Question 1

Wealth can be thought of as:

Accepted Answer

A)   the total of all assets less any debts.
B)   the total of all assets held at any one point in time.
C)   the income earned in a year.
D)   the total of all current and expected assets.E) A) and D)
F) None of the above

Question 2

The effect of government spending or tax cuts on national income is measured by the:

Accepted Answer

A)   multiplier.
B)   output gap.
C)   aggregator.
D)   tax rate.E) A) and D)
F) B) and C)

Question 3

Which of the following scenarios would cause investment to decrease?

Accepted Answer

A)   High foreign demand for government debt lowers interest rates.
B)   Vermont starts taxing tech firms to fund water quality improvement initiatives.
C)   The government announces that economists expect strong consumer confidence during the upcoming year.
D)   5G technology requires increasing cell phone tower coverage.E) C) and D)
F) A) and B)

Question 4

A _______ relationship exists between the real interest rate and investment spending.

Accepted Answer

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

Question 5

In economics, investment refers to:

Accepted Answer

A)   stocks.
B)   bonds.
C)   physical capital.
D)   mutual funds.E) B) and C)
F) B) and D)

Question 6

In the equation PAE = A + bY, autonomous sources of spending are captured by:

Accepted Answer

A)   b.
B)   Y.
C)   A.
D)   PAE.E) A) and C)
F) All of the above

Question 7

What is one solution for an economy stuck in a recessionary output gap?

Accepted Answer

A)   Decrease production.
B)   Increase government spending.
C)   Decrease government spending.
D)   Increase inventories.E) None of the above
F) All of the above B

Question 8

If the government wishes to decrease GDP by $2,000 billion, and the MPC is 0.6, it should_______ its spending by _______ billion.

Accepted Answer

A)   increase; $1,200
B)   decrease; $1,200
C)   increase; $800
D)   decrease; $800E) None of the above
F) All of the above D

Question 9

Economic environments that have lower levels of planned aggregate expenditure for a given level of output have:

Accepted Answer

A)   PAE curves that are higher on the expenditure diagram.
B)   PAE curves that are lower on the expenditure diagram.
C)   higher levels of imports.
D)   higher levels of inventory.E) A) and B)
F) None of the above

Question 10

The equilibrium aggregate expenditure model:

Accepted Answer

A)   can explain why an economy should always be at the natural rate of GDP.
B)   illustrates how government always moves an economy towards equilibrium GDP.
C)   illustrates how an economy can achieve equilibrium below the natural rate of GDP.
D)   proves that an economy will always tend towards the natural rate of GDP.E) All of the above
F) A) and D)

Question 11

If the MPC is 0.9, and the government cuts spending by $200 billion, the overall effect on GDP will be:

Accepted Answer

A)   a decrease of $2,000 billion.
B)   an increase of $2,000 billion.
C)   a decrease of $1,800 billion.
D)   an increase of $180 billion.E) A) and B)
F) A) and C)

Question 12

If the domestic income of a nation's citizens increases, net exports will likely:

Accepted Answer

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

Question 13

If the government wishes to increase GDP by $1,000 billion, and the MPC is 0.6, it should increase its spending by _______ billion.

Accepted Answer

A)   $250
B)   $400
C)   $600
D)   $1,000E) B) and C)
F) A) and D)

Question 14

What is the equation for aggregate expenditure?

Accepted Answer

A)   C + I + GDP
B)   C + Inventory + G + NX
C)   C + I + G + NX
D)   C + I + G + ExportsE) B) and C)
F) A) and B)

Question 15

If consumers increase their preference for foreign goods and services, imports will likely:

Accepted Answer

A)   increase.
B)   decrease.
C)   remain constant.
D)   increase at first and then decrease.E) A) and D)
F) B) and C)

Question 16

The spending multiplier grows _______ as the marginal propensity to consume _______.

