MACRO Ch 11

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Larger the multiplier

In general, the steeper the aggregate expenditure curve, the

Decreases real GDP by a larger amount

In the short run, with fixed prices and no imports and no income taxes, a decrease in investment

Induced consumption expenditure minus imports

Induced expenditure includes ______

Aggregate planned expenditure

The sum of planned consumption expenditure, planned investment, planned government purchases, and planned net exports is _____

I is false and II is true

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.

Flatter than it would be without income taxes and exports

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

Planned expenditure divided by the change in real GDP

The slope of the aggregate expenditure curve equals the change in

Increases; decreases

The slope of the aggregate expenditure curve increases when the marginal propensity to consume _____ or the marginal propensity to import _____

Greater than 0 and less than 1

The slope of the aggregate expenditure curve is

Less than the slope of the 45-degree line but not equal to zero

The slope of the consumption is _____

A change in induced expenditure

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

Shift the aggregate expenditure function downward

A decrease in autonomous consumption will

Actual investment is less than planned investment

All of the following statements about equilibrium expenditure are true EXCEPT

An increase in autonomous expenditure

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

The price level; downward; autonomous expenditure; rightward

An increase in _____ shifts the AE curve _____ and an increase in _____ shifts the aggregate demand curve _____

Shift in the AE curve and a movement along the AD curve

Any change in the price level will result in a

Induced expenditure

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

Imports increase

As a nation's GDP increases, that nation's

Is independent of income

Autonomous consumption

Imports

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

The level of disposable income

The consumption function relates the consumption expenditure decision of households to _____

Aggregate planned expenditure; real GDP

The graph of the aggregate expenditure curve has _____ on the y-axis and _____ on the x-axis

Disposable income on the horizontal axis

The graph of the consumption function has consumption expenditure on the vertical axis and _____

Is between 0 and 1

The marginal propensity to consume

Fraction of a change in disposable income that is consumed

The marginal propensity to consume is the ____

Fraction of an increase in real GDP

The marginal propensity to import is the _______ that is spent on imports

More induced expenditure

The multiplier is greater than 1 because the change in autonomous expenditure leas to _____

Marginal propensity to consume is larger

The multiplier is larger if the

Fall in value but remain positive

The presence of income taxes and imports cause the multiplier to

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

What is the marginal propensity to consume

Greater than one

When prices are fixed and there are no imports or income taxes, the value of the multiplier is

An increase in the marginal propensity to consume

Which of the following events will make the consumption function steeper

I, II, and III

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

Leftward shift of the AD curve

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


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