Question 1

The change in consumption divided by the change in disposable income is equal to

Accepted Answer

A)  the slope of the consumption function.
B)  aggregate expenditure.
C)  household saving.
D)  real GDP.E) None of the above
F) All of the above

Question 2

A decrease in the real interest rate will

Accepted Answer

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

Question 3

If disposable income falls by $40 billion and consumption falls by $30 billion,then the slope of the consumption function is

Accepted Answer

A)  1.33.
B)  0.75.
C)  0.4.
D)  0.3.E) C) and D)
F) All of the above

Question 4

On the 45-degree line diagram,the 45-degree line shows points where

Accepted Answer

A)  real income equals real GDP.
B)  real aggregate expenditure equals C + I.
C)  real aggregate expenditure equals real GDP.
D)  real aggregate output equals the quantity produced.E) A) and B)
F) C) and D)

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

At macroeconomic equilibrium,

Accepted Answer

A)  total investment equals total inventories.
B)  total spending equals total production.
C)  total consumption equals total production.
D)  total taxes equal total transfers.E) B) and D)
F) All of the above

Question 7

Which of the following leads to an increase in 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.E) B) and D)
F) None of the above

Question 8

What are inventories? What usually happens to inventories at the beginning of a recession,and what usually happens to inventories at the beginning of an expansion?

Accepted Answer

Inventories are goods that hav...

Question 9

Ceteris paribus,how does an expansion in the United States affect U.S.net exports?

Accepted Answer

As GDP increases in the United States du...

Question 10

C = 2,550 + (MPC)Y
I = 800
G = 1,100
NX = 50
If the equilibrium level of GDP is $11,250,using the equations for C,I,G,and NX shown above,find the value of the marginal propensity to consume.

Accepted Answer

Y = C + I + G + NX. 11,250 = 2...

Question 11

If consumption is defined as C = 4,500 + 0.75Y,then the marginal propensity to save is 0.25.

Accepted Answer

A) True 
 B)False

Question 12

If the marginal propensity to save is 0.1,then a $10 million decrease in disposable income will

Accepted Answer

A)  increase consumption by $9 million.
B)  increase consumption by $1 million.
C)  decrease consumption by $9 million.
D)  decrease consumption by $1 million.E) C) and D)
F) A) and C)

Question 13

If planned aggregate expenditure equals GDP,the economy is in macroeconomic equilibrium.

Accepted Answer

A) True 
 B)False

Question 14

If an increase in investment spending of $20 million results in a $200 million increase in equilibrium real GDP,then

Accepted Answer

A)  the multiplier is 0.1.
B)  the multiplier is 1.
C)  the multiplier is 10.
D)  the multiplier is 100.E) A) and D)
F) None of the above

Question 15

Use a 45-degree diagram to illustrate macroeconomic equilibrium.Make sure your diagram shows the aggregate expenditure function.Include in your diagram a point where aggregate expenditure is greater than GDP and a point where aggregate expenditure is less than GDP.

Accepted Answer

<img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> Macroeconomic equilibrium occ...

Question 16

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

Accepted Answer

A)  The formula for the multiplier overstates the real world multiplier when we take into account the impact of changes in GDP on imports,inflation and the interest rate.
B)  The larger the MPC,the smaller the multiplier.
C)  The multiplier is the ratio of the change in spending to the change in GDP.
D)  The multiplier makes the economy less sensitive to changes in autonomous expenditure.E) B) and D)
F) C) and D)

Question 17

________ 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 investmentE) A) and B)
F) B) and C)

Question 18

Which is the largest component of aggregate expenditure?

Accepted Answer

A)  planned investment expenditures
B)  consumption expenditures
C)  government expenditures
D)  net export expendituresE) A) and B)
F) None of the above

Question 19

Autonomous expenditure is a type of expenditure that does not depend on

Accepted Answer

A)  wealth.
B)  expectations.
C)  rates.
D)  GDP.E) B) and C)
F) All of the above

Question 20

Table 12-11
 1 to GDP2,and this amount is $400 billion.If the MPC is 0.75,then what is the distance between N and L or by how much did government spending change? A) $10 billion B) $100 billion C) $200 billion D) $300 billion" class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 12-3.Suppose that government spending increases,shifting up the aggregate expenditure line.GDP increases from GDP1 to GDP2,and this amount is $400 billion.If the MPC is 0.75,then what is the distance between N and L or by how much did government spending change?

Accepted Answer

A)  $10 billion
B)  $100 billion
C)  $200 billion
D)  $300 billionE) None of the above
F) B) and D)

Exam 12: Aggregate Expenditure and Output in the Short Run

If disposable income falls by $40 billion and consumption falls by $30 billion,then the slope of the consumption function is

Correct AnswerverifiedShow Answer

At macroeconomic equilibrium,

Correct AnswerverifiedShow Answer

If the marginal propensity to save is 0.1,then a $10 million decrease in disposable income will

Correct AnswerverifiedShow Answer

If an increase in investment spending of $20 million results in a $200 million increase in equilibrium real GDP,then

Correct AnswerverifiedShow Answer

If planned aggregate expenditure equals GDP,the economy is in macroeconomic equilibrium.

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

Correct AnswerverifiedShow Answer

The change in consumption divided by the change in disposable income is equal to

Correct AnswerverifiedShow Answer

What are inventories? What usually happens to inventories at the beginning of a recession,and what usually happens to inventories at the beginning of an expansion?

Correct AnswerverifiedInventories are goods that hav...View AnswerShow Answer

Autonomous expenditure is a type of expenditure that does not depend on

Correct AnswerverifiedShow Answer

Ceteris paribus,how does an expansion in the United States affect U.S.net exports?

Correct AnswerverifiedAs GDP increases in the United States du...View AnswerShow Answer

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

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Which is the largest component of aggregate expenditure?

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C = 2,550 + (MPC)Y I = 800 G = 1,100 NX = 50 If the equilibrium level of GDP is $11,250,using the equations for C,I,G,and NX shown above,find the value of the marginal propensity to consume.

Correct AnswerverifiedY = C + I + G + NX. 11,250 = 2...View AnswerShow Answer

Which of the following leads to an increase in real GDP?

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On the 45-degree line diagram,the 45-degree line shows points where

Correct AnswerverifiedShow Answer

Use a 45-degree diagram to illustrate macroeconomic equilibrium.Make sure your diagram shows the aggregate expenditure function.Include in your diagram a point where aggregate expenditure is greater than GDP and a point where aggregate expenditure is less than GDP.

Correct Answerverified Macroeconomic equilibrium occ...View AnswerShow Answer

A decrease in the real interest rate will

Correct AnswerverifiedShow Answer

Table 12-11 -Refer to Figure 12-3.Suppose that government spending increases,shifting up the aggregate expenditure line.GDP increases from GDP1 to GDP2,and this amount is $400 billion.If the MPC is 0.75,then what is the distance between N and L or by how much did government spending change?

Correct AnswerverifiedShow Answer

If consumption is defined as C = 4,500 + 0.75Y,then the marginal propensity to save is 0.25.

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

Correct AnswerverifiedShow Answer

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Inventories are goods that hav...
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As GDP increases in the United States du...
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Y = C + I + G + NX. 11,250 = 2...
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Macroeconomic equilibrium occ...
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Table 12-11 -Refer to Figure 12-3.Suppose that government spending increases,shifting up the aggregate expenditure line.GDP increases from GDP₁ to GDP₂,and this amount is $400 billion.If the MPC is 0.75,then what is the distance between N and L or by how much did government spending change?

Correct Answer
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