Question 1

If the marginal propensity to consume is very close to zero, then the expenditure multiplier

Accepted Answer

A)   is very close to zero.
B)   is very close to one.
C)   is very large.
D)   cannot be calculated.
E)   might be negative if the marginal tax rate is large enough.F) All of the above
G) A) and B)

Question 2

When the real interest rate rises, there is

Accepted Answer

A)   an upward movement along the consumption function.
B)   a downward movement along the consumption function.
C)   an upward shift of the consumption function.
D)   a downward shift of the consumption function.
E)   neither a shift of the consumption function or a movement along the consumption function.F) A) and C)
G) B) and D)

Question 3

An increase in the price level shifts the aggregate planned expenditure curve downward and results in a movement along the aggregate demand curve.Why does an increase in the price level result in a shift in the aggregate planned expenditure curve rather than a movement along it?

Accepted Answer

The increase in the price level shifts t...

Question 4

The size of the expenditure multiplier is influenced by i. the marginal propensity to consume.
Ii)  autonomous spending.
Iii)  the marginal tax rate.

Accepted Answer

A)   i only
B)   ii only
C)   iii only
D)   ii and iii
E)   i and iiiF) A) and D)
G) B) and C)

Question 5

The AE curve illustrates the relationship between

Accepted Answer

A)   aggregate planned expenditure and real GDP.
B)   real GDP and actual expenditure.
C)   real GDP and the interest rate.
D)   the interest rate and aggregate planned expenditure.
E)   the quantity of real GDP demanded and the price level.F) B) and E)
G) None of the above

Question 6

If the level of real GDP is $4 trillion while aggregate planned expenditure is $5 trillion, then

Accepted Answer

A)   aggregate planned expenditure decreases to reach the equilibrium of $4 trillion.
B)   inventories rise more than planned, leading firms to cut production.
C)   inventories fall more than planned, leading firms to increase production.
D)   real GDP increases and planned expenditure decreases reaching equilibrium in the middle.
E)   inventories rise more than planned, leading firms to increase production.F) A) and C)
G) A) and B)

Question 7

Increases in autonomous expenditure induce ________ in aggregate expenditure thereby making the multiplier ________.

Accepted Answer

A)   further increases; greater than one
B)   further increases; less than one
C)   a decrease; greater than one
D)   a decrease; less than one
E)   further increases; unnecessaryF) B) and C)
G) C) and D)

Question 8

During 2015, a country reports aggregate planned expenditures of $5 trillion and an actual real GDP of $4 trillion.During 2015,

Accepted Answer

A)   inventories are less than planned.
B)   inventories are greater than planned.
C)   inventories are unaffected.
D)   actual aggregate expenditures are greater than real GDP.
E)   actual aggregate expenditures are less than real GDP.F) B) and D)
G) All of the above

Question 9

Moving along the aggregate expenditure (AE)  curve, when real GDP increases, aggregate planned expenditures increase

Accepted Answer

A)   by more than real GDP.
B)   by the same amount as does real GDP.
C)   by less than real GDP.
D)   proportionately with real GDP.
E)   by the same percentage as does real GDP.F) D) and E)
G) C) and D)

Question 10

When disposable income is zero, consumption expenditure is

Accepted Answer

A)   equal to autonomous consumption.
B)   also zero.
C)   negative.
D)   equal to induced consumption expenditure.
E)   None of the above answers is correct.F) A) and B)
G) A) and C)

Question 11

If aggregate planned expenditure equals GDP, then

Accepted Answer

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

Question 12

Unplanned inventories increase when

Accepted Answer

A)   real GDP is less than aggregate planned expenditure.
B)   actual aggregate expenditure is greater than aggregate planned expenditure.
C)   actual aggregate expenditure is equal to GDP.
D)   aggregate planned expenditure is less than GDP.
E)   actual aggregate expenditure is less than GDP.F) A) and B)
G) A) and C)

Question 13

At $10,000 of disposable income, Audrey's consumption expenditure was $11,000.At $20,000 of disposable income, Audrey's consumption expenditure was $19,000.What is Audrey's marginal propensity to consume?

