Question 1

If transfer payments increase then we would most likely conclude what about government spending as a result of this increase?

Accepted Answer

A)   We cannot reasonably conclude anything about government spending.
B)   Since transfer payments have gone up this has caused government spending to decrease.
C)   Since transfer payments have gone up this has caused government spending to increase.
D)   Government spending would not change if transfer payments increase.E) A) and B)
F) A) and C)

Question 2

The multiplier effect occurs when:

Accepted Answer

A)   spending by one person generates income for others and causes others to spend more too, increasing the impact of the initial spending on the economy.
B)   the level of consumer confidence increases more than predicted given a tax cut.
C)   increased spending by one or more individuals causes others to react and increase their savings.
D)   None of these is true.E) A) and C)
F) A) and B)

Question 3

The real exchange rate generally has ______ relationship with aggregate expenditure.

Accepted Answer

A)   a negative
B)   a positive
C)   no
D)   a constantE) A) and D)
F) B) and C)

Question 4

What type of relationship does the real interest rate have with respect to Investment spending?

Accepted Answer

A)   negative relationship
B)   positive relationship
C)   No relationship
D)   constant relationshipE) A) and B)
F) None of the above

Question 5

If the MPC is 0.9, and the government cuts spending by $200b, the overall effect on GDP will be:

Accepted Answer

A)   a decrease of $2,000b.
B)   an increase of $2,000b.
C)   a decrease of $1,800b.
D)   an increase of $180b.E) C) and D)
F) All of the above

Question 6

What type of relationship does expected profitability have with respect to Investment spending?

Accepted Answer

A)   Negative
B)   Positive
C)   Indirect
D)   ConstantE) C) and D)
F) A) and B)

Question 7

Which of the following could be a cause of consumption decreasing?

Accepted Answer

A)   Real income increases.
B)   Interest rates increase.
C)   Wealth increases.
D)   Expected future income increases.E) B) and C)
F) None of the above

Question 8

A key result of the equilibrium aggregate expenditure model is that it:

Accepted Answer

A)   can explain why the economy should always be at natural rate GDP.
B)   illustrates how the government always moves us towards equilibrium GDP.
C)   can illustrate how an economy can be at an equilibrium that is below natural rate GDP.
D)   shows how classical notion that the economy will always tend towards natural rate GDP is correct.E) A) and C)
F) B) and C)

Question 9

Which of the following is a determinant of Investment spending?

Accepted Answer

A)   Disposable income
B)   Expected future income
C)   Expected profitability
D)   Real IncomeE) B) and D)
F) A) and D)

Question 10

If the MPC is 0.6, and the government increases its spending by $300b, the overall effect on GDP will be:

Accepted Answer

A)   a decrease of $750b.
B)   an increase of $750b.
C)   a decrease of $550b.
D)   an increase of $250b.E) A) and B)
F) A) and C)

Question 11

Using Figure 2 above, suppose that the economy started at PAE2. A potential change that could cause the economy to go from PAE2 to PAE3 might be:

Accepted Answer

A)   consumption spending increases.
B)   investment decreases.
C)   imports increase.
D)   exports decrease.E) A) and B)
F) All of the above

Exam 11: Aggregate Expenditure

Which of the following could be a cause of consumption decreasing?

Correct Answer
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Which of the following is a determinant of Investment spending?

Correct Answer
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A key result of the equilibrium aggregate expenditure model is that it:

Correct Answer
verified

If the MPC is 0.9, and the government cuts spending by $200b, the overall effect on GDP will be:

Correct Answer
verified

What type of relationship does expected profitability have with respect to Investment spending?

Correct Answer
verified

What type of relationship does the real interest rate have with respect to Investment spending?

Correct Answer
verified

The multiplier effect occurs when:

Correct Answer
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If transfer payments increase then we would most likely conclude what about government spending as a result of this increase?

Correct Answer
verified

Using Figure 2 above, suppose that the economy started at PAE2. A potential change that could cause the economy to go from PAE2 to PAE3 might be:

Correct Answer
verified

The real exchange rate generally has ______ relationship with aggregate expenditure.

Correct Answer
verified

If the MPC is 0.6, and the government increases its spending by $300b, the overall effect on GDP will be:

Correct Answer
verified

Exam 11: Aggregate Expenditure

Which of the following could be a cause of consumption decreasing?

Correct AnswerverifiedShow Answer

Which of the following is a determinant of Investment spending?

Correct AnswerverifiedShow Answer

A key result of the equilibrium aggregate expenditure model is that it:

Correct AnswerverifiedShow Answer

If the MPC is 0.9, and the government cuts spending by $200b, the overall effect on GDP will be:

Correct AnswerverifiedShow Answer

What type of relationship does expected profitability have with respect to Investment spending?

Correct AnswerverifiedShow Answer

What type of relationship does the real interest rate have with respect to Investment spending?

Correct AnswerverifiedShow Answer

The multiplier effect occurs when:

Correct AnswerverifiedShow Answer

If transfer payments increase then we would most likely conclude what about government spending as a result of this increase?

Correct AnswerverifiedShow Answer

Using Figure 2 above, suppose that the economy started at PAE2. A potential change that could cause the economy to go from PAE2 to PAE3 might be:

Correct AnswerverifiedShow Answer

The real exchange rate generally has ______ relationship with aggregate expenditure.

Correct AnswerverifiedShow Answer

If the MPC is 0.6, and the government increases its spending by $300b, the overall effect on GDP will be:

Correct AnswerverifiedShow Answer

Correct Answer
verified

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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