Question 1

A stock market crash which causes stock prices to fall should cause

Accepted Answer

A) a decrease in consumption spending. 
B) an increase in consumption spending. 
C) an increase in wealth. 
D) no change in consumption spending.

Question 2

As a result of slow economic growth following the recession of 2007-2009,companies including Intel and Worthington Industries cut production and employment in 2015 as a result of the sluggish growth in the total amount of spending in the economy.The total amount of spending in the economy is known as

Accepted Answer

A) deficit spending. 
B) planned investment spending. 
C) aggregate expenditure. 
D) equilibrium spending.

Question 3

Consumption spending is $5 million,planned investment spending is $8 million,unplanned investment spending is -$2 million,government purchases are $10 million,and net export spending is $2 million.What is GDP?

Accepted Answer

A) $15 million 
B) $23 million 
C) $25 million 
D) $27 million

Question 4

Table 23-3
 $$\begin{array} { | c | c | } 
\hline \begin{array} { c } 
\text { Consumption } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Disposable Income } \
\text { (dollars) }
\end{array} \
\hline \$ 1,200 & \$ 3,000 \
\hline 2,100 & 4,000 \
\hline 3,000 & 5,000 \
\hline
\end{array}$$
-Refer to Table 23-3.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 5

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

Accepted Answer

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

Question 6

Table 23-14
 $$\begin{array} { | c | c | c | c | c | } 
\hline \text { Real GDP } & \text { Consumption } & \begin{array} { c } 
\text { Planned } \
\text { Investment }
\end{array} & \begin{array} { c } 
\text { Government } \
\text { Purchases }
\end{array} & \text { Net Exports } \
\hline \$ 1,000 & \$ 1,000 & \$ 100 & \$ 150 & - \$ 50 \
\hline 2,000 & 1,900 & 100 & 150 & - 50 \
\hline 3,000 & 2,800 & 100 & 150 & - 50 \
\hline 4,000 & 3,700 & 100 & 150 & - 50 \
\hline
\end{array}$$
-Refer to Table 23-14.Using the table above,answer the following questions.The numbers in the table are in billions of dollars.
a.What is the equilibrium level of real GDP?
b.What is the MPC?
c.If potential GDP is $4,000 billion,is the economy at full employment? If not,what is the condition of the economy?
d.If the economy is not at full employment,by how much should government spending increase so that the economy can move to the full employment level of GDP?

Accepted Answer

The answer of Table 23-14
 \[\begin{array} { | c |...

Question 7

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 8

The marginal propensity to consume is defined as

Accepted Answer

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

Question 9

The Apple iPhone is sold in a box labeled "Made in China." A study by economists at the Asian Development Bank found the value of the iPhone components China ________ U.S.firms is ________ the value of assembling the iPhones in Chinese factories.

Accepted Answer

A) exports to;equal to 
B) exports to;greater than 
C) imports from;less than 
D) imports from;greater than

Question 10

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 11

In a small economy in 2016,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 2016. 
C) Firm investment in inventories was greater than anticipated in 2016. 
D) Aggregate expenditure is always less than GDP in developing countries.

Question 12

Which of the following is a true statement about the multiplier?

Accepted Answer

A) The multiplier rises as the MPC rises. 
B) The smaller the MPC,the larger the multiplier. 
C) The multiplier is a value between zero and one. 
D) The multiplier effect does not occur when autonomous expenditure decreases.

Question 13

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 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

From 1983-2015,net exports for the United States

Accepted Answer

A) grew and then declined. 
B) were negative. 
C) were positive. 
D) increased as exports rose above imports.

Question 16

Figure 23-4 
-Refer to Figure 23-4.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 17

Aggregate expenditure includes spending on

Accepted Answer

A) C + I + G. 
B) C + I + G - NX. 
C) C + I + G + NX. 
D) C + I + depreciation - NX.

Question 18

An increase in the price level ________ real wealth,which causes consumption to ________.

Accepted Answer

A) lowers;increase 
B) lowers;decrease 
C) raises;increase 
D) raises;decrease

Question 19

U.S.net export spending falls when

Accepted Answer

A) the price level in the United States falls relative to the price level in other countries. 
B) the growth rate of U.S.GDP is faster than the growth rate of GDP in other countries. 
C) the value of the U.S.dollar decreases relative to other currencies. 
D) the inflation rate is lower in the United States relative to other countries.

Question 20

Inventories refer to

Accepted Answer

A) goods which have been presold before they are produced. 
B) goods that have been produced but not yet sold. 
C) goods that have been planned but not yet produced. 
D) goods that have been produced and sold in the same year.

Exam 23: Aggregate Expenditure and Output in the Short Run