(ECON 203-502) Homework #4
Due: April 29 th
2013
Name: (UIN: )
<Chapter 12>
1) All of the following are one of the four main categories of spending identified by John
Maynard Keynes except
A) consumption
B) net exports
C) government purchases
D) taxes
2) Actual investment spending does not include
A) spending on consumer durable goods.
B) spending on new capital equipment.
C) spending on new houses.
D) changes in inventories.
3) An unplanned increase in inventories results from
A) an increase in planned investment.
B) a decrease in planned investment.
C) actual investment that is greater than planned investment.
D) actual investment that is less than planned investment.
4) Consumption is $5 million, planned investment spending is $8 million, government purchases
are $10 million, and net exports are equal to $2 million. If GDP during that same time period is
equal to $27 million, what unplanned changes in inventories occurred?
A) There was an unplanned increase in inventories equal to $2 million.
B) There was no unplanned change in inventories.
C) There was an unplanned decrease in inventories equal to $2 million.
D) There was an unplanned decrease in inventories equal to $19 million.
5) When aggregate expenditure is more than GDP, which of the following is true?
A) There was an unplanned decrease in inventories.
B) Firms spent less on capital goods than they planned.
C) Households bought fewer new homes than they planned.
D) All of the above must be true when aggregate expenditure is more than GDP.
6) If aggregate expenditure is less than GDP, how will the economy reach macroeconomic
equilibrium?
A) Inventories will decline, and GDP and employment will decline.
B) Inventories will rise, and GDP and employment will decline.
C) Inventories will decline, and GDP and employment will rise.
D) Inventories will rise, and GDP and employment will rise.
7) If economists forecast a decrease in aggregate expenditure, which of the following is likely to
occur?
A) GDP will rise.
B) GDP will fall.
C) Wages will rise.
D) Inventories will fall.
8) ________ is defined as the value of a household’s assets minus the value of its liabilities.
A) Household income
B) Household wealth
C) Personal household consumption
D) Planned household investment
9) A stock market boom which causes stock prices to rise should cause
A) a decrease in consumption spending.
B) an increase in consumption spending.
C) a decrease in wealth.
D) a decrease in net export spending.
10) Decreases in the price level will
A) lower consumption because goods and services are less affordable.
B) raise consumption because goods and services are more affordable.
C) raise consumption because real wealth increases.
D) lower consumption because real wealth decreases.
