Question 1

Related to the Economics in Practice on p. 156: According to the "paradox of thrift," as individuals increase their saving,

Accepted Answer

A)  income in the economy increases because there is more money available for firms to invest. 
B)  income in the economy increases because interest rates will fall and the economy will expand. 
C)  income in the economy will remain constant because the change in consumption equals the change in saving. 
D)  income in the economy will fall because the decreased consumption that results from increased saving causes the economy to contract. 
A)  income in the economy increases because there is more money available for firms to invest. 
B)  income in the economy increases because interest rates will fall and the economy will expand. 
C)  income in the economy will remain constant because the change in consumption equals the change in saving. 
D)  income in the economy will fall because the decreased consumption that results from increased saving causes the economy to contract.

Question 2

In practice, the actual size of the ________ is about 2.

Accepted Answer

A)  MPC 
B)  MPS 
C)  multiplier 
D)  saving function 
A)  MPC 
B)  MPS 
C)  multiplier 
D)  saving function

Question 3

Firms would increase output as a reaction to

Accepted Answer

A)  unplanned inventory increases. 
B)  decreased demand for output. 
C)  unplanned inventory reductions. 
D)  increases in costs of resources. 
A)  unplanned inventory increases. 
B)  decreased demand for output. 
C)  unplanned inventory reductions. 
D)  increases in costs of resources.

Question 4

As long as income is above planned aggregate expenditure, unplanned inventory reductions have occurred.

Accepted Answer

A) True 
 B)False

Question 5

Assume there is no government or foreign sector. If the MPS is 0.2, a $40 billion decrease in planned investment will cause aggregate output to decrease by

Accepted Answer

A)  $20 billion. 
B)  $50 billion. 
C)  $80 billion. 
D)  $200 billion. 
A)  $20 billion. 
B)  $50 billion. 
C)  $80 billion. 
D)  $200 billion.

Question 6

Related to the Economics in Practice on p. 153: During normal economic conditions, a software company like Oracle is likely to have an inventory turnover ratio that is ________ an appliance manufacturer like Whirlpool.

Accepted Answer

A)  smaller than 
B)  equal to 
C)  larger than 
D)  close to zero compared to 
A)  smaller than 
B)  equal to 
C)  larger than 
D)  close to zero compared to

Question 7

Refer to the information provided in Figure 8.2 below to answer the questions that follow.   Figure 8.2
-Refer to Figure 8.2. Along the line segment AC, Jerry's

Accepted Answer

A)  consumption equals his income. 
B)  consumption is greater than his income. 
C)  saving is zero. 
D)  saving is positive. 
A)  consumption equals his income. 
B)  consumption is greater than his income. 
C)  saving is zero. 
D)  saving is positive.

Question 8

Refer to the information provided in Table 8.7 below to answer the questions that follow.
Table 8.7  
-Refer to Table 8.7. At an aggregate output level of $400 billion, planned expenditure equals

Accepted Answer

A)  $450 billion. 
B)  $500 billion. 
C)  $550 billion. 
D)  $850 billion. 
A)  $450 billion. 
B)  $500 billion. 
C)  $550 billion. 
D)  $850 billion.

Question 9

Without the government or the foreign sector in the income-expenditure model, planned aggregate expenditure equals

Accepted Answer

A)  consumption plus actual investment. 
B)  consumption plus inventory adjustment. 
C)  consumption minus planned investment. 
D)  consumption plus planned investment. 
A)  consumption plus actual investment. 
B)  consumption plus inventory adjustment. 
C)  consumption minus planned investment. 
D)  consumption plus planned investment.

Question 10

Refer to the information provided in Figure 8.5 below to answer the questions that follow.   Figure 8.5
-Refer to Figure 8.5. If aggregate income is $900 billion, aggregate consumption

Accepted Answer

A)  is $25 billion. 
B)  is $800 billion. 
C)  is $875 billion. 
D)  cannot be determined from this information. 
A)  is $25 billion. 
B)  is $800 billion. 
C)  is $875 billion. 
D)  cannot be determined from this information.

Question 11

Refer to the information provided in Table 8.9 below to answer the questions that follow.
Table 8.9  
-Refer to Table 8.9. Which of the following statements is false?

Accepted Answer

A)  At output levels greater than $400 billion, there is a positive unplanned inventory change. 
B)  If aggregate output equals $500 billion, then aggregate saving equals $0. 
C)  The MPC for this economy is 0.8. 
D)  At an output level of $200 billion, there is a $60 billion unplanned inventory decrease. 
A)  At output levels greater than $400 billion, there is a positive unplanned inventory change. 
B)  If aggregate output equals $500 billion, then aggregate saving equals $0. 
C)  The MPC for this economy is 0.8. 
D)  At an output level of $200 billion, there is a $60 billion unplanned inventory decrease.

Question 12

If Logan received a $2,500 bonus and his MPS is 0.20, his consumption rises by $________ and his saving rises by $________.

Accepted Answer

A)  500; 100 
B)  2,500; 200 
C)  2,000; 500 
D)  2,500; 20 
A)  500; 100 
B)  2,500; 200 
C)  2,000; 500 
D)  2,500; 20

Question 13

Refer to the information provided in Table 8.4 below to answer the questions that follow.
Table 8.4  
-Refer to Table 8.4. Society's MPC is

Accepted Answer

A)  0.1. 
B)  0.2. 
C)  0.75. 
D)  0.9. 
A)  0.1. 
B)  0.2. 
C)  0.75. 
D)  0.9.

