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Exam 14: Aggregate Expenditure Multiplier

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Question 21

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When the real interest rate falls, the consumption function

A) shifts upward.
B) does not shift and there is a movement downward along the consumption function.
C) does not shift and there is no movement along the consumption function.
D) does not shift and there is a movement upward along the consumption function.
E) shifts downward.

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Question 22

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The expenditure multiplier is larger than one because

A) an increase in autonomous expenditure induces further decreases in aggregate expenditure.
B) additional expenditure induces lower incomes.
C) an increase in autonomous expenditure induces further increases in aggregate expenditure.
D) the price level rises, thereby reinforcing the initial effect.
E) an increase in autonomous expenditure brings about a reduction in the real interest rate.

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Question 23

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When investment increases, the multiplier points out that

Which of the following variables is fixed in the aggregate expenditure model?

According to the aggregate expenditure model, when autonomous expenditure increases, equilibrium expenditure

Based on data from the U.S. economy, the marginal propensity to consume is about

The smaller the amount saved out of a change in disposable income, the

When aggregate planned expenditure _{--------------------} real GDP, there are unplanned _{--------------------} in inventories, and firms _{--------------------} production, therefore decreasing real GDP.

Autonomous expenditure includes

A country reports that when real GDP is $13.0 trillion, aggregate planned expenditure is $14.0 trillion. When real GDP equals $13.0 trillion,

The MPC is equal to the

In an economy with no income taxes or imports, the marginal propensity to consume is 0.80. The Expenditure multiplier is

$\begin{array}{rccc}\hline &\text { Consumption }&&\text { Government }\\\text { Real GDP, } Y &\text { expenditure, } C& \text { Investment, } I& \text { expenditure, } G\\\text { (billions of } & \text { (billions of } & \text { (billions of } & \text { (billions of } \\\text { 2005 dollars) } & \text { 2005 dollars) } & \text { 2005 dollars) } & \text { 2005 dollars) }\\\hline15 & 6 & 5 & 5 \\20 & 10 & 5 & 5 \\25 & 14 & 5 & 5 \\30 & 18 & 5 & 5 \\35 & 22 & 5 & 5\\\hline\end{array}$ The above table contains information about the nation of Syldavia - There are no income taxes or Imports in this nation. The expenditure multiplier is equal to

When disposable income increases from $9 trillion to $10 trillion, consumption expenditure increases from $6 trillion to $6.8 trillion. The MPC is

If the level of real GDP is $14 trillion while aggregate planned expenditure is $15 trillion, then

In the range of disposable income where the consumption function lies above the 45° line,

$\begin{array}{rccc}\hline &\text { Consumption }&&\text { Government }\\\text { Real GDP, } Y &\text { expenditure, } C& \text { Investment, } I& \text { expenditure, } G\\\text { (billions of } & \text { (billions of } & \text { (billions of } & \text { (billions of } \\\text { 2005 dollars) } & \text { 2005 dollars) } & \text { 2005 dollars) } & \text { 2005 dollars) }\\\hline15 & 6 & 5 & 5 \\20 & 10 & 5 & 5 \\25 & 14 & 5 & 5 \\30 & 18 & 5 & 5 \\35 & 22 & 5 & 5\\\hline\end{array}$ - The above table gives data for the nation of Mouseville. There are no imports into or exports from Mouseville. Unplanned inventory changes are zero when real GDP equals

If aggregate planned expenditures are less than real GDP, then

The expenditure multiplier equals 5 and there is a $3 million increase in investment. Equilibrium expenditure

When aggregate planned expenditure exceeds real GDP, there are unplanned _{--------------------} in inventories, and firms _{--------------------} production, so that real GDP _{--------------------}.