Question 1

Foreign income is earned:

Accepted Answer

A)   by a nation's firms when they operate abroad.
B)   when a domestic citizen works abroad.
C)   on investments made abroad.
D)   by those living outside a country.E) All of the above
F) A) and D)

Question 2

If the MPC is 0.5, what must the spending multiplier be?

Accepted Answer

A)   1.2
B)   2
C)   2.25
D)   2.5E) A) and B)
F) None of the above

Question 3

If planned inventories are _______ actual inventories, then demand will be _______ than anticipated.

Accepted Answer

A)   greater than; higher
B)   less than; lower
C)   equal to; higher
D)   greater than; lowerE) All of the above
F) B) and C)

Question 4

Which of the following would increase autonomous spending?

Accepted Answer

A)   An increase in interest rates.
B)   An increase in house prices.
C)   A decrease in exports.
D)   An increase in business taxes.E) None of the above
F) A) and C)

Question 5

The figure shows planned aggregate expenditure and output for an economy. 3. This level of GDP would be considered: A)  inflationary. B)  recessionary. C)  below full employment. D)  a natural rate of output." class="answers-bank-image d-inline" rel="preload" > Suppose that the economy's output is Y3. This level of GDP would be considered:

Accepted Answer

A)   inflationary.
B)   recessionary.
C)   below full employment.
D)   a natural rate of output.E) All of the above
F) A) and B)

Question 6

If PAE is greater than Y, we expect:

Accepted Answer

A)   inventories to increase.
B)   inventories to decrease.
C)   there will be no change in inventories.
D)   the government will spend more than it has collected in taxes.E) B) and D)
F) B) and C)

Question 7

If the government wishes to increase GDP by $1,200 billion, and the MPC is 0.75, it should _______ its spending by _______ billion.

Accepted Answer

A)   increase; $300
B)   decrease; $300
C)   increase; $900
D)   decrease; $900E) B) and C)
F) A) and D)

Question 8

The figure shows planned aggregate expenditure and output for an economy. 2. Which change would cause a move from PAE2 to PAE1? A)  The wealth level decreases. B)  Interest rates decrease. C)  The expected profitability of investments increase. D)  Domestic income decreases." class="answers-bank-image d-inline" rel="preload" > Suppose that the economy starts at PAE2. Which change would cause a move from PAE2 to PAE1?

Accepted Answer

A)   The wealth level decreases.
B)   Interest rates decrease.
C)   The expected profitability of investments increase.
D)   Domestic income decreases.E) A) and B)
F) All of the above

Question 9

The spending multiplier tells us the amount by which:

Accepted Answer

A)   GDP increases when spending increases by $1.
B)   GDP decreases when spending on capital goods increases by $1.
C)   GDP increases when saving increases by $1.
D)   spending increases when GDP increases by $1.E) A) and B)
F) All of the above

Question 10

Which of the following could cause an increase in consumption?

Accepted Answer

A)   Income decreases.
B)   Interest rates increase.
C)   Wealth increases.
D)   Expected future income decreases.E) A) and C)
F) A) and D)

Question 11

Autonomous expenditure is spending that:

Accepted Answer

A)   is based on the rate of borrowing.
B)   is determined by the government.
C)   is not sensitive to the level of income in the economy.
D)   occurs when income changes in the economy.E) A) and B)
F) A) and C)

Question 12

A recessionary output gap exists when equilibrium aggregate expenditure is _______ full employment GDP.

Accepted Answer

A)   below
B)   equal to
C)   above
D)   unchanging relative toE) All of the above
F) None of the above

Question 13

The real exchange rate generally has a _______ relationship with aggregate expenditure.

Accepted Answer

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

Question 14

If a firm's business taxes decrease, we would expect investment spending to:

Accepted Answer

A)   increase.
B)   decrease.
C)   remain constant.
D)   There is not enough information to determine what would happen.E) C) and D)
F) A) and B)

Question 15

If the MPC is 0.8, and the government spends an additional $100 billion, the overall effect on GDP will be _______ billion.

