Economics ch12

A decrease in Social Security payments will A. decrease consumption spending B. decrease investment spending C. decrease govt spending D. decrease export spending

A

A decrease in consumer confidence can put your job at risk if A. aggregate expenditures fall B. consumers expect their incomes to rise in the future C. aggregate expenditures rise D. consumers expect firms to increase investment in the future

A

Actual investment spending does not include A. spending on consumer durable goods B. spending on new capital equipment C. spending on new houses D. changes in inventories

A

When aggregate expenditure is more than GDP, which of the following is true? A. there was an unplanned decrease in inventories B. firms spent less on capital goods than they planned C. households bought fewer new homes than they planned D. All of the above must be true when aggregate expenditure is more than GDP

A

_____consimption is consumption that does not depend upon the level of GDP A. Autonomous B. Induced C. Voluntary D. Disposable

A

A stock market boom which causes stock prices to rise should cause A. a decrease in consumption spending B. an increase in consumption spending C. a decrease in wealth D. a decrease in net export spending

B

At macroeconomic equilibrium A. total investment equals total inventories B. total spending equals total production C. total consumption equals total production D. total taxes equal total transfers

B

An unplanned increase in inventories results from A. an increase in planned investment B. a decrease in planned investment C. actual investment that is greater than planned investment D. actual investment that is less than planned investment

C

What impact does a decrease in the price level in the United States have on net exports and why? A) A decrease in the price level increases net exports because lower prices increase the value of the dollar. B) A decrease in the price level increases net exports by reducing the relative cost of American goods. C) A decrease in the price level reduces net exports because lower prices raise the value of the dollar. D) A decrease in the price level reduces net exports because lower prices increase American spending on imports.

b

Given the equations for C, I, G, and NX below, what is the equilibrium level of GDP? C = 2,000 + 0.9Y I = 2,500 G = 3,000 NX = 400 A) $4,333 B) $7,100 C) $8,778 D) $79,000

d

If the consumption function is defined as C = 5,500 + 0.9Y, what is the multiplier? A) 0.l B) 0.9 C) 6.1 D) 10

d

If the consumption function is defined as C = 5,500 + 0.9Y, what is the value of the multiplier? A) 0.1 B) 0.9 C) 9 D) 10

d

If the consumption function is defined as C = 7,250 + 0.8Y, what is the value of the multiplier? A) 0.2 B) 0.8 C) 1.25 D) 5

d

Which of the following correctly describes how an increase in the price level affects consumption spending? A) An increase in the price level raises real wealth, which causes consumption to increase. B) An increase in the price level decreases the amount of money a household needs to buy goods and raises the interest rate, which causes consumption to increase. C) An increase in the price level increases the amount of money a household needs to buy goods and raises the interest rate, which causes consumption to increase. D) An increase in the price level lowers real wealth, which causes consumption to decrease.

d

When aggregate expenditure = GDP A. macroeconomic equilibrium occurs B. the federal budget is balanced C. net exports equal zero D. saving equals zero

A

Examples of assets that are included in household wealth would be A. stocks, bonds, and savings accts B. stocks, loans owed, and savings accts C. stocks, bonds, and mortgages D. stocks, credit cards, and savings accts

A

Household spending on goods and services is known as A. consumption spending B. planned investment spending C. government purchases D. net exports

A

If the consumption function is defined as C = 7,250 + 0.8Y, what is the marginal propensity to save? A) 0.2 B) 0.8 C) 5.8 D) 9.1

a

The ________ illustrates the relationship between the price level and the quantity of planned aggregate expenditure, holding constant all other factors that affect aggregate expenditure. A) aggregate demand curve B) savings line C) 45-‐‑degree line D) consumption function

a

Economists first begin studying the relationship btwn changes in aggregate expenditures and changes in GDP A. in the 1950s B. during the Great Depression C. at the end of the Civil War D. during the Industrial Revolution

B

If inventories decline by more than analysts predict they will decline, this implies that A. actual investment spending was greater than planned investment spending B. actual investment spending was less that planned investment spending C. actual investment spending was equal to planned investment spending D. there is no relationship btwn actual investment spending and planned investment spending

B

In the aggregate expenditure model, ______has both an autonomous component and an induced component A. planned investment spending B. consumption spending C. govt spending D. net export spending

B

Inventories refer to A. goods which have been presold before they are produced B. goods that have been produced but not yet sold C. goods that have been planned but not yet produced D. goods that have been produced and sold in the same year

B

On the 45 degree line diagram, for points that lie below 45 degree line A. planned aggregate expenditure is greater than GDP B. planned aggregate expenditure is less than GDP C. planned aggregate expenditure is equal to GDP D. planned aggregate expenditure is less than aggregate income