Accepted Answer

The marginal propensity to consume is th...

Question 14

The expenditure multiplier is typically

Accepted Answer

A)   less than 1 but greater than 0.
B)   greater than 1.
C)   equal to 1.
D)   greater than 10.
E)   negative.F) B) and D)
G) B) and C)

Question 15

If an economy experiences a $0.8 trillion increase in investment resulting in an increase in real GDP from $10 trillion to $12 trillion
a. what is the change in equilibrium expenditure
b. what is the change in autonomous expenditure
c. what is the multiplier
d. how would an increase in the marginal tax rate effect the multiplier

Accepted Answer

a. The change in equilibrium expenditure...

Question 16

Which of the following situations leads to an unplanned increase in inventories of $2.0 trillion?

Accepted Answer

A)   real GDP = $5.0 trillion and aggregate planned expenditures = $7.0 trillion
B)   real GDP = $5.0 trillion and aggregate planned expenditures = $5.0 trillion
C)   real GDP = $6.0 trillion and aggregate planned expenditures = $4.0 trillion
D)   real GDP = $8.0 trillion and aggregate planned expenditures = $5.0 trillion
E)   More information is needed about planned investment and actual investment.F) A) and E)
G) D) and E)

Question 17

Induced expenditure is any expenditure that

Accepted Answer

A)   is fixed for all levels of real GDP.
B)   is fixed for all price levels.
C)   is fixed for all levels of the interest rate.
D)   changes when real GDP changes.
E)   changes when the interest rate changes.F) C) and D)
G) B) and C)

Question 18

Points where the aggregate expenditure (AE)  curve lie above the 45∘ line are points where aggregate planned expenditure is

Accepted Answer

A)   greater than real GDP.
B)   less than real GDP.
C)   equal to real GDP.
D)   the inverse of real GDP.
E)   not related to real GDP.F) None of the above
G) All of the above

Question 19

If the slope of the aggregate expenditure curve is 0.5, then the expenditure multiplier equals

Accepted Answer

A)   5.
B)   4.
C)   3.
D)   2.
E)   0.5.F) None of the above
G) B) and C)

Question 20

What is the relationship between the aggregate planned expenditure curve and the aggregate demand curve?
 Explain the relationship.

Accepted Answer

The aggregate demand curve is derived us...

Exam 14: Aggregate Expenditure Multiplier

If aggregate planned expenditure equals GDP, then

Correct Answer
verified

Points where the aggregate expenditure (AE) curve lie above the 45∘ line are points where aggregate planned expenditure is

Correct Answer
verified

Induced expenditure is any expenditure that

Correct Answer
verified

The size of the expenditure multiplier is influenced by i. the marginal propensity to consume. Ii) autonomous spending. Iii) the marginal tax rate.

Correct Answer
verified

What is the relationship between the aggregate planned expenditure curve and the aggregate demand curve? Explain the relationship.

Correct Answer
verified
The aggregate demand curve is derived us...
View Answer

When the real interest rate rises, there is

Correct Answer
verified

An increase in the price level shifts the aggregate planned expenditure curve downward and results in a movement along the aggregate demand curve.Why does an increase in the price level result in a shift in the aggregate planned expenditure curve rather than a movement along it?

Correct Answer
verified
The increase in the price level shifts t...
View Answer

Moving along the aggregate expenditure (AE) curve, when real GDP increases, aggregate planned expenditures increase

Correct Answer
verified

If the marginal propensity to consume is very close to zero, then the expenditure multiplier

Correct Answer
verified

At $10,000 of disposable income, Audrey's consumption expenditure was $11,000.At $20,000 of disposable income, Audrey's consumption expenditure was $19,000.What is Audrey's marginal propensity to consume?

