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An economy has a fixed price level, no imports, and no income taxes.MPC is 0.5 and real GDP is $300 billion.Businesses increase investment by $10 billion.The new level of real GDP is


A) $305 billion.
B) $5 billion.
C) $320 billion.
D) $20 billion.
E) $300 billion.

F) B) and D)
G) A) and B)

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Use the table below to answer the following questions. Table 11.1.1 The following table shows the relationship between consumption expenditure C) and disposable income YD) for a hypothetical economy. Use the table below to answer the following questions. Table 11.1.1 The following table shows the relationship between consumption expenditure C) and disposable income YD) for a hypothetical economy. -Refer to Table 11.1.1.The marginal propensity to consume is A) 0.75. B) increasing as YD increases. C) equal to 1 when YD equals $600. D) 0.25. E) 1.33. -Refer to Table 11.1.1.The marginal propensity to consume is


A) 0.75.
B) increasing as YD increases.
C) equal to 1 when YD equals $600.
D) 0.25.
E) 1.33.

F) A) and B)
G) A) and C)

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Use the table below to answer the following questions. Table 11.3.1 The following table shows the relationship between aggregate planned expenditure and real GDP in the hypothetical economy of Econoworld. Use the table below to answer the following questions. Table 11.3.1 The following table shows the relationship between aggregate planned expenditure and real GDP in the hypothetical economy of Econoworld. -Refer to Table 11.3.1.The equilibrium level of real GDP is A) $600 billion. B) $550 billion. C) $525 billion. D) $450 billion. E) $500 billion. -Refer to Table 11.3.1.The equilibrium level of real GDP is


A) $600 billion.
B) $550 billion.
C) $525 billion.
D) $450 billion.
E) $500 billion.

F) C) and D)
G) B) and C)

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Use the figure below to answer the following questions. Use the figure below to answer the following questions. Figure 11.2.1 There are no exports or imports in this economy. -Refer to Figure 11.2.1.When real GDP is equal to Y<sub>a</sub>, then aggregate planned expenditure A) exceeds real GDP, and real GDP increases. B) exceeds real GDP, and real GDP decreases. C) is less than real GDP, and real GDP decreases. D) is equal to real GDP, and real GDP neither increases nor decreases. E) is less than real GDP, and real GDP increases. Figure 11.2.1 There are no exports or imports in this economy. -Refer to Figure 11.2.1.When real GDP is equal to Ya, then aggregate planned expenditure


A) exceeds real GDP, and real GDP increases.
B) exceeds real GDP, and real GDP decreases.
C) is less than real GDP, and real GDP decreases.
D) is equal to real GDP, and real GDP neither increases nor decreases.
E) is less than real GDP, and real GDP increases.

F) None of the above
G) A) and C)

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The components of aggregate expenditure that are influenced by real GDP are


A) consumption expenditure and imports.
B) consumption expenditure, investment, and imports.
C) wages, transfer payments, and government expenditure.
D) consumption expenditure, government expenditure, investment, and imports.
E) investment, exports, and imports.

F) A) and E)
G) A) and C)

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The formula for the multiplier in an open economy is


A) 1/1 + marginal propensity to import) .
B) 1/1 - slope of the AE curve) .
C) 1/1 - marginal propensity to import) .
D) 1/1 - MPC) .
E) 1/1 + slope of the AE curve) .

F) A) and B)
G) A) and C)

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Use the table below to answer the following questions. Table 11.3.1 The following table shows the relationship between aggregate planned expenditure and real GDP in the hypothetical economy of Econoworld. Use the table below to answer the following questions. Table 11.3.1 The following table shows the relationship between aggregate planned expenditure and real GDP in the hypothetical economy of Econoworld. -Refer to Table 11.3.1.If investment increases by $25 billion, the real GDP becomes A) $525 billion. B) $725 billion. C) $675 billion. D) $600 billion. E) $625 billion. -Refer to Table 11.3.1.If investment increases by $25 billion, the real GDP becomes


A) $525 billion.
B) $725 billion.
C) $675 billion.
D) $600 billion.
E) $625 billion.

F) B) and C)
G) C) and E)

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When firms plan to restock their inventories, equilibrium expenditure_______ and real GDP_______.


A) decreases; decreases
B) decreases; does not change
C) increases; decreases
D) decreases; increases
E) increases; increases

F) None of the above
G) A) and B)

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Use the figure below to answer the following questions. Use the figure below to answer the following questions. Figure 11.2.2 The economy depicted does not engage in international trade and has no government.Planned aggregate expenditure AE) is equal to the sum of consumption expenditure C) and investment I) . -Refer to Figure 11.2.2.When real GDP is $300 billion, real GDP A) exceeds aggregate planned expenditure by $50 billion, and firms increase production. B) is the same as aggregate planned expenditure, and firms do not change production. C) is less than aggregate planned expenditure by $25 billion, and firms decrease production. D) exceeds aggregate planned expenditure by $25 billion, and firms increase production. E) exceeds aggregate planned expenditure by $25 billion, and firms decrease production. Figure 11.2.2 The economy depicted does not engage in international trade and has no government.Planned aggregate expenditure AE) is equal to the sum of consumption expenditure C) and investment I) . -Refer to Figure 11.2.2.When real GDP is $300 billion, real GDP


A) exceeds aggregate planned expenditure by $50 billion, and firms increase production.
B) is the same as aggregate planned expenditure, and firms do not change production.
C) is less than aggregate planned expenditure by $25 billion, and firms decrease production.
D) exceeds aggregate planned expenditure by $25 billion, and firms increase production.
E) exceeds aggregate planned expenditure by $25 billion, and firms decrease production.

