Deck 12: Aggregate Expenditure Multiplier

Question 1

As disposable income ________,planned consumption expenditure ________ by a ________ amount.

A)decreases;increases;smaller
B)increases;increases;smaller
C)increases;decreases;smaller
D)decreases;increases;larger
E)increases;increases;larger

Answer 1

B

Question 2

If your planned consumption expenditure is $600 per month and your disposable income is $500 per month,your

A)dissaving is $100 per month.
B)saving is $100 per month.
C)autonomous consumption is -$100 per month.
D)autonomous consumption must be zero per month.
E)induced consumption is $600.

Answer 2

A

Question 3

If disposable income decreases during a recession,there is

A)an upward shift in the consumption function.
B)a downward shift in the consumption function.
C)no change in consumption expenditures.
D)movement upward along the consumption function.
E)movement downward along the consumption function.

Answer 3

E

Question 4

When disposable income is zero,consumption expenditure is

A)negative.
B)also zero.
C)equal to induced consumption expenditure.
D)equal to autonomous consumption.
E)None of the above answers is correct.

Question 5

Aggregate expenditure is equal to

A)C + I + G - NX.
B)C - I - G - NX.
C)C + I + G.
D)Y + C + I + G + NX.
E)C + I + G + NX.

Question 6

When disposable income increases,consumption expenditure

A)does not change.
B)also increases,and by an equal amount.
C)also increases,and by more.
D)decreases by the same amount.
E)also increases,but by less.

Question 7

What is the key difference between the aggregate expenditure model and the aggregate demand/aggregate supply model?

A)The aggregate demand/aggregate supply model assumes that the price level is fixed.
B)The aggregate expenditure model assumes that real GDP is fixed.
C)The aggregate expenditure model examines monetary policy,whereas the aggregate demand/aggregate supply model does not.
D)The aggregate expenditure model assumes that the price level is fixed.
E)Monetary and real factors interact in the aggregate demand/aggregate supply model.

Question 8

During 2015,a country has consumption expenditures of $3.0 trillion,investment expenditures of $1.5 trillion,government expenditure of $1.5 trillion,exports of $1.0 trillion,and imports of $1.5 trillion.Aggregate expenditure for the country is

A)$7.0 trillion.
B)$5.5 trillion.
C)$8.5 trillion.
D)$6.0 trillion.
E)$6.5 trillion.

Question 9

The consumption function shows the relationship between

A)consumption expenditure and the price level.
B)consumption expenditure and planned income.
C)consumption expenditure and disposable income.
D)inventory levels and real GDP.
E)consumption expenditure and planned inventory investment.

Question 10

A movement along the consumption function shows the change in consumption expenditure as a result of a change in

A)net taxes.
B)saving.
C)disposable income.
D)the interest rate.
E)the price level.

Question 11

As disposable income ________ planned consumption expenditure ________.

A)increases;increases
B)increases;changes only if net taxes also change
C)increases;decreases
D)decreases;increases
E)decreases;remains the same,since it is autonomous expenditure

Question 12

Which of the following variables is fixed in the aggregate expenditure model?

A)Real GDP
B)Price level
C)Investment
D)Consumption
E)Output

Question 13

In the range of disposable income where the consumption function lies above the 45° line,

A)saving is positive.
B)disposable income equals planned expenditures.
C)disposable income is negative.
D)saving is negative.
E)induced consumption is zero.

Question 14

The slope of the consumption function is

A)equal to the MPC and is equal to 1.
B)equal to the MPC and is greater than 1.
C)equal to the MPC and is less than 1.
D)not equal to the MPC and is less than 1.
E)not equal to the MPC and is equal to 1.

Question 15

On a graph of the consumption function,where the consumption function is below the 45° line,there is

A)maximum disposable income.
B)no induced consumption.
C)saving.
D)zero disposable income.
E)dissaving.

Question 16

As a household's disposable income increases,its autonomous expenditures ________ and its induced expenditures ________.

A)decrease;do not change
B)do not change;increase by a smaller amount than the increase in income
C)do not change;increase by an amount equal to the increase in income
D)increase;do not change
E)increase;increase by a smaller amount than the increase in income

Question 17

Consumption expenditure exceeds disposable income

A)only when the economy is in equilibrium.
B)when there is dissaving.
C)never.
D)when there is positive saving.
E)always.

