Question 1

If consumption is $10,000 when income is $10,000,and consumption increases to $11,000 when income increases to $12,000,the MPS is

Accepted Answer

A) 0.10. 
B) 0.25. 
C) 0.50. 
D) 0.90. 
A) 0.10. 
B) 0.25. 
C) 0.50. 
D) 0.90.

Question 2

Saving equals

Accepted Answer

A) Y - C. 
B) Y - planned I. 
C) Y - actual I. 
D) inventory changes. 
A) Y - C. 
B) Y - planned I. 
C) Y - actual I. 
D) inventory changes.

Question 3

If the marginal propensity to consume is 0.8,the marginal propensity to save is 8.

Accepted Answer

A) True 
 B)False

Question 4

Assume there is no government or foreign sector.If the multiplier is 10,a $10 billion increase in planned investment will cause aggregate output to increase by

Accepted Answer

A) $1 billion. 
B) $5 billion. 
C) $10 billion. 
D) $100 billion. 
A) $1 billion. 
B) $5 billion. 
C) $10 billion. 
D) $100 billion.

Question 5

If Lily's consumption function is of the form C = 100 + 0.8Y,her saving equals zero at an income level of

Accepted Answer

A) 180. 
B) 500. 
C) 800. 
D) cannot be determined from the given information 
A) 180. 
B) 500. 
C) 800. 
D) cannot be determined from the given information

Question 6

Refer to the information provided in Figure 8.12 below to answer the questions that follow.   Figure 8.12
-Refer to Figure 8.12.Suppose AE1,AE2 and AE3 are parallel.What is the value of Point A?

Accepted Answer

A) $450 million 
B) $510 million 
C) $540 million 
D) cannot be determined from the given information 
A) $450 million 
B) $510 million 
C) $540 million 
D) cannot be determined from the given information

Question 7

Suppose consumption is $5,000 when income is $8,000 and the MPC equals 0.9.When income increases to $10,000,consumption is

Accepted Answer

A) $2,700. 
B) $4,500. 
C) $6,800. 
D) $7,200. 
A) $2,700. 
B) $4,500. 
C) $6,800. 
D) $7,200.

Question 8

An expected permanent tax increase is likely to increase current spending.

Accepted Answer

A) True 
 B)False

Question 9

The smaller the MPS,the larger the multiplier.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following is an investment?

Accepted Answer

A) the purchase of a new printing press by a business 
B) the purchase of a corporate bond by a household 
C) the purchase of a share of stock by a household 
D) a leveraged buyout of one corporation by another 
A) the purchase of a new printing press by a business 
B) the purchase of a corporate bond by a household 
C) the purchase of a share of stock by a household 
D) a leveraged buyout of one corporation by another

Question 11

Firms react to an unplanned inventory investment by increasing output.

Accepted Answer

A) True 
 B)False

Question 12

Refer to the information provided in Figure 8.9 below to answer the questions that follow.   Figure 8.9
-Refer to Figure 8.9.How will equilibrium aggregate expenditure and equilibrium aggregate output change as a result of a decrease in investment by $20 million?

Accepted Answer

A) AE line shifts down,increasing equilibrium output and equilibrium expenditure. 
B) AE line shifts up,increasing equilibrium output and equilibrium expenditure. 
C) AE line shifts down,decreasing equilibrium output and equilibrium expenditure. 
D) AE line shifts down,increasing equilibrium output and decreasing equilibrium expenditure. 
A) AE line shifts down,increasing equilibrium output and equilibrium expenditure. 
B) AE line shifts up,increasing equilibrium output and equilibrium expenditure. 
C) AE line shifts down,decreasing equilibrium output and equilibrium expenditure. 
D) AE line shifts down,increasing equilibrium output and decreasing equilibrium expenditure.

Question 13

Refer to the information provided in Figure 8.4 below to answer the questions that follow.   Figure 8.4
-Refer to Figure 8.4.Suppose the consumption function for C1 = 10 + 0.8Y,the consumption function that best fits C2 is

Accepted Answer

A) C2 = 20 + 0.8Y. 
B) C2 = 10 + 0.4Y. 
C) C2 = 40 + 0.5Y. 
D) C2 = 20 + 0.1Y. 
A) C2 = 20 + 0.8Y. 
B) C2 = 10 + 0.4Y. 
C) C2 = 40 + 0.5Y. 
D) C2 = 20 + 0.1Y.

Question 14

Refer to the information provided in Figure 8.12 below to answer the questions that follow.   Figure 8.12
-Refer to Figure 8.12.Suppose AE1,AE2 and AE3 are parallel.What is the value of Point B?

Accepted Answer

A) $750 million 
B) $800 million 
C) $900 million 
D) cannot be determined from the given information 
A) $750 million 
B) $800 million 
C) $900 million 
D) cannot be determined from the given information

Question 15

Refer to the information provided in Table 8.3 below to answer the questions that follow.
Table 8.3
A Hypothetical Investment Schedule  
-Refer to Table 8.3.If the interest rate dropped from 15% to 6%,planned investment would ________ by $________ billion.

Accepted Answer

A) increase;120 
B) increase;180 
C) decrease;120 
D) decrease;180 
A) increase;120 
B) increase;180 
C) decrease;120 
D) decrease;180

Question 16

Refer to the information provided in Figure 8.10 below to answer the questions that follow.   Figure 8.10
-Refer to Figure 8.10.What is the equation for the aggregate expenditure function (AE)?

