Question 1

If trade policies change, then we would expect aggregate expenditure to:

Accepted Answer

A)   increase.
B)   decrease.
C)   remain constant.
D)   depends on the policy.E) A) and B)
F) A) and C)

Question 2

A main reason the federal government may choose to spend would be the:

Accepted Answer

A)   real interest rates decrease.
B)   real interest rates increase.
C)   desire to achieve full-employment GDP.
D)   government expected to earn a large return on its spending.E) C) and D)
F) All of the above

Question 3

Which of the following could be a direct cause of investment spending increasing?

Accepted Answer

A)   The wealth of consumers increasing causing them to radically increase their purchases.
B)   Interest rates increase.
C)   A firms costs unexpectedly drop making their profit margin higher.
D)   Expected future income decreases.E) A) and D)
F) All of the above

Question 4

The spending multiplier:

Accepted Answer

A)   grows larger as the marginal propensity to consume increases.
B)   grows larger as the marginal propensity to consume decreases.
C)   grows smaller as the marginal propensity to consume increases.
D)   None of these is true.E) B) and C)
F) None of the above

Question 5

Which of the following is not a determinant of Investment spending?

Accepted Answer

A)   Real income
B)   Interest rates
C)   Taxes
D)   Expected profitabilityE) C) and D)
F) B) and D)

Question 6

What type of relationship do business taxes have with respect to Investment spending?

Accepted Answer

A)   Negative
B)   Positive
C)   Secondary
D)   ConstantE) B) and C)
F) None of the above

Question 7

actual output. C)  no change in production since PAE = actual output. D)  a decrease in production since PAE  In Figure 1 above if the economy were at Y3 then we would expect there to be:

Accepted Answer

A)   an increase in production since PAE 
B)   an increase in production since PAE > actual output.
C)   no change in production since PAE = actual output.
D)   a decrease in production since PAE < actual output.E) B) and C)
F) A) and B)

Question 8

If spending increased by $100, and the GDP increased $400 as a result, the MPC must be:

Accepted Answer

A)   0.70
B)   0.75
C)   4
D)   2E) A) and B)
F) A) and C)

Question 9

If the marginal propensity to consume was 0.9, it would mean that:

Accepted Answer

A)   consumers spend $9 out of every $10 of additional disposable income.
B)   consumers save $9 out of every $10 of additional disposable income.
C)   consumers spend $1 out of every $10 of additional disposable income.
D)   people should save more.E) All of the above
F) C) and D)

Question 10

The multiplier effect suggests that:

Accepted Answer

A)   spending $1 increases GDP by more than $1.
B)   spending $1 increases GDP by less than $1.
C)   saving $1 increases GDP by more than $1.
D)   spending $1 decreases GDP by more than $1.E) B) and D)
F) None of the above

Question 11

Autonomous expenditure is spending that is:

Accepted Answer

A)   depends on the level of income in the economy.
B)   that is determined by the government.
C)   not sensitive to the level of income in the economy.
D)   what is spent when income changes in the economy.E) B) and C)
F) A) and D)

Question 12

How would the real exchange rate need to change to get aggregate expenditure to increase?

Accepted Answer

A)   Increase
B)   Decrease
C)   Remain constant
D)   Exchanges rates don't generally affect aggregate expenditure.E) A) and D)
F) All of the above

Question 13

If spending increased by $250, and the GDP decreased $1,000 as a result, the MPC must be:

Accepted Answer

A)   −0.75
B)   0.75
C)   −4
D)   2E) B) and D)
F) B) and C)

Question 14

If spending increased by $200, and the GDP increased $1,000 as a result, the MPC must be:

Accepted Answer

A)   0.80
B)   0.75
C)   4
D)   5E) None of the above
F) B) and C)

Question 15

During the Great Depression in the 1930s the banking industry was crippled so badly that nearly _____ of the banks failed.

Accepted Answer

A)   50%
B)   20%
C)   25%
D)   33%E) C) and D)
F) All of the above

Question 16

Using Figure 3 above the distance between what 2 lines illustrate a recessionary output gap?

Accepted Answer

A)   PAE2 to PAE3
B)   PAE1 to PAE2
C)   Y1 to Y2
D)   Y2 to Y3E) B) and D)
F) B) and C)

Question 17

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

Accepted Answer

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

Question 18

Domestic income has a ______ relationship with net export spending.

Accepted Answer

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

Question 19

If the MPC = 0.75, then the spending multiplier must be:

Accepted Answer

A)   3
B)   4
C)   5
D)   1.25E) B) and C)
F) A) and D)

Question 20

If tastes for foreign goods and services go up, then we would expect aggregate expenditure to:

Accepted Answer

A)   increase.
B)   decrease.
C)   remain constant.
D)   increase and then sharply decrease more.E) B) and C)
F) A) and B)

Exam 11: Aggregate Expenditure

The spending multiplier:

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If spending increased by $200, and the GDP increased $1,000 as a result, the MPC must be:

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Autonomous expenditure is spending that is:

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Which of the following is not a determinant of Investment spending?

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If spending increased by $100, and the GDP increased $400 as a result, the MPC must be:

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How would the real exchange rate need to change to get aggregate expenditure to increase?

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During the Great Depression in the 1930s the banking industry was crippled so badly that nearly _____ of the banks failed.

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

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Domestic income has a ______ relationship with net export spending.

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What type of relationship do business taxes have with respect to Investment spending?

Correct AnswerverifiedShow Answer

A main reason the federal government may choose to spend would be the:

Correct AnswerverifiedShow Answer

If spending increased by $250, and the GDP decreased $1,000 as a result, the MPC must be:

Correct AnswerverifiedShow Answer

If the marginal propensity to consume was 0.9, it would mean that:

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The multiplier effect suggests that:

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In Figure 1 above if the economy were at Y3 then we would expect there to be:

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If tastes for foreign goods and services go up, then we would expect aggregate expenditure to:

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If the MPC = 0.75, then the spending multiplier must be:

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If trade policies change, then we would expect aggregate expenditure to:

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Using Figure 3 above the distance between what 2 lines illustrate a recessionary output gap?

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Which of the following could be a direct cause of investment spending increasing?

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