Question 1

Which of the following increases the size of the expenditure multiplier?

Accepted Answer

A)   a decrease in the marginal propensity to consume
B)   an increase in autonomous spending
C)   an increase in the marginal income tax rate
D)   a decrease in the marginal propensity to import
E)   an increase in investment

Question 2

If the economy is in the expansion phase of a business cycle and investment increases, when the multiplier effect kicks in the expansion

Accepted Answer

A)   picks up speed.
B)   slows down.
C)   peaks.
D)   is not effected.
E)   reverses.

Question 3

What is the key difference between the aggregate expenditure model and the aggregate demand/aggregate supply model?

Accepted Answer

A)   the aggregate expenditure model examines monetary policy whereas the aggregate demand/aggregate supply model does not
B)   monetary and real factors interact in the aggregate demand/aggregate supply model
C)   the aggregate expenditure model assumes that the price level is fixed
D)   the aggregate demand/aggregate supply model assumes that the price level is fixed
E)   the aggregate expenditure model assumes that real GDP is fixed

Question 4

As the economy turns the corner into a recession, the level of unplanned inventories ________ and firms ________ production.

Accepted Answer

A)   increases; begin to decrease
B)   increases; begin to increase
C)   decreases; begin to decrease
D)   decreases; begin to increase
E)   increases; do not change

Question 5

The aggregate expenditure model predicts a business cycle expansion occurs when

Accepted Answer

A)   autonomous expenditure increases.
B)   aggregate supply increases.
C)   potential GDP increases.
D)   induced expenditure decreases.
E)   the aggregate planned expenditure curve shifts downward.

Question 6

If aggregate planned expenditure is greater than real GDP,

Accepted Answer

A)   an unplanned decrease in inventories leads to an increase in production.
B)   an unplanned increase in inventories leads to a decrease in production.
C)   a planned decrease in inventories leads to an decrease in production.
D)   a planned increase in inventories leads to an increase in production.
E)   an unplanned decrease in inventories leads to an increase in the price level.

Question 7

If aggregate planned expenditures equal real GDP, then

Accepted Answer

A)   inventories increase above their planned levels and businesses decrease their production.
B)   inventories decrease below their planned levels and businesses increase their production.
C)   there is no equilibrium level of real GDP.
D)   inventories decrease below their planned levels and businesses decrease their production.
E)   unplanned inventory changes equal zero.

Question 8

$$\begin{array} { c c c c } 
\begin{array} { c } 
\text { Real GDP, } Y \
\text { (billions of 2005 } \
\text { dollars) }
\end{array} & \begin{array} { c } 
\text { Consumption } \
\text { expenditure, } C
\end{array} & \begin{array} { c } 
\text { (billions of 2005 } \
\text { Investment, } I
\end{array} & \begin{array} { c } 
\text { Government } \
\text { expendithare, } G
\end{array} \
\text { (billions of 2005 } & \begin{array} { c } 
\text { (billions of 2005 } \
\text { dollars) }
\end{array} & \text { dollars) } \
\hline 100 & 150 & 150 & 150 \
200 & 200 & 150 & 150 \
300 & 250 & 150 & 150 \
400 & 300 & 150 & 150 \
500 & 350 & 150 & 150 \
600 & 400 & 150 & 150 \
700 & 450 & 150 & 150 \
800 & 500 & 150 & 150 \
900 & 550 & 150 & 150 \
\hline
\end{array}$$
-The above table gives information for the nation of North Hampton.There are no imports to or exports from North Hampton.
a. Find aggregate planned expenditure for each level of real GDP.
b. What is the equilibrium level of real GDP?

Accepted Answer

\[\begin{array} { c c }
\begin{array} {...

Question 9

Disposable income  (trillions of 2005 dollars)   Consumption expenditure  (trillions of 2005 dollars)  0.01.52.03.04.04.56.06.08.07.5\begin{array} { c c } \begin{array} { c } 	ext { Disposable income } \	ext { (trillions of 2005 dollars)  }\end{array} & \begin{array} { c } 	ext { Consumption expenditure } \	ext { (trillions of 2005 dollars)  }\end{array} \\hline 0.0 & 1.5 \2.0 & 3.0 \4.0 & 4.5 \6.0 & 6.0 \8.0 & 7.5 \\hline\end{array} Disposable income  (trillions of 2005 dollars)  ​0.02.04.06.08.0​ Consumption expenditure  (trillions of 2005 dollars)  ​1.53.04.56.07.5​​ 
-The above table has data from the nation of Atlantica.Based on these data, the amount of autonomous consumption is

Accepted Answer

A)   $1.5 trillion.
B)   $1.0 trillion.
C)   $0.5 trillion.
D)   $7.5 trillion.
E)   $6.0 trillion.

Question 10

When the price level increases, aggregate planned expenditure ________ and equilibrium real GDP ________. As a result, in the AS-AD model, the aggregate demand curve has a ________ slope.

