Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

Household spending on goods and services is known as

Accepted Answer

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

Question 3

Table 12-1
 
-Refer to Table 12-1.Using the table above,compute aggregate expenditure and identify the macroeconomic equilibrium.

Accepted Answer

The macroeconomic equilibrium is determi...

Question 4

How does an increase in government spending affect the aggregate expenditure line?

Accepted Answer

A)  It shifts the aggregate expenditure line upward.
B)  It shifts the aggregate expenditure line downward.
C)  It increases the slope of the aggregate expenditure line.
D)  It decreases the slope of the aggregate expenditure line.

Question 5

________ usually increase(s) when the U.S.economy is in a recession and decrease(s) when the U.S.economy is expanding.

Accepted Answer

A)  Consumer spending
B)  Planned investment
C)  Net Exports
D)  Unplanned investment

Question 6

Table 12-15
 
-Refer to Table 12-15.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 investment spending declines by $10 billion,what will happen to equilibrium GDP?

Accepted Answer

a.Equilibrium real GDP is determined whe...

Question 7

Which of the following correctly describes how an increase in the price level affects consumption spending?

Accepted Answer

A)  An increase in the price level raises real wealth,which causes consumption to increase.
B)  An increase in the price level decreases the amount of money a household needs to buy goods and raises the interest rate,which causes consumption to increase.
C)  An increase in the price level increases the amount of money a household needs to buy goods and raises the interest rate,which causes consumption to increase.
D)  An increase in the price level lowers real wealth,which causes consumption to decrease.

Question 8

In the aggregate expenditure model,________ has both an autonomous component and an induced component.

Accepted Answer

A)  planned investment spending
B)  consumption spending
C)  government spending
D)  net export spending

Question 9

Figure 12-2 
-Refer to Figure 12-2.Suppose that the level of GDP associated with point K is potential GDP.If the U.S.economy is currently at point N,

Accepted Answer

A)  firms are operating below capacity.
B)  the economy is at full employment.
C)  the economy is in an expansion.
D)  the level of unemployment is above the natural rate.

Question 10

An increase in the price level results in a(n) ________ in household consumption spending and a(n) ________ in investment spending.

Accepted Answer

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

Question 11

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

Y = C + I + G + NX.
Y = 2,800 ...

Question 12

If planned aggregate expenditure is less than real GDP,some firms will experience unplanned increases in inventories.

Accepted Answer

A) True 
 B)False

Question 13

If planned investment is greater than actual investment,then aggregate expenditure is less than GDP.

Accepted Answer

A) True 
 B)False

Question 14

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 15

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

Accepted Answer

A) True 
 B)False

Question 16

All of the following are true statements about the multiplier except

Accepted Answer

A)  the multiplier rises as the MPC rises.
B)  the smaller the MPS,the larger the multiplier.
C)  the multiplier is a value between zero and one.
D)  the multiplier effect occurs when autonomous expenditure changes.

Question 17

Figure 12-2 
-Refer to Figure 12-2.Suppose that the level of GDP associated with point N is potential GDP.If the U.S.economy is currently at point K,

Accepted Answer

A)  firms are operating above capacity.
B)  the economy is at full employment.
C)  the economy is in recession.
D)  the level of unemployment is equal to the natural rate.

Question 18

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 19

Actual investment spending includes spending by consumers on

Accepted Answer

A)  durable goods.
B)  nondurable goods.
C)  new houses.
D)  services.

Question 20

The difference between GDP and net taxes is

Accepted Answer

A)  personal income.
B)  actual investment spending.
C)  disposable income.
D)  unplanned investment spending.

Exam 12: Aggregate Expenditure and Output in the Short Run

An increase in the price level results in a(n) ________ in household consumption spending and a(n) ________ in investment spending.

Correct AnswerverifiedShow Answer

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)?

Correct AnswerverifiedY = C + I + G + NX.Y = 2,800 ...View AnswerShow Answer

Figure 12-2 -Refer to Figure 12-2.Suppose that the level of GDP associated with point K is potential GDP.If the U.S.economy is currently at point N,

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

How does an increase in government spending affect the aggregate expenditure line?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Table 12-15 -Refer to Table 12-15.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 investment spending declines by $10 billion,what will happen to equilibrium GDP?

Correct Answerverifieda.Equilibrium real GDP is determined whe...View AnswerShow Answer

________ usually increase(s) when the U.S.economy is in a recession and decrease(s) when the U.S.economy is expanding.

Correct AnswerverifiedShow Answer

Table 12-1 -Refer to Table 12-1.Using the table above,compute aggregate expenditure and identify the macroeconomic equilibrium.

Correct AnswerverifiedThe macroeconomic equilibrium is determi...View AnswerShow Answer

Which of the following correctly describes how an increase in the price level affects consumption spending?

Correct AnswerverifiedShow Answer

The difference between GDP and net taxes is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If planned investment is greater than actual investment,then aggregate expenditure is less than GDP.

Correct AnswerverifiedShow Answer

Figure 12-2 -Refer to Figure 12-2.Suppose that the level of GDP associated with point N is potential GDP.If the U.S.economy is currently at point K,

Correct AnswerverifiedShow Answer

Actual investment spending includes spending by consumers on

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If planned aggregate expenditure is less than real GDP,some firms will experience unplanned increases in inventories.

Correct AnswerverifiedShow Answer

Household spending on goods and services is known as

Correct AnswerverifiedShow Answer

In the aggregate expenditure model,________ has both an autonomous component and an induced component.

Correct AnswerverifiedShow Answer

All of the following are true statements about the multiplier except

Correct AnswerverifiedShow Answer

An increase in the price level results in a(n) in household consumption spending and a(n) in investment spending.

Correct Answer
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Y = C + I + G + NX.
Y = 2,800 ...
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a.Equilibrium real GDP is determined whe...
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The macroeconomic equilibrium is determi...
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