Correct Answer
verified
The marginal propensity to consume is th...
View Answer

The expenditure multiplier is typically

Correct Answer
verified

If the level of real GDP is $4 trillion while aggregate planned expenditure is $5 trillion, then

Correct Answer
verified

During 2015, a country reports aggregate planned expenditures of $5 trillion and an actual real GDP of $4 trillion.During 2015,

Correct Answer
verified

Correct Answer
verified
a. The change in equilibrium expenditure...
View Answer

Unplanned inventories increase when

Correct Answer
verified

Increases in autonomous expenditure induce in aggregate expenditure thereby making the multiplier .

Correct Answer
verified

When disposable income is zero, consumption expenditure is

Correct Answer
verified

If the slope of the aggregate expenditure curve is 0.5, then the expenditure multiplier equals

Correct Answer
verified

Which of the following situations leads to an unplanned increase in inventories of $2.0 trillion?

Correct Answer
verified

The AE curve illustrates the relationship between

Correct Answer
verified

Exam 14: Aggregate Expenditure Multiplier

If aggregate planned expenditure equals GDP, then

Correct AnswerverifiedShow Answer

Points where the aggregate expenditure (AE) curve lie above the 45∘ line are points where aggregate planned expenditure is

Correct AnswerverifiedShow Answer

Induced expenditure is any expenditure that

Correct AnswerverifiedShow Answer

The size of the expenditure multiplier is influenced by i. the marginal propensity to consume. Ii) autonomous spending. Iii) the marginal tax rate.

Correct AnswerverifiedShow Answer

What is the relationship between the aggregate planned expenditure curve and the aggregate demand curve? Explain the relationship.

Correct AnswerverifiedThe aggregate demand curve is derived us...View AnswerShow Answer

When the real interest rate rises, there is

Correct AnswerverifiedShow Answer

An increase in the price level shifts the aggregate planned expenditure curve downward and results in a movement along the aggregate demand curve.Why does an increase in the price level result in a shift in the aggregate planned expenditure curve rather than a movement along it?

Correct AnswerverifiedThe increase in the price level shifts t...View AnswerShow Answer

Moving along the aggregate expenditure (AE) curve, when real GDP increases, aggregate planned expenditures increase

Correct AnswerverifiedShow Answer

If the marginal propensity to consume is very close to zero, then the expenditure multiplier

Correct AnswerverifiedShow Answer

At $10,000 of disposable income, Audrey's consumption expenditure was $11,000.At $20,000 of disposable income, Audrey's consumption expenditure was $19,000.What is Audrey's marginal propensity to consume?

Correct AnswerverifiedThe marginal propensity to consume is th...View AnswerShow Answer

The expenditure multiplier is typically

Correct AnswerverifiedShow Answer

If the level of real GDP is $4 trillion while aggregate planned expenditure is $5 trillion, then

Correct AnswerverifiedShow Answer

During 2015, a country reports aggregate planned expenditures of $5 trillion and an actual real GDP of $4 trillion.During 2015,

Correct AnswerverifiedShow Answer

Correct Answerverifieda. The change in equilibrium expenditure...View AnswerShow Answer

Unplanned inventories increase when

Correct AnswerverifiedShow Answer

Increases in autonomous expenditure induce ________ in aggregate expenditure thereby making the multiplier ________.

Correct AnswerverifiedShow Answer

When disposable income is zero, consumption expenditure is

Correct AnswerverifiedShow Answer

If the slope of the aggregate expenditure curve is 0.5, then the expenditure multiplier equals

Correct AnswerverifiedShow Answer

Which of the following situations leads to an unplanned increase in inventories of $2.0 trillion?

Correct AnswerverifiedShow Answer

The AE curve illustrates the relationship between

Correct AnswerverifiedShow 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
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The aggregate demand curve is derived us...
View Answer

Correct Answer
verified

Correct Answer
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The increase in the price level shifts t...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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The marginal propensity to consume is th...
View Answer

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Correct Answer
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Correct Answer
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Correct Answer
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a. The change in equilibrium expenditure...
View Answer

Correct Answer
verified

Increases in autonomous expenditure induce in aggregate expenditure thereby making the multiplier .

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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