Question 1

Which of the following will decrease aggregate expenditure in the United States?

Accepted Answer

A) a decrease in the value of the dollar 
B) a decrease in the price level 
C) a decrease in interest rates 
D) a decrease in government purchases 
A) a decrease in the value of the dollar 
B) a decrease in the price level 
C) a decrease in interest rates 
D) a decrease in government purchases

Question 2

Consumer spending ________ and investment spending ________.

Accepted Answer

A) is very volatile and subject to fluctuations;follows a smooth trend 
B) follows a smooth trend;is more volatile and subject to fluctuations 
C) follows a smooth trend;is the most stable component of aggregate expenditure 
D) is very erratic;is also erratic,but less erratic than consumer spending 
A) is very volatile and subject to fluctuations;follows a smooth trend 
B) follows a smooth trend;is more volatile and subject to fluctuations 
C) follows a smooth trend;is the most stable component of aggregate expenditure 
D) is very erratic;is also erratic,but less erratic than consumer spending

Question 3

The aggregate demand curve shows the relationship between the price level and the level of planned aggregate expenditure in the economy.

Accepted Answer

A) True 
 B)False

Question 4

If economists forecast an increase in aggregate expenditure,which of the following is likely to occur?

Accepted Answer

A) GDP will rise. 
B) GDP will fall. 
C) Wages will fall. 
D) Inventories will rise. 
A) GDP will rise. 
B) GDP will fall. 
C) Wages will fall. 
D) Inventories will rise.

Question 5

An increase in Social Security payments will

Accepted Answer

A) increase consumption spending. 
B) increase investment spending. 
C) increase government spending. 
D) increase export spending. 
A) increase consumption spending. 
B) increase investment spending. 
C) increase government spending. 
D) increase export spending.

Question 6

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 7

Discuss the leading causes of the Great Depression.Use the 45-degree line diagram to show how they caused a decline in GDP.

Accepted Answer

Several events lowered aggregate expendi

Question 8

If the marginal propensity to save is 0.4,then a $2 million increase in disposable income will

Accepted Answer

A) increase consumption by $5 million. 
B) increase consumption by $1.2 million. 
C) decrease consumption by $5 million. 
D) decrease consumption by $1.2 million. 
A) increase consumption by $5 million. 
B) increase consumption by $1.2 million. 
C) decrease consumption by $5 million. 
D) decrease consumption by $1.2 million.

Question 9

What are inventories? What usually happens to inventories at the beginning of a recession,and what usually happens to inventories at the beginning of an expansion?

Accepted Answer

Inventories are goods that hav

Question 10

If inventories decline by more than analysts predict they will decline,this implies that

Accepted Answer

A) actual investment spending was greater than planned investment spending. 
B) actual investment spending was less than planned investment spending. 
C) actual investment spending was equal to than planned investment spending. 
D) there is no relationship between actual investment spending and planned investment spending. 
A) actual investment spending was greater than planned investment spending. 
B) actual investment spending was less than planned investment spending. 
C) actual investment spending was equal to than planned investment spending. 
D) there is no relationship between actual investment spending and planned investment spending.

Question 11

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

Accepted Answer

A) investment spending. 
B) export spending. 
C) government spending. 
D) the level of aggregate expenditure. 
A) investment spending. 
B) export spending. 
C) government spending. 
D) the level of aggregate expenditure.

Question 12

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 13

Economists think that the marginal propensity to consume for the U.S.economy is somewhere around 0.9.Based on our simple multiplier formula,this would imply that the multiplier for the United States should be around 10.However,economists agree that the spending multiplier is closer to 2.What might explain this supposed anomaly?

Accepted Answer

The formula for the multiplier,M = @#LAT-DLM& ,is

Question 14

If aggregate expenditure is less than GDP,how will the economy reach macroeconomic equilibrium?

Accepted Answer

A) Inventories will decline,and GDP and employment will decline. 
B) Inventories will rise,and GDP and employment will decline. 
C) Inventories will decline,and GDP and employment will rise. 
D) Inventories will rise,and GDP and employment will rise. 
A) Inventories will decline,and GDP and employment will decline. 
B) Inventories will rise,and GDP and employment will decline. 
C) Inventories will decline,and GDP and employment will rise. 
D) Inventories will rise,and GDP and employment will rise.

Question 15

If disposable income increases by $500 million,and consumption increases by $400 million,then the marginal propensity to consume is

Accepted Answer

A) 1.25. 
B) 0.8. 
C) 0.6. 
D) 0.4. 
A) 1.25. 
B) 0.8. 
C) 0.6. 
D) 0.4.

Question 16

If aggregate expenditure is less than GDP,then inventories rise and GDP falls.

Accepted Answer

A) True 
 B)False

Question 17

An example of assets that are included in ________ would be stocks,bonds,and savings accounts.

Accepted Answer

A) household wealth 
B) household income 
C) planned investment 
D) consumer purchases 
A) household wealth 
B) household income 
C) planned investment 
D) consumer purchases

Question 18

National income =

Accepted Answer

A) Consumption + Saving - Taxes 
B) Consumption - Saving - Taxes 
C) Consumption - Saving +Taxes 
D) Consumption + Saving + Taxes 
A) Consumption + Saving - Taxes 
B) Consumption - Saving - Taxes 
C) Consumption - Saving +Taxes 
D) Consumption + Saving + Taxes

Question 19

Increases in the price level will

Accepted Answer

A) lower consumption because goods and services are less affordable. 
B) raise consumption because some goods and services are more affordable. 
C) raise consumption because real wealth increases. 
D) lower consumption because real wealth decreases. 
A) lower consumption because goods and services are less affordable. 
B) raise consumption because some goods and services are more affordable. 
C) raise consumption because real wealth increases. 
D) lower consumption because real wealth decreases.

Question 20

Figure 23-2  
-Refer to Figure 23-2.If the U.S.economy is currently at point K,which of the following could cause it to move to point N?

Accepted Answer

A) The price level in the United States falls relative to the price level in other countries. 
B) Congress abolishes investment tax incentives. 
C) The interest rate rises. 
D) Household wealth declines. 
A) The price level in the United States falls relative to the price level in other countries. 
B) Congress abolishes investment tax incentives. 
C) The interest rate rises. 
D) Household wealth declines.

Exam 23: Aggregate Expenditure and Output in the Short Run

Which of the following will decrease aggregate expenditure in the United States?

Consumer spending ________ and investment spending ________.

The aggregate demand curve shows the relationship between the price level and the level of planned aggregate expenditure in the economy.

If economists forecast an increase in aggregate expenditure,which of the following is likely to occur?

An increase in Social Security payments will

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

Discuss the leading causes of the Great Depression.Use the 45-degree line diagram to show how they caused a decline in GDP.

If the marginal propensity to save is 0.4,then a $2 million increase in disposable income will

What are inventories? What usually happens to inventories at the beginning of a recession,and what usually happens to inventories at the beginning of an expansion?

If inventories decline by more than analysts predict they will decline,this implies that

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

Actual investment spending does not include

If aggregate expenditure is less than GDP,how will the economy reach macroeconomic equilibrium?

If disposable income increases by $500 million,and consumption increases by $400 million,then the marginal propensity to consume is

If aggregate expenditure is less than GDP,then inventories rise and GDP falls.

An example of assets that are included in ________ would be stocks,bonds,and savings accounts.

National income =

Increases in the price level will

Figure 23-2 -Refer to Figure 23-2.If the U.S.economy is currently at point K,which of the following could cause it to move to point N?

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

Consumer spending and investment spending .