Question 1

The economy will contract (shrink) if

Accepted Answer

A)  leakages exceed injections
B)  injections exceed leakages
C)  injections equal leakages
D)  expenditures exceed output
E)  investment exceeds savingF) A) and B)
G) C) and D)

Question 2

An increase in the price level will

Accepted Answer

A)  shift the aggregate expenditure line upward
B)  shift the aggregate expenditure line downward
C)  result in a movement upward along the aggregate expenditure line
D)  result in a movement downward along the aggregate expenditure line
E)  change the slope of the aggregate expenditure lineF) C) and D)
G) A) and B)

Question 3

If the multiplier is 4,a $10 billion increase in autonomous investment will cause a

Accepted Answer

A)  $10 billion increase in equilibrium investment
B)  $40 billion increase in equilibrium investment
C)  $40 billion increase in equilibrium real GDP demanded
D)  $400 billion increase in equilibrium real GDP demanded
E)  $40 billion increase in consumption spendingF) A) and E)
G) A) and D)

Question 4

On the aggregate expenditure graph,if autonomous saving decreases by $15 billion,

Accepted Answer

A)  the aggregate expenditure line shifts upward by $15 billion
B)  planned investment increases by $15 billion
C)  the aggregate expenditure line shifts downward by $15 billion
D)  planned investment decreases by $15 billion
E)  the equilibrium level of real GDP demanded decreases by $15 billionF) D) and E)
G) A) and C)

Question 5

If households save $30 billion more at each level of income and the MPC = 0.9,the aggregate expenditure line will

Accepted Answer

A)  not be affected
B)  shift upward by $30 billion
C)  shift downward by $30 billion
D)  shift upward by $300 billion because of the multiplier
E)  shift downward by $300 billion because of the multiplierF) C) and D)
G) None of the above

Question 6

If the level of autonomous spending decreases at a given price level,

Accepted Answer

A)  the aggregate expenditure line shifts upward; the economy moves along the aggregate demand curve
B)  the aggregate expenditure line shifts downward; the economy moves along the aggregate demand curve
C)  the aggregate expenditure line shifts upward; the aggregate demand curve shifts to the right
D)  the aggregate expenditure line shifts downward; the aggregate demand curve shifts to the left
E)  the aggregate expenditure curve shifts downward; the aggregate demand curve shifts to the rightF) C) and D)
G) None of the above

Question 7

The aggregate demand curve illustrates a relationship between

Accepted Answer

A)  interest rates and income levels
B)  the price level and real GDP
C)  the price level and interest rates
D)  income levels and real GDP levels
E)  income levels and nominal income levelsF) C) and D)
G) C) and E)

Question 8

An increase in the price level can be indicated by a downward shift of the aggregate expenditure line.

Accepted Answer

A) True 
 B)False

Question 9

Suppose that at a particular level of real GDP,the unintended change in inventories is zero.Which of the following is true?

Accepted Answer

A)  That level of real GDP is less than the equilibrium level of real GDP demanded.
B)  That level of real GDP is greater than the equilibrium level of real GDP demanded.
C)  That level of real GDP is the equilibrium level of real GDP demanded.
D)  At that level of real GDP,there is no inflation.
E)  At that level of real GDP,there is no saving.F) D) and E)
G) C) and D)

Question 10

If the marginal propensity to consume is 3/4,the simple multiplier is

Accepted Answer

A)  3
B)  7
C)  4
D)  25
E)  3/10F) B) and D)
G) C) and D)

Question 11

Which of the following is not true about a change in the price level?

Accepted Answer

A)  It will shift the aggregate demand curve.
B)  It will shift the aggregate expenditure curve.
C)  It will result in a new value of equilibrium real GDP demanded.
D)  It will change the real value of dollar-denominated assets.
E)  It will shift the consumption function.F) B) and E)
G) None of the above

Question 12

The simple spending multiplier is like

Accepted Answer

A)  having a bird in the hand rather than two in the bush
B)  two wrongs making a right
C)  the spreading of ripples from a stone thrown in a pond
D)  getting too much of a good thing
E)  having too many chefs in the kitchenF) C) and E)
G) C) and D)

Question 13

If the price level rises,

Accepted Answer

A)  the aggregate expenditures line shifts upward; the economy moves downward along the aggregate demand curve
B)  the aggregate expenditures line shifts downward; the economy moves upward along the aggregate demand curve
C)  the aggregate demand curve shifts to the right; the economy moves along the aggregate expenditure line
D)  the aggregate demand curve shifts to the left; the economy moves along the aggregate expenditure line
E)  the aggregate expenditure line shifts upward; the aggregate demand curve shifts to the rightF) A) and E)
G) All of the above

Question 14

Only a change in the price level can cause shifts in both the aggregate expenditure line and the aggregate demand curve.