Question 18

Disposable income equals aggregate income

A)minus net taxes.
B)plus saving minus net taxes.
C)plus net taxes.
D)minus saving.
E)minus saving and minus net taxes.

Question 19

When consumption expenditure is ________ disposable income,saving is ________.

A)greater than;positive
B)less than;negative
C)equal to;negative
D)equal to;positive
E)less than;positive

Question 20

Which of the following is NOT a part of aggregate expenditure?

A)Government expenditure
B)Exports
C)Imports
D)Taxes
E)Investment

Question 21

When disposable income is $8 trillion,consumption expenditure is $5 trillion;when disposable income is $5 trillion,consumption expenditure is $3 trillion.The MPC is

A)(5 + 3)÷ (8 + 5)= 0.615.
B)(5 - 3)÷ (8 - 5)= 0.667.
C)(5 + 3)÷ (8 - 5)= 2.667.
D)(5/8 + 3/5)= 1.225.
E)(8 - 5)÷ (5 - 3)= 1.333.

Question 22

The above table has data from the nation of Atlantica.Based on these data,when disposable income equals 8.0 there is

A)savings of $0.5 trillion.
B)dissavings of $15.5 trillion.
C)dissavings of $7.5 trillion.
D)dissavings of $0.5 trillion.
E)savings of $15.5 trillion.

Question 23

If disposable income increases from $5 trillion to $6 trillion and,as a result,consumption expenditure increases from $7 trillion to $7.8 trillion,the MPC is

A)1)0.
B)6 ÷ 7.8 = 0.77.
C)6 ÷ 7 = 0.86.
D)5 ÷ 7 = 0.71.
E)0)8.

Question 24

In the figure above,what is the MPC?

A)0)50
B)1)00
C)0)75
D)0)90
E)0)80

Question 25

The above table has data from the nation of Atlantica.Based on these data,the amount of autonomous consumption is

A)$7.5 trillion.
B)$1.0 trillion.
C)$0.5 trillion.
D)$6.0 trillion.
E)$1.5 trillion.

Question 26

The smaller the amount saved out of a change in disposable income,the

A)more horizontal the consumption function.
B)more net taxes affect consumption.
C)larger the MPC.
D)smaller the MPC.
E)smaller is autonomous consumption.

Question 27

The figure above shows a nation's consumption function.If disposable income is $4 trillion,then the MPC is ________ and saving is ________.

A)positive;zero
B)negative;positive
C)negative;negative
D)positive;positive
E)positive;negative

Question 28

Jane supports herself at university by working in a bookstore earning $300 a month,which she spends entirely every month.If she gets a salary increase of $100 a month,she spends $90 more dollars on consumption expenditure.Jane's MPC is equal to

A)0)10.
B)$90.
C)1)00.
D)0)50.
E)0)90.

Question 29

The figure above shows a nation's consumption function.If disposable income is $2 trillion,then the MPC is ________ and saving is ________.

A)positive;zero
B)positive;positive
C)positive;negative
D)negative;positive
E)negative;negative

Question 30

When Joe's disposable income is $50,000,his consumption expenditure is $45,000,and when his disposable income is $60,000,his consumption expenditure is $53,000.Joe's marginal propensity to consume is

A)$8,000.
B)1)25
C)80.
D)100.
E)0)80.

Question 31

In the figure above,when disposable income equals $10 trillion,

A)consumption expenditure is less than disposable income,so consumers are saving.
B)consumption expenditure is greater than disposable income,so consumers are dissaving.
C)consumption expenditure is greater than disposable income but it is not possible to determine if consumers are saving or dissaving.
D)consumption expenditure is greater than disposable income,so consumers are saving.
E)consumption expenditure is less than disposable income,so consumers are dissaving.

Question 32

The above table has data from the nation of Atlantica.Based on these data,what is the marginal propensity to consume?

A)1)00
B)1)50
C)0)50
D)1)33
E)0)75

Question 33

The marginal propensity to consume equals

A)consumption expenditure divided by the change in disposable income.
B)the change in autonomous consumption divided by the change in induced consumption.
C)consumption expenditure divided by disposable income.
D)the change in consumption expenditure divided by the change in disposable income.
E)the change in consumption expenditure divided by disposable income.

