Question 1

Which of the following will raise consumer expenditures?

Accepted Answer

A) an increase in interest rates 
B) a general decline in housing prices 
C) an increase in expected future income 
D) an increase in the price level 
A) an increase in interest rates 
B) a general decline in housing prices 
C) an increase in expected future income 
D) an increase in the price level

Question 2

Figure 23-1  
-Refer to Figure 23-1.If the economy is in equilibrium,it is at a level of aggregate expenditure given by point

Accepted Answer

A) J. 
B) K. 
C) L. 
D) Points J,K and L all represent equilibrium. 
A) J. 
B) K. 
C) L. 
D) Points J,K and L all represent equilibrium.

Question 3

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

Accepted Answer

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

Question 4

Disposable income is defined as

Accepted Answer

A) national income - transfers + taxes. 
B) national income + transfers + taxes. 
C) national income - transfers - taxes. 
D) national income + transfers - taxes. 
A) national income - transfers + taxes. 
B) national income + transfers + taxes. 
C) national income - transfers - taxes. 
D) national income + transfers - taxes.

Question 5

The sum of the marginal propensity to consume and the marginal propensity to save is always equal to

Accepted Answer

A) zero. 
B) 0.5. 
C) 1. 
D) 100. 
A) zero. 
B) 0.5. 
C) 1. 
D) 100.

Question 6

Examples of assets that are included in household wealth would be

Accepted Answer

A) stocks,bonds,and savings accounts. 
B) stocks,loans owed,and savings accounts. 
C) stocks,bonds,and mortgages. 
D) stocks,credit cards,and savings accounts. 
A) stocks,bonds,and savings accounts. 
B) stocks,loans owed,and savings accounts. 
C) stocks,bonds,and mortgages. 
D) stocks,credit cards,and savings accounts.

Question 7

If the multiplier is 5,the marginal propensity to consume must be 0.8.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

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

Question 9

The five most important variables that determine the level of consumption are

Accepted Answer

A) disposable income,wealth,expected future income,price level,and interest rate. 
B) wealth,savings account balances,checking account balances,stock portfolio balances,and bond portfolio balances. 
C) government purchases,interest rates,income,taxes,and transfers. 
D) government purchases,saving account balances,wealth,interest rates,portfolio balances. 
A) disposable income,wealth,expected future income,price level,and interest rate. 
B) wealth,savings account balances,checking account balances,stock portfolio balances,and bond portfolio balances. 
C) government purchases,interest rates,income,taxes,and transfers. 
D) government purchases,saving account balances,wealth,interest rates,portfolio balances.

Question 10

If firms are more pessimistic and believe that future profits will fall and remain weak 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 11

If the marginal propensity to consume is 0.75,the marginal propensity to save is

Accepted Answer

A) 0.25. 
B) 0.5. 
C) 1. 
D) 3. 
A) 0.25. 
B) 0.5. 
C) 1. 
D) 3.

Question 12

________ is defined as the value of a household's assets minus the value of its liabilities.

Accepted Answer

A) Household income 
B) Household wealth 
C) Personal household consumption 
D) Planned household investment 
A) Household income 
B) Household wealth 
C) Personal household consumption 
D) Planned household investment

Question 13

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

Accepted Answer

A) Autonomous 
B) Induced 
C) Voluntary 
D) Disposable 
A) Autonomous 
B) Induced 
C) Voluntary 
D) Disposable

Question 14

Macroeconomic equilibrium can occur at any point on the 45-degree line.

Accepted Answer

A) True 
 B)False

Question 15

The marginal propensity to consume is the slope of the consumption function.

Accepted Answer

A) True 
 B)False

Question 16

The difference between GDP and net taxes is

Accepted Answer

A) personal income. 
B) actual investment spending. 
C) disposable income. 
D) unplanned investment spending. 
A) personal income. 
B) actual investment spending. 
C) disposable income. 
D) unplanned investment spending.

Question 17

If the consumption function is defined as C = 7,250 + 0.8Y,what is the value of 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 18

Table 23-15
 $$\begin{array} { | c | c | c | c | c | } 
\hline \text { Real GDP } & \text { Consumption } & \begin{array} { c } 
\text { Planned } \
\text { Investment }
\end{array} & \begin{array} { c } 
\text { Government } \
\text { Purchases }
\end{array} & \text { Net Exports } \
\hline \$ 250 & \$ 200 & \$ 40 & \$ 60 & - \$ 20 \
\hline 300 & 240 & 40 & 60 & - 20 \
\hline 350 & 280 & 40 & 60 & - 20 \
\hline 400 & 320 & 40 & 60 & - 20 \
\hline
\end{array}$$
-Refer to Table 23-15.Using the table above,answer the following questions.The numbers in the table are in billions of dollars.
a.What is the equilibrium level of real GDP?
b.What is the MPC?
c.If investment spending declines by $10 billion,what will happen to equilibrium GDP?

Accepted Answer

a.Equilibrium real GDP is determined whe

Question 19

The ________ illustrates the relationship between the price level and the quantity of planned aggregate expenditure,holding constant all other factors that affect aggregate expenditure.

Accepted Answer

A) aggregate demand curve 
B) savings line 
C) 45-degree line 
D) consumption function 
A) aggregate demand curve 
B) savings line 
C) 45-degree line 
D) consumption function

Question 20

Firms in a small economy anticipated that inventories would grow over the past year by $750,000,and over that year,inventories grew by exactly $750,000.This implies that

Accepted Answer

A) aggregate expenditure and GDP were equal that year. 
B) there was an unplanned increase in inventories that year. 
C) there was an unplanned decrease in inventories that year. 
D) aggregate expenditure was greater than GDP that year. 
A) aggregate expenditure and GDP were equal that year. 
B) there was an unplanned increase in inventories that year. 
C) there was an unplanned decrease in inventories that year. 
D) aggregate expenditure was greater than GDP that year.

Exam 23: Aggregate Expenditure and Output in the Short Run

Which of the following will raise consumer expenditures?

Figure 23-1 -Refer to Figure 23-1.If the economy is in equilibrium,it is at a level of aggregate expenditure given by point

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

Disposable income is defined as

The sum of the marginal propensity to consume and the marginal propensity to save is always equal to

Examples of assets that are included in household wealth would be

If the multiplier is 5,the marginal propensity to consume must be 0.8.

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

The five most important variables that determine the level of consumption are

If firms are more pessimistic and believe that future profits will fall and remain weak for the next few years,then

If the marginal propensity to consume is 0.75,the marginal propensity to save is

________ is defined as the value of a household's assets minus the value of its liabilities.

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

Macroeconomic equilibrium can occur at any point on the 45-degree line.

The marginal propensity to consume is the slope of the consumption function.

The difference between GDP and net taxes is

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

The ________ illustrates the relationship between the price level and the quantity of planned aggregate expenditure,holding constant all other factors that affect aggregate expenditure.

Firms in a small economy anticipated that inventories would grow over the past year by $750,000,and over that year,inventories grew by exactly $750,000.This implies that

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

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