B

The ratio of the increase in_____to the increase in____is called the multiplier. A. Equilibrium nominal GDP; autonomous expenditure B. Equilibrium real gdp; autonomous expenditure C. Autonomous expenditure; equilibrium real GDP D. induced expenditure; equilibrium real GDP

B

Which is the largest component of aggregate expenditure? A. planned investment spending B. consumption spending C. govt spending D. net export spending

B

______in taxes will decrease consumption spending, and ____ in transfer payments will increase consumption spending A. increase;increase B. decrease; increase C. increase; decrease D. decrease; decrease

B

_____is defined as the value of a household's assets minus the value of its liabilities A. household income B. household wealth C. personal household consumption D. planned household investment

B

Actual investment spending includes spending by consumers on A. durable goods B. nondurable goods C. new houses D. services

C

Aggregate expenditure includes spending on A. C+I+G B. C+I+G-NX C. C+I+G+NX D. C+I+depreciation-NX

C

All of the following are components of aggregate expenditure except A. consumption spending B. net export spending C. actual investment spending D. govt spending

C

_____describes the relationship btwn consumption spending and disposable income A. household wealth B. the liquidity trap C. the consumption function D. the paradox of thrift

C

Decreases in price level will A. lower consumption because goods and services are less affordable B. raise consumption because goods and services are more affordable C. raise consumption because real wealth increases D. lower consumption because real wealth decreases

C

If an increase in autonomous consumption spending of $10 million results in a $50 million increase in equilibrium real GDP then A. The MPC is 0.5 B. The MPC is 0.75 C. The MPC 0.8 D. The MPC is 0.9

C

If an increase in investment spending of $50 million results In a $400 million increase in equilibrium real GDP, then A. The multiplier is 0.125 B. Multiplier is 3.5 C. Multiplier is 8 D. Multiplier is 50

C

If planned aggregate expenditure is less than total production, A. actual inventories will equal planned inventories B. firms will experience an unplanned increase in C. GDP will increase D. the economy is in equilibrium

C

On the 45 degree line diagram, the 45 degree line shows points where A. real income equals real GDP B. real aggregate expenditure equals C+I C. real aggregate expenditure equals real GDP D. real aggregate output equals the quantity produced

C

The aggregate expenditure model focuses on the relationship between____and_____in the short run, assuming_____is constant A. total production; total income; real GDP B. total spending; real GDP; total income C. total spending; real GDP; the price level D. total income; real GDP; the price level

C

The formula for aggregate expenditure is A. AE = C + I + G B. AE = C + I + G - NX C. AE = C + I +G + NX D. AE = C + I + depreciation - NX

C

The marginal propensity to save is defined as A. saving divided by disposable income B. disposable income divided by saving C. the change in saving divided by the change in disposable income D. the change in disposable income divided by the change in saving

C

Which of the following will cause a direct increase in consumption spending? A. an increase in planned investment B. an increase in govt spending C. an increase in disposable income D. a decrease in net export spending

C

Which of the following will raise consumer expenditures? A. an increase in interest rates B. a general decline in housing prices C.an increase in expected future income D. an increase in the price level

C

Each of the following is one of four main categories of spending identified by John Maynard Keynes except A. consumption B. net exports C. government purchases D. taxes

D

The key idea of aggregate expenditure model is that in any particular year, the level of GDP is determined mainly by A. investment spending B. export spending C. government spending D. the level of aggregate expenditure

D

If the economy is currently in equilibrium at a level of GDP that is below potential GDP, which of the following would move the economy back to potential GDP? A. an increase in wealth B. an increase in interest rates C. a decrease in business confidence D. an increase in the value of the dollar relative to other currencies

A

Macroeconomic equilibrium occurs when A. aggregate expenditure = GDP B. aggregate expenditure = C+I+G+net transfers C. aggregate income = planned inventories D. aggregate expenditure = planned inventories

A

The 5 most important variables that determine the level of consumption are A. disposable income, wealth, expected future income, price level, and interst rate B. wealth, savings acct balance, checking acct balance, stock portfolio balances, and bond portfolio balances C. govt purchases, interest rates, income, taxes, and transfers D. govt purchases, savings acct balance, wealth, interest rates, portfolio balances

A

The aggregate expenditure model focuses on the_____relationship between real spending and _____. A. short-run; real GDP B. short-run; inflation C. long-run; real GDP D. long-run inflation

A

The multiplier is calculated as the A. Change in real GDP/change in autonomous expenditure B. Change in autonomous expenditure/change in real GDP C. Change in nominal GDP/change in autonomous expenditure D. Change in real gdp/ change in induced speeding

A

The slope of the consumption function is equal to A. the change in consumption divided by the change in disposable income B. the change in consumption divided by the change in personal income C. the change in disposable income divided by the change in consumption D. the change in national income divided by the change in consumption

