggregate expenditure is exactly equal to real GDP 
D) real GDP exceeds aggregate expenditure 
E) producers are experiencing an unexpected accumulation of inventory 
A) consumption expenditures exceeds disposable income 
B) producers are experiencing an unexpected loss in inventory 
C) aggregate expenditure is exactly equal to real GDP 
D) real GDP exceeds aggregate expenditure 
E) producers are experiencing an unexpected accumulation of inventory

Question 7

Which of the following is not a part of planned aggregate spending?

Accepted Answer

A) consumption 
B) investment 
C) government expenditures 
D) net exports 
E) saving 
A) consumption 
B) investment 
C) government expenditures 
D) net exports 
E) saving

Question 8

An increase in the U.S. price level, other things constant, would

Accepted Answer

A) increase U.S. exports and decrease U.S. imports 
B) increase U.S. exports and leave U.S. imports unchanged 
C) decrease U.S. exports and increase U.S. imports 
D) decrease U.S. exports and leave U.S. imports unchanged 
E) leave both U.S. exports and U.S. imports unchanged 
A) increase U.S. exports and decrease U.S. imports 
B) increase U.S. exports and leave U.S. imports unchanged 
C) decrease U.S. exports and increase U.S. imports 
D) decrease U.S. exports and leave U.S. imports unchanged 
E) leave both U.S. exports and U.S. imports unchanged

Question 9

The simple multiplier

Accepted Answer

A) when divided by consumption spending equals saving 
B) is defined as 1.0 divided by the marginal propensity to save 
C) is defined as 1.0 divided by the marginal propensity to consume 
D) is equal to the MPS plus the MPC 
E) is equal to the MPS minus the MPC 
A) when divided by consumption spending equals saving 
B) is defined as 1.0 divided by the marginal propensity to save 
C) is defined as 1.0 divided by the marginal propensity to consume 
D) is equal to the MPS plus the MPC 
E) is equal to the MPS minus the MPC

Question 10

The equilibrium quantity of aggregate output occurs when

Accepted Answer

A) the economy reaches the full employment of labor 
B) planned aggregate expenditure equals income generated from production 
C) actual aggregate expenditures equal real GDP 
D) inventories of goods and services are increasing 
E) inventories of goods and services are decreasing 
A) the economy reaches the full employment of labor 
B) planned aggregate expenditure equals income generated from production 
C) actual aggregate expenditures equal real GDP 
D) inventories of goods and services are increasing 
E) inventories of goods and services are decreasing

Question 11

Only a change in the price level can cause shifts in both the aggregate expenditure line and the aggregate demand curve.

Accepted Answer

A) True 
 B)False

Question 12

An increase in planned investment would shift the

Accepted Answer

A) aggregate demand curve outward 
B) aggregate demand curve inward 
C) aggregate supply curve outward 
D) aggregate supply curve inward 
E) consumption function upward 
A) aggregate demand curve outward 
B) aggregate demand curve inward 
C) aggregate supply curve outward 
D) aggregate supply curve inward 
E) consumption function upward

Question 13

A decrease in autonomous investment will

Accepted Answer

A) shift the aggregate expenditure line upward 
B) shift the aggregate expenditure line downward 
C) result in an upward movement along the aggregate expenditure line 
D) result in a downward movement along the aggregate expenditure line 
E) decrease aggregate expenditures only at low levels of income 
A) shift the aggregate expenditure line upward 
B) shift the aggregate expenditure line downward 
C) result in an upward movement along the aggregate expenditure line 
D) result in a downward movement along the aggregate expenditure line 
E) decrease aggregate expenditures only at low levels of income

Question 14

If the spending multiplier is greater than 1.0, a $200 billion increase in autonomous investment will cause