Question 34

The above table has data from the nation of Atlantica.Based on these data,when disposal income equals $3.0 trillion,

A)savings equals $3.0 trillion.
B)savings equals $1.0 trillion.
C)savings equals $4.0 trillion.
D)dissavings equals $1.0 trillion.
E)dissavings equals $4.0 trillion.

Question 35

The figure above shows a nation's consumption function.The amount of autonomous consumption expenditure is

A)$0.
B)$2 trillion.
C)$1 trillion.
D)$3 trillion.
E)more than $3 trillion.

Question 36

The above table has data from the nation of Atlantica.Based on these data,at what point does saving equal zero?

A)None,dissavings occurs at all of the above points.
B)None,savings occurs at all of the above points.
C)Between disposable income of $8.0 trillion and $7.5 trillion.
D)Between disposable income of $0.0 and $1.5 trillion.
E)At disposable income of $6.0 trillion.

Question 37

In the figure above,when disposable income equals $20 trillion,

A)consumption expenditure is less than disposable income,so consumers are dissaving.
B)consumption expenditure is greater than disposable income,so consumers are dissaving.
C)consumption expenditure is greater than disposable income,so consumers are saving.
D)consumption expenditure is less than disposable income,so consumers are saving.
E)consumption expenditure is less than disposable income but it is not possible to determine whether consumers are saving or dissaving.

Question 38

The above table has data from the nation of Atlantica.Based on these data,when disposable income equals $2.0 trillion there is

A)savings of $1.0 trillion.
B)dissavings of $1.0 trillion.
C)savings of $3.0 trillion.
D)dissavings of $3.0 trillion.
E)dissavings of $5.0 trillion.

Question 39

The above table has data from the nation of Atlantica.Based on these data,autonomous consumption is

A)$5.8 trillion.
B)$1.8 trillion.
C)$2.6 trillion.
D)$4.0 trillion.
E)$3.2 trillion.

Question 40

The fraction of a change in disposable income that is spent on consumption is the

A)marginal propensity to dissave.
B)expected future disposable income.
C)marginal buying power of money.
D)marginal dissaving ratio.
E)marginal propensity to consume.

Question 41

________ shifts the consumption function upward.

A)An increase in expected future disposable income
B)An increase in the real interest rate
C)A decrease in the marginal propensity to consume
D)An increase in the price level
E)An increase in disposable income

Question 42

An increase in expected future disposable income ________ consumption expenditure and ________.

A)increases;results in a movement upward along the consumption function
B)decreases;shifts the consumption function upward
C)decreases;shifts the consumption function downward
D)increases;shifts the consumption function upward
E)increases;shifts the consumption function downward

Question 43

A decrease in wealth ________ consumption expenditure and ________.

A)decreases;results in a movement downward along the consumption function
B)increases;shifts the consumption function downward
C)decreases;shifts the consumption function upward
D)decreases;shifts the consumption function downward
E)increases;shifts the consumption function upward

Question 44

When Australian real GDP increases,Australian imports

A)increase by more than the change in real GDP.
B)increase by the same amount.
C)decrease by the same amount.
D)increase by less than the change in real GDP.
E)decrease by less than the change in real GDP.

Question 45

A rise in the real interest rate ________ consumption expenditure and ________.

A)decreases;shifts the consumption function upward
B)decreases;results in a movement downward along the consumption function
C)increases;shifts the consumption function upward
D)increases;shifts the consumption function downward
E)decreases;shifts the consumption function downward

Question 46

The above table has data from the nation of Media.Based on these data,the marginal propensity to consume is

A)0)67.
B)1)33.
C)0)25.
D)0)75.
E)1)50.

Question 47

The above table has data from the nation of Media.Based on these data,when disposable income is $8.0 trillion,saving is

A)$1.5 trillion.
B)$0.5 trillion.
C)-$0.5 trillion.
D)$7.5 trillion.
E)-$1.5 trillion.

Question 48

When disposable income increases from $400 billion to $500 billion,consumption expenditure increases from $320 billion to $400 trillion.The MPC is

A)$6.8 trillion.
B)0)60.
C)1)00.
D)0)68.
E)0)80.

