Question 1

The real exchange rate generally has ______ relationship with aggregate expenditure.

Accepted Answer

A)  a negative 
B)  a positive 
C)  no 
D)  a constant 
A)  a negative 
B)  a positive 
C)  no 
D)  a constant

Question 2

Using Figure 2 above, suppose that the economy started at PAE2. A potential change that could cause the economy to go from PAE2 to PAE3 might be:

Accepted Answer

A)  consumption spending increases. 
B)  investment decreases. 
C)  imports increase. 
D)  exports decrease. 
A)  consumption spending increases. 
B)  investment decreases. 
C)  imports increase. 
D)  exports decrease.

Question 3

The multiplier effect occurs when:

Accepted Answer

A)  spending by one person generates income for others and causes others to spend more too, increasing the impact of the initial spending on the economy. 
B)  the level of consumer confidence increases more than predicted given a tax cut. 
C)  increased spending by one or more individuals causes others to react and increase their savings. 
D)  None of these is true. 
A)  spending by one person generates income for others and causes others to spend more too, increasing the impact of the initial spending on the economy. 
B)  the level of consumer confidence increases more than predicted given a tax cut. 
C)  increased spending by one or more individuals causes others to react and increase their savings. 
D)  None of these is true.

Question 4

If transfer payments increase then we would most likely conclude what about government spending as a result of this increase?

Accepted Answer

A)  We cannot reasonably conclude anything about government spending. 
B)  Since transfer payments have gone up this has caused government spending to decrease. 
C)  Since transfer payments have gone up this has caused government spending to increase. 
D)  Government spending would not change if transfer payments increase. 
A)  We cannot reasonably conclude anything about government spending. 
B)  Since transfer payments have gone up this has caused government spending to decrease. 
C)  Since transfer payments have gone up this has caused government spending to increase. 
D)  Government spending would not change if transfer payments increase.

Question 5

If the MPC is 0.9, and the government cuts spending by $200b, the overall effect on GDP will be:

Accepted Answer

A)  a decrease of $2,000b. 
B)  an increase of $2,000b. 
C)  a decrease of $1,800b. 
D)  an increase of $180b. 
A)  a decrease of $2,000b. 
B)  an increase of $2,000b. 
C)  a decrease of $1,800b. 
D)  an increase of $180b.

Question 6

What type of relationship does the real interest rate have with respect to Investment spending?

Accepted Answer

A)  negative relationship 
B)  positive relationship 
C)  No relationship 
D)  constant relationship 
A)  negative relationship 
B)  positive relationship 
C)  No relationship 
D)  constant relationship

Question 7

A key result of the equilibrium aggregate expenditure model is that it:

Accepted Answer

A)  can explain why the economy should always be at natural rate GDP. 
B)  illustrates how the government always moves us towards equilibrium GDP. 
C)  can illustrate how an economy can be at an equilibrium that is below natural rate GDP. 
D)  shows how classical notion that the economy will always tend towards natural rate GDP is correct. 
A)  can explain why the economy should always be at natural rate GDP. 
B)  illustrates how the government always moves us towards equilibrium GDP. 
C)  can illustrate how an economy can be at an equilibrium that is below natural rate GDP. 
D)  shows how classical notion that the economy will always tend towards natural rate GDP is correct.

Question 8

Which of the following is a determinant of Investment spending?

Accepted Answer

A)  Disposable income 
B)  Expected future income 
C)  Expected profitability 
D)  Real Income 
A)  Disposable income 
B)  Expected future income 
C)  Expected profitability 
D)  Real Income

Question 9

Which of the following could be a cause of consumption decreasing?

Accepted Answer

A)  Real income increases. 
B)  Interest rates increase. 
C)  Wealth increases. 
D)  Expected future income increases. 
A)  Real income increases. 
B)  Interest rates increase. 
C)  Wealth increases. 
D)  Expected future income increases.

Question 10

If the MPC is 0.6, and the government increases its spending by $300b, the overall effect on GDP will be:

Accepted Answer

A)  a decrease of $750b. 
B)  an increase of $750b. 
C)  a decrease of $550b. 
D)  an increase of $250b. 
A)  a decrease of $750b. 
B)  an increase of $750b. 
C)  a decrease of $550b. 
D)  an increase of $250b.

Question 11

What type of relationship does expected profitability have with respect to Investment spending?

Accepted Answer

A)  Negative 
B)  Positive 
C)  Indirect 
D)  Constant 
A)  Negative 
B)  Positive 
C)  Indirect 
D)  Constant

The real exchange rate generally has ______ relationship with aggregate expenditure.

Using Figure 2 above, suppose that the economy started at PAE2. A potential change that could cause the economy to go from PAE2 to PAE3 might be:

The multiplier effect occurs when:

If transfer payments increase then we would most likely conclude what about government spending as a result of this increase?

If the MPC is 0.9, and the government cuts spending by $200b, the overall effect on GDP will be:

What type of relationship does the real interest rate have with respect to Investment spending?

A key result of the equilibrium aggregate expenditure model is that it:

Which of the following is a determinant of Investment spending?

Which of the following could be a cause of consumption decreasing?

If the MPC is 0.6, and the government increases its spending by $300b, the overall effect on GDP will be:

What type of relationship does expected profitability have with respect to Investment spending?

Economics and Life

Specialization and Exchange

Markets

Elasticity

Efficiency

Government Intervention

Measuring GDP

The Cost of Living

Unemployment and the Labor Market

Economic Growth

Aggregate Demand and Aggregate Supply

Fiscal Policy

The Basics of Finance

Money and the Monetary System

Inflation

Financial Crisis

Open-Market Macroeconomics

Development Economics

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Exam 11: Aggregate Expenditure

The real exchange rate generally has ______ relationship with aggregate expenditure.

Using Figure 2 above, suppose that the economy started at PAE2. A potential change that could cause the economy to go from PAE2 to PAE3 might be:

The multiplier effect occurs when:

If transfer payments increase then we would most likely conclude what about government spending as a result of this increase?

If the MPC is 0.9, and the government cuts spending by $200b, the overall effect on GDP will be:

What type of relationship does the real interest rate have with respect to Investment spending?

A key result of the equilibrium aggregate expenditure model is that it:

Which of the following is a determinant of Investment spending?

Which of the following could be a cause of consumption decreasing?

If the MPC is 0.6, and the government increases its spending by $300b, the overall effect on GDP will be:

What type of relationship does expected profitability have with respect to Investment spending?

Economics and Life

Specialization and Exchange

Markets

Elasticity

Efficiency

Government Intervention

Measuring GDP

The Cost of Living

Unemployment and the Labor Market

Economic Growth

Aggregate Demand and Aggregate Supply

Fiscal Policy

The Basics of Finance

Money and the Monetary System

Inflation

Financial Crisis

Open-Market Macroeconomics

Development Economics

Filters