Question 1

All of the following are true statements about the multiplier except

Accepted Answer

A) The formula for the multiplier overstates the real world multiplier when we take into account the impact of changes in GDP on imports,inflation and the interest rate. 
B) The larger the MPC,the larger the multiplier. 
C) The multiplier is the ratio of the change in real GDP to the change in autonomous expenditure. 
D) The multiplier makes the economy less sensitive to changes in autonomous expenditure. 
A) The formula for the multiplier overstates the real world multiplier when we take into account the impact of changes in GDP on imports,inflation and the interest rate. 
B) The larger the MPC,the larger the multiplier. 
C) The multiplier is the ratio of the change in real GDP to the change in autonomous expenditure. 
D) The multiplier makes the economy less sensitive to changes in autonomous expenditure.

Question 2

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 3

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 4

Which of the following will cause a direct increase in consumption spending?

Accepted Answer

A) an increase in planned investment 
B) an increase in government spending 
C) an increase in disposable income 
D) a decrease in net export spending 
A) an increase in planned investment 
B) an increase in government spending 
C) an increase in disposable income 
D) a decrease in net export spending

Question 5

When Jack's income increases by $5,000,he spends an additional $4,000 dollars.This implies that his marginal propensity to consume is 1.25.

Accepted Answer

A) True 
 B)False

Question 6

Would a larger multiplier lead to longer and more severe recessions or shorter and less severe recessions? Briefly explain.

Accepted Answer

A larger multiplier would be l

Question 7

Equations for C,I,G,and NX are given below.If the equilibrium level of GDP is $21,500,what is the marginal propensity to consume? C = 1,500 + (MPC)Y
I = 1,000
G = 2,000
NX = -200

Accepted Answer

A) 0.67 
B) 0.75 
C) 0.8 
D) 0.9 
A) 0.67 
B) 0.75 
C) 0.8 
D) 0.9

Question 8

For all points below the 45-degree line,planned aggregate expenditure will be less than GDP.

Accepted Answer

A) True 
 B)False

Question 9

Consumption spending is $5 million,planned investment spending is $8 million,unplanned investment spending is $2 million,government purchases are $10 million,and net export spending is $2 million.What is GDP?

Accepted Answer

A) $15 million 
B) $23 million 
C) $25 million 
D) $27 million 
A) $15 million 
B) $23 million 
C) $25 million 
D) $27 million

Question 10

Consumption is $5 million,planned investment spending is $8 million,government purchases are $10 million,and net exports are equal to $2 million.If GDP during that same time period is equal to $27 million,what unplanned changes in inventories occurred?

Accepted Answer

A) There was an unplanned increase in inventories equal to $2 million. 
B) There was no unplanned change in inventories. 
C) There was an unplanned decrease in inventories equal to $2 million. 
D) There was an unplanned decrease in inventories equal to $19 million. 
A) There was an unplanned increase in inventories equal to $2 million. 
B) There was no unplanned change in inventories. 
C) There was an unplanned decrease in inventories equal to $2 million. 
D) There was an unplanned decrease in inventories equal to $19 million.

Question 11

If firms sell exactly what they expected to sell,all of the following will be true except

Accepted Answer

A) aggregate expenditure will be greater than GDP. 
B) there is no unplanned change in inventories. 
C) inventories will not change,and GDP and employment will remain stable. 
D) aggregate expenditure will be equal to GDP. 
A) aggregate expenditure will be greater than GDP. 
B) there is no unplanned change in inventories. 
C) inventories will not change,and GDP and employment will remain stable. 
D) aggregate expenditure will be equal to GDP.

Question 12

Figure 12-4  
-Refer to Figure 12-4.Potential GDP equals $100 billion.The economy is currently producing GDP1 which is equal to $90 billion.If the MPC is 0.8,then how much must autonomous spending change for the economy to move to potential GDP?

Accepted Answer

A) -$18 billion 
B) -$2 billion 
C) $2 billion 
D) $18 billion 
A) -$18 billion 
B) -$2 billion 
C) $2 billion 
D) $18 billion

Question 13

C = 3,600 + (MPC)Y
I = 1,200
G = 1,400
NX = -200
If the equilibrium level of GDP is $30,000,using the equations for C,I,G,and NX shown above,find the value of the marginal propensity to consume.

Accepted Answer

Y = C + I + G + NX.
30,000 = 3

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

On the 45-degree line diagram,the 45-degree line shows points where real aggregate expenditure equals

Accepted Answer

A) unplanned investment. 
B) planned investment. 
C) real GDP. 
D) nominal GDP. 
A) unplanned investment. 
B) planned investment. 
C) real GDP. 
D) nominal GDP.

Question 16

Consumption spending refers to ________ spending on goods and services.

Accepted Answer

A) household 
B) business 
C) government 
D) foreign 
A) household 
B) business 
C) government 
D) foreign

Question 17

What is the main reason for changes in GDP in the short run?

