Question 1

3 The Multiplier
-When autonomous expenditure decreases,

Accepted Answer

A)   the AE curve shifts downward.
B)   there is a movement down along the AE curve.
C)   the AE curve becomes less steep.
D)   the AE curve shifts upward.E) A) and D)
F) A) and C)

Question 2

Between 2015 and 2016 the government reported that disposable income decreased by $400 billion and consumption expenditure decreased by $280 billion. Based on these data, the MPS equals

Accepted Answer

A)   1.42.
B)   0.70.
C)   0.30.
D)   $120 billion.E) B) and C)
F) All of the above

Question 3

If aggregate planned expenditure is less than real GDP

Accepted Answer

A)   real GDP will increase.
B)   real GDP remains unchanged.
C)   real GDP will either decrease or increase, depending on the MPC.
D)   inventories will increase above their target level and real GDP will decrease.E) A) and B)
F) A) and C)

Question 4

0. Suppose investment decreases. As a result A)  the AE curve shifts upward to a curve such as AE2. B)  the AE curve shifts downward to a curve such as AE1. C)  there is a movement along AE0 to a point such as B. D)  there is a movement along AE0 to a point such as C." class="answers-bank-image d-inline" rel="preload" >
-In the above figure the economy is initially at point A on the aggregate expenditure curve AE0. Suppose investment decreases. As a result

Accepted Answer

A)   the AE curve shifts upward to a curve such as AE2.
B)   the AE curve shifts downward to a curve such as AE1.
C)   there is a movement along AE0 to a point such as B.
D)   there is a movement along AE0 to a point such as C.E) All of the above
F) A) and B)

Question 5

The government increases its expenditures. The steeper the SAS curve, the ________ will be the increase in the price level and the ________ will be the increase in real GDP.

Accepted Answer

A)   larger; larger
B)   larger; smaller
C)   smaller; larger
D)   smaller; smallerE) A) and B)
F) A) and C)

Question 6

Explain the basic idea of the expenditure multiplier and the role consumers play in determining its magnitude.

Accepted Answer

The basic idea of the multiplier is that...

Question 7

An increase in the value of the multiplier can be caused by

Accepted Answer

A)   a decrease in the marginal propensity to consume.
B)   an increase in the marginal propensity to import.
C)   an increase in autonomous consumption expenditure.
D)   an increase in the marginal propensity to consume.E) None of the above
F) All of the above

Question 8

-In the above figure, equilibrium expenditure is

Accepted Answer

A)   less than $16 trillion.
B)   $16 trillion.
C)   more than $16 trillion.
D)   some amount that cannot be determined without more information.E) A) and D)
F) A) and C)

Question 9

0 to AE1 might have been caused by A)  an increase in government expenditures. B)  an increase in the real interest rate. C)  an increase in the price level. D)  All of the above answers are correct. " class="answers-bank-image d-inline" rel="preload" >
-In the above figure, the shift from AE0 to AE1 might have been caused by

Accepted Answer

A)   an increase in government expenditures.
B)   an increase in the real interest rate.
C)   an increase in the price level.
D)   All of the above answers are correct.E) A) and B)
F) A) and C)

Question 10

A decrease in autonomous consumption will

Accepted Answer

A)   shift the aggregate expenditure function downward.
B)   decrease the marginal propensity to save.
C)   decrease the marginal propensity to consume.
D)   change the slope of the aggregate expenditure curve.E) A) and D)
F) C) and D)

Question 11

Intertemporal substitution means changes in purchases

Accepted Answer

A)   through time.
B)   between imports and exports.
C)   across different stores.
D)   across different goods and services.E) A) and B)
F) C) and D)

Question 12

The multiplier measures the

Accepted Answer

A)   horizontal shift in the aggregate demand curve from an increase in autonomous spending.
B)   vertical shift in the aggregate demand curve from an increase in autonomous spending.
C)   horizontal difference between two points on the same aggregate demand curve.
D)   vertical difference between two points on the same aggregate demand curve.E) None of the above
F) A) and B)

Question 13

If wealth increases, the consumption function shifts upward.

