Question 1

During a(n)________ many firms experience increased profits,which increases ________ and investment spending.

Accepted Answer

A)  expansion; government spending 
B)  recession; cash flow 
C)  expansion; cash flow 
D)  recession; business confidence 
A)  expansion; government spending 
B)  recession; cash flow 
C)  expansion; cash flow 
D)  recession; business confidence

Question 2

Concerned that its dependence on sales of microprocessors to computer firms would make it vulnerable to sharp sales declines during the recession of 2007-2009,Intel began to develop memory chips that could be used in portable consumer electronic devices such as cell phones.One reason that Intel chose to branch out from producing microprocessors for computers is that

Accepted Answer

A)  sales of computers have been declining over the past decade. 
B)  technology with respect to microprocessor production was no longer advancing at a rate where Intel's new products were still wanted by computer manufacturers. 
C)  Intel had lost a majority of its market share in microprocessor production to foreign competition. 
D)  computers are durable goods and spending on computers follows the business cycle. 
A)  sales of computers have been declining over the past decade. 
B)  technology with respect to microprocessor production was no longer advancing at a rate where Intel's new products were still wanted by computer manufacturers. 
C)  Intel had lost a majority of its market share in microprocessor production to foreign competition. 
D)  computers are durable goods and spending on computers follows the business cycle.

Question 3

How does a decrease in government spending affect the aggregate expenditure line?

Accepted Answer

A)  It shifts the aggregate expenditure line upward. 
B)  It shifts the aggregate expenditure line downward. 
C)  It increases the slope of the aggregate expenditure line. 
D)  It decreases the slope of the aggregate expenditure line. 
A)  It shifts the aggregate expenditure line upward. 
B)  It shifts the aggregate expenditure line downward. 
C)  It increases the slope of the aggregate expenditure line. 
D)  It decreases the slope of the aggregate expenditure line.

Question 4

When we graph consumption as a function of ________ rather than as a function of disposable income,the slope of this consumption function is ________.

Accepted Answer

A)  national income; the MPC 
B)  personal income; (MPC - MPS) 
C)  national income; the MPS 
D)  personal income; the MPS 
A)  national income; the MPC 
B)  personal income; (MPC - MPS) 
C)  national income; the MPS 
D)  personal income; the MPS

Question 5

If planned aggregate expenditure is less than total production,

Accepted Answer

A)  actual inventories will equal planned inventories. 
B)  firms will experience an unplanned increase in inventories. 
C)  GDP will increase. 
D)  the economy is in equilibrium. 
A)  actual inventories will equal planned inventories. 
B)  firms will experience an unplanned increase in inventories. 
C)  GDP will increase. 
D)  the economy is in equilibrium.

Question 6

Actual investment spending does not include

Accepted Answer

A)  spending on consumer durable goods. 
B)  spending on new capital equipment. 
C)  spending on new houses. 
D)  changes in inventories. 
A)  spending on consumer durable goods. 
B)  spending on new capital equipment. 
C)  spending on new houses. 
D)  changes in inventories.

Question 7

If the multiplier is 5,the marginal propensity to consume must be 0.8.

Accepted Answer

A) True 
 B)False

Question 8

For all points below the 45-degree line,planned aggregate expenditure will be less than GDP.

Accepted Answer

A) True 
 B)False

Question 9

Which is the largest component of aggregate expenditure?

Accepted Answer

A)  planned investment expenditures 
B)  consumption expenditures 
C)  government expenditures 
D)  net export expenditures 
A)  planned investment expenditures 
B)  consumption expenditures 
C)  government expenditures 
D)  net export expenditures

Question 10

A stock market boom which causes stock prices to rise should cause

Accepted Answer

A)  a decrease in consumption spending. 
B)  an increase in consumption spending. 
C)  a decrease in wealth. 
D)  a decrease in net export spending. 
A)  a decrease in consumption spending. 
B)  an increase in consumption spending. 
C)  a decrease in wealth. 
D)  a decrease in net export spending.

Question 11

Table 23-1
  
-Refer to Table 23-1.Using the table above,compute aggregate expenditure and identify the macroeconomic equilibrium.

Accepted Answer

The macroeconomic equilibrium is determi

Question 12

________ in taxes will decrease consumption spending,and ________ in transfer payments will increase consumption spending.

Accepted Answer

A)  An increase; an increase 
B)  A decrease; an increase 
C)  An increase; a decrease 
D)  A decrease; a decrease 
A)  An increase; an increase 
B)  A decrease; an increase 
C)  An increase; a decrease 
D)  A decrease; a decrease

Question 13

If firms find that consumers are purchasing more than expected,which of the following would you expect?