Accepted Answer

The main reason for changes in

Question 18

Consumption spending is $5 million,planned investment spending is $8 million,unplanned investment spending is -$2 million,government purchases are $10 million,and net export spending is $2 million.What is GDP?

Accepted Answer

A) $15 million 
B) $23 million 
C) $25 million 
D) $27 million 
A) $15 million 
B) $23 million 
C) $25 million 
D) $27 million

Question 19

Investment spending will increase when

Accepted Answer

A) the interest rate rises. 
B) the corporate income tax increases. 
C) business cash flow increases. 
D) firms become more pessimistic about earning future profits. 
A) the interest rate rises. 
B) the corporate income tax increases. 
C) business cash flow increases. 
D) firms become more pessimistic about earning future profits.

Question 20

What are the four categories of aggregate expenditure?

Accepted Answer

The four categories are consum

All of the following are true statements about the multiplier except

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

Actual investment spending does not include

Which of the following will cause a direct increase in consumption spending?

When Jack's income increases by $5,000,he spends an additional $4,000 dollars.This implies that his marginal propensity to consume is 1.25.

Would a larger multiplier lead to longer and more severe recessions or shorter and less severe recessions? Briefly explain.

Equations for C,I,G,and NX are given below.If the equilibrium level of GDP is $21,500,what is the marginal propensity to consume? C = 1,500 + (MPC)Y I = 1,000 G = 2,000 NX = -200

For all points below the 45-degree line,planned aggregate expenditure will be less than GDP.

Consumption spending is $5 million,planned investment spending is $8 million,unplanned investment spending is $2 million,government purchases are $10 million,and net export spending is $2 million.What is GDP?

Consumption is $5 million,planned investment spending is $8 million,government purchases are $10 million,and net exports are equal to $2 million.If GDP during that same time period is equal to $27 million,what unplanned changes in inventories occurred?

If firms sell exactly what they expected to sell,all of the following will be true except

Figure 12-4 -Refer to Figure 12-4.Potential GDP equals $100 billion.The economy is currently producing GDP1 which is equal to $90 billion.If the MPC is 0.8,then how much must autonomous spending change for the economy to move to potential GDP?

C = 3,600 + (MPC)Y I = 1,200 G = 1,400 NX = -200 If the equilibrium level of GDP is $30,000,using the equations for C,I,G,and NX shown above,find the value of the marginal propensity to consume.

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

On the 45-degree line diagram,the 45-degree line shows points where real aggregate expenditure equals

Consumption spending refers to ________ spending on goods and services.

What is the main reason for changes in GDP in the short run?

Consumption spending is $5 million,planned investment spending is $8 million,unplanned investment spending is -$2 million,government purchases are $10 million,and net export spending is $2 million.What is GDP?

Investment spending will increase when

What are the four categories of aggregate expenditure?

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

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

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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Exam 12: Aggregate Expenditure and Output in the Short Run

All of the following are true statements about the multiplier except

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

Actual investment spending does not include

Which of the following will cause a direct increase in consumption spending?

When Jack's income increases by $5,000,he spends an additional $4,000 dollars.This implies that his marginal propensity to consume is 1.25.

Would a larger multiplier lead to longer and more severe recessions or shorter and less severe recessions? Briefly explain.

Equations for C,I,G,and NX are given below.If the equilibrium level of GDP is $21,500,what is the marginal propensity to consume? C = 1,500 + (MPC)Y I = 1,000 G = 2,000 NX = -200

For all points below the 45-degree line,planned aggregate expenditure will be less than GDP.

Consumption spending is $5 million,planned investment spending is $8 million,unplanned investment spending is $2 million,government purchases are $10 million,and net export spending is $2 million.What is GDP?

Consumption is $5 million,planned investment spending is $8 million,government purchases are $10 million,and net exports are equal to $2 million.If GDP during that same time period is equal to $27 million,what unplanned changes in inventories occurred?

If firms sell exactly what they expected to sell,all of the following will be true except

Figure 12-4 -Refer to Figure 12-4.Potential GDP equals $100 billion.The economy is currently producing GDP1 which is equal to $90 billion.If the MPC is 0.8,then how much must autonomous spending change for the economy to move to potential GDP?

C = 3,600 + (MPC)Y I = 1,200 G = 1,400 NX = -200 If the equilibrium level of GDP is $30,000,using the equations for C,I,G,and NX shown above,find the value of the marginal propensity to consume.

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

On the 45-degree line diagram,the 45-degree line shows points where real aggregate expenditure equals

Consumption spending refers to ________ spending on goods and services.

What is the main reason for changes in GDP in the short run?

Consumption spending is $5 million,planned investment spending is $8 million,unplanned investment spending is -$2 million,government purchases are $10 million,and net export spending is $2 million.What is GDP?

Investment spending will increase when

What are the four categories of aggregate expenditure?

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

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

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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