Question 1

The marginal propensity to save is defined as

Accepted Answer

A) saving divided by disposable income. 
B) disposable income divided by saving. 
C) the change in saving divided by the change in disposable income. 
D) the change in disposable income divided by the change in saving.

Question 2

Figure 12-4 
-Refer to Figure 12-4.Potential GDP equals $500 billion.The economy is currently producing GDP1 which is equal to $450 billion.If the MPC is 0.8,then how much must autonomous spending change for the economy to move to potential GDP?

Accepted Answer

A) -$40 billion 
B) -$10 billion 
C) $10 billion 
D) $40 billion

Question 3

A stock market boom which causes stock prices to rise should cause

Accepted Answer

A) a decrease in consumption spending. 
B) an increase in consumption spending. 
C) a decrease in wealth. 
D) a decrease in net export spending.

Question 4

A rising price level decreases consumption by decreasing the real value of household wealth.

Accepted Answer

A) True 
 B)False

Question 5

The slope of the consumption function is equal to

Accepted Answer

A) the change in consumption divided by the change in disposable income. 
B) the change in consumption divided by the change in personal income. 
C) the change in disposable income divided by the change in consumption. 
D) the change in national income divided by the change in consumption.

Question 6

________ is equal to consumption spending plus planned investment spending plus government purchases plus net exports.

Accepted Answer

A) Full employment GDP 
B) Short-run aggregate supply 
C) Planned inventory investment 
D) Planned aggregate expenditure

Question 7

The five most important variables that determine the level of consumption are

Accepted Answer

A) disposable income,wealth,expected future income,price level,and interest rate. 
B) wealth,savings account balances,checking account balances,stock portfolio balances,and bond portfolio balances. 
C) government purchases,interest rates,income,taxes,and transfers. 
D) government purchases,saving account balances,wealth,interest rates,portfolio balances.

Question 8

Table 12-10
 
-Refer to Table 12-10.Using the table above,calculate the unplanned change in inventories for each level of GDP,and explain what will happen to GDP?

Accepted Answer

The answer of Table 12-10
 
-Refer to Table 12-10.Using the...

Question 9

What is the difference between aggregate expenditure and aggregate demand?

Accepted Answer

The answer of What is the difference between aggregate expenditure...

Question 10

The ratio of the increase in ________ to the increase in ________ is called the multiplier.

Accepted Answer

A) equilibrium nominal GDP; autonomous expenditure 
B) equilibrium real GDP; autonomous expenditure 
C) autonomous expenditure; equilibrium real GDP 
D) induced expenditure; equilibrium real GDP

Question 11

________ describes the relationship between consumption spending and disposable income.

Accepted Answer

A) Household wealth 
B) The liquidity trap 
C) The consumption function 
D) The paradox of thrift

Question 12

The ratio of the increase in equilibrium real GDP to the increase in autonomous expenditure is called the

Accepted Answer

A) MPC. 
B) multiplier. 
C) MPS. 
D) consumption function.

Question 13

Planned aggregate expenditure is equal to

Accepted Answer

A) consumption spending only. 
B) consumption spending plus planned investment spending. 
C) planned investment spending only. 
D) consumption spending plus planned investment spending plus government purchases plus net exports.

Question 14

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

Accepted Answer

A) 0.2 
B) 0.8 
C) 5.8 
D) 7.25

Question 15

The multiplier is calculated as the change in ________ / change in ________.

Accepted Answer

A) real GDP; autonomous expenditure 
B) autonomous expenditure; real GDP 
C) nominal GDP; autonomous expenditure 
D) real GDP; induced spending

Question 16

Firms in a small economy anticipated that inventories would grow over the past year by $750,000,and over that year,inventories grew by exactly $750,000.This implies that

Accepted Answer

A) aggregate expenditure and GDP were equal that year. 
B) there was an unplanned increase in inventories that year. 
C) there was an unplanned decrease in inventories that year. 
D) aggregate expenditure was greater than GDP that year.

Question 17

When Jack's income increases by $1,000,he spends an additional $850 dollars.This implies that his marginal propensity to save is 0.85.

