Question 1

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.

Question 2

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

Accepted Answer

A) Autonomous;induced 
B) Induced;autonomous 
C) Voluntary;autonomous 
D) Autonomous;voluntary 
A) Autonomous;induced 
B) Induced;autonomous 
C) Voluntary;autonomous 
D) Autonomous;voluntary

Question 3

Which is the smallest 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 4

Investment spending increases during ________,and decreases during ________.

Accepted Answer

A) an expansion;a recession 
B) a recession;an expansion 
C) a recession;a depression 
D) a deflation;an inflation 
A) an expansion;a recession 
B) a recession;an expansion 
C) a recession;a depression 
D) a deflation;an inflation

Question 5

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 6

If the economy is currently in equilibrium at a level of GDP that is above potential GDP,which of the following would move the economy back to potential GDP?

Accepted Answer

A) a decrease in wealth 
B) a decrease in interest rates 
C) an increase in business confidence 
D) a decrease in the value of the dollar relative to other currencies 
A) a decrease in wealth 
B) a decrease in interest rates 
C) an increase in business confidence 
D) a decrease in the value of the dollar relative to other currencies

Question 7

The ratio of the increase in equilibrium real GDP to the increase in autonomous expenditure is called the

Accepted Answer

A) MPC. 
B) multiplier. 
C) MPS. 
D) consumption function. 
A) MPC. 
B) multiplier. 
C) MPS. 
D) consumption function.

Question 8

C = 4,000 + 0.5Y
I = 1,500
G =2,250
NX = -150
Given the equations for C,I,G,and NX above,what is the equilibrium level of GDP (Y)?

Accepted Answer

Y = C + I + G + NX.
Y = 4,000

Question 9

Which of the following is true?

Accepted Answer

A) National income = Consumption + Savings - Taxes 
B) National income = Consumption - Savings - Taxes 
C) National income = Consumption + Savings + Taxes 
D) National income = Consumption - Savings + Taxes 
A) National income = Consumption + Savings - Taxes 
B) National income = Consumption - Savings - Taxes 
C) National income = Consumption + Savings + Taxes 
D) National income = Consumption - Savings + Taxes

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

If consumption is defined as C = 4,500 + 0.75Y,then the marginal propensity to save is 0.25.

Accepted Answer

A) True 
 B)False

Question 12

A decrease in the real interest rate will

Accepted Answer

A) cause consumers to spend less and save more. 
B) most likely increase consumer's purchases of durable goods. 
C) most likely increase the reward to savings. 
D) most likely increase the cost of borrowing. 
A) cause consumers to spend less and save more. 
B) most likely increase consumer's purchases of durable goods. 
C) most likely increase the reward to savings. 
D) most likely increase the cost of borrowing.

Question 13

Given the equations for C,I,G,and NX below,what is the equilibrium level of GDP? C = 1,000 + 0.8Y
I = 1,500
G =1,250
NX = 100

Accepted Answer

A) $3,080 
B) $3,850 
C) $6,930 
D) $19,250 
A) $3,080 
B) $3,850 
C) $6,930 
D) $19,250

Question 14

What are the five main determinants of consumption spending? Which of these is the most important?

Accepted Answer

The five main determinants of consumptio

Question 15

Figure 23-1  
-Refer to Figure 23-1.At point L in the figure above,which of the following is true?

Accepted Answer

A) Aggregate expenditure is greater than GDP. 
B) The economy has achieved macroeconomic equilibrium. 
C) Actual inventories are greater than planned inventories. 
D) GDP will be increasing. 
A) Aggregate expenditure is greater than GDP. 
B) The economy has achieved macroeconomic equilibrium. 
C) Actual inventories are greater than planned inventories. 
D) GDP will be increasing.

Question 16

Firms in a small economy anticipated that inventories would grow over the past year by $500,000.Over that year,inventories actually grew by only $400,000.This implies that

Accepted Answer

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

Question 17

During the Great Depression,economists first began studying the relationship between

Accepted Answer

A) changes in GDP and changes in interest rates. 
B) changes in aggregate expenditures and changes in GDP. 
C) changes in nominal GDP and changes in real GDP. 
D) changes in stock prices and changes in price controls. 
A) changes in GDP and changes in interest rates. 
B) changes in aggregate expenditures and changes in GDP. 
C) changes in nominal GDP and changes in real GDP. 
D) changes in stock prices and changes in price controls.

Question 18

The key idea of the aggregate expenditure model is that in any particular year,the level of ________ is determined mainly by the level of aggregate expenditure.

Accepted Answer

A) frictional unemployment 
B) export spending 
C) government spending 
D) GDP 
A) frictional unemployment 
B) export spending 
C) government spending 
D) GDP

Question 19

C = 2,800 + 0.9Y
I = 750
G = 1,200
NX = 150
Given the equations for C,I,G,and NX above,what is the equilibrium level of GDP (Y)?

Accepted Answer

Y = C + I + G + NX.
Y = 2,800

Question 20

Which of the following correctly describes how an increase in the price level affects consumption spending?

Accepted Answer

A) An increase in the price level raises real wealth,which causes consumption to increase. 
B) An increase in the price level decreases the amount of money a household needs to buy goods and raises the interest rate,which causes consumption to increase. 
C) An increase in the price level increases the amount of money a household needs to buy goods and raises the interest rate,which causes consumption to increase. 
D) An increase in the price level lowers real wealth,which causes consumption to decrease. 
A) An increase in the price level raises real wealth,which causes consumption to increase. 
B) An increase in the price level decreases the amount of money a household needs to buy goods and raises the interest rate,which causes consumption to increase. 
C) An increase in the price level increases the amount of money a household needs to buy goods and raises the interest rate,which causes consumption to increase. 
D) An increase in the price level lowers real wealth,which causes consumption to decrease.

Exam 23: Aggregate Expenditure and Output in the Short Run

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

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

Which is the smallest component of aggregate expenditure?

Investment spending increases during ________,and decreases during ________.

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

If the economy is currently in equilibrium at a level of GDP that is above potential GDP,which of the following would move the economy back to potential GDP?

The ratio of the increase in equilibrium real GDP to the increase in autonomous expenditure is called the

C = 4,000 + 0.5Y I = 1,500 G =2,250 NX = -150 Given the equations for C,I,G,and NX above,what is the equilibrium level of GDP (Y)?

Which of the following is true?

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

If consumption is defined as C = 4,500 + 0.75Y,then the marginal propensity to save is 0.25.

A decrease in the real interest rate will

Given the equations for C,I,G,and NX below,what is the equilibrium level of GDP? C = 1,000 + 0.8Y I = 1,500 G =1,250 NX = 100

What are the five main determinants of consumption spending? Which of these is the most important?

Figure 23-1 -Refer to Figure 23-1.At point L in the figure above,which of the following is true?

Firms in a small economy anticipated that inventories would grow over the past year by $500,000.Over that year,inventories actually grew by only $400,000.This implies that

During the Great Depression,economists first began studying the relationship between

The key idea of the aggregate expenditure model is that in any particular year,the level of ________ is determined mainly by the level of aggregate expenditure.

C = 2,800 + 0.9Y I = 750 G = 1,200 NX = 150 Given the equations for C,I,G,and NX above,what is the equilibrium level of GDP (Y)?

Which of the following correctly describes how an increase in the price level affects consumption spending?

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

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

Investment spending increases during ,and decreases during .