Question 1

Assuming no government or foreign sector, if the MPC is 0.9, the multiplier is

Accepted Answer

A)  0.1. 
B)  5. 
C)  9. 
D)  10. 
A)  0.1. 
B)  5. 
C)  9. 
D)  10.

Question 2

Refer to the information provided in Figure 8.1 below to answer the questions that follow.   Figure 8.1
-Refer to Figure 8.1. At income level ________, this household's saving is greater than zero and this household's consumption is greater than zero.

Accepted Answer

A)  -$200 
B)  $800 
C)  $1,000 
D)  $1,500 
A)  -$200 
B)  $800 
C)  $1,000 
D)  $1,500

Question 3

An increase in planned investment causes

Accepted Answer

A)  output to increase. 
B)  output to decrease, but by a smaller amount than the decrease in investment. 
C)  output to decrease, but by a larger amount than the decrease in investment. 
D)  output to decrease by an amount equal to the decrease in investment. 
A)  output to increase. 
B)  output to decrease, but by a smaller amount than the decrease in investment. 
C)  output to decrease, but by a larger amount than the decrease in investment. 
D)  output to decrease by an amount equal to the decrease in investment.

Question 4

The MPC is

Accepted Answer

A)  the change in consumption divided by the change in income. 
B)  consumption divided by income. 
C)  the change in consumption divided by the change in saving. 
D)  the change in saving divided by the change in income. 
A)  the change in consumption divided by the change in income. 
B)  consumption divided by income. 
C)  the change in consumption divided by the change in saving. 
D)  the change in saving divided by the change in income.

Question 5

Refer to the information provided in Figure 8.5 below to answer the questions that follow.   Figure 8.5
-Refer to Figure 8.5. Aggregate consumption is $875 billion when aggregate income is ________ billion.

Accepted Answer

A)   $900 
A)   $900

Question 6

Actual investment equals planned investment plus unplanned changes in inventories.

Accepted Answer

A) True 
 B)False

Question 7

Refer to the information provided in Figure 8.5 below to answer the questions that follow.   Figure 8.5
-Refer to Figure 8.5. In this graph, 0.25 represents this society's

Accepted Answer

A)  MPC. 
B)  MPS. 
C)  saving function. 
D)  consumption function. 
A)  MPC. 
B)  MPS. 
C)  saving function. 
D)  consumption function.

Question 8

Refer to the information provided in Figure 8.9 below to answer the questions that follow.   Figure 8.9
-Refer to Figure 8.9. $200 million is

Accepted Answer

A)  the break even income. 
B)  the equilibrium income. 
C)  where saving equals consumption. 
D)  where saving equals aggregate expenditures. 
A)  the break even income. 
B)  the equilibrium income. 
C)  where saving equals consumption. 
D)  where saving equals aggregate expenditures.

Question 9

Refer to the information provided in Figure 8.1 below to answer the questions that follow.   Figure 8.1
-Refer to Figure 8.1. [500 + 0.5Y] is this household's

Accepted Answer

A)  MPC. 
B)  MPS. 
C)  saving function. 
D)  consumption function. 
A)  MPC. 
B)  MPS. 
C)  saving function. 
D)  consumption function.

Question 10

If planned investment is perfectly unresponsive to changes in the interest rate, the planned investment schedule

Accepted Answer

A)  has a negative slope. 
B)  is horizontal. 
C)  is vertical. 
D)  has a positive slope. 
A)  has a negative slope. 
B)  is horizontal. 
C)  is vertical. 
D)  has a positive slope.

Question 11

When there is an unplanned draw down of inventories, firms will increase production.

Accepted Answer

A) True 
 B)False

Question 12

If the consumption function is of the form [C = 80 + 0.4Y], the MPS equals

Accepted Answer

A)  -0.6. 
B)  -0.4. 
C)  0.4. 
D)  0.6. 
A)  -0.6. 
B)  -0.4. 
C)  0.4. 
D)  0.6.

Question 13

Uncertainty about the future is likely to decrease current spending.

Accepted Answer

A) True 
 B)False

Question 14

Refer to the information provided in Figure 8.9 below to answer the questions that follow.   Figure 8.9
-Refer to Figure 8.9. What is the equation for the aggregate expenditure function (AE)?

Accepted Answer

A)  AE = 200 + 0.5Y. 
B)  AE = 150 + 0.25Y. 
C)  AE = 200 + 0.8Y. 
D)  AE = 350 + 0.6Y. 
A)  AE = 200 + 0.5Y. 
B)  AE = 150 + 0.25Y. 
C)  AE = 200 + 0.8Y. 
D)  AE = 350 + 0.6Y.

Question 15

In a closed economy with no government, ________ is consumption plus investment.

