Question 1

John Maynard Keynes argued that if many households decide at the same time to increase saving and reduce spending,

Accepted Answer

A)   this may benefit the economy in the short run, but not in the long run.
B)   the economy will benefit in the short run and benefit by an even greater amount in the long run.
C)   this will have a major negative impact on the economy in both the short run and in the long run.
D)   this may benefit the economy in the long run, but could be counterproductive in the short run.E) A) and B)
F) A) and C)

Question 2

Discuss the leading causes of the Great Depression.Use the 45-degree line diagram to show how they caused a decline in GDP.

Accepted Answer

Several events lowered aggregate expendi...

Question 3

If economists forecast a decrease in aggregate expenditure,which of the following is likely to occur?

Accepted Answer

A)   GDP will rise.
B)   GDP will fall.
C)   Wages will rise.
D)   Inventories will fall.E) A) and D)
F) A) and B)

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

Actual investment spending does not include

Accepted Answer

A)   spending on consumer durable goods.
B)   spending on new capital equipment.
C)   spending on new houses.
D)   changes in inventories.E) B) and C)
F) A) and D)

Question 6

When net exports equal zero,the economy is in macroeconomic equilibrium.

Accepted Answer

A) True 
 B)False

Question 7

Figure 23-1
 
-Refer to Figure 23-1.At point L in the figure above,which of the following is true?

Accepted Answer

A)   Aggregate expenditure is greater than GDP.
B)   The economy has achieved macroeconomic equilibrium.
C)   Actual inventories are greater than planned inventories.
D)   GDP will be increasing.E) All of the above
F) A) and B)

Question 8

When we graph consumption as a function of ________ rather than as a function of disposable income,the slope of this consumption function is ________.

Accepted Answer

A)   national income; the MPC
B)   personal income; (MPC - MPS) 
C)   national income; the MPS
D)   personal income; the MPSE) None of the above
F) All of the above

Question 9

If an increase in investment spending of $50 million results in a $400 million increase in equilibrium real GDP,then

Accepted Answer

A)   the multiplier is 0.125.
B)   the multiplier is 3.5.
C)   the multiplier is 8.
D)   the multiplier is 50.E) None of the above
F) All of the above

Question 10

Household spending on goods and services is known as

Accepted Answer

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

Question 11

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 spendingE) A) and B)
F) A) and C)

Question 12

A decrease in consumer confidence can put your job at risk if

Accepted Answer

A)   aggregate expenditures fall.
B)   consumers expect their incomes to rise in the future.
C)   aggregate expenditures rise.
D)   consumers expect firms to increase investment in the future.E) C) and D)
F) A) and D)

Question 13

If the marginal propensity to save is 0.25,then a $10,000 decrease in disposable income will

Accepted Answer

A)   increase consumption by $7,500.
B)   increase consumption by $2,500.
C)   decrease consumption by $7,500.
D)   decrease consumption by $2,500.E) All of the above
F) None of the above

Question 14

The slope of the consumption function is equal to

Accepted Answer

A)   the change in consumption divided by the change in disposable income.
B)   the change in consumption divided by the change in personal income.
C)   the change in disposable income divided by the change in consumption.
D)   the change in national income divided by the change in consumption.E) C) and D)
F) None of the above

Question 15

The aggregate demand curve shows the relationship between the price level and the level of planned aggregate expenditure in the economy.

Accepted Answer

A) True 
 B)False

Question 16

On the 45-degree line diagram,for points that lie below the 45-degree line,

Accepted Answer

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

Question 17

If consumption is defined as C = 1,350 + 0.6Y,then the marginal propensity to consume is 0.6.

Accepted Answer

A) True 
 B)False

Question 18

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) All of the above
F) None of the above

Question 19

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

Question 20

Firms in a small economy planned that inventories would grow over the past year by $300,000.Over that year,inventories actually grew by $400,000.This implies that

Accepted Answer

A)   aggregate expenditure that year was less than GDP that year.
B)   there was an unplanned decrease in inventories that year.
C)   there was a planned decrease in inventories that year.
D)   aggregate expenditure that year was equal to GDP that year.E) A) and B)
F) None of the above

Exam 12: Aggregate Expenditure and Output in the Short Run

On the 45-degree line diagram,for points that lie below the 45-degree line,

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When net exports equal zero,the economy is in macroeconomic equilibrium.

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The slope of the consumption function is equal to

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When we graph consumption as a function of ________ rather than as a function of disposable income,the slope of this consumption function is ________.

Correct AnswerverifiedShow Answer

Actual investment spending does not include

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If the marginal propensity to save is 0.25,then a $10,000 decrease in disposable income will

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The aggregate demand curve shows the relationship between the price level and the level of planned aggregate expenditure in the economy.

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Discuss the leading causes of the Great Depression.Use the 45-degree line diagram to show how they caused a decline in GDP.

Correct AnswerverifiedSeveral events lowered aggregate expendi...View AnswerShow Answer

Household spending on goods and services is known as

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Figure 23-1 -Refer to Figure 23-1.At point L in the figure above,which of the following is true?

Correct AnswerverifiedShow Answer

John Maynard Keynes argued that if many households decide at the same time to increase saving and reduce spending,

Correct AnswerverifiedShow Answer

If consumption is defined as C = 1,350 + 0.6Y,then the marginal propensity to consume is 0.6.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Firms in a small economy planned that inventories would grow over the past year by $300,000.Over that year,inventories actually grew by $400,000.This implies that

Correct AnswerverifiedShow Answer

If an increase in investment spending of $50 million results in a $400 million increase in equilibrium real GDP,then

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A decrease in consumer confidence can put your job at risk if

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

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An unplanned increase in inventories results from

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

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If economists forecast a decrease in aggregate expenditure,which of the following is likely to occur?

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When we graph consumption as a function of rather than as a function of disposable income,the slope of this consumption function is .

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Several events lowered aggregate expendi...
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