Question 1

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

Question 2

If autonomous investment expenditures decline because of higher interest rates

Accepted Answer

A) income increases 
B) the rate of return declines 
C) autonomous consumption declines 
D) aggregate demand increases 
E) aggregate demand decreases 
A) income increases 
B) the rate of return declines 
C) autonomous consumption declines 
D) aggregate demand increases 
E) aggregate demand decreases

Question 3

We can use an aggregate expenditure line to trace out a single aggregate demand curve by

Accepted Answer

A) shifting the 45-degree line 
B) letting changes in autonomous spending shift the aggregate expenditure line 
C) letting changes in the price level shift the aggregate expenditure line 
D) letting changes in the level of income shift the aggregate expenditure line 
E) letting changes in real GDP shift the aggregate expenditure line 
A) shifting the 45-degree line 
B) letting changes in autonomous spending shift the aggregate expenditure line 
C) letting changes in the price level shift the aggregate expenditure line 
D) letting changes in the level of income shift the aggregate expenditure line 
E) letting changes in real GDP shift the aggregate expenditure line

Question 4

What is the effect of an increase in the price level?

Accepted Answer

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

Question 5

In the income-expenditure framework,if planned aggregate expenditures are greater than real GDP,

Accepted Answer

A) the price level will fall 
B) consumption must fall 
C) inventories will increase 
D) inventories will decrease 
E) consumption will decrease 
A) the price level will fall 
B) consumption must fall 
C) inventories will increase 
D) inventories will decrease 
E) consumption will decrease

Question 6

As the U.S.price level rises relative to price levels in other countries,what would happen in the U.S.?

Accepted Answer

A) consumption and net exports would decline 
B) consumption and net exports would increase 
C) consumption would increase and net exports would decrease 
D) consumption would decrease and net exports would increase 
E) consumption and net exports would remain constant 
A) consumption and net exports would decline 
B) consumption and net exports would increase 
C) consumption would increase and net exports would decrease 
D) consumption would decrease and net exports would increase 
E) consumption and net exports would remain constant

Question 7

Exhibit 9-11  
-In Exhibit 9-11,which of the following best describes the situation at GDP2?

Accepted Answer

A) Equilibrium GDP 
B) Inventories are falling and real GDP will increase. 
C) Inventories are falling and real GDP will decrease 
D) Inventories  are rising and real GDP will increase 
E) Inventories are falling and real  GDP will decrease 
A) Equilibrium GDP 
B) Inventories are falling and real GDP will increase. 
C) Inventories are falling and real GDP will decrease 
D) Inventories  are rising and real GDP will increase 
E) Inventories are falling and real  GDP will decrease

Question 8

Which of the following is not included in the aggregate expenditure line?

Accepted Answer

A) C 
B) P 
C) I 
D) G 
E) (X-M) 
A) C 
B) P 
C) I 
D) G 
E) (X-M)

Question 9

Suppose that a pair of graphs represents a situation in which both the aggregate expenditure line and the aggregate demand curve have shifted.You can conclude that the shift of the aggregate expenditure line was caused by a change in

Accepted Answer

A) disposable income 
B) the price level 
C) the level of income 
D) autonomous investment 
E) the level of real GDP 
A) disposable income 
B) the price level 
C) the level of income 
D) autonomous investment 
E) the level of real GDP

Question 10

If the marginal propensity to consume in your classmate's nation is 3/5 and the marginal propensity to save in your country is 1/10,which of the following must be true?

Accepted Answer

A) The spending multiplier is larger in your classmate's nation than in your country. 
B) The spending multiplier is smaller in your classmate's nation than in your country. 
C) Autonomous consumption is higher in your classmate's nation than in your country. 
D) Autonomous consumption is lower in your classmate's nation than in your country. 
E) Total consumption is lower in your classmate's nation than in your country. 
A) The spending multiplier is larger in your classmate's nation than in your country. 
B) The spending multiplier is smaller in your classmate's nation than in your country. 
C) Autonomous consumption is higher in your classmate's nation than in your country. 
D) Autonomous consumption is lower in your classmate's nation than in your country. 
E) Total consumption is lower in your classmate's nation than in your country.

