Question 1

If the economy is currently in equilibrium at a level of GDP that is below potential GDP,which of the following would move the economy back to potential GDP?

Accepted Answer

A)   an increase in wealth
B)   an increase in interest rates
C)   a decrease in business confidence
D)   an increase in the value of the dollar relative to other currenciesE) B) and C)
F) A) and D)

Question 2

Why is the aggregate demand curve downward sloping while the aggregate expenditure line is upward sloping?

Accepted Answer

A downward sloping aggregate demand curv...

Question 3

An unplanned increase in inventories results from

Accepted Answer

A)   an increase in planned investment.
B)   a decrease in planned investment.
C)   actual investment that is greater than planned investment.
D)   actual investment that is less than planned investment.E) C) and D)
F) A) and B)

Question 4

Equations for C,I,G,and NX are given below.If the equilibrium level of GDP is $32,000,what is the marginal propensity to consume? C = 5,000 + (MPC) Y
I = 1,500
G = 2,000
NX = -500

Accepted Answer

A)   0.67
B)   0.75
C)   0.8
D)   0.9E) None of the above
F) A) and B)

Question 5

Assume that inventories declined by more than analysts predicted.This implies that

Accepted Answer

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

Question 6

Consumer spending ________ and investment spending ________.

Accepted Answer

A)   is very volatile and subject to fluctuations; follows a smooth trend
B)   follows a smooth trend; is more volatile and subject to fluctuations
C)   follows a smooth trend; is the most stable component of aggregate expenditure
D)   is very erratic; is also erratic, but less erratic than consumer spendingE) B) and C)
F) A) and D)

Question 7

What impact does a decrease in the price level in the United States have on net exports and why?

Accepted Answer

A)   A decrease in the price level increases net exports because lower prices increase the value of the dollar.
B)   A decrease in the price level increases net exports by reducing the relative cost of American goods.
C)   A decrease in the price level reduces net exports because lower prices raise the value of the dollar.
D)   A decrease in the price level reduces net exports because lower prices increase American spending on imports.E) C) and D)
F) None of the above

Question 8

When aggregate expenditure = GDP,

Accepted Answer

A)   macroeconomic equilibrium occurs.
B)   the federal budget is balanced.
C)   net exports equal zero.
D)   saving equals zero.E) A) and B)
F) A) and C)

Question 9

Table 23-6
 
-Refer to Table 23-6.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 potential GDP is $7,000 billion,is the economy at full employment? If not,what is the condition of the economy?
d.If the economy is not at full employment,by how much should government spending increase so that the economy can move to the full employment level of GDP?

Accepted Answer

a.Equilibrium real GDP is determined whe...

Question 10

If an increase in autonomous consumption spending of $10 million results in a $50 million increase in equilibrium real GDP,then

Accepted Answer

A)   the MPC is 0.5.
B)   the MPC is 0.75.
C)   the MPC is 0.8.
D)   the MPC is 0.9.E) B) and D)
F) A) and B)

Question 11

If the consumption function is defined as C = 7,250 + 0.8Y,what is the marginal propensity to save?

Accepted Answer

A)   0.2
B)   0.8
C)   5.8
D)   9.1E) A) and D)
F) All of the above

Question 12

Given Table 23-3 below,fill in the values for saving.Assume there are no taxes.

Accepted Answer

When taxes are zero,saving is ...

Question 13

If aggregate expenditure is more than GDP,then inventories fall and GDP rises.

Accepted Answer

A) True 
 B)False

Question 14

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.E) B) and D)
F) A) and D)

Question 15

All of the following are one of the four main categories of spending identified by John Maynard Keynes except

Accepted Answer

A)   consumption.
B)   net exports.
C)   government purchases.
D)   taxes.E) C) and D)
F) B) and C)

Question 16

Given Table 23-4 below,fill in the values of the marginal propensity to save (MPS)and the marginal propensity to consume (MPC).Show that MPC + MPS = 1.Table 23-4

Accepted Answer

The MPC is defined as:
MPC =

=

= 0....

Question 17

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) B) and D)
F) A) and B)

Exam 23: Aggregate Expenditure and Output in the Short Run

If the consumption function is defined as C = 7,250 + 0.8Y,what is the marginal propensity to save?

