Question 1

If the level of real GDP is $14 trillion while aggregate planned expenditure is $15 trillion,then

Accepted Answer

A)  real GDP increases and planned expenditure decreases reaching equilibrium in the middle.
B)  inventories fall more than planned,leading firms to increase production.
C)  inventories rise more than planned,leading firms to increase production.
D)  inventories rise more than planned,leading firms to cut production.
E)  aggregate planned expenditure decreases to reach the equilibrium of $14 trillion.F) A) and B)
G) D) and E)

Question 2

In an economy with no income taxes or imports,if the multiplier is 5,what does the MPC equal?

Accepted Answer

A)  0.9
B)  0.4
C)  0.8
D)  0.5
E)  0.2F) A) and D)
G) A) and C)

Question 3

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)  decreases;increases;negative
B)  increases;increases;positive
C)  increases;decreases;negative
D)  decreases;decreases;positive
E)  decreases;decreases;negativeF) A) and D)
G) B) and D)

Question 4

The expenditure multipliers occur because

Accepted Answer

A)  a change in autonomous expenditure causes real GDP to change in the opposite direction.
B)  government expenditure on goods and services change by an amount proportional to government taxes.
C)  a change in households' incomes changes autonomous expenditure.
D)  any change in real GDP must also change the price level.
E)  a change in autonomous expenditures changes households' incomes.F) C) and E)
G) B) and E)

Question 5

-In the figure above,when disposable income equals $20 trillion,

Accepted Answer

A)  consumption expenditure is less than disposable income,so consumers are dissaving.
B)  consumption expenditure is greater than disposable income,so consumers are dissaving.
C)  consumption expenditure is greater than disposable income,so consumers are saving.
D)  consumption expenditure is less than disposable income,so consumers are saving.
E)  consumption expenditure is less than disposable income but it is not possible to determine whether consumers are saving or dissaving.F) A) and E)
G) B) and E)

Question 6

Which components of aggregate expenditure change as a result of real GDP changing?

Accepted Answer

A)  Consumption expenditure and imports
B)  Consumption expenditure,investment and exports
C)  Consumption expenditure and investment
D)  Consumption expenditure,investment,and government expenditure on goods and services
E)  Consumption expenditure and government expenditure on goods and servicesF) C) and E)
G) A) and D)

Question 7

A $1.5 trillion increase in investment leads equilibrium expenditure to increase from $7.0 trillion to $10.5 trillion.In this case,the expenditure multiplier is

Accepted Answer

A)  7.00.
B)  10.5.
C)  2.33.
D)  4.67.
E)  1.50.F) D) and E)
G) B) and C)

Question 8

A country reports that unplanned inventories increased during 2014.The increase in unplanned inventories leads to

Accepted Answer

A)  consumers increasing their consumption expenditure,which increases GDP.
B)  firms decreasing production,which decreases GDP.
C)  firms increasing production,which increases GDP.
D)  actual aggregate expenditure being different than real GDP.
E)  the government decreasing production,which decreases GDP.F) None of the above
G) B) and E)

Question 9

As disposable income ________,planned consumption expenditure ________ by a ________ amount.

Accepted Answer

A)  decreases;increases;smaller
B)  increases;increases;smaller
C)  increases;decreases;smaller
D)  decreases;increases;larger
E)  increases;increases;largerF) C) and D)
G) B) and C)

Question 10

-The table above gives data for the nation of Mosh.If real GDP is $10 trillion,then

Accepted Answer

A)  firms decrease production because inventories exceed their target levels.
B)  firms increase production because inventories are less than their target levels.
C)  firms decrease production because inventories are less than their target levels.
D)  the economy has reached equilibrium and no change in production will occur.
E)  We need more information to determine whether firms increase,decrease or do not change their production.F) A) and B)
G) A) and C)

Question 11

If aggregate planned expenditure equals GDP,then

Accepted Answer

A)  the change in firms' inventories must be negative.
B)  the change in firms' inventories must be positive.
C)  actual aggregate expenditure might be greater than,equal to or less than real GDP.
D)  there must be no change in firms' inventories.
E)  the change in firms' inventories must be equal to the planned change.F) C) and D)
G) A) and B)