Question 11

Which of the following is true concerning the relationship between the marginal propensity to consume and the consumption function?

Accepted Answer

A) the larger the MPC,the higher the level of autonomous consumption 
B) the larger the MPC,the steeper the consumption function 
C) the larger the MPC,the larger the MPS 
D) The smaller the MPC,the steeper the consumption function 
E) The larger the MPC,the larger the level of autonomous consumption 
A) the larger the MPC,the higher the level of autonomous consumption 
B) the larger the MPC,the steeper the consumption function 
C) the larger the MPC,the larger the MPS 
D) The smaller the MPC,the steeper the consumption function 
E) The larger the MPC,the larger the level of autonomous consumption

Question 12

When current real production of goods and services (real GDP)is greater than planned aggregate expenditure

Accepted Answer

A) inventories of goods and services are rising 
B) firms will increase production to replenish depleted inventories 
C) businesses and households will increase planned aggregate spending because it is in their interest to promote employment 
D) the price level will automatically rise to restore equilibrium in the economy 
E) leakages must equal planned injections 
A) inventories of goods and services are rising 
B) firms will increase production to replenish depleted inventories 
C) businesses and households will increase planned aggregate spending because it is in their interest to promote employment 
D) the price level will automatically rise to restore equilibrium in the economy 
E) leakages must equal planned injections

Question 13

In a model with neither income taxes nor international trade,if the marginal propensity to consume in your classmate's nation is 3/5 and the marginal propensity to save in your country is 1/10,which of the following must be true?

Accepted Answer

A) Increases in government purchases increase real GDP demanded more per dollar in your country than they do in your classmate's country. 
B) Decreases in government purchases increase real GDP demanded more per dollar in your country than they do in your classmate's country. 
C) Increases in autonomous saving increase real GDP demanded more per dollar in your country than they do in your classmate's country. 
D) Real GDP demanded is higher in your country than in your classmate's country. 
E) Total saving is higher in your classmate's country than in your country. 
A) Increases in government purchases increase real GDP demanded more per dollar in your country than they do in your classmate's country. 
B) Decreases in government purchases increase real GDP demanded more per dollar in your country than they do in your classmate's country. 
C) Increases in autonomous saving increase real GDP demanded more per dollar in your country than they do in your classmate's country. 
D) Real GDP demanded is higher in your country than in your classmate's country. 
E) Total saving is higher in your classmate's country than in your country.

Question 14

If the simple multiplier is 8,the marginal propensity to consume is

Accepted Answer

A) 1/8 
B) 1/4 
C) 4/5 
D) 7/8 
E) 8 
A) 1/8 
B) 1/4 
C) 4/5 
D) 7/8 
E) 8

Question 15

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 16

Suppose that a pair of graphs represents a situation in which the aggregate expenditure line has shifted but the aggregate demand curve has not.The shift of the aggregate expenditure line was caused by a change in

Accepted Answer

A) the marginal propensity to consume 
B) the price level 
C) autonomous investment 
D) autonomous saving 
E) disposable income 
A) the marginal propensity to consume 
B) the price level 
C) autonomous investment 
D) autonomous saving 
E) disposable income

Question 17

Exhibit 9-11  
-In Exhibit 9-11,which of the following best describes the situation at GDP1?

Accepted Answer

A) Equilibrium GDP 
B) Inventories are falling and real GDP will increase. 
C) Inventories are falling and real GDP will decrease 
D) Inventories  are rising and real GDP will increase 
E) Inventories are falling and  real GDP will decrease 
A) Equilibrium GDP 
B) Inventories are falling and real GDP will increase. 
C) Inventories are falling and real GDP will decrease 
D) Inventories  are rising and real GDP will increase 
E) Inventories are falling and  real GDP will decrease

Question 18

If the economy is currently at equilibrium at $1 trillion and the MPC is 0.6,a $100 decrease in government purchases of goods and services will result in a new equilibrium at

