Question 1

Suppose that at a particular level of real GDP, the unintended change in inventories is zero. Which of the following is true?

Accepted Answer

A)  That level of real GDP is less than the equilibrium level of real GDP demanded.
B)  That level of real GDP is greater than the equilibrium level of real GDP demanded.
C)  That level of real GDP is the equilibrium level of real GDP demanded.
D)  At that level of real GDP, there is no inflation.
E)  At that level of real GDP, there is no saving.F) B) and C)
G) A) and D)

Question 2

Exhibit 10-3
 
-Which of the following best describes the situation at point B in Exhibit 10-3?

Accepted Answer

A)  consumption expenditures exceeds disposable income
B)  real GDP exceeds aggregate expenditure
C)  aggregate expenditure is exactly equal to real GDP
D)  aggregate expenditure exceeds real GDP
E)  producers are experiencing an unexpected accumulation of inventoryF) A) and B)
G) C) and D)

Question 3

Exhibit 10-6
 
-According to the graph in Exhibit 10-6, if the price level decreases, the new equilibrium level of real GDP must be

Accepted Answer

A)  less than $20
B)  less than $100
C)  unchanged
D)  greater than $100
E)  greater than $200F) C) and D)
G) A) and D)

Question 4

Exhibit 10-4
 
-The MPS in the economy represented in Exhibit 10-4 is

Accepted Answer

A)  0
B)  0.1
C)  0.2
D)  0.8
E)  20F) A) and B)
G) A) and C)

Question 5

In a model with neither income taxes nor international trade, if the marginal propensity to consume in your classmate's nation is 3/5 and the marginal propensity to save in your country is 1/10, which of the following must be true?

Accepted Answer

A)  Increases in government purchases increase real GDP demanded more per dollar in your country than they do in your classmate's country.
B)  Decreases in government purchases increase real GDP demanded more per dollar in your country than they do in your classmate's country.
C)  Increases in autonomous saving increase real GDP demanded more per dollar in your country than they do in your classmate's country.
D)  Real GDP demanded is higher in your country than in your classmate's country.
E)  Total saving is higher in your classmate's country than in your country.F) A) and E)
G) A) and B)

Question 6

A fall in the price level will shift the aggregate expenditure curve

Accepted Answer

A)  upward and shift the aggregate demand curve to the right
B)  upward and shift the aggregate demand curve to the left
C)  downward and shift the aggregate demand curve to the left
D)  downward and shift the aggregate demand curve to the right
E)  upward and cause a movement along the aggregate demand curveF) C) and D)
G) B) and E)

Question 7

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

Accepted Answer

A)  the smaller the marginal propensity to consume
B)  the larger the multiplier
C)  the smaller the multiplier
D)  the flatter the consumption function
E)  the steeper the saving functionF) A) and E)
G) A) and B)

Question 8

Exhibit 10-2
 
-At the equilibrium level of GDP in Exhibit 10-2, saving equals

Accepted Answer

A)  $0.4 trillion
B)  $0.6 trillion
C)  $0.5 trillion
D)  $0.2 trillion
E)  $0.3 trillionF) A) and C)
G) A) and E)

Question 9

Consumption plus saving equals disposable income at every level of real GDP demanded.

Accepted Answer

A) True 
 B)False

Question 10

We can use an aggregate expenditure line to trace out a single aggregate demand curve by

Accepted Answer

A)  shifting the 45-degree line
B)  letting changes in autonomous spending shift the aggregate expenditure line
C)  letting changes in the price level shift the aggregate expenditure line
D)  letting changes in the level of income shift the aggregate expenditure line
E)  letting changes in real GDP shift the aggregate expenditure lineF) D) and E)
G) All of the above

Question 11

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 flatter the saving function
E)  the steeper the saving functionF) D) and E)
G) A) and B)

Question 12

A decrease in planned investment would shift the

Accepted Answer

A)  aggregate demand curve outward
B)  aggregate demand curve inward
C)  aggregate supply curve inward
D)  aggregate supply curve outward
E)  consumption function downwardF) C) and D)
G) B) and D)

Question 13

A decline in the U.S. price level, other things constant, would

Accepted Answer

A)  stimulate U.S. exports, pushing the aggregate demand curve to the right
B)  stimulate U.S. imports, pushing the aggregate demand curve to the right
C)  stimulate U.S. exports but discourage imports, causing a rightward movement along a given aggregate demand curve
D)  discourage U.S. exports but stimulate imports, causing a rightward movement along a given aggregate demand curve
E)  not affect U.S. net exports, so aggregate quantity demanded would remain constantF) All of the above
G) A) and E)

Question 14

A decrease in the price level 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)  have no effect at all on aggregate demandF) B) and E)
G) A) and C)

Question 15

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

Accepted Answer

A)  the smaller the marginal propensity to consume
B)  the larger the marginal propensity to consume
C)  the smaller the multiplier
D)  the flatter the consumption function
E)  the steeper the saving functionF) A) and B)
G) A) and C)

Question 16

If investment increases by $100 and, as a result, GDP ultimately increases by $200, the multiplier equals

Accepted Answer

A)  1
B)  2
C)  3
D)  4
E)  5F) A) and B)
G) C) and E)

Question 17

The aggregate expenditure line, along with the 45-degree line, determines equilibrium. This model is based on the assumption that

Accepted Answer

A)  production is constant
B)  production is constant and at the full employment level of GDP
C)  producers are ready to supply whatever amount of output is demanded at the existing price level
D)  producers will supply more at higher prices than they will at lower prices
E)  producers will supply more at lower prices than they will at higher pricesF) A) and D)
G) A) and C)

Question 18

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 functionF) None of the above
G) All of the above

Question 19

What is the effect of an increase in the price level?

Accepted Answer

A)  The real value of dollar-denominated assets will rise.
B)  The aggregate expenditure line will shift downward.
C)  The equilibrium level of output demanded will rise.
D)  There will be downward movement along a particular aggregate demand curve.
E)  The aggregate demand curve will shift rightward.F) A) and C)
G) D) and E)

Question 20

On the aggregate expenditure graph, 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 billionF) B) and C)
G) C) and D)

Exam 11: Aggregate Expenditure and Aggregate Demand

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

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

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The aggregate expenditure line, along with the 45-degree line, determines equilibrium. This model is based on the assumption that

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Exhibit 10-3 -Which of the following best describes the situation at point B in Exhibit 10-3?

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If investment increases by $100 and, as a result, GDP ultimately increases by $200, the multiplier equals

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Exhibit 10-4 -The MPS in the economy represented in Exhibit 10-4 is

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A decrease in the price level will

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A fall in the price level will shift the aggregate expenditure curve

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We can use an aggregate expenditure line to trace out a single aggregate demand curve by

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In a model with neither income taxes nor international trade, if the marginal propensity to consume in your classmate's nation is 3/5 and the marginal propensity to save in your country is 1/10, which of the following must be true?

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

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

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A decline in the U.S. price level, other things constant, would

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On the aggregate expenditure graph, if autonomous saving decreases by $15 billion,

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What is the effect of an increase in the price level?

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Consumption plus saving equals disposable income at every level of real GDP demanded.

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Exhibit 10-6 -According to the graph in Exhibit 10-6, if the price level decreases, the new equilibrium level of real GDP must be

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Exhibit 10-2 -At the equilibrium level of GDP in Exhibit 10-2, saving equals

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Suppose that at a particular level of real GDP, the unintended change in inventories is zero. Which of the following is true?

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A decrease in planned investment would shift the

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