Question 1

The larger the MPS,the smaller the multiplier effect.

Accepted Answer

A) True 
 B)False

Question 2

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 3

A decrease in the price level will have which of the following effects?

Accepted Answer

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

Question 4

If investment increases by $100 and,as a result,GDP ultimately increases by $200,the multiplier equals

Accepted Answer

A) 1 
B) 2 
C) 3 
D) 4 
E) 5 
A) 1 
B) 2 
C) 3 
D) 4 
E) 5

Question 5

Which is true regarding the marginal propensity to consume and the multiplier?

Accepted Answer

A) The lower the MPC,the higher the multiplier. 
B) The higher the MPC,the lower the multiplier. 
C) The MPC equals the multiplier. 
D) The sum of the MPC and the multiplier equals 1. 
E) The lower the MPC,the lower the multiplier. 
A) The lower the MPC,the higher the multiplier. 
B) The higher the MPC,the lower the multiplier. 
C) The MPC equals the multiplier. 
D) The sum of the MPC and the multiplier equals 1. 
E) The lower the MPC,the lower the multiplier.

Question 6

That fraction of a change in disposable income that is consumed is called

Accepted Answer

A) autonomous consumption 
B) induced consumption 
C) the multiplier 
D) the marginal propensity to consume 
E) the marginal propensity to save 
A) autonomous consumption 
B) induced consumption 
C) the multiplier 
D) the marginal propensity to consume 
E) the marginal propensity to save

Question 7

If the marginal propensity to consume is 4/5,the value of the simple multiplier is

Accepted Answer

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

Question 8

Exhibit 9-9  
-The simple multiplier equals

Accepted Answer

A) the marginal propensity to consume 
B) the marginal propensity to save 
C) the reciprocal of the marginal propensity to save 
D) the reciprocal of the marginal propensity to consume 
E) one minus the marginal propensity to consume 
A) the marginal propensity to consume 
B) the marginal propensity to save 
C) the reciprocal of the marginal propensity to save 
D) the reciprocal of the marginal propensity to consume 
E) one minus the marginal propensity to consume

Question 9

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 10

Exhibit 9-7  
-Which of the following best describes the situation at point B in Exhibit 9-7?

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 11

Suppose that planned investment increases by $200 billion and that the marginal propensity to consume equals 0.80.The aggregate expenditure line will shift upward by __________ at every level of real GDP.

Accepted Answer

A) $40 billion 
B) $160 billion 
C) $200 billion 
D) $250 billion 
E) $1,000 billion 
A) $40 billion 
B) $160 billion 
C) $200 billion 
D) $250 billion 
E) $1,000 billion

Question 12

If the simple multiplier is 10,the marginal propensity to save is

Accepted Answer

A) 1/10 
B) 9/10 
C) 1/9 
D) 10/9 
E) 9 
A) 1/10 
B) 9/10 
C) 1/9 
D) 10/9 
E) 9

Question 13

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 14

Exhibit 9-9  
-The smaller the marginal propensity to save,other things constant,

Accepted Answer

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

Question 15

A decrease in the price level will

Accepted Answer

A) shift the aggregate demand curve to the right 
B) shift the aggregate demand curve to the left 
C) increase the level of aggregate quantity demanded 
D) decrease the level of aggregate quantity demanded 
E) have no effect at all on aggregate demand 
A) shift the aggregate demand curve to the right 
B) shift the aggregate demand curve to the left 
C) increase the level of aggregate quantity demanded 
D) decrease the level of aggregate quantity demanded 
E) have no effect at all on aggregate demand

Question 16

Anything that causes a movement along the aggregate expenditure curve will also cause a shift of the aggregate demand curve.

Accepted Answer

A) True 
 B)False

Question 17

Exhibit 9-7  
-Which of the following best describes the situation at point B in Exhibit 9-7?

Accepted Answer

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

Question 18

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 19

Suppose that the multiplier is 4,autonomous investment rises by $50 billion,and autonomous consumption falls by $50 billion at the same time.Which of the following is true?

Accepted Answer

A) Equilibrium GDP demanded will be the same,but the type of goods produced will be different. 
B) Equilibrium GDP demanded will increase by $200 billion. 
C) Equilibrium GDP demanded will decrease by $200 billion. 
D) Equilibrium GDP demanded will increase by $400 billion. 
E) Equilibrium GDP demanded will decrease by $400 billion. 
A) Equilibrium GDP demanded will be the same,but the type of goods produced will be different. 
B) Equilibrium GDP demanded will increase by $200 billion. 
C) Equilibrium GDP demanded will decrease by $200 billion. 
D) Equilibrium GDP demanded will increase by $400 billion. 
E) Equilibrium GDP demanded will decrease by $400 billion.

Question 20

If autonomous investment increases by $100 billion,equilibrium real GDP demanded will

Accepted Answer

A) increase by $100 billion 
B) not change 
C) increase by ($100 billion)/MPC 
D) increase by $100 billion $\times$ MPC 
E) increase by $100 billion/MPS 
A) increase by $100 billion 
B) not change 
C) increase by ($100 billion)/MPC 
D) increase by $100 billion $\times$ MPC 
E) increase by $100 billion/MPS

Exam 10: Baggregate Expenditure and Aggregate Demand

The larger the MPS,the smaller the multiplier effect.

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

A decrease in the price level will have which of the following effects?

If investment increases by $100 and,as a result,GDP ultimately increases by $200,the multiplier equals

Which is true regarding the marginal propensity to consume and the multiplier?

That fraction of a change in disposable income that is consumed is called

If the marginal propensity to consume is 4/5,the value of the simple multiplier is

Exhibit 9-9 -The simple multiplier equals

The aggregate expenditure line shows

Exhibit 9-7 -Which of the following best describes the situation at point B in Exhibit 9-7?

Suppose that planned investment increases by $200 billion and that the marginal propensity to consume equals 0.80.The aggregate expenditure line will shift upward by __________ at every level of real GDP.

If the simple multiplier is 10,the marginal propensity to save is

A decrease in the price level will

Exhibit 9-9 -The smaller the marginal propensity to save,other things constant,

A decrease in the price level will

Anything that causes a movement along the aggregate expenditure curve will also cause a shift of the aggregate demand curve.

Exhibit 9-7 -Which of the following best describes the situation at point B in Exhibit 9-7?

The aggregate expenditure line shows total planned spending at each

Suppose that the multiplier is 4,autonomous investment rises by $50 billion,and autonomous consumption falls by $50 billion at the same time.Which of the following is true?

If autonomous investment increases by $100 billion,equilibrium real GDP demanded will

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Introduction to Macroeconomics

Tracking the Useconomy

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Federal Budgets and Public Policy

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Banking and the Money Supply

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understanding Graphs

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