Question 1

If spending increases by $250, and GDP decreases by $1,000 as a result, what must the MPC be?

Accepted Answer

A)   0.25
B)   0.75
C)   4
D)   2E) B) and C)
F) None of the above

Question 2

Planned investment is the:

Accepted Answer

A)   spending households engage in based on their forecasted budget.
B)   amount that firms budget to spend on their workforces.
C)   investment that a firm decides upon as a result of temporary market changes.
D)   amount that firms budget for new capital resources and inventory accumulation.E) B) and D)
F) None of the above

Question 3

Consumer preference for foreign goods and services generally has a _______ relationship with aggregate expenditure.

Accepted Answer

A)   negative
B)   positive
C)   skewed
D)   constantE) B) and D)
F) A) and B)

Question 4

What is the calculation for the simplified spending multiplier?

Accepted Answer

A)   1/(1 − MP
C)  
B)   −1/(1 − MP
C)  
C)   −MPC/(1 − MP
C)  
D)   (1 − MP
C)   × − MPCE) B) and C)
F) None of the above

Question 5

The acronym MPC stands for:

Accepted Answer

A)   marginal production cost.
B)   marginal propensity to consume.
C)   marginally perfect consumption.
D)   macro possibility curve.E) A) and D)
F) None of the above

Question 6

The figure shows planned aggregate expenditure and output for an economy. 1, we would expect there to be: A)  a decrease in inventories. B)  an increase in inventories. C)  no change in inventories. D)  an increase in consumption spending." class="answers-bank-image d-inline" rel="preload" > If output in this economy is Y1, we would expect there to be:

Accepted Answer

A)   a decrease in inventories.
B)   an increase in inventories.
C)   no change in inventories.
D)   an increase in consumption spending.E) A) and B)
F) All of the above

Question 7

Which of the following is a determinant of investment spending?

Accepted Answer

A)   Real income
B)   Expected future income
C)   Taxes
D)   WealthE) C) and D)
F) B) and C)

Question 8

The macroeconomic variable used to assess the equivalence of PAE and actual output (Y)  is:

Accepted Answer

A)   unemployment.
B)   interest rates.
C)   inventories.
D)   capital expenditure.E) A) and B)
F) A) and C)

Question 9

The figure shows planned aggregate expenditure and output for an economy. 2 and PAE 3 B)  PAE 1 and PAE 2 C)  Y 1 and Y 2 D)  Y 2 and Y 3" class="answers-bank-image d-inline" rel="preload" > The distance between _______ illustrates an inflationary expenditure gap.

Accepted Answer

A)   PAE 2 and PAE 3
B)   PAE 1 and PAE 2
C)   Y 1 and Y 2
D)   Y 2 and Y 3E) A) and D)
F) A) and C)

Question 10

Autonomous expenditure:

Accepted Answer

A)   has a positive relationship with income.
B)   is mostly controlled by the government.
C)   is independent of the current level of income in the economy.
D)   stays constant over time.E) A) and D)
F) A) and C)

Question 11

If the MPC is 0.75, what must the spending multiplier be?

Accepted Answer

A)   3
B)   4
C)   5
D)   1.25E) None of the above
F) A) and B)

Question 12

Which of the following is not a primary determinant of consumption spending?

Accepted Answer

A)   Interest rates on savings
B)   Real income
C)   Wealth
D)   Rate of return on capitalE) None of the above
F) B) and C)

Question 13

Actual investment is the:

Accepted Answer

A)   spending households engage in based on what they earn.
B)   amount that firms spend on their workforces.
C)   investment a firm makes into stocks and bonds to generate profit.
D)   amount firms allocate to new capital resources and inventory accumulation.E) A) and C)
F) A) and B)

Question 14

A _______ relationship exists between business taxes and investment spending.

