58) When the real interest rate rises, there is
A) an upward movement along the consumption function.
B) a downward movement along the consumption function.
C) an upward shift of the consumption function.
D) a downward shift of the consumption function.
E) neither a shift of the consumption function nor a movement along the consumption
function.
Skill: Level 1: Deinition
Section: Checkpoint 14.1
Status: Old
AACSB: Relective thinking
59) If the real interest rate increases, there is
A) a movement upward along the consumption function.
B) a movement downward along consumption function.
C) an upward shift of the consumption function.
D) a downward shift of the consumption function.
E) a change in the slope of the consumption function.
Skill: Level 1: Deinition
Section: Checkpoint 14.1
Status: Old
AACSB: Relective thinking
60) A rise in the real interest rate ________ consumption expenditure and ________.
A) increases; shifts the consumption function upward
B) decreases; shifts the consumption function downward
C) increases; shifts the consumption function downward
D) decreases; shifts the consumption function upward
E) decreases; results in a movement downward along the consumption function
Skill: Level 1: Deinition
Section: Checkpoint 14.1
Status: Old
AACSB: Relective thinking
21
61) An increase in expected future disposable income ________ consumption expenditure
and ________.
A) increases; shifts the consumption function upward
B) decreases; shifts the consumption function downward
C) increases; shifts the consumption function downward
D) decreases; shifts the consumption function upward
E) increases; results in a movement upward along the consumption function
Skill: Level 2: Using deinitions
Section: Checkpoint 14.1
Status: Old
AACSB: Relective thinking
62) In Germany, expected future income increased during 2010. This increase led to
A) a movement upward along the consumption function.
B) a movement downward along the consumption function.
C) an upward shift of the consumption function.
D) a downward shift of the consumption function.
E) no movement along the consumption function and no shift of the consumption function.
Skill: Level 2: Using deinitions
Section: Checkpoint 14.1
Status: Old
AACSB: Relective thinking
63) ________ shifts the consumption function upward.
A) A decrease in the marginal propensity to consume
B) An increase in the real interest rate
C) An increase in expected future disposable income
D) An increase in disposable income
E) An increase in the price level
Skill: Level 2: Using deinitions
Section: Checkpoint 14.1
Status: Old
AACSB: Relective thinking
22
64) When the economy enters an expansion of a business cycle, households become more
optimistic about expected future disposable income. The increase in optimism leads to
A) a shift upward of the consumption function.
B) an increase in consumption expenditures.
C) no change in the level of consumption expenditures.
D) a movement upward along the consumption function.
E) a movement downward along the consumption function.
Skill: Level 2: Using deinitions
Section: Checkpoint 14.1
Status: Old
AACSB: Relective thinking
65) A decrease in wealth ________ consumption expenditure and ________.
A) increases; shifts the consumption function upward
B) decreases; shifts the consumption function downward
C) increases; shifts the consumption function downward
D) decreases; shifts the consumption function upward
E) decreases; results in a movement downward along the consumption function
Skill: Level 2: Using deinitions
Section: Checkpoint 14.1
Status: Old
AACSB: Relective thinking
66) Other things remaining the same, ________ in U.S. real GDP results in ________ in U.S.
imports.
A) an increase; an increase
B) an increase; a decrease
C) a decrease; an increase
D) a decrease; no change
E) an increase; a decrease followed by no change
Skill: Level 1: Deinition
Section: Checkpoint 14.1
Status: Old
AACSB: Relective thinking
23
67) When U.S. real GDP increases, U.S. imports
A) decrease by the same amount.
B) increase by the same amount.
C) increase by less than the change in real GDP.
D) decrease by less than the change in real GDP.
E) increase by more than the change in real GDP.
Skill: Level 2: Using deinitions
Section: Checkpoint 14.1
Status: Old
AACSB: Relective thinking
68) As real U.S. GDP increases, U.S. income increases and so
A) U.S. imports decrease.
B) U.S. exports decrease.
C) U.S. imports increase.
D) U.S. exports increase.
E) investment increases.
Skill: Level 2: Using deinitions
Section: Checkpoint 14.1
Status: Old
AACSB: Relective thinking
69) If the marginal propensity to import is ________, then a $2 trillion increase in disposable
income would increase import expenditure by $0.2 trillion. If the marginal propensity to
import is ________, then a $2 trillion increase in disposable income would increase import
expenditure by $0.6 trillion.
A) 1.0; 3.0
B) 0.1; 0.3
C) 0.2; 0.6
D) 0.6; 2.0
E) 0.3; 0.1
Skill: Level 2: Using deinitions
Section: Checkpoint 14.1
Status: Old
AACSB: Analytical thinking
24
70) Based on data from the U.S. economy, the marginal propensity to consume is about
A) 0.87.
B) 0.75.
C) 0.60.
D) 0.95.
E) 1.10.
Skill: Level 2: Using deinitions
Section: Checkpoint 14.1
Status: Old
AACSB: Relective thinking
71) The components of aggregate expenditure are consumption expenditure,
A) interest, gross spending, and net spending.
B) investment, government expenditure on goods and services, and net income.
C) interest, government expenditure on goods and services, and net exports.
D) investment, government expenditure on goods and services, and net exports.
E) investment, government expenditure on goods and services, and net taxes.
Skill: Level 1: Deinition
Section: Checkpoint 14.1
Status: Old
AACSB: Relective thinking
72) Which of the following is true?
A) Actual aggregate expenditure does not always equal real GDP.
B) Aggregate planned expenditure always equals real GDP.
C) Actual aggregate expenditure always equals real GDP.
D) Aggregate planned expenditure and actual aggregate expenditures both are always
equal to real GDP.
E) Actual aggregate expenditure cannot be measured.
