Question 1

An increase in the price level in an economy will _____

Accepted Answer

A)   shift the aggregate demand curve to the right.
B)   shift the aggregate demand curve to the left.
C)   increase the quantity of real gross domestic product (GDP)  demanded.
D)   decrease the quantity of real gross domestic product (GDP)  demanded.
E)   increase the aggregate expenditure.

Question 2

When economists say investment is autonomous, they mean that investment is independent of the level of saving.

Accepted Answer

A) True 
 B)False

Question 3

If the price level in an economy decreases, other things constant, people consume _____

Accepted Answer

A)   more because nominal income falls.
B)   less because nominal income rises.
C)   more because the real value of their wealth increases.
D)   less because real income decreases.
E)   less because the real value of their wealth decreases.

Question 4

Which of the following is correct if real GDP is $20.5 trillion and spending is $20 trillion?

Accepted Answer

A)   Inventories increase by 0.5 trillion.
B)   Inventories decrease by 0.5 trillion.
C)   GDP increases by 0.5 trillion.
D)   GDP decreases by 0.5 trillion.
E)   Spending and GDP are in equilibrium.

Question 5

Expectations that disposable income will increase in the future will _____

Accepted Answer

A)   shift the current consumption function upward.
B)   shift the current consumption function downward.
C)   result in an upward movement along the current consumption function.
D)   make the current consumption function flatter.
E)   make the current consumption function steeper.

Question 6

If the marginal propensity to consume (MPC)  is less than 1 and a household's disposable income increases by $2,000, the household's consumption will _____

Accepted Answer

A)   increase by less than $2,000.
B)   increase by $2,000.
C)   decrease if the total income of the household is above $100,000.
D)   remain the same unless the change in income significantly affects the household's wealth.
E)   increase by more than $2,000.

Question 7

In the income-expenditure model, if autonomous saving decreases by $15 billion, _____

Accepted Answer

A)   the aggregate expenditure line shifts upward by $15 billion.
B)   planned investment increases by $15 billion.
C)   the aggregate expenditure line shifts downward by $15 billion.
D)   planned investment decreases by $15 billion.
E)   the equilibrium level of real GDP demanded decreases by $15 billion.

Question 8

An increase in the interest rate will increase consumption spending.

Accepted Answer

A) True 
 B)False

Question 9

In the income-expenditure model, if autonomous investment increases by $10 billion, _____

Accepted Answer

A)   the aggregate expenditure line shifts upward by $10 billion.
B)   planned saving increases by $10 billion.
C)   the aggregate expenditure line shifts downward by $10 billion.
D)   planned saving decreases by $10 billion.
E)   the equilibrium level of real GDP demanded increases by $10 billion. A

Question 10

An increase in the marginal propensity to consume (MPC) will cause the consumption function to become steeper.

Accepted Answer

A) True 
 B)False  True

Question 11

What is the formula for the simple spending multiplier?

Accepted Answer

A)   1/(1+MP
C)  
B)   1/(1-MP
C)  
C)   1/(MPC-1) 
D)   1/MPC
E)   (1-MP
C)  /(1+MP
C)   B

Question 12

The smaller the marginal propensity to save, other things constant, _____

Accepted Answer

A)   the smaller the marginal propensity to consume.
B)   the smaller the multiplier.
C)   the flatter the consumption function.
D)   the steeper the consumption function.
E)   the steeper the saving function.

Question 13

An increase in the interest rate, other things constant, decreases the amount of investment spending.

Accepted Answer

A) True 
 B)False

Question 14

If a household's income rises from $46,000 to $46,700, and its consumption spending rises from $35,800 to $36,400, then its _____

Accepted Answer

A)   marginal propensity to consume is 0.86.
B)   marginal propensity to consume is 0.99.
C)   marginal propensity to consume is 0.98.
D)   marginal propensity to save is 0.01.
E)   marginal propensity to save is 0.86.

Question 15

A decrease in the price level in an economy will _____

Accepted Answer

A)   shift the aggregate demand curve to the right.
B)   shift the aggregate demand curve to the left.
C)   increase the level of aggregate quantity demanded.
D)   decrease the level of aggregate quantity demanded.
E)   shift the aggregate expenditure line downward.

Question 16

Which of the following is least likely to cause a shift of the consumption function?

Accepted Answer

A)   a change in the level of saving
B)   a change in consumer expectations about future prices
C)   a change in household wealth
D)   a change in investment spending
E)   a change in the interest rate

Question 17

In the simple aggregate expenditure model, the slope of the aggregate expenditure line depends on _____

Accepted Answer

A)   interest rates.
B)   real gross domestic product.
C)   the price level.
D)   the marginal propensity to consume.
E)   the marginal propensity to save.