F) B) and C)
G) C) and D)

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Use the table below to answer the following questions. Table 11.3.1 The following table shows the relationship between aggregate planned expenditure and real GDP in the hypothetical economy of Econoworld. Use the table below to answer the following questions. Table 11.3.1 The following table shows the relationship between aggregate planned expenditure and real GDP in the hypothetical economy of Econoworld. -Refer to Table 11.3.1.What is the slope of the AE curve? A) 0.6 B) 1 C) 1.3 D) 0.8 E) 0.75 -Refer to Table 11.3.1.What is the slope of the AE curve?


A) 0.6
B) 1
C) 1.3
D) 0.8
E) 0.75

F) D) and E)
G) A) and D)

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Use the information below to answer the following questions. Fact 11.1.1 In an economy, when disposable income increases from $400 billion to $500 billion, consumption expenditure increases from billion to $540 billion. -Consider Fact 11.1.1.When disposable income increases from $400 billion to $500 billion, saving


A) decreases by an unknown amount.
B) decreases by $60 billion.
C) increases by $60 billion.
D) increases by $40 billion.
E) increases by an unknown amount.

F) A) and B)
G) A) and C)

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Use the figure below to answer the following questions. Use the figure below to answer the following questions. Figure 11.1.1 This figure describes the relationship between consumption expenditure and disposable income for an economy. -Refer to Figure 11.1.1.When disposable income is $500 billion, saving is equal to A) $20 billion. B) consumption expenditure. C) zero. D) $40 billion. E) disposable income. Figure 11.1.1 This figure describes the relationship between consumption expenditure and disposable income for an economy. -Refer to Figure 11.1.1.When disposable income is $500 billion, saving is equal to


A) $20 billion.
B) consumption expenditure.
C) zero.
D) $40 billion.
E) disposable income.

F) B) and E)
G) A) and C)

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The fraction of a change in disposable income that is saved is the


A) marginal tax rate.
B) marginal propensity to dispose.
C) marginal propensity to save.
D) saving function.
E) marginal propensity to consume.

F) D) and E)
G) A) and B)

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If there is an unplanned increase in inventories, aggregate planned expenditure is


A) greater than real GDP and firms decrease production.
B) less than real GDP and firms increase production.
C) less than real GDP and firms decrease production.
D) greater than real GDP and firms increase production.
E) less than real GDP and firms decrease investment.

F) B) and C)
G) A) and E)

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The sum of the marginal propensity to save and the marginal propensity to consume


A) always equals 0.
B) never equals 1.
C) is greater than zero but less than 1.
D) always equals 1.
E) sometimes equals 1.

F) B) and C)
G) A) and B)

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The multiplier shows that as _______ expenditure changes, real GDP changes by _______ amount.


A) induced; a smaller
B) autonomous; an even larger
C) induced; the same
D) induced; an even larger
E) autonomous; the same

F) B) and D)
G) C) and D)

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Use the figure below to answer the following questions. Use the figure below to answer the following questions. Figure 11.2.1 There are no exports or imports in this economy. -Refer to Figure 11.2.1.When real GDP is equal to Y<sub>c</sub>, then aggregate planned expenditure is A) greater than real GDP, and real GDP decreases. B) less than real GDP, and real GDP decreases. C) equal to real GDP, and real GDP neither increases nor decreases. D) less than real GDP, and real GDP increases. E) greater than real GDP, and real GDP increases. Figure 11.2.1 There are no exports or imports in this economy. -Refer to Figure 11.2.1.When real GDP is equal to Yc, then aggregate planned expenditure is


A) greater than real GDP, and real GDP decreases.
B) less than real GDP, and real GDP decreases.
C) equal to real GDP, and real GDP neither increases nor decreases.
D) less than real GDP, and real GDP increases.
E) greater than real GDP, and real GDP increases.

F) B) and D)
G) D) and E)

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Suppose there is an increase in exports.Assuming the price level is held constant, which one of the following best describes the sequence of changes in the economy?


A) Induced expenditure increases, real GDP increases, autonomous expenditure increases, real GDP increases more, autonomous expenditure increases again, etc.
B) Induced expenditure increases, real GDP increases, autonomous expenditure increases, and the price level increases, lowering autonomous expenditure and real GDP increases by a smaller amount.
C) Induced expenditure increases, autonomous expenditure increases, real GDP increases, and consumption increases.
D) Autonomous expenditure increases, real GDP increases, induced expenditure increases, real GDP increases more, induced expenditure increases again, and the process continues until equilibrium expenditure is reached.
E) Autonomous expenditure increases, induced expenditure increases, real GDP increases, and the price level rises.

F) B) and C)
G) None of the above

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In an economy, autonomous spending is $20 trillion and the slope of the AE curve is 0.8.The equation of the AE curve is


A) AE = 20 - 0.8Y.
B) AE = 20 + 0.8Y.
C) AE = 0.2Y- 20.
D) AE = 0.8Y - 20.
E) AE = 20 + 0.2Y.

F) B) and D)
G) B) and E)

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Use the information below to answer the following questions. Fact 11.3.1 An economy has a fixed price level, no imports, and no income taxes.MPC is 0.5 and real GDP is $200 billion.Businesses incr investment by $2 billion. -Consider Fact 11.3.1.The multiplier is


A) 2.0.
B) 0.8.
C) 0.5.
D) 2.5.
E) 0.75

F) None of the above
G) C) and D)

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