Question 1

Why is the aggregate demand curve downward sloping while the aggregate expenditure line is upward sloping?

Accepted Answer

The answer of Why is the aggregate demand curve downward...

Question 2

Table 12-9
 
-Given Table 12-9 below,fill in the values of the marginal propensity to save (MPS)and the marginal propensity to consume (MPC).Show that MPC + MPS = 1.

Accepted Answer

The answer of Table 12-9
 
-Given Table 12-9 below,fill in...

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

Economists think that the marginal propensity to consume for the U.S.economy is somewhere around 0.9.Based on our simple multiplier formula,this would imply that the multiplier for the United States should be around 10.However,economists agree that the spending multiplier is closer to 2.What might explain this supposed anomaly?

Accepted Answer

The answer of Economists think that the marginal propensity to...

Question 5

Table 12-8
 
-Given Table 12-8 below,fill in the values for saving.Assume there are no taxes.

Accepted Answer

The answer of Table 12-8
 
-Given Table 12-8 below,fill in...

Question 6

The five most important variables that determine the level of ________ are disposable income,wealth,expected future income,price level,and interest rate.

Accepted Answer

A) consumption 
B) government purchases 
C) planned investment 
D) net exports

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is a reason why decreases in the price level result in a rise in aggregate expenditure?

Accepted Answer

A) Price level decreases cause firms and consumers to hold less money,which lowers the interest rate.Lower interest rates raise consumption and planned investment expenditures,which raises aggregate expenditure. 
B) Price level decreases reduce real wealth,which causes consumption spending and aggregate expenditure to rise. 
C) As the price level falls,government spending rises,which raises aggregate expenditure. 
D) Price level decreases in the United States relative to other countries' lower net exports,which raises aggregate expenditure.

Question 9

When net exports equal zero,the economy is in macroeconomic equilibrium.

Accepted Answer

A) True 
 B)False

Question 10

If firms are more optimistic that future profits will rise and remain strong for the next few years,then

Accepted Answer

A) investment spending will fall. 
B) investment spending will rise. 
C) investment spending will remain unaffected. 
D) investment spending will rise and then fall.

Question 11

Figure 12-1 
-Refer to Figure 12-1.If the economy is in equilibrium,it is at a level of aggregate expenditure given by point

Accepted Answer

A) J. 
B) K. 
C) L. 
D) Points J,K and L all represent equilibrium.

Question 12

In a small economy in 2018,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 2018. 
C) Firm investment in inventories was greater than anticipated in 2018. 
D) Aggregate expenditure is always less than GDP in developing countries.

Question 13

If planned aggregate expenditure is greater 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.

Question 14

Which is the largest component of aggregate expenditure?

Accepted Answer

A) planned investment expenditures 
B) consumption expenditures 
C) government expenditures 
D) net export expenditures

Question 15

Suppose the United States experiences a long period of relatively stable prices while other countries experience long periods of inflation.How will this affect U.S.net exports?

Accepted Answer

The answer of Suppose the United States experiences a long...

Question 16

If the consumption function is defined as C = 7,250 + 0.8Y,what is the value of the marginal propensity to save?

Accepted Answer

A) 0.2 
B) 0.8 
C) 5.8 
D) 9.1

Question 17

What impact does a decrease in the price level in the United States have on net exports and why?

Accepted Answer

A) A decrease in the U.S.price level increases net exports because lower prices increase the value of the dollar. 
B) A decrease in the U.S.price level increases net exports by reducing the relative cost of American goods. 
C) A decrease in the U.S.price level reduces net exports because lower prices raise the value of the dollar. 
D) A decrease in the U.S.price level reduces net exports because lower prices increase American spending on imports.

Question 18

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.

Question 19

The aggregate expenditure model focuses on the ________ relationship between real spending and ________.

Accepted Answer

A) short-run; real GDP 
B) short-run; inflation 
C) long-run; real GDP 
D) long-run; inflation

Question 20

Consumption spending is $5 million,planned investment spending is $8 million,actual investment spending is $8 million,government purchases are $10 million,and net export spending is $2 million.Based on this information,which of the following is true?

Accepted Answer

A) There was an unplanned change in inventories. 
B) Aggregate expenditure is equal to GDP. 
C) Aggregate expenditure is greater than GDP. 
D) Aggregate expenditure is less than GDP.

Exam 12: Aggregate Expenditure and Output in the Short Run

Why is the aggregate demand curve downward sloping while the aggregate expenditure line is upward sloping?

Table 12-9 -Given Table 12-9 below,fill in the values of the marginal propensity to save (MPS)and the marginal propensity to consume (MPC).Show that MPC + MPS = 1.

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

Table 12-8 -Given Table 12-8 below,fill in the values for saving.Assume there are no taxes.

The five most important variables that determine the level of ________ are disposable income,wealth,expected future income,price level,and interest rate.

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

Which of the following is a reason why decreases in the price level result in a rise in aggregate expenditure?

When net exports equal zero,the economy is in macroeconomic equilibrium.

If firms are more optimistic that future profits will rise and remain strong for the next few years,then

Figure 12-1 -Refer to Figure 12-1.If the economy is in equilibrium,it is at a level of aggregate expenditure given by point

In a small economy in 2018,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?

If planned aggregate expenditure is greater than total production

Which is the largest component of aggregate expenditure?

Suppose the United States experiences a long period of relatively stable prices while other countries experience long periods of inflation.How will this affect U.S.net exports?

If the consumption function is defined as C = 7,250 + 0.8Y,what is the value of the marginal propensity to save?

What impact does a decrease in the price level in the United States have on net exports and why?

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

The aggregate expenditure model focuses on the relationship between real spending and .

Consumption spending is $5 million,planned investment spending is $8 million,actual investment spending is $8 million,government purchases are $10 million,and net export spending is $2 million.Based on this information,which of the following is true?