Accepted Answer

A) AE = 600 + 0.1Y. 
B) AE = 200 + 0.8Y. 
C) AE = 550 + 0.8Y. 
D) AE = 100 + 0.9Y. 
A) AE = 600 + 0.1Y. 
B) AE = 200 + 0.8Y. 
C) AE = 550 + 0.8Y. 
D) AE = 100 + 0.9Y.

Question 17

Refer to the information provided in Table 8.5 below to answer the questions that follow.
Table 8.5  
-Refer to Table 8.5.Which of the following statements is FALSE?

Accepted Answer

A) At an output level $4,000 million,there is a $400 million unplanned inventory decrease. 
B) If aggregate output equals $4,000 million,then aggregate saving equals $1000 million. 
C) The MPC for this economy is 0.8. 
D) At an output level of $3,000 million,there is a $600 million unplanned inventory decrease. 
A) At an output level $4,000 million,there is a $400 million unplanned inventory decrease. 
B) If aggregate output equals $4,000 million,then aggregate saving equals $1000 million. 
C) The MPC for this economy is 0.8. 
D) At an output level of $3,000 million,there is a $600 million unplanned inventory decrease.

Question 18

Related to the Economics in Practice on p.464: Early results from the Save More Tomorrow retirement plans have shown ________ in the savings rates of the enrolled.

Accepted Answer

A) very little change 
B) mixed results 
C) significant decreases 
D) dramatic increases 
A) very little change 
B) mixed results 
C) significant decreases 
D) dramatic increases

Question 19

Refer to the information provided in Figure 8.7 below to answer the questions that follow.   Figure 8.7
-Refer to Figure 8.7.In Farley,planned investment varies inversely with income.Farley's planned investment function is represented by

Accepted Answer

A) Panel A. 
B) Panel B. 
C) Panel C. 
D) Panel D. 
A) Panel A. 
B) Panel B. 
C) Panel C. 
D) Panel D.

Question 20

If aggregate expenditure decreases,then equilibrium output increases.

Accepted Answer

A) True 
 B)False

Exam 8: Aggregate Expenditure and Equilibrium Output

If consumption is $10,000 when income is $10,000,and consumption increases to $11,000 when income increases to $12,000,the MPS is

Saving equals

If the marginal propensity to consume is 0.8,the marginal propensity to save is 8.

Assume there is no government or foreign sector.If the multiplier is 10,a $10 billion increase in planned investment will cause aggregate output to increase by

If Lily's consumption function is of the form C = 100 + 0.8Y,her saving equals zero at an income level of

Refer to the information provided in Figure 8.12 below to answer the questions that follow. Figure 8.12 -Refer to Figure 8.12.Suppose AE1,AE2 and AE3 are parallel.What is the value of Point A?

Suppose consumption is $5,000 when income is $8,000 and the MPC equals 0.9.When income increases to $10,000,consumption is

An expected permanent tax increase is likely to increase current spending.

The smaller the MPS,the larger the multiplier.

Which of the following is an investment?

Firms react to an unplanned inventory investment by increasing output.

Refer to the information provided in Figure 8.9 below to answer the questions that follow. Figure 8.9 -Refer to Figure 8.9.How will equilibrium aggregate expenditure and equilibrium aggregate output change as a result of a decrease in investment by $20 million?

Refer to the information provided in Figure 8.4 below to answer the questions that follow. Figure 8.4 -Refer to Figure 8.4.Suppose the consumption function for C1 = 10 + 0.8Y,the consumption function that best fits C2 is

Refer to the information provided in Figure 8.12 below to answer the questions that follow. Figure 8.12 -Refer to Figure 8.12.Suppose AE1,AE2 and AE3 are parallel.What is the value of Point B?

Refer to the information provided in Table 8.3 below to answer the questions that follow. Table 8.3 A Hypothetical Investment Schedule -Refer to Table 8.3.If the interest rate dropped from 15% to 6%,planned investment would ________ by $________ billion.

Refer to the information provided in Figure 8.10 below to answer the questions that follow. Figure 8.10 -Refer to Figure 8.10.What is the equation for the aggregate expenditure function (AE)?

Refer to the information provided in Table 8.5 below to answer the questions that follow. Table 8.5 -Refer to Table 8.5.Which of the following statements is FALSE?

Related to the Economics in Practice on p.464: Early results from the Save More Tomorrow retirement plans have shown ________ in the savings rates of the enrolled.

Refer to the information provided in Figure 8.7 below to answer the questions that follow. Figure 8.7 -Refer to Figure 8.7.In Farley,planned investment varies inversely with income.Farley's planned investment function is represented by

If aggregate expenditure decreases,then equilibrium output increases.

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand,supply,and Market Equilibrium

Demand and Supply Applications

Introduction to Macroeconomics

Measuring National Output and National Income

Unemployment, inflation, and Long-Run Growth

The Government and Fiscal Policy

The Money Supply and the Federal Reserve System

Money Demand and the Equilibrium Interest Rate

The Determination of Aggregate Output, the Price Level, and the Interest Rate

Policy Effects and Costs Shocks in the Asad Model

The Labor Market in the Macroeconomy

Financial Crises, stabilization, and Deficits

Household and Firm Behavior in the Macroeconomy: a Further Look

Long-Run Growth

Alternative Views in Macroeconomics

International Trade,comparative Advantage,and Protectionism

Open-Economy Macroeconomics: the Balance of Payments and Exchange Rates

Economic Growth in Developing and Transitional Economies

Filters

Refer to the information provided in Table 8.3 below to answer the questions that follow. Table 8.3 A Hypothetical Investment Schedule -Refer to Table 8.3.If the interest rate dropped from 15% to 6%,planned investment would by $ billion.