Accepted Answer

A)  Aggregate expenditure will likely be greater than GDP. 
B)  Aggregate expenditure will likely be less than GDP. 
C)  The economy will adjust to macroeconomic equilibrium as inventories rise, and production and employment fall. 
D)  The economy will adjust to macroeconomic equilibrium as inventories fall, and production and employment fall. 
A)  Aggregate expenditure will likely be greater than GDP. 
B)  Aggregate expenditure will likely be less than GDP. 
C)  The economy will adjust to macroeconomic equilibrium as inventories rise, and production and employment fall. 
D)  The economy will adjust to macroeconomic equilibrium as inventories fall, and production and employment fall.

Question 14

________ consumption is consumption that does not depend upon the level of GDP.

Accepted Answer

A)  Autonomous 
B)  Induced 
C)  Voluntary 
D)  Disposable 
A)  Autonomous 
B)  Induced 
C)  Voluntary 
D)  Disposable

Question 15

When Jack's income increases by $5,000,he spends an additional $4,000 dollars.This implies that his marginal propensity to consume is 1.25.

Accepted Answer

A) True 
 B)False

Question 16

If the consumption function is defined as C = 5,500 + 0.9Y,what is the autonomous level of consumption expenditure?

Accepted Answer

A)  $4,950 
B)  $5,500 
C)  $6,050 
D)  $6,111 
A)  $4,950 
B)  $5,500 
C)  $6,050 
D)  $6,111

Question 17

Investment spending will increase when

Accepted Answer

A)  the interest rate rises. 
B)  the corporate income tax increases. 
C)  business cash flow increases. 
D)  firms become more pessimistic about earning future profits. 
A)  the interest rate rises. 
B)  the corporate income tax increases. 
C)  business cash flow increases. 
D)  firms become more pessimistic about earning future profits.

Question 18

The marginal propensity to consume is the slope of the consumption function.

Accepted Answer

A) True 
 B)False

Question 19

If the marginal propensity to consume is 0.75,the marginal propensity to save is

Accepted Answer

A)  0.25. 
B)  0.5. 
C)  1. 
D)  3. 
A)  0.25. 
B)  0.5. 
C)  1. 
D)  3.

Question 20

All of the following are true statements about the multiplier except

Accepted Answer

A)  The formula for the multiplier overstates the real world multiplier when we take into account the impact of changes in GDP on imports, inflation and the interest rate. 
B)  The larger the MPC, the larger the multiplier. 
C)  The multiplier is the ratio of the change in real GDP to the change in autonomous expenditure. 
D)  The multiplier makes the economy less sensitive to changes in autonomous expenditure. 
A)  The formula for the multiplier overstates the real world multiplier when we take into account the impact of changes in GDP on imports, inflation and the interest rate. 
B)  The larger the MPC, the larger the multiplier. 
C)  The multiplier is the ratio of the change in real GDP to the change in autonomous expenditure. 
D)  The multiplier makes the economy less sensitive to changes in autonomous expenditure.

Exam 23: Aggregate Expenditure and Output in the Short Run

During a(n)________ many firms experience increased profits,which increases ________ and investment spending.

How does a decrease in government spending affect the aggregate expenditure line?

When we graph consumption as a function of ________ rather than as a function of disposable income,the slope of this consumption function is ________.

If planned aggregate expenditure is less than total production,

Actual investment spending does not include

If the multiplier is 5,the marginal propensity to consume must be 0.8.

For all points below the 45-degree line,planned aggregate expenditure will be less than GDP.

Which is the largest component of aggregate expenditure?

A stock market boom which causes stock prices to rise should cause

Table 23-1 -Refer to Table 23-1.Using the table above,compute aggregate expenditure and identify the macroeconomic equilibrium.

________ in taxes will decrease consumption spending,and ________ in transfer payments will increase consumption spending.

If firms find that consumers are purchasing more than expected,which of the following would you expect?

________ consumption is consumption that does not depend upon the level of GDP.

When Jack's income increases by $5,000,he spends an additional $4,000 dollars.This implies that his marginal propensity to consume is 1.25.

If the consumption function is defined as C = 5,500 + 0.9Y,what is the autonomous level of consumption expenditure?

Investment spending will increase when

The marginal propensity to consume is the slope of the consumption function.

If the marginal propensity to consume is 0.75,the marginal propensity to save is

All of the following are true statements about the multiplier except

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

During a(n) many firms experience increased profits,which increases and investment spending.

When we graph consumption as a function of rather than as a function of disposable income,the slope of this consumption function is .

in taxes will decrease consumption spending,and in transfer payments will increase consumption spending.