Question 1

If national income increases by $20 million and consumption increases by $5 million,the marginal propensity to consume is

Accepted Answer

A)  4. 
B)  0.75. 
C)  0.5. 
D)  0.25. 
A)  4. 
B)  0.75. 
C)  0.5. 
D)  0.25.

Question 2

An increase in the price level results in a(n)________ in household consumption spending and a(n)________ in investment spending.

Accepted Answer

A)  increase; decrease 
B)  increase; increase 
C)  decrease; decrease 
D)  decrease; increase 
A)  increase; decrease 
B)  increase; increase 
C)  decrease; decrease 
D)  decrease; increase

Question 3

Explain,in detail,how the adjustment to macroeconomic equilibrium occurs when spending is less than production.Be sure to discuss how inventories play a crucial role in the adjustment process.State what happens to GDP and employment during the adjustment process.

Accepted Answer

If spending is less than production,then

Question 4

U.S.net export spending rises when

Accepted Answer

A)  the price level in the United States rises relative to the price level in other countries. 
B)  the growth rate of U.S. GDP is slower than the growth rate of GDP in other countries. 
C)  the value of the U.S. dollar increases relative to other currencies. 
D)  the inflation rate is higher in the United States relative to other countries. 
A)  the price level in the United States rises relative to the price level in other countries. 
B)  the growth rate of U.S. GDP is slower than the growth rate of GDP in other countries. 
C)  the value of the U.S. dollar increases relative to other currencies. 
D)  the inflation rate is higher in the United States relative to other countries.

Question 5

A general formula for the multiplier is

Accepted Answer

A)    . 
B)    . 
C)    . 
D)    . 
A)    . 
B)    . 
C)    . 
D)    .

Question 6

You review a salesman's income over a 5-year period.You note it fluctuates tremendously from year to year,yet his consumption of goods and services remains consistently at the same level,year after year.Does this mean that income is not a determinant of consumption,or could something else explain his behavior?

Accepted Answer

The salesman is not making purchase deci

Question 7

Figure 23-2  
-Refer to Figure 23-2.Suppose that the level of GDP associated with point N is potential GDP.If the U.S.economy is currently at point K,

Accepted Answer

A)  firms are operating above capacity. 
B)  the economy is at full employment. 
C)  the economy is in recession. 
D)  the level of unemployment is equal to the natural rate. 
A)  firms are operating above capacity. 
B)  the economy is at full employment. 
C)  the economy is in recession. 
D)  the level of unemployment is equal to the natural rate.

Question 8

Figure 23-2  
-Refer to Figure 23-2.If the U.S.economy is currently at point N,which of the following could cause it to move to point K?

Accepted Answer

A)  Households expect future income to decline. 
B)  Household wealth rises. 
C)  The firm's cash flow rises as profits rise. 
D)  Government expenditures increase. 
A)  Households expect future income to decline. 
B)  Household wealth rises. 
C)  The firm's cash flow rises as profits rise. 
D)  Government expenditures increase.

Question 9

Firms in a small economy planned that inventories would grow over the past year by $500,000.Over that year,inventories did grow by exactly $500,000.This implies that

Accepted Answer

A)  aggregate expenditure that year was equal to GDP that year. 
B)  there was an unplanned increase in inventories that year. 
C)  there was an unplanned decrease in inventories that year. 
D)  aggregate expenditure that year was greater than GDP that year. 
A)  aggregate expenditure that year was equal to GDP that year. 
B)  there was an unplanned increase in inventories that year. 
C)  there was an unplanned decrease in inventories that year. 
D)  aggregate expenditure that year was greater than GDP that year.

Question 10

The aggregate demand curve illustrates the relationship between ________ and the ________,holding constant all other factors that affect aggregate expenditure.

Accepted Answer

A)  the price level; quantity of planned aggregate expenditure 
B)  the inflation rate; quantity of planned aggregate expenditure 
C)  the price level; quantity of planned investment expenditure 
D)  the price level; quantity of consumption expenditure 
A)  the price level; quantity of planned aggregate expenditure 
B)  the inflation rate; quantity of planned aggregate expenditure 
C)  the price level; quantity of planned investment expenditure 
D)  the price level; quantity of consumption expenditure

Question 11

The aggregate demand curve shows the relationship between the price level and the level of planned aggregate expenditure in the economy.

Accepted Answer

A) True 
 B)False

Question 12

If the consumption function is defined as C = 7,250 + 0.8Y,what is the value of the multiplier?