Question 49

If your MPC is 0.5 then,when your disposable income increases by $100,your consumption expenditure increases by

A)$100.
B)$200.
C)$5.
D)$50.
E)$95.

Question 50

When the real interest rate falls,the consumption function

A)shifts upward.
B)shifts downward.
C)does not shift and there is no movement along the consumption function.
D)does not shift and there is a movement downward along the consumption function.
E)does not shift and there is a movement upward along the consumption function.

Question 51

When the economy enters an expansion of a business cycle,households become more optimistic about expected future disposable income.The increase in optimism leads to

A)a shift upward of the consumption function.
B)a movement downward along the consumption function.
C)a movement upward along the consumption function.
D)an increase in consumption expenditures.
E)no change in the level of consumption expenditures.

Question 52

If the marginal propensity to consume is ________,then a $2 trillion increase in disposable income increases consumption expenditure by $1.2 trillion.If the marginal propensity to consume is ________,then a $2 trillion increase in disposable income increases consumption expenditures by $1.6 trillion.

A)1)67;2.25
B)1)2;1.6
C)0)6;0.8
D)6)0;8.0
E)None of the above because a $2 trillion increase in disposable income always leads to a $2 trillion increase in consumption expenditure.

Question 53

Based on data from the Australian economy,the marginal propensity to consume is about

A)0)75.
B)1)10.
C)0)60.
D)0)95.
E)0)87.

Question 54

If the marginal propensity to import is ________,then a $2 trillion increase in disposable income would increase import expenditure by $0.2 trillion.If the marginal propensity to import is ________,then a $2 trillion increase in disposable income would increase import expenditure by $0.6 trillion.

A)1)0;3.0
B)0)6;2.0
C)0)2;0.6
D)0)1;0.3
E)0)3;0.1

Question 55

When the real interest rate rises,there is

A)an upward movement along the consumption function.
B)a downward movement along the consumption function.
C)neither a shift of the consumption function nor a movement along the consumption function.
D)an upward shift of the consumption function.
E)a downward shift of the consumption function.

Question 56

In Germany,expected future income increased during 2014.This increase led to

A)a downward shift of the consumption function.
B)no movement along the consumption function and no shift of the consumption function.
C)a movement upward along the consumption function.
D)a movement downward along the consumption function.
E)an upward shift of the consumption function.

Question 57

Other things remaining the same,________ in Australian real GDP results in ________ in Australian imports.

A)an increase;a decrease
B)a decrease;an increase
C)an increase;an increase
D)an increase;a decrease followed by no change
E)a decrease;no change

Question 58

What is the value of the MPC if $66 out of every $100 increase in disposable income is consumed?

A)0)34
B)$166
C)$34
D)0)66
E)More information is needed to determine the MPC.

Question 59

If the real interest rate increases,there is

A)a downward shift of the consumption function.
B)a movement upward along the consumption function.
C)a movement downward along consumption function.
D)an upward shift of the consumption function.
E)a change in the slope of the consumption function.

Question 60

The components of aggregate expenditure that are NOT influenced by GDP are known as

A)induced expenditure.
B)planned expenditure.
C)fixed expenditure.
D)autonomous expenditure.
E)unplanned expenditure.

Question 61

If aggregate planned expenditure equals GDP,then

A)the change in firms' inventories must be negative.
B)the change in firms' inventories must be positive.
C)actual aggregate expenditure might be greater than,equal to or less than real GDP.
D)there must be no change in firms' inventories.
E)the change in firms' inventories must be equal to the planned change.

Question 62

If aggregate planned expenditure equals GDP,then

A)firms' inventories exceed planned inventories.
B)firms' inventories equal planned inventories.
C)firms' inventories are less than planned inventories.
D)firms' actual investment has no relationship to its planned investment.
E)firms do not have any inventories.

Question 63

To find aggregate planned expenditures,which of the following must be added to consumption expenditure?
I)Net exports
Ii)Investment
Iii)Government expenditure on goods and services

A)i only
B)ii only
C)iii only
D)i and ii
E)i,ii and iii

Question 64

Induced expenditure includes

A)consumption expenditure and exports.
B)consumption expenditure and imports.
C)consumption expenditure and government expenditure on goods and services.
D)consumption expenditure,government expenditure on goods and services,and imports.
E)investment,consumption expenditures and exports.

