Question 1

Higher interest rates increase both consumption and investment spending.

Accepted Answer

A) True 
 B)False

Question 2

The Apple iPhone is sold in a box labeled "Made in China." A study by economists at the Asian Development Bank found the value of the iPhone components China ________ U.S. firms is ________ the value of assembling the iPhones in Chinese factories.

Accepted Answer

A)   exports to; equal to
B)   exports to; greater than
C)   imports from; less than
D)   imports from; greater thanE) C) and D)
F) A) and B)

Question 3

If the consumption function is defined as C = 5,500 + 0.9Y, what is the autonomous level of consumption expenditure?

Accepted Answer

A)   $4,950
B)   $5,500
C)   $6,050
D)   $6,111E) A) and B)
F) B) and D)

Question 4

What impact does an increase in the price level in the United States have on net exports and why?

Accepted Answer

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.E) All of the above
F) C) and D)

Question 5

If economists forecast an increase in aggregate expenditure, which of the following is likely to occur?

Accepted Answer

A)   GDP will rise.
B)   GDP will fall.
C)   Wages will fall.
D)   Inventories will rise.E) A) and B)
F) B) and D)

Question 6

If the MPC is 0.5, then a $10 million increase in disposable income will increase consumption by

Accepted Answer

A)   $2 million.
B)   $5 million.
C)   $15 million
D)   $50 million.E) B) and C)
F) A) and C)

Question 7

If aggregate expenditure is more than GDP, then inventories fall and GDP rises.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is true?

Accepted Answer

A)   National income = Consumption + Savings - Taxes
B)   National income = Consumption - Savings - Taxes
C)   National income = Consumption + Savings + Taxes
D)   National income = Consumption - Savings + TaxesE) A) and B)
F) A) and C)

Question 9

What is the macroeconomic consequence if firms accumulate large amounts of unplanned inventory at the beginning of a recession?

Accepted Answer

Firms will decrease ...

Question 10

Figure 23-2 
-Refer to Figure 23-2. Suppose that the level of GDP associated with point N is potential GDP. If the U.S. economy is currently at point K, then

Accepted Answer

A)   firms are operating above capacity.
B)   the economy is at full employment.
C)   the economy is in recession.
D)   the level of unemployment is equal to the natural rate.E) None of the above
F) C) and D)

Question 11

The marginal propensity to save is defined as

Accepted Answer

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.E) None of the above
F) All of the above

Question 12

Which of the following will cause a direct increase in consumption spending?

Accepted Answer

A)   an increase in planned investment
B)   an increase in government spending
C)   an increase in disposable income
D)   a decrease in net export spendingE) All of the above
F) B) and C)

Question 13

Which is the smallest component of aggregate expenditure?

Accepted Answer

A)   planned investment expenditures
B)   consumption expenditures
C)   government expenditures
D)   net export expendituresE) C) and D)
F) A) and B)

Question 14

If planned aggregate expenditure is less than real GDP, some firms will experience unplanned increases in inventories.

Accepted Answer

A) True 
 B)False

Question 15

MPC + MPS =

Accepted Answer

A)   0.
B)   0.5.
C)   1.
D)   100.E) B) and D)
F) B) and C)

Question 16

The passage of the Smoot-Hawley Tariff in 1930 sparked a trade war that caused net exports to ________ and real GDP to ________.

Accepted Answer

A)   increase; increase
B)   decrease; increase
C)   increase; decrease
D)   decrease; decreaseE) A) and B)
F) None of the above

Question 17

If national income increases by $75 million and consumption increases by $15 million, the marginal propensity to consume is

Accepted Answer

A)   5.
B)   0.75.
C)   0.20.
D)   0.15.E) All of the above
F) B) and C)

Question 18

Figure 23-1 
-Refer to Figure 23-1. If the economy is at a level of aggregate expenditure given by point K, then

Accepted Answer

A)   the economy is in equilibrium.
B)   production is greater than spending.
C)   production is less than spending.
D)   inventories will increase above their desired level.E) None of the above
F) A) and B)

Question 19

In the United States, spending on residential construction

Accepted Answer

A)   rose slowly in the period just before the recession of 2007-2009, declined slowly during the recession, and recovered slowly thereafter.
B)   rose rapidly in the period just before the recession of 2007-2009, declined dramatically during the recession, and recovered rapidly thereafter.
C)   rose rapidly in the period just before the recession of 2007-2009, declined dramatically during the recession, and continued to decline slowly thereafter.
D)   rose rapidly in the period just before the recession of 2007-2009, declined dramatically during the recession, and recovered only slowly thereafter.E) All of the above
F) A) and B)

Question 20

What impact does a higher price level have on interest rates, wealth, and investment spending?

Accepted Answer

A higher price level reduces t...

Exam 23: Aggregate Expenditure and Output in the Short Run

If economists forecast an increase in aggregate expenditure, which of the following is likely to occur?

Correct AnswerverifiedShow Answer

The marginal propensity to save is defined as

Correct AnswerverifiedShow Answer

Which of the following will cause a direct increase in consumption spending?

Correct AnswerverifiedShow Answer

The Apple iPhone is sold in a box labeled "Made in China." A study by economists at the Asian Development Bank found the value of the iPhone components China ________ U.S. firms is ________ the value of assembling the iPhones in Chinese factories.

Correct AnswerverifiedShow Answer

Figure 23-1 -Refer to Figure 23-1. If the economy is at a level of aggregate expenditure given by point K, then

Correct AnswerverifiedShow Answer

If national income increases by $75 million and consumption increases by $15 million, the marginal propensity to consume is

Correct AnswerverifiedShow Answer

Which of the following is true?

Correct AnswerverifiedShow Answer

If aggregate expenditure is more than GDP, then inventories fall and GDP rises.

Correct AnswerverifiedShow Answer

The passage of the Smoot-Hawley Tariff in 1930 sparked a trade war that caused net exports to ________ and real GDP to ________.

Correct AnswerverifiedShow Answer

What impact does an increase in the price level in the United States have on net exports and why?

Correct AnswerverifiedShow Answer

MPC + MPS =

Correct AnswerverifiedShow Answer

Higher interest rates increase both consumption and investment spending.

Correct AnswerverifiedShow Answer

Which is the smallest component of aggregate expenditure?

Correct AnswerverifiedShow Answer

If the consumption function is defined as C = 5,500 + 0.9Y, what is the autonomous level of consumption expenditure?

Correct AnswerverifiedShow Answer

If the MPC is 0.5, then a $10 million increase in disposable income will increase consumption by

Correct AnswerverifiedShow Answer

What is the macroeconomic consequence if firms accumulate large amounts of unplanned inventory at the beginning of a recession?

Correct AnswerverifiedFirms will decrease ...View AnswerShow Answer

What impact does a higher price level have on interest rates, wealth, and investment spending?

Correct AnswerverifiedA higher price level reduces t...View AnswerShow Answer

Figure 23-2 -Refer to Figure 23-2. Suppose that the level of GDP associated with point N is potential GDP. If the U.S. economy is currently at point K, then

Correct AnswerverifiedShow Answer

In the United States, spending on residential construction

Correct AnswerverifiedShow Answer

If planned aggregate expenditure is less than real GDP, some firms will experience unplanned increases in inventories.

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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The Apple iPhone is sold in a box labeled "Made in China." A study by economists at the Asian Development Bank found the value of the iPhone components China U.S. firms is the value of assembling the iPhones in Chinese factories.

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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The passage of the Smoot-Hawley Tariff in 1930 sparked a trade war that caused net exports to and real GDP to .

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Firms will decrease ...
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Correct Answer
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A higher price level reduces t...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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