Accepted Answer

A) $600 billion 
B) $400 billion 
C) $750 billion 
D) $1.4 trillion 
E) $1.6 trillion 
A) $600 billion 
B) $400 billion 
C) $750 billion 
D) $1.4 trillion 
E) $1.6 trillion

Question 19

If the multiplier is 3,a $20 billion increase in autonomous consumption will cause a

Accepted Answer

A) $20 billion increase in equilibrium consumption 
B) $60 billion increase in equilibrium consumption 
C) $20 billion increase in equilibrium real GDP demanded 
D) $60 billion increase in equilibrium real GDP demanded 
E) $60 billion decrease in autonomous saving 
A) $20 billion increase in equilibrium consumption 
B) $60 billion increase in equilibrium consumption 
C) $20 billion increase in equilibrium real GDP demanded 
D) $60 billion increase in equilibrium real GDP demanded 
E) $60 billion decrease in autonomous saving

Question 20

A decline in the U.S.price level,other things constant,would

Accepted Answer

A) stimulate U.S.exports,pushing the aggregate demand curve to the right 
B) stimulate U.S.imports,pushing the aggregate demand curve to the right 
C) stimulate U.S.exports but discourage imports,causing a rightward movement along a given aggregate demand curve 
D) discourage U.S.exports but stimulate imports,causing a rightward movement along a given aggregate demand curve 
E) not affect U.S.net exports,so aggregate quantity demanded would remain constant 
A) stimulate U.S.exports,pushing the aggregate demand curve to the right 
B) stimulate U.S.imports,pushing the aggregate demand curve to the right 
C) stimulate U.S.exports but discourage imports,causing a rightward movement along a given aggregate demand curve 
D) discourage U.S.exports but stimulate imports,causing a rightward movement along a given aggregate demand curve 
E) not affect U.S.net exports,so aggregate quantity demanded would remain constant

Exam 10: Baggregate Expenditure and Aggregate Demand

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

If autonomous investment expenditures decline because of higher interest rates

We can use an aggregate expenditure line to trace out a single aggregate demand curve by

What is the effect of an increase in the price level?

In the income-expenditure framework,if planned aggregate expenditures are greater than real GDP,

As the U.S.price level rises relative to price levels in other countries,what would happen in the U.S.?

Exhibit 9-11 -In Exhibit 9-11,which of the following best describes the situation at GDP2?

Which of the following is not included in the aggregate expenditure line?

Suppose that a pair of graphs represents a situation in which both the aggregate expenditure line and the aggregate demand curve have shifted.You can conclude that the shift of the aggregate expenditure line was caused by a change in

If the marginal propensity to consume in your classmate's nation is 3/5 and the marginal propensity to save in your country is 1/10,which of the following must be true?

Which of the following is true concerning the relationship between the marginal propensity to consume and the consumption function?

When current real production of goods and services (real GDP)is greater than planned aggregate expenditure

In a model with neither income taxes nor international trade,if the marginal propensity to consume in your classmate's nation is 3/5 and the marginal propensity to save in your country is 1/10,which of the following must be true?

If the simple multiplier is 8,the marginal propensity to consume is

In the simple aggregate expenditures model,planned investment is

Suppose that a pair of graphs represents a situation in which the aggregate expenditure line has shifted but the aggregate demand curve has not.The shift of the aggregate expenditure line was caused by a change in

Exhibit 9-11 -In Exhibit 9-11,which of the following best describes the situation at GDP1?

If the economy is currently at equilibrium at $1 trillion and the MPC is 0.6,a $100 decrease in government purchases of goods and services will result in a new equilibrium at

If the multiplier is 3,a $20 billion increase in autonomous consumption will cause a

A decline in the U.S.price level,other things constant,would

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Introduction to Macroeconomics

Tracking the Useconomy

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Exhibit 9-11 -In Exhibit 9-11,which of the following best describes the situation at GDP₂?

Exhibit 9-11 -In Exhibit 9-11,which of the following best describes the situation at GDP₁?