Question 18

Table 9.3
   ‡ Table 9.3 Real  GDP ($)  Consumption ($)  Planned  Investment ($) 01401001002201002003001003003801004004601005005401006006201007007001008007801009008601001,0009401001,1001,0201001,2001,1001001,3001,180100\begin{array}{l}	ext { ‡ Table } 9.3\\begin{array} { c c c } \begin{array} { c } 	ext { Real } \	ext { GDP } ( \$ ) \end{array} & 	ext { Consumption } ( \$ )  & \begin{array} { c } 	ext { Planned } \	ext { Investment } ( \$ ) \end{array} \\hline 0 & 140 & 100 \100 & 220 & 100 \200 & 300 & 100 \300 & 380 & 100 \400 & 460 & 100 \500 & 540 & 100 \600 & 620 & 100 \700 & 700 & 100 \800 & 780 & 100 \900 & 860 & 100 \1,000 & 940 & 100 \1,100 & 1,020 & 100 \1,200 & 1,100 & 100 \1,300 & 1,180 & 100\end{array}\end{array} ‡ Table 9.3 Real  GDP ($) ​01002003004005006007008009001,0001,1001,2001,300​ Consumption ($) 1402203003804605406207007808609401,0201,1001,180​ Planned  Investment ($) ​100100100100100100100100100100100100100100​​​ 
-Refer to Table 9.3, which shows the real gross domestic product (GDP) , consumption, and planned investment in an economy. The marginal propensity to save (MPS)  in the economy is _____

Accepted Answer

A)   0.
B)   0.1.
C)   0.2.
D)   0.8.
E)   20.

Question 19

Only a change in the price level can cause shifts in both the aggregate expenditure line and the aggregate demand curve.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following is true of the simple spending multiplier?

Accepted Answer

A)   It equals the ratio of the marginal propensity to consume to the marginal propensity to save.
B)   It equals the difference between the marginal propensity to save and the marginal propensity to consume.
C)   It is the reciprocal of the marginal propensity to save.
D)   It is the reciprocal of the marginal propensity to consume.
E)   It is the sum of the marginal propensity to consume and the marginal propensity to save.

Exam 9: Aggregate Demand.

An increase in the price level in an economy will _____

Correct Answer
verified

When economists say investment is autonomous, they mean that investment is independent of the level of saving.

Correct Answer
verified

If the price level in an economy decreases, other things constant, people consume _____

Correct Answer
verified

Which of the following is correct if real GDP is $20.5 trillion and spending is $20 trillion?

Correct Answer
verified

Expectations that disposable income will increase in the future will _____

Correct Answer
verified

If the marginal propensity to consume (MPC) is less than 1 and a household's disposable income increases by $2,000, the household's consumption will _____

Correct Answer
verified

In the income-expenditure model, if autonomous saving decreases by $15 billion, _____

Correct Answer
verified

An increase in the interest rate will increase consumption spending.

Correct Answer
verified

In the income-expenditure model, if autonomous investment increases by $10 billion, _____

Correct Answer
verified
A

An increase in the marginal propensity to consume (MPC) will cause the consumption function to become steeper.

Correct Answer
verified
True

What is the formula for the simple spending multiplier?

Correct Answer
verified
B

The smaller the marginal propensity to save, other things constant, _____

Correct Answer
verified

An increase in the interest rate, other things constant, decreases the amount of investment spending.

Correct Answer
verified

If a household's income rises from $46,000 to $46,700, and its consumption spending rises from $35,800 to $36,400, then its _____

Correct Answer
verified

A decrease in the price level in an economy will _____

Correct Answer
verified

Which of the following is least likely to cause a shift of the consumption function?

Correct Answer
verified

In the simple aggregate expenditure model, the slope of the aggregate expenditure line depends on _____

Correct Answer
verified

Correct Answer
verified

Only a change in the price level can cause shifts in both the aggregate expenditure line and the aggregate demand curve.

Correct Answer
verified

Which of the following is true of the simple spending multiplier?

Correct Answer
verified

Exam 9: Aggregate Demand.

An increase in the price level in an economy will _____

Correct AnswerverifiedShow Answer

When economists say investment is autonomous, they mean that investment is independent of the level of saving.

Correct AnswerverifiedShow Answer

If the price level in an economy decreases, other things constant, people consume _____

Correct AnswerverifiedShow Answer

Which of the following is correct if real GDP is $20.5 trillion and spending is $20 trillion?

Correct AnswerverifiedShow Answer

Expectations that disposable income will increase in the future will _____

Correct AnswerverifiedShow Answer

If the marginal propensity to consume (MPC) is less than 1 and a household's disposable income increases by $2,000, the household's consumption will _____

Correct AnswerverifiedShow Answer

In the income-expenditure model, if autonomous saving decreases by $15 billion, _____

Correct AnswerverifiedShow Answer

An increase in the interest rate will increase consumption spending.

Correct AnswerverifiedShow Answer

In the income-expenditure model, if autonomous investment increases by $10 billion, _____

Correct AnswerverifiedA

An increase in the marginal propensity to consume (MPC) will cause the consumption function to become steeper.

Correct AnswerverifiedTrue

What is the formula for the simple spending multiplier?

Correct AnswerverifiedB

The smaller the marginal propensity to save, other things constant, _____

Correct AnswerverifiedShow Answer

An increase in the interest rate, other things constant, decreases the amount of investment spending.

Correct AnswerverifiedShow Answer

If a household's income rises from $46,000 to $46,700, and its consumption spending rises from $35,800 to $36,400, then its _____

Correct AnswerverifiedShow Answer

A decrease in the price level in an economy will _____

Correct AnswerverifiedShow Answer

Which of the following is least likely to cause a shift of the consumption function?

Correct AnswerverifiedShow Answer

In the simple aggregate expenditure model, the slope of the aggregate expenditure line depends on _____

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Only a change in the price level can cause shifts in both the aggregate expenditure line and the aggregate demand curve.

Correct AnswerverifiedShow Answer

Which of the following is true of the simple spending multiplier?

Correct AnswerverifiedShow 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

Correct Answer
verified
A

Correct Answer
verified
True

Correct Answer
verified
B

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified