Question 1

If the marginal propensity to consume equals 0.9, the multiplier is

Accepted Answer

A) 1 
B) 2 
C) 5 
D) 10 
E) 12 
A) 1 
B) 2 
C) 5 
D) 10 
E) 12

Question 2

A change in consumers' expectations about the future will shift both the aggregate expenditure curve and the aggregate demand curve.

Accepted Answer

A) True 
 B)False

Question 3

At the equilibrium level of real GDP, unplanned inventory adjustment equals

Accepted Answer

A) planned investment 
B) saving 
C) zero 
D) actual investment 
E) consumption 
A) planned investment 
B) saving 
C) zero 
D) actual investment 
E) consumption

Question 4

A decrease in the price level will

Accepted Answer

A) shift the aggregate demand curve to the left 
B) shift the aggregate demand curve to the right 
C) result in a movement up and to the left along the aggregate demand curve 
D) result in a movement down and to the right along the aggregate demand curve 
E) have no effect on the aggregate quantity demanded 
A) shift the aggregate demand curve to the left 
B) shift the aggregate demand curve to the right 
C) result in a movement up and to the left along the aggregate demand curve 
D) result in a movement down and to the right along the aggregate demand curve 
E) have no effect on the aggregate quantity demanded

Question 5

Exhibit 10-5
  
-In Exhibit 10-5, assume the economy is in equilibrium with real GDP of $5 trillion dollars. If aggregate expenditure (AE) increases by $1 trillion, we would expect the economy's equilibrium real GDP to

Accepted Answer

A) increase by $1 trillion 
B) increase by more than $1 trillion 
C) increase by less than $1 trillion 
D) decrease by $1 trillion 
E) remain unchanged 
A) increase by $1 trillion 
B) increase by more than $1 trillion 
C) increase by less than $1 trillion 
D) decrease by $1 trillion 
E) remain unchanged

Question 6

The aggregate expenditure line shows

Accepted Answer

A) real GDP on the horizontal axis and aggregate expenditure on the vertical axis 
B) aggregate expenditure on the horizontal axis and real GDP on the vertical axis 
C) consumption on the horizontal axis and aggregate expenditure on the vertical axis 
D) aggregate expenditure on the horizontal axis and consumption on the vertical axis 
E) investment on the horizontal axis and aggregate expenditure on the vertical axis 
A) real GDP on the horizontal axis and aggregate expenditure on the vertical axis 
B) aggregate expenditure on the horizontal axis and real GDP on the vertical axis 
C) consumption on the horizontal axis and aggregate expenditure on the vertical axis 
D) aggregate expenditure on the horizontal axis and consumption on the vertical axis 
E) investment on the horizontal axis and aggregate expenditure on the vertical axis

Question 7

An increase in the price level will

Accepted Answer

A) shift the aggregate expenditure line upward 
B) shift the aggregate expenditure line downward 
C) cause a movement up along the aggregate expenditure line 
D) cause a movement down along the aggregate expenditure line 
E) have no effect on the aggregate expenditure line or the equilibrium level of real GDP 
A) shift the aggregate expenditure line upward 
B) shift the aggregate expenditure line downward 
C) cause a movement up along the aggregate expenditure line 
D) cause a movement down along the aggregate expenditure line 
E) have no effect on the aggregate expenditure line or the equilibrium level of real GDP

Question 8

A decrease in the price level will

Accepted Answer

A) shift the aggregate expenditure line upward 
B) shift the aggregate expenditure line downward 
C) cause a movement up along the aggregate expenditure line 
D) cause a movement down along the aggregate expenditure line 
E) have no effect on the aggregate expenditure or the equilibrium level of real GDP 
A) shift the aggregate expenditure line upward 
B) shift the aggregate expenditure line downward 
C) cause a movement up along the aggregate expenditure line 
D) cause a movement down along the aggregate expenditure line 
E) have no effect on the aggregate expenditure or the equilibrium level of real GDP

Question 9

Which of the following is not true?

Accepted Answer

A) When planned aggregate expenditure is greater than output, real GDP demanded will rise. 
B) When planned aggregate expenditure is greater than output, real GDP demanded will fall. 
C) When planned aggregate expenditure is increasing, disposable income and consumption are increasing. 
D) When planned aggregate expenditure is increasing, consumption and saving are both increasing. 
E) As long as planned aggregate expenditure is increasing, real GDP demanded does also. 
A) When planned aggregate expenditure is greater than output, real GDP demanded will rise. 
B) When planned aggregate expenditure is greater than output, real GDP demanded will fall. 
C) When planned aggregate expenditure is increasing, disposable income and consumption are increasing. 
D) When planned aggregate expenditure is increasing, consumption and saving are both increasing. 
E) As long as planned aggregate expenditure is increasing, real GDP demanded does also.