Accepted Answer

A)   increases; increases; positive
B)   decreases; decreases; negative
C)   decreases; decreases; positive
D)   increases; decreases; negative
E)   decreases; increases; negative

Question 11

Disposable income  (trillions of 2005 dollars)   Consumption expenditure  (trillions of 2005 dollars)  0.01.52.03.04.04.56.06.08.07.5\begin{array} { c c } \begin{array} { c } 	ext { Disposable income } \	ext { (trillions of 2005 dollars)  }\end{array} & \begin{array} { c } 	ext { Consumption expenditure } \	ext { (trillions of 2005 dollars)  }\end{array} \\hline 0.0 & 1.5 \2.0 & 3.0 \4.0 & 4.5 \6.0 & 6.0 \8.0 & 7.5 \\hline\end{array} Disposable income  (trillions of 2005 dollars)  ​0.02.04.06.08.0​ Consumption expenditure  (trillions of 2005 dollars)  ​1.53.04.56.07.5​​ 
-The above table has data from the nation of Media.Based on these data, when disposable income is $8.0 trillion, saving is

Accepted Answer

A)   -$0.5 trillion.
B)   -$1.5 trillion.
C)   $0.5 trillion.
D)   $1.5 trillion.
E)   $7.5 trillion.

Question 12

Briefly describe how imports and taxes affect the size of the expenditure multiplier.

Accepted Answer

Both imports and taxes make the expendit...

Question 13

-The figure above shows a nation's consumption function.If disposable income is $4 trillion, then the MPC is ________ and saving is ________.

Accepted Answer

A)   positive; positive
B)   positive; negative
C)   negative; positive
D)   negative; negative
E)   positive; zero

Question 14

"A country's expenditure multiplier is constant over time." Explain whether the previous statement is correct or incorrect.

Accepted Answer

The statement is incorrect.The expenditu...

Question 15

Disposable income  (trillions of 2005 dollars)   Consumption expenditure  (trillions of 2005 dollars)  0.01.52.03.04.04.56.06.08.07.5\begin{array} { c c } \begin{array} { c } 	ext { Disposable income } \	ext { (trillions of 2005 dollars)  }\end{array} & \begin{array} { c } 	ext { Consumption expenditure } \	ext { (trillions of 2005 dollars)  }\end{array} \\hline 0.0 & 1.5 \2.0 & 3.0 \4.0 & 4.5 \6.0 & 6.0 \8.0 & 7.5 \\hline\end{array} Disposable income  (trillions of 2005 dollars)  ​0.02.04.06.08.0​ Consumption expenditure  (trillions of 2005 dollars)  ​1.53.04.56.07.5​​ 
-The above table has data from the nation of Atlantica.Based on these data, at what point does saving equal zero.

Accepted Answer

A)   none, dissavings occurs at all of the above points
B)   none, savings occurs at all of the above points
C)   Between disposable income of $0.0 and $1.5 trillion.
D)   Between disposable income of $8.0 trillion and $7.5 trillion.
E)   At disposable income of $6.0.

Question 16

Based on data from the U.S.economy, the marginal propensity to consume is about

Accepted Answer

A)   0.87.
B)   0.75.
C)   0.60.
D)   0.95.
E)   1.10.

Question 17

The ________ the marginal propensity to import, the ________ the expenditure multiplier.

Accepted Answer

A)   smaller; smaller
B)   larger; larger
C)   larger; smaller
D)   larger; more negative
E)   None of the above is correct, because the expenditure multiplier is not related to the marginal propensity to import.

Question 18

When the price level falls, the aggregate planned expenditure curve shifts ________, equilibrium expenditure ________ and there is a movement ________ along the aggregate demand curve.

Accepted Answer

A)   upward; increases; upward
B)   downward; decreases; downward
C)   upward; increases; downward
D)   downward; increases; upward
E)   upward; decreases; downward

Question 19

The AD curve is the relationship between

Accepted Answer

A)   aggregate planned expenditure and the price level.
B)   aggregate planned expenditure and the quantity of real GDP demanded.
C)   the quantity of real GDP demanded and the quantity of real GDP supplied.
D)   the quantity of real GDP demanded and the unemployment rate.
E)   aggregate planned expenditure and real GDP when the price level is fixed.

Question 20

Real GDP is $5 trillion and aggregate planned expenditure is $7 trillion.As a result, unplanned inventory change is ________ and real GDP ________.

Accepted Answer

A)   positive; decreases
B)   positive; increases
C)   negative; increases
D)   negative; decreases
E)   negative; does not change

Exam 14: Aggregate Expenditure Multiplier

Correct Answer
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View Answer

Correct Answer
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Based on data from the U.S.economy, the marginal propensity to consume is about

Correct Answer
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The the marginal propensity to import, the the expenditure multiplier.

Correct Answer
verified

Correct Answer
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What is the key difference between the aggregate expenditure model and the aggregate demand/aggregate supply model?