Question 14

Refer to the information provided in Figure 8.8 below to answer the questions that follow.   Figure 8.8
-Refer to Figure 8.8. The amount of planned investment increases if the interest rate

Accepted Answer

A)  drops from 8% to 4%. 
B)  rises from 4% to 8%. 
C)  remains at 8%. 
D)  remains at 4%. 
A)  drops from 8% to 4%. 
B)  rises from 4% to 8%. 
C)  remains at 8%. 
D)  remains at 4%.

Question 15

Related to the Economics in Practice on p. 153: If a recovery from a recession is slower than expected, companies like General Motors would likely experience ________ in unplanned inventories and as a result ________ production.

Accepted Answer

A)  increases; increase 
B)  decreases; decrease 
C)  increases; decrease 
D)  decrease; increase 
A)  increases; increase 
B)  decreases; decrease 
C)  increases; decrease 
D)  decrease; increase

Question 16

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 17

When aggregate expenditure is greater than aggregate output, there will be an unplanned build up of inventories.

Accepted Answer

A) True 
 B)False

Question 18

Refer to the information provided in Figure 8.8 below to answer the questions that follow.   Figure 8.8
-Refer to Figure 8.8. The amount of planned investment decreases if the interest rate

Accepted Answer

A)  drops from 8% to 4%. 
B)  rises from 4% to 8%. 
C)  remains at 8%. 
D)  remains at 4%. 
A)  drops from 8% to 4%. 
B)  rises from 4% to 8%. 
C)  remains at 8%. 
D)  remains at 4%.

Question 19

Refer to the information provided in Table 8.2 below to answer the questions that follow.
Table 8.2  
-Refer to Table 8.2. Society's MPS is

Accepted Answer

A)  0.1. 
B)  0.2. 
C)  0.3. 
D)  0.9. 
A)  0.1. 
B)  0.2. 
C)  0.3. 
D)  0.9.

Question 20

The change in consumption divided by the change in income is equal to

Accepted Answer

A)  the MPC. 
B)  the MPS. 
C)  1 - MPC. 
D)  MPC + MPS. 
A)  the MPC. 
B)  the MPS. 
C)  1 - MPC. 
D)  MPC + MPS.

Exam 8: Aggregate Expenditure and Equilibrium Output

Related to the Economics in Practice on p. 156: According to the "paradox of thrift," as individuals increase their saving,

In practice, the actual size of the ________ is about 2.

Firms would increase output as a reaction to

As long as income is above planned aggregate expenditure, unplanned inventory reductions have occurred.

Assume there is no government or foreign sector. If the MPS is 0.2, a $40 billion decrease in planned investment will cause aggregate output to decrease by

Related to the Economics in Practice on p. 153: During normal economic conditions, a software company like Oracle is likely to have an inventory turnover ratio that is ________ an appliance manufacturer like Whirlpool.

Refer to the information provided in Figure 8.2 below to answer the questions that follow. Figure 8.2 -Refer to Figure 8.2. Along the line segment AC, Jerry's

Refer to the information provided in Table 8.7 below to answer the questions that follow. Table 8.7 -Refer to Table 8.7. At an aggregate output level of $400 billion, planned expenditure equals

Without the government or the foreign sector in the income-expenditure model, planned aggregate expenditure equals

Refer to the information provided in Figure 8.5 below to answer the questions that follow. Figure 8.5 -Refer to Figure 8.5. If aggregate income is $900 billion, aggregate consumption

Refer to the information provided in Table 8.9 below to answer the questions that follow. Table 8.9 -Refer to Table 8.9. Which of the following statements is false?

If Logan received a $2,500 bonus and his MPS is 0.20, his consumption rises by $________ and his saving rises by $________.

Refer to the information provided in Table 8.4 below to answer the questions that follow. Table 8.4 -Refer to Table 8.4. Society's MPC is

Refer to the information provided in Figure 8.8 below to answer the questions that follow. Figure 8.8 -Refer to Figure 8.8. The amount of planned investment increases if the interest rate

Related to the Economics in Practice on p. 153: If a recovery from a recession is slower than expected, companies like General Motors would likely experience ________ in unplanned inventories and as a result ________ production.

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?

When aggregate expenditure is greater than aggregate output, there will be an unplanned build up of inventories.

Refer to the information provided in Figure 8.8 below to answer the questions that follow. Figure 8.8 -Refer to Figure 8.8. The amount of planned investment decreases if the interest rate

Refer to the information provided in Table 8.2 below to answer the questions that follow. Table 8.2 -Refer to Table 8.2. Society's MPS is

The change in consumption divided by the change in income is equal to

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

Money, the Federal Reserve, and the Interest Rate

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

Policy Effects and Cost 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 Economies

Critical Thinking About Research

Filters

If Logan received a $2,500 bonus and his MPS is 0.20, his consumption rises by $ and his saving rises by $.

Related to the Economics in Practice on p. 153: If a recovery from a recession is slower than expected, companies like General Motors would likely experience in unplanned inventories and as a result production.