Question 10

If the marginal propensity to consume is 3/4, the simple multiplier is

Accepted Answer

A) 3 
B) 7 
C) 4 
D) 25 
E) 3/10 
A) 3 
B) 7 
C) 4 
D) 25 
E) 3/10

Question 11

The simple spending multiplier is like

Accepted Answer

A) having a bird in the hand rather than two in the bush 
B) two wrongs making a right 
C) the spreading of ripples from a stone thrown in a pond 
D) getting too much of a good thing 
E) having too many chefs in the kitchen 
A) having a bird in the hand rather than two in the bush 
B) two wrongs making a right 
C) the spreading of ripples from a stone thrown in a pond 
D) getting too much of a good thing 
E) having too many chefs in the kitchen

Question 12

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

Accepted Answer

A) the aggregate expenditure line shifts upward; the economy moves upward along the aggregate demand curve 
B) the aggregate expenditure line shifts downward; the economy moves upward 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 upward; the aggregate demand curve shifts to the left 
A) the aggregate expenditure line shifts upward; the economy moves upward along the aggregate demand curve 
B) the aggregate expenditure line shifts downward; the economy moves upward 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 upward; the aggregate demand curve shifts to the left

Question 13

On the aggregate expenditure graph, if autonomous investment decreases by $10 billion,

Accepted Answer

A) the aggregate expenditure line shifts upward by $10 billion 
B) planned saving increases by $10 billion 
C) the aggregate expenditure line shifts downward by $10 billion 
D) planned saving decreases by $10 billion 
E) the equilibrium level of real GDP demanded increases by $10 billion 
A) the aggregate expenditure line shifts upward by $10 billion 
B) planned saving increases by $10 billion 
C) the aggregate expenditure line shifts downward by $10 billion 
D) planned saving decreases by $10 billion 
E) the equilibrium level of real GDP demanded increases by $10 billion

Question 14

In the simple aggregate expenditures model, planned investment is

Accepted Answer

A) a function of disposable income 
B) a function of profit expectations 
C) a function of the interest rate 
D) autonomous 
E) all of the above 
A) a function of disposable income 
B) a function of profit expectations 
C) a function of the interest rate 
D) autonomous 
E) all of the above

Question 15

If autonomous investment decreases by $60 billion, equilibrium real GDP demanded will

Accepted Answer

A) increase by $60 billion 
B) decrease by $60 billion 
C) decrease by ($60 billion) × MPC 
D) decrease by $60 billion × (1 - MP
C)  
E) decrease by $60 billion/MPS 
A) increase by $60 billion 
B) decrease by $60 billion 
C) decrease by ($60 billion) × MPC 
D) decrease by $60 billion × (1 - MP
C)  
E) decrease by $60 billion/MPS

Question 16

If output exceeds planned aggregate spending, the result is unintended inventory increases.

Accepted Answer

A) True 
 B)False

Question 17

The loss of jobs as a result of the September 11, 2001, attack in New York

Accepted Answer

A) affected all sectors of the economy because of the multiplier effect 
B) affected only the airline and travel industries 
C) had little effect on the national economy 
D) was concentrated in New York City 
E) explains why job losses are larger within a state than for the nation as a whole 
A) affected all sectors of the economy because of the multiplier effect 
B) affected only the airline and travel industries 
C) had little effect on the national economy 
D) was concentrated in New York City 
E) explains why job losses are larger within a state than for the nation as a whole

Question 18

If the price level decreases, other things constant, people consume

Accepted Answer

A) more because nominal income falls 
B) less because nominal income rises 
C) more because the real value of their wealth increases 
D) more because real income increases 
E) less because real income decreases 
A) more because nominal income falls 
B) less because nominal income rises 
C) more because the real value of their wealth increases 
D) more because real income increases 
E) less because real income decreases

Question 19

During the 2007-2009 recession in the United States, the component of consumption spending that was impacted the most was

Accepted Answer

A) durable goods 
B) nondurable goods 
C) saving 
D) investment 
E) services 
A) durable goods 
B) nondurable goods 
C) saving 
D) investment 
E) services

Question 20

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

Accepted Answer

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

Exam 11: Aggregate Expenditure and Aggregate Demand

If the marginal propensity to consume equals 0.9, the multiplier is

A change in consumers' expectations about the future will shift both the aggregate expenditure curve and the aggregate demand curve.

At the equilibrium level of real GDP, unplanned inventory adjustment equals

A decrease in the price level will

Exhibit 10-5 -In Exhibit 10-5, assume the economy is in equilibrium with real GDP of $5 trillion dollars. If aggregate expenditure (AE) increases by $1 trillion, we would expect the economy's equilibrium real GDP to

The aggregate expenditure line shows

An increase in the price level will

A decrease in the price level will

Which of the following is not true?

If the marginal propensity to consume is 3/4, the simple multiplier is

The simple spending multiplier is like

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

On the aggregate expenditure graph, if autonomous investment decreases by $10 billion,

In the simple aggregate expenditures model, planned investment is

If autonomous investment decreases by $60 billion, equilibrium real GDP demanded will

If output exceeds planned aggregate spending, the result is unintended inventory increases.

The loss of jobs as a result of the September 11, 2001, attack in New York

If the price level decreases, other things constant, people consume

During the 2007-2009 recession in the United States, the component of consumption spending that was impacted the most was

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

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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