Accepted Answer

A)   larger; increases
B)   larger; decreases
C)   smaller; increases
D)   smaller; stays the sameE) C) and D)
F) A) and B) A

Question 17

Economist John Maynard Keynes noted that one of the main contributors to the Great Depression in the 1930s was:

Accepted Answer

A)   weak spending.
B)   poor infrastructure for manufacturing.
C)   a sharp decline in U.S. exports.
D)   high interest rates.E) None of the above
F) C) and D)

Question 18

The figure shows planned aggregate expenditure and output for an economy. 2, we would expect there to be: A)  a decrease in inventories. B)  an increase in inventories. C)  no change in inventories. D)  an increase in consumption spending." class="answers-bank-image d-inline" rel="preload" > If output in this economy is Y2, we would expect there to be:

Accepted Answer

A)   a decrease in inventories.
B)   an increase in inventories.
C)   no change in inventories.
D)   an increase in consumption spending.E) B) and C)
F) A) and C)

Question 19

The marginal propensity to consume (MPC)  is calculated as:

Accepted Answer

A)   the change in consumption divided by the change in disposable income.
B)   total income divided by total consumption.
C)   total consumption divided by the change in disposable income.
D)   the change in consumption divided by total disposable income.E) All of the above
F) None of the above

Question 20

Economic environments that have higher levels of planned aggregate expenditure for a given level of output have:

Accepted Answer

A)   PAE curves that are higher on the expenditure diagram.
B)   PAE curves that reflect higher levels of interest rates.
C)   higher levels of imports.
D)   higher levels of inventory.E) A) and D)
F) None of the above

Exam 11: Aggregateexpenditures

Wealth can be thought of as:

Correct AnswerverifiedShow Answer

The effect of government spending or tax cuts on national income is measured by the:

Correct AnswerverifiedShow Answer

Which of the following scenarios would cause investment to decrease?

Correct AnswerverifiedShow Answer

A _______ relationship exists between the real interest rate and investment spending.

Correct AnswerverifiedShow Answer

In economics, investment refers to:

Correct AnswerverifiedShow Answer

In the equation PAE = A + bY, autonomous sources of spending are captured by:

Correct AnswerverifiedShow Answer

What is one solution for an economy stuck in a recessionary output gap?

Correct AnswerverifiedB

If the government wishes to decrease GDP by $2,000 billion, and the MPC is 0.6, it should_______ its spending by _______ billion.

Correct AnswerverifiedD

Economic environments that have lower levels of planned aggregate expenditure for a given level of output have:

Correct AnswerverifiedShow Answer

The equilibrium aggregate expenditure model:

Correct AnswerverifiedShow Answer

If the MPC is 0.9, and the government cuts spending by $200 billion, the overall effect on GDP will be:

Correct AnswerverifiedShow Answer

If the domestic income of a nation's citizens increases, net exports will likely:

Correct AnswerverifiedShow Answer

If the government wishes to increase GDP by $1,000 billion, and the MPC is 0.6, it should increase its spending by _______ billion.

Correct AnswerverifiedShow Answer

What is the equation for aggregate expenditure?

Correct AnswerverifiedShow Answer

If consumers increase their preference for foreign goods and services, imports will likely:

Correct AnswerverifiedShow Answer

The spending multiplier grows _______ as the marginal propensity to consume _______.

Correct AnswerverifiedA

Economist John Maynard Keynes noted that one of the main contributors to the Great Depression in the 1930s was:

Correct AnswerverifiedShow Answer

The figure shows planned aggregate expenditure and output for an economy. If output in this economy is Y2, we would expect there to be:

Correct AnswerverifiedShow Answer

The marginal propensity to consume (MPC) is calculated as:

Correct AnswerverifiedShow Answer

Economic environments that have higher levels of planned aggregate expenditure for a given level of output have:

Correct AnswerverifiedShow Answer

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B

If the government wishes to decrease GDP by $2,000 billion, and the MPC is 0.6, it should_ its spending by _ billion.

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D

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The spending multiplier grows _ as the marginal propensity to consume _.

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A

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The figure shows planned aggregate expenditure and output for an economy. If output in this economy is Y₂, we would expect there to be:

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