Accepted Answer

A) equilibrium investment to increase by less than $200 billion 
B) equilibrium investment to decrease by more than $200 billion 
C) equilibrium real GDP demanded to increase by more than $200 billion 
D) equilibrium real GDP demanded to decrease by less than $200 billion 
E) equilibrium saving to decrease by more than $200 billion 
A) equilibrium investment to increase by less than $200 billion 
B) equilibrium investment to decrease by more than $200 billion 
C) equilibrium real GDP demanded to increase by more than $200 billion 
D) equilibrium real GDP demanded to decrease by less than $200 billion 
E) equilibrium saving to decrease by more than $200 billion

Question 15

In an economy without a government and without international transactions, aggregate expenditure at each level of income is equal to

Accepted Answer

A) consumption plus saving 
B) planned investment plus saving 
C) disposable income plus the price level 
D) consumption plus planned investment 
E) planned investment minus saving 
A) consumption plus saving 
B) planned investment plus saving 
C) disposable income plus the price level 
D) consumption plus planned investment 
E) planned investment minus saving

Question 16

What is the effect of an increase in the price level?

Accepted Answer

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

Question 17

On the aggregate expenditure graph, if autonomous saving increases by $15 billion,

Accepted Answer

A) the aggregate expenditure line shifts upward by $15 billion 
B) planned investment increases by $15 billion 
C) the aggregate expenditure line shifts downward by $15 billion 
D) planned investment decreases by $15 billion 
E) the equilibrium level of real GDP demanded decreases by $15 billion 
A) the aggregate expenditure line shifts upward by $15 billion 
B) planned investment increases by $15 billion 
C) the aggregate expenditure line shifts downward by $15 billion 
D) planned investment decreases by $15 billion 
E) the equilibrium level of real GDP demanded decreases by $15 billion

Question 18

What does the marginal propensity to consume tell us?

Accepted Answer

A) how much of our total income we spend on current consumption 
B) how much additional income is spent on consumption 
C) how much of aggregate expenditures will be allocated to consumption spending 
D) how much induced consumption there is in the economy 
E) the relationship between autonomous and induced consumption 
A) how much of our total income we spend on current consumption 
B) how much additional income is spent on consumption 
C) how much of aggregate expenditures will be allocated to consumption spending 
D) how much induced consumption there is in the economy 
E) the relationship between autonomous and induced consumption

Question 19

When the real estate market in the United States crashed in 2006, it caused a significant decline in net wealth.

Accepted Answer

A) True 
 B)False

Question 20

The aggregate demand curve illustrates a relationship between

Accepted Answer

A) interest rates and income levels 
B) the price level and real GDP 
C) the price level and interest rates 
D) income levels and real GDP levels 
E) income levels and nominal income levels 
A) interest rates and income levels 
B) the price level and real GDP 
C) the price level and interest rates 
D) income levels and real GDP levels 
E) income levels and nominal income levels

Exam 11: Aggregate Expenditure and Aggregate Demand

If the simple multiplier is 8, the marginal propensity to consume is

Increases in the marginal propensity to consume, other things constant,

If current aggregate expenditure equals current production, the economy is in equilibrium.

The aggregate expenditure line shows total planned spending at each

If autonomous investment expenditures decline because of higher interest rates

Exhibit 10-3 -Which of the following best describes the situation at point B in Exhibit 10-3?

Which of the following is not a part of planned aggregate spending?

An increase in the U.S. price level, other things constant, would

The simple multiplier

The equilibrium quantity of aggregate output occurs when

Only a change in the price level can cause shifts in both the aggregate expenditure line and the aggregate demand curve.

An increase in planned investment would shift the

A decrease in autonomous investment will

If the spending multiplier is greater than 1.0, a $200 billion increase in autonomous investment will cause

In an economy without a government and without international transactions, aggregate expenditure at each level of income is equal to

What is the effect of an increase in the price level?

On the aggregate expenditure graph, if autonomous saving increases by $15 billion,

What does the marginal propensity to consume tell us?

When the real estate market in the United States crashed in 2006, it caused a significant decline in net wealth.

The aggregate demand curve illustrates a relationship between

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

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