Question 1

If disposable income falls by $40 billion and consumption falls by $30 billion,then the slope of the consumption function is

Accepted Answer

A) 1.33. 
B) 0.75. 
C) 0.4. 
D) 0.3. 
A) 1.33. 
B) 0.75. 
C) 0.4. 
D) 0.3.

Question 2

The aggregate expenditure model focuses on the relationship between ________ and ________ in the short run,assuming ________ is constant.

Accepted Answer

A) total production;total income;real GDP 
B) total spending;real GDP;total income 
C) total spending;real GDP;the price level 
D) total income;real GDP;the price level 
A) total production;total income;real GDP 
B) total spending;real GDP;total income 
C) total spending;real GDP;the price level 
D) total income;real GDP;the price level

Question 3

Aggregate expenditure includes consumption spending,unplanned investment spending,government purchases,and net exports.

Accepted Answer

A) True 
 B)False

Question 4

If the consumption function is defined as C = 7,250 + 0.8Y,what is the multiplier?

Accepted Answer

A) 0.2 
B) 0.8 
C) 1.25 
D) 5 
A) 0.2 
B) 0.8 
C) 1.25 
D) 5

Question 5

If planned aggregate expenditure is greater than total production

Accepted Answer

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

Question 6

If inflation in the United States is lower 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 increase. 
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 increase. 
C) Net exports will decrease as U.S.exports decrease. 
D) Net exports will decrease as U.S.imports decrease.

Question 7

Table 23-10
 $$\begin{array} { | c | c | c | c | c | } 
\hline \text { Real GDP } & \text { Consumption } & \begin{array} { c } 
\text { Planned } \
\text { Investment }
\end{array} & \begin{array} { c } 
\text { Government } \
\text { Purchases }
\end{array} & \text { Net Exports } \
\hline \$ 2,000 & \$ 1,600 & \$ 250 & \$ 250 & \$ 100 \
\hline 2,500 & 2,000 & 250 & 250 & 100 \
\hline 3,000 & 2,400 & 250 & 250 & 100 \
\hline 3,500 & 2,800 & 250 & 250 & 100 \
\hline
\end{array}$$
-Refer to Table 23-10.Using the table above,calculate the unplanned change in inventories for each level of GDP,and explain what will happen to GDP?

Accepted Answer

The macroeconomic equilibrium is determi

Question 8

Which of the following is not a component of aggregate expenditure?

Accepted Answer

A) consumption spending 
B) planned investment spending 
C) actual investment spending 
D) government spending 
A) consumption spending 
B) planned investment spending 
C) actual investment spending 
D) government spending

Question 9

An increase in the price level in the United States will reduce imports and increase exports.

Accepted Answer

A) True 
 B)False

Question 10

What are the four categories of aggregate expenditure?

Accepted Answer

The four categories are consum

Question 11

Which of the following is not one of the four main categories of spending identified by John Maynard Keynes?

Accepted Answer

A) consumption 
B) planned investment 
C) government purchases 
D) transfer payments 
A) consumption 
B) planned investment 
C) government purchases 
D) transfer payments

Question 12

If the marginal propensity to consume is 0.6,the marginal propensity to save is

Accepted Answer

A) 0.4. 
B) 0.6. 
C) 1. 
D) 1.5. 
A) 0.4. 
B) 0.6. 
C) 1. 
D) 1.5.

Question 13

________ 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 14

If disposable income increases by $100 million,and consumption increases by $90 million,then the marginal propensity to consume is

Accepted Answer

A) 0.9. 
B) 0.8. 
C) 0.75. 
D) 0.6. 
A) 0.9. 
B) 0.8. 
C) 0.75. 
D) 0.6.

Question 15

On the 45-degree line diagram,the 45-degree line shows points where

Accepted Answer

A) real income equals real GDP. 
B) real aggregate expenditure equals C + I. 
C) real aggregate expenditure equals real GDP. 
D) real aggregate output equals the quantity produced. 
A) real income equals real GDP. 
B) real aggregate expenditure equals C + I. 
C) real aggregate expenditure equals real GDP. 
D) real aggregate output equals the quantity produced.

Question 16

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 17

What is the formula for the multiplier? Explain why this formula is considered to be too simple.

Accepted Answer

Multiplier = @#LAT-DLM& .
The formula ignores the

Question 18

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

Accepted Answer

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

Question 19

Explain,in detail,how the adjustment to macroeconomic equilibrium occurs when spending is less than production.Be sure to discuss how inventories play a crucial role in the adjustment process.State what happens to GDP and employment during the adjustment process.

Accepted Answer

If spending is less than production,then

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

If disposable income falls by $40 billion and consumption falls by $30 billion,then the slope of the consumption function is

The aggregate expenditure model focuses on the relationship between ________ and ________ in the short run,assuming ________ is constant.

Aggregate expenditure includes consumption spending,unplanned investment spending,government purchases,and net exports.

If the consumption function is defined as C = 7,250 + 0.8Y,what is the multiplier?

If planned aggregate expenditure is greater than total production

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

Which of the following is not a component of aggregate expenditure?

An increase in the price level in the United States will reduce imports and increase exports.

What are the four categories of aggregate expenditure?

Which of the following is not one of the four main categories of spending identified by John Maynard Keynes?

If the marginal propensity to consume is 0.6,the marginal propensity to save is

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

If disposable income increases by $100 million,and consumption increases by $90 million,then the marginal propensity to consume is

On the 45-degree line diagram,the 45-degree line shows points where

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?

What is the formula for the multiplier? Explain why this formula is considered to be too simple.

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

Explain,in detail,how the adjustment to macroeconomic equilibrium occurs when spending is less than production.Be sure to discuss how inventories play a crucial role in the adjustment process.State what happens to GDP and employment during the adjustment process.

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 and in the short run,assuming is constant.

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

During a(n) many firms experience reduced profits,which reduces and investment spending.