Accepted Answer

A)   $400
B)   $500
C)   $120
D)   $180E) B) and D)
F) B) and C)

Question 16

The Keynesian equilibrium occurs when:

Accepted Answer

A)   planned inventories are equal to actual inventories.
B)   planned investment is equal to domestic consumption.
C)   national capital investment is equal to planned aggregate expenditure.
D)   planned spending is equal to expected household spending.E) A) and D)
F) B) and D)

Question 17

Which of the following is a determinant of investment spending?

Accepted Answer

A)   Disposable income
B)   Expected future income
C)   Expected profitability
D)   Real incomeE) A) and D)
F) A) and C)

Question 18

The figure shows planned aggregate expenditure and output for an economy. 2. What change would cause a move from PAE2 to PAE1? A)  Consumption increases. B)  Investment increases. C)  Exports increase. D)  Government spending decreases." class="answers-bank-image d-inline" rel="preload" > Suppose that the economy starts at PAE2. What change would cause a move from PAE2 to PAE1?

Accepted Answer

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

Question 19

Which of the following would cause investment spending to decrease?

Accepted Answer

A)   Real income increases.
B)   Real interest rates increase.
C)   A firm's revenues increase while their costs remain constant.
D)   Expected future income increases.E) B) and D)
F) C) and D)

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)  The wealth level decreases. B)  Interest rates decrease. C)  The expected profitability of investments decrease. D)  Domestic income increases." 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)   The wealth level decreases.
B)   Interest rates decrease.
C)   The expected profitability of investments decrease.
D)   Domestic income increases.E) A) and C)
F) None of the above

Exam 11: Aggregateexpenditures

Which of the following would cause investment spending to decrease?

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 AnswerverifiedShow Answer

If PAE is greater than Y, we expect:

Correct AnswerverifiedShow Answer

Foreign income is earned:

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 PAE1?

Correct AnswerverifiedShow Answer

Autonomous expenditure is spending that:

Correct AnswerverifiedShow Answer

If the MPC is 0.8, and the government spends an additional $100 billion, the overall effect on GDP will be _______ billion.

Correct AnswerverifiedShow Answer

Which of the following is a determinant of investment spending?

Correct AnswerverifiedShow Answer

If planned inventories are _______ actual inventories, then demand will be _______ than anticipated.

Correct AnswerverifiedShow Answer

The figure shows planned aggregate expenditure and output for an economy. Suppose that the economy starts at PAE2. What change would cause a move from PAE2 to PAE1?

Correct AnswerverifiedShow Answer

The Keynesian equilibrium occurs when:

Correct AnswerverifiedShow Answer

If the MPC is 0.5, what must the spending multiplier be?

Correct AnswerverifiedShow Answer

If a firm's business taxes decrease, we would expect investment spending to:

Correct AnswerverifiedShow Answer

A recessionary output gap exists when equilibrium aggregate expenditure is _______ full employment GDP.

Correct AnswerverifiedShow Answer

The spending multiplier tells us the amount by which:

Correct AnswerverifiedShow Answer

The figure shows planned aggregate expenditure and output for an economy. Suppose that the economy's output is Y3. This level of GDP would be considered:

Correct AnswerverifiedShow Answer

The real exchange rate generally has a _______ relationship with aggregate expenditure.

Correct AnswerverifiedShow Answer

Which of the following would increase autonomous spending?

Correct AnswerverifiedShow Answer

If the government wishes to increase GDP by $1,200 billion, and the MPC is 0.75, it should _______ its spending by _______ billion.

Correct AnswerverifiedShow Answer

Which of the following could cause an increase in consumption?

Correct AnswerverifiedShow Answer

Correct Answer
verified

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
verified

Correct Answer
verified

Correct Answer
verified

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 PAE₁?

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

If planned inventories are _ actual inventories, then demand will be _ than anticipated.

Correct Answer
verified

The figure shows planned aggregate expenditure and output for an economy. Suppose that the economy starts at PAE₂. What change would cause a move from PAE₂ to PAE₁?

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

The figure shows planned aggregate expenditure and output for an economy. Suppose that the economy's output is Y₃. This level of GDP would be considered:

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

If the government wishes to increase GDP by $1,200 billion, and the MPC is 0.75, it should _ its spending by _ billion.

Correct Answer
verified

Correct Answer
verified