Accepted Answer

A)   negative
B)   positive
C)   secondary
D)   constantE) A) and B)
F) A) and C)

Question 15

In the equation PAE = A + bY, the MPC is captured by:

Accepted Answer

A)   b.
B)   Y.
C)   A.
D)   PAE.E) C) and D)
F) A) and B)

Question 16

The four components of aggregate expenditure (AE)  are:

Accepted Answer

A)   consumption, investment, exports, and imports.
B)   consumption, investment, government, and capital.
C)   consumption, investment, government, and net exports.
D)   consumption, internet, government, and capital.E) A) and B)
F) A) and C)

Question 17

If the MPC is 0.6, and the government spends an additional $50 billion, the overall effect on GDP will be:

Accepted Answer

A)   an increase of $250 billion.
B)   a decrease of $25 billion.
C)   a decrease of $75 billion.
D)   an increase of $125 billion.E) A) and C)
F) All of the above

Question 18

If the MPC is 0.5, and the government cuts spending by $400 billion, the overall effect on GDP will be:

Accepted Answer

A)   a decrease of $400 billion.
B)   an increase of $400 billion.
C)   a decrease of $800 billion.
D)   an increase of $800 billion.E) A) and C)
F) C) and D)

Question 19

In order to accurately capture the multiplier effect, it is important to know:

Accepted Answer

A)   an individual's wealth.
B)   what proportion of additional income people spend.
C)   what people's expectations of the future are.
D)   real GDP.E) A) and C)
F) B) and C)

Question 20

The figure shows planned aggregate expenditure and output for an economy. 2. Which change would cause a move from PAE2 to PAE3? A)  Consumption spending increases. B)  Investment decreases. C)  Imports increase. D)  Exports decrease." class="answers-bank-image d-inline" rel="preload" > Suppose that the economy starts at PAE2. Which change would cause a move from PAE2 to PAE3?

Accepted Answer

A)   Consumption spending increases.
B)   Investment decreases.
C)   Imports increase.
D)   Exports decrease.E) A) and B)
F) B) and C)

Exam 11: Aggregateexpenditures

The figure shows planned aggregate expenditure and output for an economy. Suppose that the economy starts at PAE2. Which change would cause a move from PAE2 to PAE3?

Correct AnswerverifiedShow Answer

If the MPC is 0.6, and the government spends an additional $50 billion, the overall effect on GDP will be:

Correct AnswerverifiedShow Answer

Consumer preference for foreign goods and services generally has a _______ relationship with aggregate expenditure.

Correct AnswerverifiedShow Answer

Actual investment is the:

Correct AnswerverifiedShow Answer

The figure shows planned aggregate expenditure and output for an economy. If output in this economy is Y1, we would expect there to be:

Correct AnswerverifiedShow Answer

The macroeconomic variable used to assess the equivalence of PAE and actual output (Y) is:

Correct AnswerverifiedShow Answer

A _______ relationship exists between business taxes and investment spending.

Correct AnswerverifiedShow Answer

If spending increases by $250, and GDP decreases by $1,000 as a result, what must the MPC be?

Correct AnswerverifiedShow Answer

In the equation PAE = A + bY, the MPC is captured by:

Correct AnswerverifiedShow Answer

If the MPC is 0.5, and the government cuts spending by $400 billion, the overall effect on GDP will be:

Correct AnswerverifiedShow Answer

In order to accurately capture the multiplier effect, it is important to know:

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Planned investment is the:

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Which of the following is not a primary determinant of consumption spending?

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The figure shows planned aggregate expenditure and output for an economy. The distance between _______ illustrates an inflationary expenditure gap.

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Which of the following is a determinant of investment spending?

Correct AnswerverifiedShow Answer

The acronym MPC stands for:

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Autonomous expenditure:

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What is the calculation for the simplified spending multiplier?

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The four components of aggregate expenditure (AE) are:

Correct AnswerverifiedShow Answer

If the MPC is 0.75, what must the spending multiplier be?

Correct AnswerverifiedShow Answer

The figure shows planned aggregate expenditure and output for an economy. Suppose that the economy starts at PAE₂. Which change would cause a move from PAE₂ to PAE₃?

Correct Answer
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The figure shows planned aggregate expenditure and output for an economy. If output in this economy is Y₁, we would expect there to be:

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