Skill: Level 1: Deinition
Section: Checkpoint 14.1
Status: Old
AACSB: Relective thinking
25
73) Autonomous expenditure is the component of
A) aggregate expenditure that changes when real GDP changes.
B) induced expenditure that changes when in real GDP changes.
C) aggregate planned expenditure that changes only when government expenditure on
goods and services change.
D) aggregate expenditure that does not change when real GDP changes.
E) aggregate expenditure that does not change when the interest rate changes.
Skill: Level 1: Deinition
Section: Checkpoint 14.1
Status: Old
AACSB: Relective thinking
74) The components of aggregate expenditure that change when real GDP changes are
known as
A) unplanned expenditure.
B) induced expenditure.
C) planned expenditure.
D) autonomous expenditure.
E) changeable expenditure.
Skill: Level 1: Deinition
Section: Checkpoint 14.1
Status: Old
AACSB: Relective thinking
75) The consumption function is the relationship between ________, other things remaining
the same.
A) consumption expenditure and saving
B) consumption expenditure and the price level
C) consumption expenditure and disposable income
D) net taxes and disposable income
E) consumption expenditure and net taxes
Skill: Level 1: Deinition
Section: Checkpoint 14.1
Status: Old
AACSB: Relective thinking
26
76) When disposable income increases from $9 trillion to $10 trillion, consumption
expenditure increases from $6 trillion to $6.8 trillion. The MPC is
A) 1.00.
B) 0.80.
C) 0.60.
D) 0.68.
E) $6.8 trillion.
Skill: Level 2: Using deinitions
Section: Checkpoint 14.1
Status: Old
AACSB: Analytical thinking
14.2 Equilibrium Expenditure
1) The components of aggregate expenditure that are not inluenced by GDP are known as
A) unplanned expenditure.
B) induced expenditure.
C) planned expenditure.
D) autonomous expenditure.
E) ixed expenditure.
Skill: Level 1: Deinition
Section: Checkpoint 14.2
Status: Old
AACSB: Relective thinking
2) Autonomous expenditure is expenditure that is
A) inluenced by real GDP.
B) inluenced by the interest rate.
C) not inluenced by real GDP.
D) not inluenced by the interest rate.
E) not inluenced by the price level.
Skill: Level 1: Deinition
Section: Checkpoint 14.2
Status: Old
AACSB: Relective thinking
27
3) The quantity of U.S. exports is determined by
A) U.S. GDP.
B) U.S. consumption expenditure.
C) political factors.
D) aggregate incomes in the rest of the world.
E) U.S. aggregate expenditure.
Skill: Level 1: Deinition
Section: Checkpoint 14.2
Status: Old
AACSB: Relective thinking
4) Autonomous expenditure includes
A) investment, government expenditure for goods and services, and imports.
B) consumption expenditures, investment, and exports.
C) consumption expenditure, investment, and imports.
D) investment, government expenditure on goods and services, and exports.
E) consumption expenditure, investment, and net taxes.
Skill: Level 1: Deinition
Section: Checkpoint 14.2
Status: Old
AACSB: Relective thinking
5) Induced expenditure is any expenditure that
A) is ixed for all levels of real GDP.
B) is ixed for all price levels.
C) is ixed for all levels of the interest rate.
D) changes when real GDP changes.
E) changes when the interest rate changes.
Skill: Level 1: Deinition
Section: Checkpoint 14.2
Status: Old
AACSB: Relective thinking
28
6) Induced expenditures are deined as that part of
A) aggregate expenditure that responds to changes in real GDP.
B) real GDP that does not respond to changes in aggregate expenditure.
C) aggregate expenditure that does not respond to changes in real GDP.
D) autonomous expenditure that responds to changes in real GDP.
E) autonomous expenditure that does not respond to changes in real GDP.
Skill: Level 1: Deinition
Section: Checkpoint 14.2
Status: Old
AACSB: Relective thinking
7) Which of the following increases as a result of an increase in real GDP?
i. autonomous expenditure
ii. induced expenditure
iii. potential GDP
A) i only
B) ii only
C) iii only
D) ii and iii
E) i, ii, and iii
Skill: Level 1: Deinition
Section: Checkpoint 14.2
Status: Old
AACSB: Relective thinking
8) Which aggregate expenditure categories are inluenced by the level of real GDP?
A) investment and government expenditures on goods and services
B) consumption and investment
C) imports and exports
D) consumption and imports
E) consumption and government expenditures on goods and services
Skill: Level 1: Deinition
Section: Checkpoint 14.2
Status: Old
AACSB: Relective thinking
29
9) Induced expenditure includes
A) consumption expenditure, government expenditure on goods and services, and imports.
B) investment, consumption expenditures, and exports.
C) consumption expenditure and imports.
D) consumption expenditure and exports.
E) consumption expenditure and government expenditure on goods and services.
Skill: Level 1: Deinition
Section: Checkpoint 14.2
Status: Old
AACSB: Relective thinking
10) Which components of aggregate expenditure change as a result of real GDP changing?
A) consumption expenditure and imports
B) consumption expenditure and investment
C) consumption expenditure, investment, and exports
D) consumption expenditure, investment, and government expenditure on goods and
services
E) consumption expenditure and government expenditure on goods and services
Skill: Level 1: Deinition
Section: Checkpoint 14.2
Status: Old
AACSB: Relective thinking
11) To ind aggregate planned expenditures, which of the following must be added to
consumption expenditure?
i. net exports
ii. investment
iii. government expenditure on goods and services
A) i only
B) ii only
C) iii only
D) i and ii
E) i, ii, and iii
Skill: Level 1: Deinition
Section: Checkpoint 14.2
Status: Old
AACSB: Relective thinking
30