macroeconomics

Read the two statements below and indicate if they are true or false. I. Autonomous expenditures change when GDP changes. II. Aggregate planned expenditure is the sum of planned consumption expenditure, investment, government purchases, and net exports.

I is false and II is true.

Which of the following will affect the size of the multiplier? I. marginal propensity to import II. marginal propensity to consume III. marginal income tax rate

I, II, and III

In general, the steeper the aggregate expenditure curve, the

larger the multiplier

In general, a decrease in autonomous expenditure that is NOT caused by a price change results in a

leftward shift of the AD curve.

The multiplier is larger if the

marginal propensity to consume is larger

In the above figure, the economy is initially at point B. If the government decreases transfer payments, there is

a shift to AD2

All of the following statements about equilibrium expenditure are true EXCEPT_____.

actual investment is less than planned investment

People expect their incomes will decrease next year. As a result, the_____will shift_____.

aggregate demand curve; leftward

The graph of the aggregate expenditure curve has_____on the y-axis and_____on the x-axis

aggregate planned expenditure; real GDP

An increase in U.S. exports because of increasing foreign incomes is_____in the United States.

an increase in autonomous expenditure

Which of the following events will make the consumption function steeper?

an increase in the marginal propensity to consume

Which of the following does NOT shift the aggregate demand curve

an increase in the price level

Moving along the aggregate demand curve, a decrease in the quantity of real GDP demanded is a result of

an increase in the price level.

Using the data in above table, the marginal propensity to consume is

constant at 0.75

higher taxes

decrease aggregate demand.

imports

decrease the size of the multiplier because spending on imports does not increase real GDP in the domestic nation.

A rise in the foreign exchange rate of the dollar

decreases aggregate demand

A decrease in government transfer payments

decreases aggregate demand.

A decrease in the quantity of money

decreases aggregate demand.

A fall in the expected future inflation rate

decreases aggregate demand.

In the above figure, if the economy is at point a, an increase in_____will move the economy to_____.

expected future income; point b

The presence of income taxes and imports cause the multiplier to

fall in value but remain positive.

The presence of income taxes and imports cause the slope of the aggregate expenditure curve to be

flatter than it would be without income taxes and exports.

The marginal propensity to consume is the_____.

fraction of a change in disposable income that is consumed.

The marginal propensity to import is the_____that is spent on imports.

fraction of an increase in real GDP

The slope of the aggregate expenditure curve equals the change in

planned expenditure divided by the change in real GDP.

Any change in the price level will result in a

shift in the AE curve and a movement along the AD curve.

A decrease in autonomous consumption will

shift the aggregate expenditure function downward

If the multiplier is 4.0 and, owing to a decrease in expected future profit, investment decreases by $2.5 billion, the AD curve

shifts leftward by $10 billion.

If an increase in a household's disposable income from $10,000 to $12,000 boosts its consumption expenditure from $8,000 to $9,000, the

slope of the consumption function is 0.5

In the above figure, the line AB is called

the 45- degree line

If investment increases by $150 and, in response, equilibrium expenditure rises by $600,

the multiplier is 4.0

Which of the following changes while moving along the aggregate demand curve?

the price level

An increase in_____shifts the AE curve_____and an increase in_____shifts the aggregate demand curve_____.

the price level; downward; autonomous expenditure; rightward

The slope of the aggregate expenditure curve increases when the marginal propensity to consume_____or the marginal propensity to import______

increases; decreases

Disposable income_____when_____.

increases; taxes decrease

Autonomous consumption

independent of income

Any expenditure component that depends on the level of real GDP is called

induced expenditure

The marginal propensity to consume

is between 0 and 1

A change in_____creates a movement along the aggregate demand curve, while a change in_____shifts the aggregate demand curve.

the price level; government purchases

An example of monetary policy is an increase in_____by the_____, which_____aggregate demand.

the quantity of money; Federal Reserve; increases

When the price level increases,_____

the quantity of real GDP demanded decreases

What is the marginal propensity to consume?

the ratio of the change in consumption expenditure to the change in disposable income

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MOD 5

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

$2 million

In the above figure, the economy is initially at point B. If the slope of the aggregate expenditure function is 0.75. To shift the aggregate demand to AD1 the government needs to increase its autonomous expenditure by

0.1

The data in the above table indicate that autonomous expenditure is

0.3 trillion

The figure above illustrates an economy's consumption function. What is the marginal propensity to consume in this economy?

0.33

In the above table, C is consumption expenditure, I is investment, G is government purchases, and NX is net exports. All entries are in dollars. The slope of the aggregate expenditure function is

0.60

If consumption expenditures for a household increase from $1000 to $1800 when disposable income rises from$1000 to $2000, the marginal propensity to consume is

0.8

In the above figure, equilibrium expenditure along AE2 is

8 trillion

In the above figure, autonomous expenditure along AE2 equals

4 trillion

In the above figure, equilibrium expenditure is

10 trillion

In the above figure, at the equilibrium, induced expenditure is

100 billion

If investment increases by $300 and, in response, equilibrium aggregate expenditure increases by $600, the multiplier is

2

In the above figure, autonomous expenditure along AE1 equals

2 trillion

In the above figure, the multiplier is

2.0

In the above figure, autonomous expenditure is

200 billion

In the above table, C is consumption expenditure, I is investment, G is government purchases, and NX is net exports. All entries are in dollars. The equilibrium level of real GDP is

2400

A change in imports caused by rising U.S. incomes is

a change in induced expenditure.

Other things equal, along the aggregate demand curve, a higher price level is associated with

a decrease in the quantity of real GDP demanded

In the above figure, consumption and disposable income are equal at

a disposable income level of $200 billion

In the above figure, the economy is initially at point B. If the Fed increases the quantity of money, there is

a shift to AD1

In the above figure, the economy is initially at point B. If taxes increase, there is

a shift to AD2

In the above figure, the economy is initially at point B. If the Fed decreases the quantity of money, there is

a shift to AD2

Suppose the value of the U.S. dollar decreases from $1.60 Canadian to $1.50 Canadian. U.S. exports will_____, U.S. imports will_____, and U.S. aggregate demand will_____.

increase; decrease; increase

An increase in expected future incomes

increases aggregate demand

An increase in foreign incomes

increases aggregate demand in the United States.

A fall in the foreign exchange rate of the dollar

increases aggregate demand.

An increase in government purchases of goods and services

increases aggregate demand.

Aggregate demand will increase if the quantity of money_____.

increases or tax rates decrease