Accepted Answer

A) True 
 B)False

Question 14

If consumption expenditures for a household increase from $1,000 to $1,800 when disposable income rises from $1,000 to $2,000, the marginal propensity to consume is

Accepted Answer

A)   0.8.
B)   80.
C)   1.25.
D)   0.2.E) All of the above
F) A) and D)

Question 15

A movement along the consumption function to higher levels of consumption expenditure arises because

Accepted Answer

A)   the level of disposable income decreases.
B)   household wealth rises.
C)   the level of disposable income increases.
D)   the level of desired saving rises.E) B) and C)
F) None of the above

Question 16

-In the above figure, line ABC is called

Accepted Answer

A)   the 45-degree line.
B)   the consumption function.
C)   the saving function.
D)   aggregate supply.E) A) and B)
F) B) and C)

Question 17

-In the above figure, point d represents the point where planned expenditures are ________ real GDP.

Accepted Answer

A)   greater than
B)   equal to
C)   less than
D)   There is not enough information to answer the question.E) A) and C)
F) All of the above

Question 18

-The figure above illustrates an economy's consumption function. What is autonomous consumption in this economy?

Accepted Answer

A)   $0
B)   $4 trillion
C)   $6 trillion
D)   None of the above answers is correct.E) C) and D)
F) B) and C)

Question 19

The smaller the slope of the AE curve,

Accepted Answer

A)   the greater is the value of the multiplier.
B)   the smaller is slope of the saving function.
C)   the steeper is the consumption function.
D)   the smaller is the value of the multiplier.E) A) and B)
F) A) and C)

Question 20

Disposable income is equal to

Accepted Answer

A)   consumption expenditure minus taxes plus transfer payments.
B)   aggregate income minus taxes plus government expenditures on goods and services.
C)   aggregate income minus taxes plus transfer payments.
D)   aggregate income plus transfer payments.E) B) and C)
F) None of the above

Exam 11: Expenditure Multipliers

If consumption expenditures for a household increase from $1,000 to $1,800 when disposable income rises from $1,000 to $2,000, the marginal propensity to consume is

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An increase in the value of the multiplier can be caused by

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Between 2015 and 2016 the government reported that disposable income decreased by $400 billion and consumption expenditure decreased by $280 billion. Based on these data, the MPS equals

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-The figure above illustrates an economy's consumption function. What is autonomous consumption in this economy?

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-In the above figure, line ABC is called

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If aggregate planned expenditure is less than real GDP

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-In the above figure the economy is initially at point A on the aggregate expenditure curve AE0. Suppose investment decreases. As a result

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-In the above figure, equilibrium expenditure is

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-In the above figure, point d represents the point where planned expenditures are ________ real GDP.

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Disposable income is equal to

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The government increases its expenditures. The steeper the SAS curve, the ________ will be the increase in the price level and the ________ will be the increase in real GDP.

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-In the above figure, the shift from AE0 to AE1 might have been caused by

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3 The Multiplier -When autonomous expenditure decreases,

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If wealth increases, the consumption function shifts upward.

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Intertemporal substitution means changes in purchases

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A decrease in autonomous consumption will

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Explain the basic idea of the expenditure multiplier and the role consumers play in determining its magnitude.

Correct AnswerverifiedThe basic idea of the multiplier is that...View AnswerShow Answer

The multiplier measures the

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A movement along the consumption function to higher levels of consumption expenditure arises because

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The smaller the slope of the AE curve,

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-In the above figure the economy is initially at point A on the aggregate expenditure curve AE₀. Suppose investment decreases. As a result

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The government increases its expenditures. The steeper the SAS curve, the will be the increase in the price level and the will be the increase in real GDP.

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-In the above figure, the shift from AE₀ to AE₁ might have been caused by

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The basic idea of the multiplier is that...
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