Question 1

Explain how a stock market crash has the potential to lead to a recession in an economy.

Accepted Answer

The answer of Explain how a stock market crash has...

Question 2

The aggregate expenditure model focuses on the relationship between ________ and ________ in the short run,assuming ________ is constant.

Accepted Answer

A)  total production; total income; real GDP 
B)  total spending; real GDP; total income 
C)  total spending; real GDP; the price level 
D)  total income; real GDP; the price level

Question 3

The multiplier is calculated as the

Accepted Answer

A)  change in real GDP/ change in autonomous expenditure. 
B)  change in autonomous expenditure/ change in real GDP. 
C)  change in nominal GDP/ change in autonomous expenditure. 
D)  change in real GDP/ change in induced spending.

Question 4

Given Table 23-3 below,fill in the values for saving.Assume taxes = $800.Table 23-3

Accepted Answer

The answer of Given Table 23-3 below,fill in the values...

Question 5

If inventories decline by more than analysts predict they will decline,this implies that

Accepted Answer

A)  actual investment spending was greater than planned investment spending. 
B)  actual investment spending was less than planned investment spending. 
C)  actual investment spending was equal to than planned investment spending. 
D)  there is no relationship between actual investment spending and planned investment spending.

Question 6

Which of the following leads to an increase real GDP?

Accepted Answer

A)  a decrease in government spending 
B)  a decrease in the inflation rate in other countries, relative to the inflation in the United States 
C)  a decrease in interest rates 
D)  households have increasingly pessimistic expectations about future income

Question 7

Firms in a small economy planned that inventories would grow over the past year by $300,000.Over that year,inventories actually grew by $400,000.This implies that

Accepted Answer

A)  aggregate expenditure that year was less than GDP that year. 
B)  there was an unplanned decrease in inventories that year. 
C)  there was a planned decrease in inventories that year. 
D)  aggregate expenditure that year was equal to GDP that year.

Question 8

An increase in the real interest rate will

Accepted Answer

A)  cause consumers to spend more and save less. 
B)  most likely lower consumers' purchases of durable goods. 
C)  most likely lower the reward to savings. 
D)  most likely lower the cost of borrowing.

Question 9

If the marginal propensity to save is 0.25,then a $10,000 decrease in disposable income will

Accepted Answer

A)  increase consumption by $7,500. 
B)  increase consumption by $2,500. 
C)  decrease consumption by $7,500. 
D)  decrease consumption by $2,500.

Question 10

Table 23-5
 
-Refer to Table 23-5.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 23-5
 
-Refer to Table 23-5.Using the...

Question 11

A decrease in Social Security payments will

Accepted Answer

A)  decrease consumption spending. 
B)  decrease investment spending. 
C)  decrease government spending. 
D)  decrease export spending.

Question 12

Suppose the United States experiences a long period of inflation relative to other countries.How will this affect U.S.net exports?

Accepted Answer

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

Question 13

________ is defined as the value of a household's assets minus the value of its liabilities.

Accepted Answer

A)  Household income 
B)  Household wealth 
C)  Personal household consumption 
D)  Planned household investment

Question 14

Table 23-2
 
-Refer to Table 23-2.Given the consumption schedule in the table above,the marginal propensity to save is

Accepted Answer

A)  0.1. 
B)  0.4. 
C)  0.7. 
D)  0.9.

Question 15

If the consumption function is defined as C = 5,500 + 0.9Y,what is the value of the multiplier?

Accepted Answer

A)  0.1 
B)  0.9 
C)  9 
D)  10

Question 16

Economists first began studying the relationship between changes in aggregate expenditures and changes in GDP

Accepted Answer

A)  in the 1950s. 
B)  during the Great Depression. 
C)  at the end of the Civil War. 
D)  during the Industrial Revolution.

Question 17

If disposable income increases by $100 million,and consumption increases by $90 million,then the marginal propensity to consume is

Accepted Answer

A)  0.9. 
B)  0.8. 
C)  0.75. 
D)  0.6.

Question 18

If the marginal propensity to save is 0.4,the multiplier is 2.5.

Accepted Answer

A) True 
 B)False

Question 19

Figure 23-1 
-Refer to Figure 23-1.At point L in the figure above,which of the following is true?

Accepted Answer

A)  Aggregate expenditure is greater than GDP. 
B)  The economy has achieved macroeconomic equilibrium. 
C)  Actual inventories are greater than planned inventories. 
D)  GDP will be increasing.

Question 20

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.

Exam 23: Aggregate Expenditure and Output in the Short Run