A

As a result of slow economic growth following the recession of 2007-2009, many companies including Cisco Systems, Lockheed Martin, and Cracker Barrel Old Country Store cut the production and employment as a result of the sluggish growth in the total amount of spending in the economy. The total amount of spending in the economy is known as A. deficit spending B. planned investment spending C. aggregate expenditure D. equilibrium spending

C

An increase in aggregate expenditure has what result on equilibrium GDP? A) Equilibrium GDP rises. B) Equilibrium GDP is not affected by a decrease in aggregate expenditure. C) Equilibrium GDP falls. D) Equilibrium GDP may rise or fall depending on the size of the decrease in aggregate expenditure relative to the initial level of GDP

a

An increase in the price level in the United States will have what effect on the aggregate expenditure line? A) Aggregate expenditure will shift downward. B) Aggregate expenditure will become steeper. C) Aggregate expenditure will shift upward. D) Aggregate expenditure will not be affected by an increase in the price level in the United States.

a

The aggregate demand curve illustrates the relationship btwn ____ and _____, holding constant all other factors that affect aggregate expenditure A.the price level; quantity of planned aggregate expenditure B) the inflation rate; quantity of planned aggregate expenditure C) the price level; quantity of planned investment expenditure D) the price level; quantity of consumption expenditure

a

Which of the following is a reason why decreases in the price level result in a rise in aggregate expenditure? A) Price level decreases cause firms and consumers to hold less money, which lowers the interest rate. Lower interest rates raise consumption and planned investment expenditures, which raises aggregate expenditure. B) Price level decreases reduce real wealth, which causes consumption spending and aggregate expenditure to rise. C) As the price level falls, government spending rises, which raises aggregate expenditure. D) Price level decreases in the United States relative to other countries'ʹ lower net exports, which raises aggregate expenditure.

a

A decrease in the price level results in a(n) ________ in household consumption spending and a(n) ________ in investment spending. A) increase; decrease B) increase; increase C) decrease; decrease D) decrease; increase

b

An increase in the price level ________ real wealth, which causes consumption to ________. A) lowers; increase B) lowers; decrease C) raises; increase D) raises; decrease

b

Equations for C, I, G, and NX are given below. If the equilibrium level of GDP is $32,000, what will the new equilibrium level of GDP be if government spending increases to 2,500? C = 5,000 + (MPC)Y I = 1,500 G = 2,000 NX = -‐‑500 A) $32,500 B) $34,000 C) $38,000 D) $42,000

b

Equations for C, I, G, and NX are given below. If the equilibrium level of GDP is $32,000, what is the marginal propensity to consume? C = 5,000 + (MPC)Y I = 1,500 G = 2,000 NX = -‐‑500 A) 0.67 B) 0.75 C) 0.8 D) 0.9

b

If the consumption function is defined as C = 5,500 + 0.9Y, what is the autonomous level of consumption expenditure? A) $4,950 B) $5,500 C) $6,050 D) $6,111

b

What impact does an increase in the price level in the United States have on net exports and why? A) An increase in the price level decreases net exports because higher prices decrease the value of the dollar. B) An increase in the price level decreases net exports by increasing the relative cost of American goods. C) An increase in the price level increases net exports because higher prices lower the value of the dollar. D) An increase in the price level increases net exports because higher prices decrease American spending on imports.

b

A decrease in aggregate expenditure has what result on equilibrium GDP? A) Equilibrium GDP rises. B) Equilibrium GDP is not affected by a decrease in aggregate expenditure. C) Equilibrium GDP falls. D) Equilibrium GDP may rise or fall depending on the size of the decrease in aggregate expenditure relative to the initial level of GDP.

c

A decrease in the price level in the United States will have what effect on the aggregate expenditure line? A) Aggregate expenditure will shift downward. B) Aggregate expenditure will become steeper. C) Aggregate expenditure will shift upward. D) Aggregate expenditure will not be affected by an increase in the price level in the United States.

c

An increase in the price level results in a(n) ________ in household consumption spending and a(n) ________ in investment spending. A) increase; decrease B) increase; increase C) decrease; decrease D) decrease; increase

c

Autonomous expenditure times the multiplier equals A) autonomous saving. B) autonomous consumption. C) equilibrium GDP. D) planned autonomous investment.

c

Equilibrium GDP is equal to A) autonomous expenditure times the marginal propensity to consume. B) autonomous expenditure times the marginal propensity to save. C) autonomous expenditure times the multiplier. D) autonomous expenditure.

c

Given the equations for C, I, G, and NX below, what is the marginal propensity to consume? C = 2,000 + 0.9Y I = 2,500 G = 3,000 NX = 400 A) -‐‑0.1 B) 0.1 C) 0.9 D) 2000

c