Question 65

The aggregate expenditure (AE)curve

A)includes expenditures by domestic residents only.
B)includes expenditures on foreign as well as domestic goods.
C)includes all expenditures on domestic goods.
D)adds expenditures on imports because they are consumed in the nation and subtracts expenditures on exports because they are consumed abroad.
E)does not include expenditures on either imports or exports.

Question 66

For each one dollar increase in real GDP,aggregate planned expenditure

A)increases by more than a dollar.
B)increases by less than a dollar.
C)is unaffected.
D)increases only if autonomous expenditure increases.
E)increases by one dollar.

Question 67

Which of the following is NOT included in aggregate expenditure?

A)Government expenditure
B)Net exports
C)Consumption expenditure
D)Taxes
E)Investment

Question 68

The AE curve illustrates the relationship between

A)the quantity of real GDP demanded and the price level.
B)the interest rate and aggregate planned expenditure.
C)real GDP and the interest rate.
D)aggregate planned expenditure and real GDP.
E)real GDP and actual expenditure.

Question 69

The quantity of Australian exports is determined by

A)political factors.
B)Australian aggregate expenditure.
C)Australian consumption expenditure.
D)Australian real GDP.
E)aggregate incomes in the rest of the world.

Question 70

The above table presents data from the nation of Pacifica.Aggregate planned expenditure equals $7.5 trillion when real GDP equals

A)$8.5 trillion.
B)$7.5 trillion.
C)$4.0 trillion.
D)$8.0 trillion.
E)$6.0 trillion.

Question 71

Which components of aggregate expenditure change as a result of real GDP changing?

A)Consumption expenditure and imports
B)Consumption expenditure,investment and exports
C)Consumption expenditure and investment
D)Consumption expenditure,investment,and government expenditure on goods and services
E)Consumption expenditure and government expenditure on goods and services

Question 72

Equilibrium expenditure occurs when

A)disposable income equals consumption expenditures plus imports.
B)aggregate planned expenditure equals real GDP.
C)real GDP plus net taxes equals disposable income.
D)disposable income equals real GDP.
E)real GDP minus net taxes equals disposable income.

Question 73

Induced expenditures are defined as that part of

A)autonomous expenditure that responds to changes in real GDP.
B)aggregate expenditure that responds to changes in real GDP.
C)autonomous expenditure that does not respond to changes in real GDP.
D)real GDP that does not respond to changes in aggregate expenditure.
E)aggregate expenditure that does not respond to changes in real GDP.

Question 74

Moving along the aggregate expenditure (AE)curve,when real GDP increases,aggregate planned expenditures increase

A)by the same percentage as real GDP.
B)by more than real GDP.
C)by less than real GDP.
D)proportionately with real GDP.
E)by the same amount as real GDP.

Question 75

The above table presents data from the nation of Pacifica.When real GDP equals $2.0 trillion,aggregate planned expenditure equals

A)$5.00 trillion.
B)$3.75 trillion.
C)$4.00 trillion.
D)$5.50 trillion.
E)$6.00 trillion.

Question 76

Autonomous expenditure is expenditure that is

A)not influenced by the interest rate.
B)not influenced by the price level.
C)influenced by real GDP.
D)not influenced by real GDP.
E)influenced by the interest rate.

Question 77

Autonomous expenditure includes

A)investment,government expenditure on goods and services,and exports.
B)consumption expenditure,investment and net taxes.
C)consumption expenditures,investment and exports.
D)investment,government expenditure for goods and services,and imports.
E)consumption expenditure,investment and imports.

Question 78

The equilibrium level of aggregate planned expenditure is found where

A)there is no saving and no dissaving.
B)the price level is rising at a constant rate.
C)autonomous expenditure equals equilibrium expenditure.
D)aggregate planned expenditure equals real GDP.
E)net exports is zero.

Question 79

Induced expenditure is any expenditure that

A)changes when real GDP changes.
B)is fixed for all levels of real GDP.
C)is fixed for all price levels.
D)is fixed for all levels of the interest rate.
E)changes when the interest rate changes.

Question 80

Aggregate planned expenditure decreases if

A)real GDP decreases.
B)government expenditure on goods and services increases.
C)autonomous consumption increases.
D)exports increase.
E)investment increases.