Question 12

The expenditure multiplier explains how a change in

Accepted Answer

A)  real GDP leads to a change in induced expenditure.
B)  induced expenditure leads to a change in real GDP.
C)  induced expenditure leads to a change in autonomous expenditure.
D)  autonomous expenditure leads to a change in real GDP.
E)  real GDP leads to a change in autonomous expenditure.F) A) and B)
G) A) and E)

Question 13

An economy has no imports or income taxes.An increase in autonomous expenditure of $40 billion increases equilibrium expenditure by $160 billion.The expenditure multiplier equals

Accepted Answer

A)  6.
B)  8.
C)  2.
D)  4.
E)  16.F) A) and E)
G) A) and D)

Question 14

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

Accepted Answer

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

Question 15

Other things remaining the same,________ in Australian real GDP results in ________ in Australian imports.

Accepted Answer

A)  an increase;a decrease
B)  a decrease;an increase
C)  an increase;an increase
D)  an increase;a decrease followed by no change
E)  a decrease;no changeF) C) and D)
G) A) and E)

Question 16

Compared to the magnitude of the multiplier in an economy without imports,the multiplier in an identical economy with imports is

Accepted Answer

A)  exactly the same.
B)  smaller only if imports exceed exports.
C)  always smaller.
D)  larger only if exports exceed imports.
E)  always larger.F) A) and C)
G) B) and E)

Question 17

The MPC is 0.90 and there are no income taxes or imports.If government expenditures on goods and services increase by $2.0 billion,after the multiplier effect works out,aggregate expenditure increases by

Accepted Answer

A)  $1.8 billion.
B)  $2.0 billion.
C)  $2.22 billion.
D)  $20 billion.
E)  $10 billion.F) C) and E)
G) A) and E)

Question 18

-The above table has data from the nation of Atlantica.Based on these data,the amount of autonomous consumption is

Accepted Answer

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

Question 19

When the AE curve shifts upward because the price level falls,the corresponding effect on the aggregate demand curve is

Accepted Answer

A)  a shift rightward of the aggregate demand curve.
B)  a shift leftward of the aggregate demand curve.
C)  nothing because aggregate demand does respond to changes in the price level.
D)  a movement downward along the aggregate demand curve.
E)  a movement upward along the aggregate demand curve.F) C) and D)
G) A) and D)

Question 20

The slope of the consumption function is

Accepted Answer

A)  equal to the MPC and is equal to 1.
B)  equal to the MPC and is greater than 1.
C)  equal to the MPC and is less than 1.
D)  not equal to the MPC and is less than 1.
E)  not equal to the MPC and is equal to 1.F) A) and C)
G) A) and E)

Exam 12: Aggregate Expenditure Multiplier

As disposable income ________,planned consumption expenditure ________ by a ________ amount.

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If aggregate planned expenditure equals GDP,then

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Which components of aggregate expenditure change as a result of real GDP changing?

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When the AE curve shifts upward because the price level falls,the corresponding effect on the aggregate demand curve is

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The expenditure multipliers occur because

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Compared to the magnitude of the multiplier in an economy without imports,the multiplier in an identical economy with imports is

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In an economy with no income taxes or imports,if the multiplier is 5,what does the MPC equal?

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The expenditure multiplier explains how a change in

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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.

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

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An economy has no imports or income taxes.An increase in autonomous expenditure of $40 billion increases equilibrium expenditure by $160 billion.The expenditure multiplier equals

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The MPC is 0.90 and there are no income taxes or imports.If government expenditures on goods and services increase by $2.0 billion,after the multiplier effect works out,aggregate expenditure increases by

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-The above table has data from the nation of Atlantica.Based on these data,the amount of autonomous consumption is

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A country reports that unplanned inventories increased during 2014.The increase in unplanned inventories leads to

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A $1.5 trillion increase in investment leads equilibrium expenditure to increase from $7.0 trillion to $10.5 trillion.In this case,the expenditure multiplier is

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-The table above gives data for the nation of Mosh.If real GDP is $10 trillion,then

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If the level of real GDP is $14 trillion while aggregate planned expenditure is $15 trillion,then

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Other things remaining the same,________ in Australian real GDP results in ________ in Australian imports.

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The slope of the consumption function is

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-In the figure above,when disposable income equals $20 trillion,

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As disposable income ,planned consumption expenditure by a amount.

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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.

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

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Other things remaining the same, in Australian real GDP results in in Australian imports.

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