Correct Answer
verified

The aggregate expenditure model predicts a business cycle expansion occurs when

Correct Answer
verified

Briefly describe how imports and taxes affect the size of the expenditure multiplier.

Correct Answer
verified
Both imports and taxes make the expendit...
View Answer

If aggregate planned expenditures equal real GDP, then

Correct Answer
verified

If aggregate planned expenditure is greater than real GDP,

Correct Answer
verified

Real GDP is $5 trillion and aggregate planned expenditure is $7 trillion.As a result, unplanned inventory change is and real GDP .

Correct Answer
verified

The AD curve is the relationship between

Correct Answer
verified

"A country's expenditure multiplier is constant over time." Explain whether the previous statement is correct or incorrect.

Correct Answer
verified
The statement is incorrect.The expenditu...
View Answer

As the economy turns the corner into a recession, the level of unplanned inventories and firms production.

Correct Answer
verified

-The figure above shows a nation's consumption function.If disposable income is $4 trillion, then the MPC is and saving is .

Correct Answer
verified

Correct Answer
verified

When the price level increases, aggregate planned expenditure and equilibrium real GDP . As a result, in the AS-AD model, the aggregate demand curve has a slope.

Correct Answer
verified

When the price level falls, the aggregate planned expenditure curve shifts , equilibrium expenditure and there is a movement along the aggregate demand curve.

Correct Answer
verified

If the economy is in the expansion phase of a business cycle and investment increases, when the multiplier effect kicks in the expansion

Correct Answer
verified

Which of the following increases the size of the expenditure multiplier?

Correct Answer
verified

Exam 14: Aggregate Expenditure Multiplier

Correct Answerverified\[\begin{array} { c c } \begin{array} {...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Based on data from the U.S.economy, the marginal propensity to consume is about

Correct AnswerverifiedShow Answer

The ________ the marginal propensity to import, the ________ the expenditure multiplier.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

What is the key difference between the aggregate expenditure model and the aggregate demand/aggregate supply model?

Correct AnswerverifiedShow Answer

The aggregate expenditure model predicts a business cycle expansion occurs when

Correct AnswerverifiedShow Answer

Briefly describe how imports and taxes affect the size of the expenditure multiplier.

Correct AnswerverifiedBoth imports and taxes make the expendit...View AnswerShow Answer

If aggregate planned expenditures equal real GDP, then

Correct AnswerverifiedShow Answer

If aggregate planned expenditure is greater than real GDP,

Correct AnswerverifiedShow Answer

Real GDP is $5 trillion and aggregate planned expenditure is $7 trillion.As a result, unplanned inventory change is ________ and real GDP ________.

Correct AnswerverifiedShow Answer

The AD curve is the relationship between

Correct AnswerverifiedShow Answer

"A country's expenditure multiplier is constant over time." Explain whether the previous statement is correct or incorrect.

Correct AnswerverifiedThe statement is incorrect.The expenditu...View AnswerShow Answer

As the economy turns the corner into a recession, the level of unplanned inventories ________ and firms ________ production.

Correct AnswerverifiedShow Answer

-The figure above shows a nation's consumption function.If disposable income is $4 trillion, then the MPC is ________ and saving is ________.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When the price level increases, aggregate planned expenditure ________ and equilibrium real GDP ________. As a result, in the AS-AD model, the aggregate demand curve has a ________ slope.

Correct AnswerverifiedShow Answer

When the price level falls, the aggregate planned expenditure curve shifts ________, equilibrium expenditure ________ and there is a movement ________ along the aggregate demand curve.

Correct AnswerverifiedShow Answer

If the economy is in the expansion phase of a business cycle and investment increases, when the multiplier effect kicks in the expansion

Correct AnswerverifiedShow Answer

Which of the following increases the size of the expenditure multiplier?

Correct AnswerverifiedShow Answer

Correct Answer
verified
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View Answer

Correct Answer
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Correct Answer
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The the marginal propensity to import, the the expenditure multiplier.

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
Both imports and taxes make the expendit...
View Answer

Correct Answer
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Correct Answer
verified

Real GDP is $5 trillion and aggregate planned expenditure is $7 trillion.As a result, unplanned inventory change is and real GDP .

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The statement is incorrect.The expenditu...
View Answer

As the economy turns the corner into a recession, the level of unplanned inventories and firms production.

Correct Answer
verified

-The figure above shows a nation's consumption function.If disposable income is $4 trillion, then the MPC is and saving is .

Correct Answer
verified

Correct Answer
verified

When the price level increases, aggregate planned expenditure and equilibrium real GDP . As a result, in the AS-AD model, the aggregate demand curve has a slope.

Correct Answer
verified

When the price level falls, the aggregate planned expenditure curve shifts , equilibrium expenditure and there is a movement along the aggregate demand curve.

Correct Answer
verified

Correct Answer
verified

Correct Answer
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