Correct Answer
verified

Given Table 23-4 below,fill in the values of the marginal propensity to save (MPS)and the marginal propensity to consume (MPC).Show that MPC + MPS = 1.Table 23-4

Correct Answer
verified
The MPC is defined as:
MPC = = = = 0....
View Answer

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

Correct Answer
verified

Assume that inventories declined by more than analysts predicted.This implies that

Correct Answer
verified

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

Correct Answer
verified

If an increase in autonomous consumption spending of $10 million results in a $50 million increase in equilibrium real GDP,then

Correct Answer
verified

When aggregate expenditure = GDP,

Correct Answer
verified

If aggregate expenditure is more than GDP,then inventories fall and GDP rises.

Correct Answer
verified

If the economy is currently in equilibrium at a level of GDP that is below potential GDP,which of the following would move the economy back to potential GDP?

Correct Answer
verified

Correct Answer
verified
a.Equilibrium real GDP is determined whe...
View Answer

Why is the aggregate demand curve downward sloping while the aggregate expenditure line is upward sloping?

Correct Answer
verified
A downward sloping aggregate demand curv...
View Answer

An unplanned increase in inventories results from

Correct Answer
verified

Given Table 23-3 below,fill in the values for saving.Assume there are no taxes.

Correct Answer
verified
When taxes are zero,saving is ...
View Answer

What impact does a decrease in the price level in the United States have on net exports and why?

Correct Answer
verified

Equations for C,I,G,and NX are given below.If the equilibrium level of GDP is $32,000,what is the marginal propensity to consume? C = 5,000 + (MPC) Y I = 1,500 G = 2,000 NX = -500

Correct Answer
verified

Consumer spending and investment spending .

Correct Answer
verified

All of the following are one of the four main categories of spending identified by John Maynard Keynes except

Correct Answer
verified

Exam 23: Aggregate Expenditure and Output in the Short Run

If the consumption function is defined as C = 7,250 + 0.8Y,what is the marginal propensity to save?

Correct AnswerverifiedShow Answer

Given Table 23-4 below,fill in the values of the marginal propensity to save (MPS)and the marginal propensity to consume (MPC).Show that MPC + MPS = 1.Table 23-4

Correct AnswerverifiedThe MPC is defined as:MPC = = = = 0....View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Assume that inventories declined by more than analysts predicted.This implies that

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If an increase in autonomous consumption spending of $10 million results in a $50 million increase in equilibrium real GDP,then

Correct AnswerverifiedShow Answer

When aggregate expenditure = GDP,

Correct AnswerverifiedShow Answer

If aggregate expenditure is more than GDP,then inventories fall and GDP rises.

Correct AnswerverifiedShow Answer

If the economy is currently in equilibrium at a level of GDP that is below potential GDP,which of the following would move the economy back to potential GDP?

Correct AnswerverifiedShow Answer

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

Why is the aggregate demand curve downward sloping while the aggregate expenditure line is upward sloping?

Correct AnswerverifiedA downward sloping aggregate demand curv...View AnswerShow Answer

An unplanned increase in inventories results from

Correct AnswerverifiedShow Answer

Given Table 23-3 below,fill in the values for saving.Assume there are no taxes.

Correct AnswerverifiedWhen taxes are zero,saving is ...View AnswerShow Answer

What impact does a decrease in the price level in the United States have on net exports and why?

Correct AnswerverifiedShow Answer

Equations for C,I,G,and NX are given below.If the equilibrium level of GDP is $32,000,what is the marginal propensity to consume? C = 5,000 + (MPC) Y I = 1,500 G = 2,000 NX = -500

Correct AnswerverifiedShow Answer

Consumer spending ________ and investment spending ________.

Correct AnswerverifiedShow Answer

All of the following are one of the four main categories of spending identified by John Maynard Keynes except

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
The MPC is defined as:
MPC = = = = 0....
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
a.Equilibrium real GDP is determined whe...
View Answer

Correct Answer
verified
A downward sloping aggregate demand curv...
View Answer

Correct Answer
verified

Correct Answer
verified
When taxes are zero,saving is ...
View Answer

Correct Answer
verified

Correct Answer
verified

Consumer spending and investment spending .

Correct Answer
verified

Correct Answer
verified