Accepted Answer

A)  0.2 
B)  0.8 
C)  1.25 
D)  5 
A)  0.2 
B)  0.8 
C)  1.25 
D)  5

Question 13

If firms are more optimistic that future profits will rise and remain strong for the next few years,then

Accepted Answer

A)  investment spending will fall. 
B)  investment spending will rise. 
C)  investment spending will remain unaffected. 
D)  investment spending will rise and then fall. 
A)  investment spending will fall. 
B)  investment spending will rise. 
C)  investment spending will remain unaffected. 
D)  investment spending will rise and then fall.

Question 14

MPC + MPS =

Accepted Answer

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

Question 15

Which of the following is a reason why decreases in the price level result in a rise in aggregate expenditure?

Accepted Answer

A)  Price level decreases cause firms and consumers to hold less money, which lowers the interest rate. Lower interest rates raise consumption and planned investment expenditures, which raises aggregate expenditure. 
B)  Price level decreases reduce real wealth, which causes consumption spending and aggregate expenditure to rise. 
C)  As the price level falls, government spending rises, which raises aggregate expenditure. 
D)  Price level decreases in the United States relative to other countries lower net exports, which raises aggregate expenditure. 
A)  Price level decreases cause firms and consumers to hold less money, which lowers the interest rate. Lower interest rates raise consumption and planned investment expenditures, which raises aggregate expenditure. 
B)  Price level decreases reduce real wealth, which causes consumption spending and aggregate expenditure to rise. 
C)  As the price level falls, government spending rises, which raises aggregate expenditure. 
D)  Price level decreases in the United States relative to other countries lower net exports, which raises aggregate expenditure.

Question 16

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 17

The formula for the multiplier is (1 - MPC).

Accepted Answer

A) True 
 B)False

Question 18

________ usually increase(s)when the U.S.economy is in a recession and decrease(s)when the U.S.economy is expanding.

Accepted Answer

A)  Consumer spending 
B)  Planned investment 
C)  Net Exports 
D)  Unplanned investment 
A)  Consumer spending 
B)  Planned investment 
C)  Net Exports 
D)  Unplanned investment

Question 19

Consumption spending is $16 million,planned investment spending is $4 million,unplanned investment spending is $2 million,government purchases are $6 million,and net export spending is $1 million.What is aggregate expenditure?

Accepted Answer

A)  $22 million 
B)  $26 million 
C)  $27 million 
D)  $29 million 
A)  $22 million 
B)  $26 million 
C)  $27 million 
D)  $29 million

Question 20

A decrease in consumer confidence can put your job at risk if

Accepted Answer

A)  aggregate expenditures fall. 
B)  consumers expect their incomes to rise in the future. 
C)  aggregate expenditures rise. 
D)  consumers expect firms to increase investment in the future. 
A)  aggregate expenditures fall. 
B)  consumers expect their incomes to rise in the future. 
C)  aggregate expenditures rise. 
D)  consumers expect firms to increase investment in the future.

Exam 23: Aggregate Expenditure and Output in the Short Run

If national income increases by $20 million and consumption increases by $5 million,the marginal propensity to consume is

An increase in the price level results in a(n)________ in household consumption spending and a(n)________ in investment spending.

Explain,in detail,how the adjustment to macroeconomic equilibrium occurs when spending is less than production.Be sure to discuss how inventories play a crucial role in the adjustment process.State what happens to GDP and employment during the adjustment process.

U.S.net export spending rises when

A general formula for the multiplier is

Figure 23-2 -Refer to Figure 23-2.Suppose that the level of GDP associated with point N is potential GDP.If the U.S.economy is currently at point K,

Figure 23-2 -Refer to Figure 23-2.If the U.S.economy is currently at point N,which of the following could cause it to move to point K?

Firms in a small economy planned that inventories would grow over the past year by $500,000.Over that year,inventories did grow by exactly $500,000.This implies that

The aggregate demand curve illustrates the relationship between ________ and the ________,holding constant all other factors that affect aggregate expenditure.

The aggregate demand curve shows the relationship between the price level and the level of planned aggregate expenditure in the economy.

If the consumption function is defined as C = 7,250 + 0.8Y,what is the value of the multiplier?

If firms are more optimistic that future profits will rise and remain strong for the next few years,then

MPC + MPS =

Which of the following is a reason why decreases in the price level result in a rise in aggregate expenditure?

At macroeconomic equilibrium,

The formula for the multiplier is (1 - MPC).

________ usually increase(s)when the U.S.economy is in a recession and decrease(s)when the U.S.economy is expanding.

Consumption spending is $16 million,planned investment spending is $4 million,unplanned investment spending is $2 million,government purchases are $6 million,and net export spending is $1 million.What is aggregate expenditure?

A decrease in consumer confidence can put your job at risk if

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

An increase in the price level results in a(n) in household consumption spending and a(n) in investment spending.

The aggregate demand curve illustrates the relationship between and the ,holding constant all other factors that affect aggregate expenditure.