Accepted Answer

A)  saving 
B)  national income 
C)  aggregate expenditures 
D)  real spending 
A)  saving 
B)  national income 
C)  aggregate expenditures 
D)  real spending

Question 16

Refer to the information provided in Figure 8.3 below to answer the questions that follow.   Figure 8.3
-Refer to Figure 8.3. Which of the following statements is true?

Accepted Answer

A)  Aggregate saving is negative for all income levels below $400. 
B)  For all aggregate income levels above $200, aggregate consumption is greater than aggregate income. 
C)  If consumption is the only expenditure, this economy would be in equilibrium at an aggregate income level of $300. 
D)  Saving is negative at all income levels below $200. 
A)  Aggregate saving is negative for all income levels below $400. 
B)  For all aggregate income levels above $200, aggregate consumption is greater than aggregate income. 
C)  If consumption is the only expenditure, this economy would be in equilibrium at an aggregate income level of $300. 
D)  Saving is negative at all income levels below $200.

Question 17

If planned investment is perfectly responsive to changes in the interest rate, the planned investment schedule

Accepted Answer

A)  has a negative slope. 
B)  is horizontal. 
C)  is vertical. 
D)  has a positive slope. 
A)  has a negative slope. 
B)  is horizontal. 
C)  is vertical. 
D)  has a positive slope.

Question 18

Refer to the information provided in Table 8.8 below to answer the questions that follow.
Table 8.8  
-Refer to Table 8.8. If aggregate output equals ________, there will be a $200 million unplanned decrease in inventories.

Accepted Answer

A)  $3,000 million 
B)  $4,000 million 
C)  $5,000 million 
D)  $6,000 million 
A)  $3,000 million 
B)  $4,000 million 
C)  $5,000 million 
D)  $6,000 million

Question 19

Assume there is no government or foreign sector. If the multiplier is 5, a $4 billion increase in investment will cause aggregate output to increase by

Accepted Answer

A)  $125 billion. 
B)  $80 billion. 
C)  $50 billion. 
D)  $20 billion. 
A)  $125 billion. 
B)  $80 billion. 
C)  $50 billion. 
D)  $20 billion.

Question 20

Refer to the information provided in Table 8.10 below to answer the questions that follow.
Table 8.10  
-Refer to Table 8.10. If aggregate output equals ________, there will be a $100 million unplanned decrease in inventories.

Accepted Answer

A)  $2,400 million 
B)  $2,800 million 
C)  $3,200 million 
D)  $3,600 million 
A)  $2,400 million 
B)  $2,800 million 
C)  $3,200 million 
D)  $3,600 million

Exam 8: Aggregate Expenditure and Equilibrium Output

Assuming no government or foreign sector, if the MPC is 0.9, the multiplier is

Refer to the information provided in Figure 8.1 below to answer the questions that follow. Figure 8.1 -Refer to Figure 8.1. At income level ________, this household's saving is greater than zero and this household's consumption is greater than zero.

An increase in planned investment causes

The MPC is

Refer to the information provided in Figure 8.5 below to answer the questions that follow. Figure 8.5 -Refer to Figure 8.5. Aggregate consumption is $875 billion when aggregate income is ________ billion.

Actual investment equals planned investment plus unplanned changes in inventories.

Refer to the information provided in Figure 8.5 below to answer the questions that follow. Figure 8.5 -Refer to Figure 8.5. In this graph, 0.25 represents this society's

Refer to the information provided in Figure 8.9 below to answer the questions that follow. Figure 8.9 -Refer to Figure 8.9. $200 million is

Refer to the information provided in Figure 8.1 below to answer the questions that follow. Figure 8.1 -Refer to Figure 8.1. [500 + 0.5Y] is this household's

If planned investment is perfectly unresponsive to changes in the interest rate, the planned investment schedule

When there is an unplanned draw down of inventories, firms will increase production.

If the consumption function is of the form [C = 80 + 0.4Y], the MPS equals

Uncertainty about the future is likely to decrease current spending.

Refer to the information provided in Figure 8.9 below to answer the questions that follow. Figure 8.9 -Refer to Figure 8.9. What is the equation for the aggregate expenditure function (AE)?

In a closed economy with no government, ________ is consumption plus investment.

Refer to the information provided in Figure 8.3 below to answer the questions that follow. Figure 8.3 -Refer to Figure 8.3. Which of the following statements is true?

If planned investment is perfectly responsive to changes in the interest rate, the planned investment schedule

Refer to the information provided in Table 8.8 below to answer the questions that follow. Table 8.8 -Refer to Table 8.8. If aggregate output equals ________, there will be a $200 million unplanned decrease in inventories.

Assume there is no government or foreign sector. If the multiplier is 5, a $4 billion increase in investment will cause aggregate output to increase by

Refer to the information provided in Table 8.10 below to answer the questions that follow. Table 8.10 -Refer to Table 8.10. If aggregate output equals ________, there will be a $100 million unplanned decrease in inventories.

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

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