Question 1

Which of the following will raise consumer expenditures?

Accepted Answer

A)  an increase in interest rates 
B)  a general decline in housing prices 
C)  an increase in expected future income 
D)  an increase in the price level 
A)  an increase in interest rates 
B)  a general decline in housing prices 
C)  an increase in expected future income 
D)  an increase in the price level

Question 2

The larger the MPC,the smaller the value of the multiplier.

Accepted Answer

A) True 
 B)False

Question 3

Table 23-7
  
-Refer to Table 23-7.Using the table above,answer the following questions.The numbers in the table are in billions of dollars.
a.What is the equilibrium level of real GDP?
b.What is the MPC?
c.If investment spending declines by $50 billion,what will happen to equilibrium GDP?

Accepted Answer

a.Equilibrium real GDP is determined whe

Question 4

Household spending on goods and services is known as

Accepted Answer

A)  consumption spending. 
B)  planned investment spending. 
C)  government purchases. 
D)  net exports. 
A)  consumption spending. 
B)  planned investment spending. 
C)  government purchases. 
D)  net exports.

Question 5

Table 23-2
  
-Refer to Table 23-2.Given the consumption schedule in the table above,the marginal propensity to consume is

Accepted Answer

A)  0.1. 
B)  0.3. 
C)  0.6. 
D)  0.9. 
A)  0.1. 
B)  0.3. 
C)  0.6. 
D)  0.9.

Question 6

Examples of assets that are included in household wealth would be

Accepted Answer

A)  stocks, bonds, and savings accounts. 
B)  stocks, loans owed, and savings accounts. 
C)  stocks, bonds, and mortgages. 
D)  stocks, credit cards, and savings accounts. 
A)  stocks, bonds, and savings accounts. 
B)  stocks, loans owed, and savings accounts. 
C)  stocks, bonds, and mortgages. 
D)  stocks, credit cards, and savings accounts.

Question 7

Consumption spending is $22 million,planned investment spending is $7 million,actual investment spending is $7 million,government purchases are $9 million,and net export spending is $3 million.Based on this information,which of the following is true?

Accepted Answer

A)  There was an unplanned change in inventories. 
B)  Aggregate expenditure is equal to GDP. 
C)  Aggregate expenditure is greater than GDP. 
D)  Aggregate expenditure is less than GDP. 
A)  There was an unplanned change in inventories. 
B)  Aggregate expenditure is equal to GDP. 
C)  Aggregate expenditure is greater than GDP. 
D)  Aggregate expenditure is less than GDP.

Question 8

An increase in aggregate expenditure has what result on equilibrium GDP?

Accepted Answer

A)  Equilibrium GDP rises. 
B)  Equilibrium GDP is not affected by a decrease in aggregate expenditure. 
C)  Equilibrium GDP falls. 
D)  Equilibrium GDP may rise or fall depending on the size of the decrease in aggregate expenditure relative to the initial level of GDP. 
A)  Equilibrium GDP rises. 
B)  Equilibrium GDP is not affected by a decrease in aggregate expenditure. 
C)  Equilibrium GDP falls. 
D)  Equilibrium GDP may rise or fall depending on the size of the decrease in aggregate expenditure relative to the initial level of GDP.

Question 9

Planned aggregate expenditure is equal to

Accepted Answer

A)  consumption spending only. 
B)  consumption spending plus planned investment spending. 
C)  planned investment spending only. 
D)  consumption spending plus planned investment spending plus government purchases plus net exports. 
A)  consumption spending only. 
B)  consumption spending plus planned investment spending. 
C)  planned investment spending only. 
D)  consumption spending plus planned investment spending plus government purchases plus net exports.

Question 10

If inflation in the United States is higher than inflation in other countries,what will be the effect on net exports for the United States?

Accepted Answer

A)  Net exports will rise as U.S. exports increase. 
B)  Net exports will rise as U.S. imports decrease. 
C)  Net exports will decrease as U.S. exports decrease. 
D)  Net exports will decrease as U.S. imports decrease. 
A)  Net exports will rise as U.S. exports increase. 
B)  Net exports will rise as U.S. imports decrease. 
C)  Net exports will decrease as U.S. exports decrease. 
D)  Net exports will decrease as U.S. imports decrease.

Question 11

The aggregate expenditure model focuses on the ________ relationship between real spending and ________.

Accepted Answer

A)  short-run; real GDP 
B)  short-run; inflation 
C)  long-run; real GDP 
D)  long-run; inflation 
A)  short-run; real GDP 
B)  short-run; inflation 
C)  long-run; real GDP 
D)  long-run; inflation

Question 12

The five most important variables that determine the level of consumption are

Accepted Answer

A)  disposable income, wealth, expected future income, price level, and interest rate 
B)  wealth, savings account balances, checking account balances, stock portfolio balances, and bond portfolio balances 
C)  government purchases, interest rates, income, taxes, and transfers 
D)  government purchases, saving account balances, wealth, interest rates, portfolio balances 
A)  disposable income, wealth, expected future income, price level, and interest rate 
B)  wealth, savings account balances, checking account balances, stock portfolio balances, and bond portfolio balances 
C)  government purchases, interest rates, income, taxes, and transfers 
D)  government purchases, saving account balances, wealth, interest rates, portfolio balances

Question 13

Equations for C,I,G,and NX are given below.If the equilibrium level of GDP is $32,000,what will the new equilibrium level of GDP be if government spending increases to 2,500? C = 5,000 + (MPC)Y
I = 1,500
G = 2,000
NX = -500

