Question 1

Discuss the leading causes of the Great Depression.Use the 45-degree line diagram to show how they caused a decline in GDP.

Accepted Answer

The answer of Discuss the leading causes of the Great...

Question 2

When aggregate expenditure is more than GDP, which of the following is true?

Accepted Answer

A) There was an unplanned decrease in inventories. 
B) Firms spent less on capital goods than they planned. 
C) Households bought fewer new homes than they planned. 
D) All of the above must be true when aggregate expenditure is more than GDP.

Question 3

If the MPC is 0.5, then a $10 million increase in disposable income will increase consumption by

Accepted Answer

A) $2 million. 
B) $5 million. 
C) $15 million 
D) $50 million. 
E) There is not enough information to determine the change in consumption.

Question 4

If consumption is defined as C = 2,400 + 0.9Y, then the marginal propensity to consume is 0.9.

Accepted Answer

A) True 
 B)False

Question 5

Assume that inventories declined by more than analysts predicted.This implies that

Accepted Answer

A) planned aggregate expenditure was greater than real GDP. 
B) planned aggregate expenditure was equal to real GDP. 
C) planned aggregate expenditure was less than real GDP. 
D) planned aggregate expenditure is unrelated to real GDP. 
E) planned aggregate expenditure is likely to increase.

Question 6

Examples of assets that are included in ________ would be stocks, bonds, and savings accounts.

Accepted Answer

A) household wealth 
B) household income 
C) planned investment 
D) consumer purchases 
E) capital

Question 7

If planned aggregate expenditure is less than total production,

Accepted Answer

A) actual inventories will equal planned inventories. 
B) firms will experience an unplanned increase in inventories. 
C) GDP will increase. 
D) the economy is in equilibrium. 
E) governments will run budget surpluses.

Question 8

In a small economy in 2017, aggregate expenditure was $800 million while GDP that year was $850 million.Which of the following can explain the difference between aggregate expenditure and GDP that year?

Accepted Answer

A) Aggregate expenditure is always less than GDP in developed countries. 
B) Firm investment in inventories was less than anticipated in 2017. 
C) Firm investment in inventories was greater than anticipated in 2017. 
D) Aggregate expenditure is always less than GDP in developing countries. 
E) Consumer spending was greater than expected.

Question 9

On the 45-degree line diagram, for points that lie above the 45-degree line,

Accepted Answer

A) planned aggregate expenditure is greater than GDP. 
B) planned aggregate expenditure is less than GDP. 
C) planned aggregate expenditure is equal to GDP. 
D) planned aggregate expenditure is less than aggregate income. 
E) planned aggregate expenditure is greater than potential GDP.

Question 10

The larger the MPC, the smaller the value of the multiplier.

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

A) There was an unplanned increase in inventories equal to $2 billion. 
B) There was no unplanned change in inventories. 
C) There was an unplanned decrease in inventories equal to $2 billion. 
D) There was an unplanned decrease in inventories equal to $19 billion. 
E) There was an unplanned increase in inventories of $3 billion.

Question 12

If the consumption function is defined as C = 7,250 + 0.8Y, what is the multiplier?

Accepted Answer

A) 0.2 
B) 0.8 
C) 1.25 
D) 5 
E) 10

Question 13

Investment spending increases during ________, and decreases during ________.

Accepted Answer

A) an expansion; a recession 
B) a recession; an expansion 
C) a recession; a depression 
D) a deflation; an inflation 
E) an expansion; an inflation

Question 14

Figure 8.3  Alt text for Figure 8.3: In figure 8.3, a graph comparing real GDP and real aggregate expenditure.
Long description for Figure 8.3: The x-axis is labelled, real GDP, Y (trillions of 2002 dollars).The y-axis is labelled, real aggregate expenditure, AE (trillions of 2002 dollars).Line Y = AE, originates at the vertex and slopes up to the top right corner.Line AE1, begins a little less than half way along the x-axis and slopes up to the end of the x-axis.Both these lines intersect at point K, approximately 3 quarters of the way along both lines.Point J is plotted a little less than half way along line AE1, to the left of point K.Point L is marked close to the right end of the line AE1, to the right of point K.
-Refer to Figure 8.3.At point J in the figure above, which of the following is true?

Accepted Answer

A) Aggregate expenditure is less than GDP. 
B) The economy has achieved macroeconomic equilibrium. 
C) Actual inventories are less than planned inventories. 
D) GDP will be decreasing. 
E) unemployment will be rising.

Question 15

Table 8.7 
-Refer to Table 8.7.Given the consumption schedule in the table above, the marginal propensity to consume is

Accepted Answer

A) 0.4. 
B) 0.5. 
C) 0.6. 
D) 0.75. 
E) 0.8.

Question 16

If planned investment is greater than actual investment, then aggregate expenditure is less than GDP.

Accepted Answer

A) True 
 B)False

Question 17

Given Table 8.6 below, fill in the values of the marginal propensity to save (MPS)and the marginal propensity to consume (MPC).Show that MPC + MPS = 1.
Table 8.6

Accepted Answer

The answer of Given Table 8.6 below, fill in the...

Question 18

If the MPC is 0.95, then a $10 million increase in disposable income will

Accepted Answer

A) increase consumption by $200 million. 
B) increase consumption by $9.5 million. 
C) decrease consumption by $105 million. 
D) increase consumption by $950 million. 
E) increase consumption by 0.5 million.

Question 19

In the aggregate expenditure model, ________ has both an autonomous component and an induced component.

Accepted Answer

A) planned investment spending 
B) consumption spending 
C) government spending 
D) net export spending 
E) unplanned investment spending

Question 20

As a result of the oil price, revenues at many ________Tim Hortons locations ________, and it ________ the size of its workforce.

Accepted Answer

A) Ontario; fell; increased 
B) Alberta; fell; decreased 
C) Quebec; rose; increased 
D) British Columbia; rose; decreased 
E) PEI; fell; decreased.

Exam 8: Aggregate Expenditure and Output in the Short Run

Discuss the leading causes of the Great Depression.Use the 45-degree line diagram to show how they caused a decline in GDP.

When aggregate expenditure is more than GDP, which of the following is true?

If the MPC is 0.5, then a $10 million increase in disposable income will increase consumption by

If consumption is defined as C = 2,400 + 0.9Y, then the marginal propensity to consume is 0.9.

Assume that inventories declined by more than analysts predicted.This implies that

Examples of assets that are included in ________ would be stocks, bonds, and savings accounts.

If planned aggregate expenditure is less than total production,

In a small economy in 2017, aggregate expenditure was $800 million while GDP that year was $850 million.Which of the following can explain the difference between aggregate expenditure and GDP that year?

On the 45-degree line diagram, for points that lie above the 45-degree line,

The larger the MPC, the smaller the value of the multiplier.

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

If the consumption function is defined as C = 7,250 + 0.8Y, what is the multiplier?

Investment spending increases during , and decreases during .

Table 8.7 -Refer to Table 8.7.Given the consumption schedule in the table above, the marginal propensity to consume is

If planned investment is greater than actual investment, then aggregate expenditure is less than GDP.

Given Table 8.6 below, fill in the values of the marginal propensity to save (MPS)and the marginal propensity to consume (MPC).Show that MPC + MPS = 1. Table 8.6

If the MPC is 0.95, then a $10 million increase in disposable income will

In the aggregate expenditure model, ________ has both an autonomous component and an induced component.

As a result of the oil price, revenues at many Tim Hortons locations , and it the size of its workforce.