Accepted Answer

A) True 
 B)False

Question 18

In a small economy in 2013,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 2013. 
C) Firm investment in inventories was greater than anticipated in 2013. 
D) Aggregate expenditure is always less than GDP in developing countries.

Question 19

If an increase in investment spending of $50 million results in a $400 million increase in equilibrium real GDP,then

Accepted Answer

A) the multiplier is 0.125. 
B) the multiplier is 3.5. 
C) the multiplier is 8. 
D) the multiplier is 50.

Question 20

The marginal propensity to consume measures the average amount of wealth that a consumer spends in a given period of time.

Accepted Answer

A) True 
 B)False

Exam 12: Aggregate Expenditure and Output in the Short Run

The marginal propensity to save is defined as

Figure 12-4 -Refer to Figure 12-4.Potential GDP equals $500 billion.The economy is currently producing GDP₁ which is equal to $450 billion.If the MPC is 0.8,then how much must autonomous spending change for the economy to move to potential GDP?

A stock market boom which causes stock prices to rise should cause

A rising price level decreases consumption by decreasing the real value of household wealth.

The slope of the consumption function is equal to

________ is equal to consumption spending plus planned investment spending plus government purchases plus net exports.

The five most important variables that determine the level of consumption are

Table 12-10 -Refer to Table 12-10.Using the table above,calculate the unplanned change in inventories for each level of GDP,and explain what will happen to GDP?

What is the difference between aggregate expenditure and aggregate demand?

The ratio of the increase in to the increase in is called the multiplier.

________ describes the relationship between consumption spending and disposable income.

The ratio of the increase in equilibrium real GDP to the increase in autonomous expenditure is called the

Planned aggregate expenditure is equal to

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

The multiplier is calculated as the change in / change in .

Firms in a small economy anticipated that inventories would grow over the past year by $750,000,and over that year,inventories grew by exactly $750,000.This implies that

When Jack's income increases by $1,000,he spends an additional $850 dollars.This implies that his marginal propensity to save is 0.85.

In a small economy in 2013,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?

If an increase in investment spending of $50 million results in a $400 million increase in equilibrium real GDP,then

The marginal propensity to consume measures the average amount of wealth that a consumer spends in a given period of time.

Exam 12: Aggregate Expenditure and Output in the Short Run

The marginal propensity to save is defined as

Figure 12-4 -Refer to Figure 12-4.Potential GDP equals $500 billion.The economy is currently producing GDP1 which is equal to $450 billion.If the MPC is 0.8,then how much must autonomous spending change for the economy to move to potential GDP?

A stock market boom which causes stock prices to rise should cause

A rising price level decreases consumption by decreasing the real value of household wealth.

The slope of the consumption function is equal to

________ is equal to consumption spending plus planned investment spending plus government purchases plus net exports.

The five most important variables that determine the level of consumption are

Table 12-10 -Refer to Table 12-10.Using the table above,calculate the unplanned change in inventories for each level of GDP,and explain what will happen to GDP?

What is the difference between aggregate expenditure and aggregate demand?

The ratio of the increase in ________ to the increase in ________ is called the multiplier.

________ describes the relationship between consumption spending and disposable income.

The ratio of the increase in equilibrium real GDP to the increase in autonomous expenditure is called the

Planned aggregate expenditure is equal to

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

The multiplier is calculated as the change in ________ / change in ________.

Firms in a small economy anticipated that inventories would grow over the past year by $750,000,and over that year,inventories grew by exactly $750,000.This implies that

When Jack's income increases by $1,000,he spends an additional $850 dollars.This implies that his marginal propensity to save is 0.85.

In a small economy in 2013,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?

If an increase in investment spending of $50 million results in a $400 million increase in equilibrium real GDP,then

The marginal propensity to consume measures the average amount of wealth that a consumer spends in a given period of time.

Figure 12-4 -Refer to Figure 12-4.Potential GDP equals $500 billion.The economy is currently producing GDP₁ which is equal to $450 billion.If the MPC is 0.8,then how much must autonomous spending change for the economy to move to potential GDP?

The ratio of the increase in to the increase in is called the multiplier.

The multiplier is calculated as the change in / change in .