Accepted Answer

A) True 
 B)False

Question 15

If the spending multiplier is greater than 1.0,a $200 billion increase in autonomous investment will cause

Accepted Answer

A)  equilibrium investment to increase by less than $200 billion
B)  equilibrium investment to decrease by more than $200 billion
C)  equilibrium real GDP demanded to increase by more than $200 billion
D)  equilibrium real GDP demanded to decrease by less than $200 billion
E)  equilibrium saving to decrease by more than $200 billionF) C) and E)
G) A) and E)

Question 16

If the level of autonomous spending increases at a given price level,

Accepted Answer

A)  the aggregate expenditure line shifts upward; the economy moves upward along the aggregate demand curve
B)  the aggregate expenditure line shifts downward; the economy moves upward along the aggregate demand curve
C)  the aggregate expenditure line shifts upward; the aggregate demand curve shifts to the right
D)  the aggregate expenditure line shifts downward; the aggregate demand curve shifts to the left
E)  the aggregate expenditure curve shifts upward; the aggregate demand curve shifts to the leftF) B) and D)
G) A) and E)

Question 17

Exhibit 9-9 
-The larger the marginal propensity to save,other things constant,

Accepted Answer

A)  the smaller the marginal propensity to consume
B)  the larger the marginal propensity to consume
C)  the larger the multiplier
D)  the steeper the consumption function
E)  the flatter the saving functionF) A) and E)
G) A) and D)

Question 18

Which of the following would result from a decrease in autonomous saving?

Accepted Answer

A)  an upward shift of the aggregate expenditure line
B)  an upward shift of the 45-degree line
C)  a decrease in the equilibrium level of real GDP demanded
D)  an increase in the level of autonomous consumption
E)  an increase in the level of autonomous investmentF) B) and E)
G) C) and D)

Question 19

A decrease in planned investment would shift the

Accepted Answer

A)  aggregate demand curve outward
B)  aggregate demand curve inward
C)  aggregate supply curve inward
D)  aggregate supply curve outward
E)  consumption function downwardF) B) and D)
G) C) and D)

Question 20

Exhibit 9-11 
-In Exhibit 9-11,real GDP occurs at point

Accepted Answer

A)  A
B)  B
C)  C
D)  D
E)  EF) A) and C)
G) None of the above

Exam 10: Baggregate Expenditure and Aggregate Demand

The economy will contract (shrink) if

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If the price level rises,

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A decrease in planned investment would shift the

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On the aggregate expenditure graph,if autonomous saving decreases by $15 billion,

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The simple spending multiplier is like

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If households save $30 billion more at each level of income and the MPC = 0.9,the aggregate expenditure line will

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If the level of autonomous spending increases at a given price level,

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If the spending multiplier is greater than 1.0,a $200 billion increase in autonomous investment will cause

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An increase in the price level can be indicated by a downward shift of the aggregate expenditure line.

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Exhibit 9-9 -The larger the marginal propensity to save,other things constant,

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Only a change in the price level can cause shifts in both the aggregate expenditure line and the aggregate demand curve.

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Suppose that at a particular level of real GDP,the unintended change in inventories is zero.Which of the following is true?

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Which of the following is not true about a change in the price level?

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If the level of autonomous spending decreases at a given price level,

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If the multiplier is 4,a $10 billion increase in autonomous investment will cause a

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Which of the following would result from a decrease in autonomous saving?

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An increase in the price level will

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The aggregate demand curve illustrates a relationship between

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If the marginal propensity to consume is 3/4,the simple multiplier is

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Exhibit 9-11 -In Exhibit 9-11,real GDP occurs at point

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