Question 1

Consumption spending is $16 million,planned investment spending is $4 million,unplanned investment spending is $2 million,government purchases are $6 million,and net export spending is $1 million.What is aggregate expenditure?

Accepted Answer

A) $22 million 
B) $26 million 
C) $27 million 
D) $29 million

Question 2

________ is defined as national income + transfers - taxes.

Accepted Answer

A) Gross private domestic investment 
B) GDP 
C) Personal income 
D) Disposable income

Question 3

Which of the following will raise consumer expenditures?

Accepted Answer

A) an increase in interest rates 
B) a general decline in housing prices 
C) an increase in expected future income 
D) an increase in the price level

Question 4

Given the equations for C,I,G,and NX below,what is the value of the marginal propensity to consume? C = 1,000 + 0.8Y
I = 1,500
G =1,250
NX = 100

Accepted Answer

A) 0.2 
B) 0.8 
C) 1.8 
D) 10

Question 5

The National Restaurant Association states that the restaurant industry has an economic effect of more than $1.7 trillion annually in the United States,with every dollar spent in restaurants generating an estimated total of $2.05 in spending in the economy.This indicates that the spending multiplier for the restaurant industry is equal to

Accepted Answer

A) 1.21. 
B) 1.70. 
C) 2.05. 
D) 4.25.

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

If the economy is currently in equilibrium at a level of GDP that is above potential GDP,which of the following would move the economy back to potential GDP?

Accepted Answer

A) a decrease in wealth 
B) a decrease in interest rates 
C) an increase in business confidence 
D) a decrease in the value of the dollar relative to other currencies

Question 8

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 $23 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.

Question 9

If the marginal propensity to save is 0.1,then a $10 million decrease in disposable income will

Accepted Answer

A) increase consumption by $9 million. 
B) increase consumption by $1 million. 
C) decrease consumption by $9 million. 
D) decrease consumption by $1 million.

Question 10

Household wealth is defined as the value of a household's

Accepted Answer

A) assets minus the value of its liabilities. 
B) assets plus the value of its liabilities. 
C) assets. 
D) liabilities.

Question 11

The components of aggregate expenditure are

Accepted Answer

A) consumption,actual investment,and net exports. 
B) actual investment,planned investment,and depreciation. 
C) consumption,planned investment,government purchases,and net exports. 
D) government purchases,imports,exports,and planned investment.

Question 12

What are the five main determinants of consumption spending? Which of these is the most important?

Accepted Answer

The answer of What are the five main determinants of...

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 decrease in inventories. 
C) GDP will decrease. 
D) the economy is in equilibrium.

Question 14

Macroeconomic equilibrium can occur at any point on the 45 degree line.

Accepted Answer

A) True 
 B)False

Question 15

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.

Question 16

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.

Question 17

In a small economy in 2018,aggregate expenditure was $850 million while GDP that year was $800 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 18

Table 12-3
 
-Refer to Table 12-3.Given the consumption schedule in the table above,the marginal propensity to consume is

Accepted Answer

A) 0.1. 
B) 0.3. 
C) 0.6. 
D) 0.9.

Question 19

C = 2,800 + 0.9Y
I = 750
G = 1,200
NX = 150
Given the equations for C,I,G,and NX above,what is the equilibrium level of GDP (Y)?

Accepted Answer

The answer of C = 2,800 + 0.9Y
I = 750
G...

Question 20

Given the equations for C,I,G,and NX below,what is the equilibrium level of GDP? C = 2,000 + 0.9Y
I = 2,500
G = 3,000
NX = 400

Accepted Answer

A) $4,333 
B) $7,100 
C) $8,778 
D) $79,000

Exam 12: Aggregate Expenditure and Output in the Short Run