Accepted Answer

A)  $32,500 
B)  $34,000 
C)  $38,000 
D)  $42,000 
A)  $32,500 
B)  $34,000 
C)  $38,000 
D)  $42,000

Question 14

John Maynard Keynes argued that if many households decide at the same time to increase saving and reduce spending,

Accepted Answer

A)  this may benefit the economy in the short run, but not in the long run. 
B)  the economy will benefit in the short run and benefit by an even greater amount in the long run. 
C)  this will have a major negative impact on the economy in both the short run and in the long run. 
D)  this may benefit the economy in the long run, but could be counterproductive in the short run. 
A)  this may benefit the economy in the short run, but not in the long run. 
B)  the economy will benefit in the short run and benefit by an even greater amount in the long run. 
C)  this will have a major negative impact on the economy in both the short run and in the long run. 
D)  this may benefit the economy in the long run, but could be counterproductive in the short run.

Question 15

Decreases in the price level will

Accepted Answer

A)  lower consumption because goods and services are less affordable. 
B)  raise consumption because goods and services are more affordable. 
C)  raise consumption because real wealth increases. 
D)  lower consumption because real wealth decreases. 
A)  lower consumption because goods and services are less affordable. 
B)  raise consumption because goods and services are more affordable. 
C)  raise consumption because real wealth increases. 
D)  lower consumption because real wealth decreases.

Question 16

Which of the following is a true statement about the multiplier?

Accepted Answer

A)  The multiplier rises as the MPC rises. 
B)  The smaller the MPC, the larger the multiplier. 
C)  The multiplier is a value between zero and one. 
D)  The multiplier effect does not occur when autonomous expenditure decreases. 
A)  The multiplier rises as the MPC rises. 
B)  The smaller the MPC, the larger the multiplier. 
C)  The multiplier is a value between zero and one. 
D)  The multiplier effect does not occur when autonomous expenditure decreases.

Question 17

When Jack's income increases by $1,000,he spends an additional $850 dollars.This implies that his marginal propensity to consume is 0.85.

Accepted Answer

A) True 
 B)False

Question 18

The formula for aggregate expenditure is

Accepted Answer

A)  AE = C + I + G. 
B)  AE = C + I + G - NX. 
C)  AE = C + I + G + NX. 
D)  AE = C + I + depreciation - NX. 
A)  AE = C + I + G. 
B)  AE = C + I + G - NX. 
C)  AE = C + I + G + NX. 
D)  AE = C + I + depreciation - NX.

Question 19

Higher interest rates increase both consumption and investment spending.

Accepted Answer

A) True 
 B)False

Question 20

Figure 23-4  
-Refer to Figure 23-4.Potential GDP equals $100 billion.The economy is currently producing GDP1 which is equal to $90 billion.If the MPC is 0.8,then how much must autonomous spending change for the economy to move to potential GDP?

Accepted Answer

A)  -$18 billion 
B)  -$2 billion 
C)  $2 billion 
D)  $18 billion 
A)  -$18 billion 
B)  -$2 billion 
C)  $2 billion 
D)  $18 billion

Exam 23: Aggregate Expenditure and Output in the Short Run

Which of the following will raise consumer expenditures?

The larger the MPC,the smaller the value of the multiplier.

Table 23-7 -Refer to Table 23-7.Using the table above,answer the following questions.The numbers in the table are in billions of dollars. a.What is the equilibrium level of real GDP? b.What is the MPC? c.If investment spending declines by $50 billion,what will happen to equilibrium GDP?

Household spending on goods and services is known as

Table 23-2 -Refer to Table 23-2.Given the consumption schedule in the table above,the marginal propensity to consume is

Examples of assets that are included in household wealth would be

Consumption spending is $22 million,planned investment spending is $7 million,actual investment spending is $7 million,government purchases are $9 million,and net export spending is $3 million.Based on this information,which of the following is true?

An increase in aggregate expenditure has what result on equilibrium GDP?

Planned aggregate expenditure is equal to

If inflation in the United States is higher than inflation in other countries,what will be the effect on net exports for the United States?

The aggregate expenditure model focuses on the ________ relationship between real spending and ________.

The five most important variables that determine the level of consumption are

Equations for C,I,G,and NX are given below.If the equilibrium level of GDP is $32,000,what will the new equilibrium level of GDP be if government spending increases to 2,500? C = 5,000 + (MPC)Y I = 1,500 G = 2,000 NX = -500

John Maynard Keynes argued that if many households decide at the same time to increase saving and reduce spending,

Decreases in the price level will

Which of the following is a true statement about the multiplier?

When Jack's income increases by $1,000,he spends an additional $850 dollars.This implies that his marginal propensity to consume is 0.85.

The formula for aggregate expenditure is

Higher interest rates increase both consumption and investment spending.

Figure 23-4 -Refer to Figure 23-4.Potential GDP equals $100 billion.The economy is currently producing GDP1 which is equal to $90 billion.If the MPC is 0.8,then how much must autonomous spending change for the economy to move to potential GDP?

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

The aggregate expenditure model focuses on the relationship between real spending and .

Figure 23-4 -Refer to Figure 23-4.Potential GDP equals $100 billion.The economy is currently producing GDP₁ which is equal to $90 billion.If the MPC is 0.8,then how much must autonomous spending change for the economy to move to potential GDP?