41) If aggregate planned expenditures are less than real GDP, then
A) inventories increase above their planned levels and businesses decrease their
production.
B) inventories decrease below their planned levels and businesses increase their
production.
C) there is no equilibrium level of real GDP.
D) inventories increase above their planned levels and businesses increase their
production.
E) unplanned inventory changes equal zero.
Skill: Level 2: Using deinitions
Section: Checkpoint 14.2
Status: Old
AACSB: Relective thinking
42) When real GDP exceeds aggregate planned expenditure
A) irms increase production.
B) real GDP increases.
C) an unplanned decrease in inventories occurs.
D) an unplanned increase in inventories occurs.
E) real GDP remains at its equilibrium.
Skill: Level 1: Deinition
Section: Checkpoint 14.2
Status: Old
AACSB: Relective thinking
43) When GDP = $2.5 trillion, C = $1.0 trillion, I = $0.6 trillion, G = $0.4 trillion, and NX =
$0. Then
A) unplanned inventory change = $0.5 trillion.
B) aggregate planned expenditure = $2.5 trillion.
C) aggregate planned expenditure = $1.6 trillion.
D) unplanned inventory change = –$0.5 trillion.
E) equilibrium expenditure = $2.0 trillion.
Skill: Level 2: Using deinitions
Section: Checkpoint 14.2
Status: Old
AACSB: Analytical thinking
41
44) Which of the following situations leads to an unplanned increase in inventories of $2.0
trillion?
A) real GDP = $5.0 trillion and aggregate planned expenditures = $7.0 trillion
B) real GDP = $5.0 trillion and aggregate planned expenditures = $5.0 trillion
C) real GDP = $6.0 trillion and aggregate planned expenditures = $4.0 trillion
D) real GDP = $8.0 trillion and aggregate planned expenditures = $5.0 trillion
E) More information is needed about planned investment and actual investment.
Skill: Level 2: Using deinitions
Section: Checkpoint 14.2
Status: Old
AACSB: Analytical thinking
45) Points where the aggregate expenditure (AE) curve lie above the 45° line are points
where aggregate planned expenditure is
A) greater than real GDP.
B) less than real GDP.
C) equal to real GDP.
D) the inverse of real GDP.
E) not related to real GDP.
Skill: Level 1: Deinition
Section: Checkpoint 14.2
Status: Old
AACSB: Relective thinking
46) If aggregate planned expenditure is greater than GDP, then
A) inventory investment is smaller than planned.
B) inventory investment is larger than planned.
C) production is too high.
D) a recession will result.
E) the consumption function will shift downward to restore the equilibrium.
Skill: Level 1: Deinition
Section: Checkpoint 14.2
Status: Old
AACSB: Relective thinking
42
47) When aggregate planned expenditure exceeds real GDP,
A) irms decrease production.
B) real GDP decreases.
C) an unplanned decrease in inventories occurs.
D) an unplanned increase in inventories occurs.
E) real GDP remains at its equilibrium level.
Skill: Level 1: Deinition
Section: Checkpoint 14.2
Status: Old
AACSB: Relective thinking
48) If aggregate planned expenditure exceeds real GDP, then
A) unplanned inventory changes are positive.
B) unplanned inventory changes are negative.
C) aggregate planned expenditure must decrease to restore the equilibrium.
D) real GDP will decrease.
E) planned inventory changes must be negative.
Skill: Level 2: Using deinitions
Section: Checkpoint 14.2
Status: Old
AACSB: Relective thinking
49) When the AE line lies above the 45° line,
A) there are unplanned decreases in inventories.
B) aggregate planned expenditure is less than real GDP.
C) there are unplanned increases in inventories.
D) real GDP exceeds aggregate planned expenditure.
E) the price level is rising.
Skill: Level 1: Deinition
Section: Checkpoint 14.2
Status: Old
AACSB: Relective thinking
43
50) When aggregate planned expenditure exceeds real GDP, there are unplanned ________
in inventories, and irms ________ production, so that real GDP ________.
A) decreases; decrease; increases
B) increases; decrease; decreases
C) increases; increase; increases
D) decreases; increase; increases
E) decreases; decrease; decreases
Skill: Level 2: Using deinitions
Section: Checkpoint 14.2
Status: Old
AACSB: Relective thinking
51) Real GDP is $13 trillion and aggregate planned expenditure is $14 trillion. As a result,
unplanned inventory change is ________ and real GDP ________.
A) positive; decreases
B) positive; increases
C) negative; increases
D) negative; decreases
E) negative; does not change
Skill: Level 3: Using models
Section: Checkpoint 14.2
Status: Old
AACSB: Relective thinking
52) When aggregate planned expenditure exceeds real GDP,
A) irms increase production and real GDP increases.
B) irms decrease production and real GDP increases.
C) irms decrease production and real GDP decreases.
D) irms increase production and real GDP decreases.
E) irms do nothing because induced expenditure will increase so that the equilibrium is
reached.
Skill: Level 2: Using deinitions
Section: Checkpoint 14.2
Status: Old
AACSB: Relective thinking
44
53) If aggregate planned expenditures exceed real GDP, then
A) inventories increase above their planned levels and businesses decrease their
production.
B) inventories decrease below their planned levels and businesses increase their
production.
C) there is no equilibrium level of real GDP.
D) inventories decrease below their planned levels and businesses decrease their
production.
E) unplanned inventory changes equal zero.
Skill: Level 2: Using deinitions
Section: Checkpoint 14.2
Status: Old
AACSB: Relective thinking
54) When planned aggregate expenditure is larger than real GDP, actual inventories
________ planned inventories and real GDP ________.
A) are less than; increases
B) are less than; decreases
C) are more than; increases
D) are more than; decreases
E) are not related to; increases
Skill: Level 2: Using deinitions
Section: Checkpoint 14.2
Status: Old
AACSB: Relective thinking
55) If the level of real GDP is $14 trillion while aggregate planned expenditure is $15
trillion, then
A) aggregate planned expenditure decreases to reach the equilibrium of $14 trillion.
B) inventories rise more than planned, leading irms to cut production.
C) inventories fall more than planned, leading irms to increase production.
D) real GDP increases and planned expenditure decreases reaching equilibrium in the
middle.
E) inventories rise more than planned, leading irms to increase production.
Skill: Level 3: Using models
Section: Checkpoint 14.2
Status: Old
AACSB: Relective thinking
45
56) Which of the following situations lead irms to increase production?
A) real GDP = $16.0 trillion and aggregate planned expenditures = $15.0 trillion
B) real GDP = $12.0 trillion and aggregate planned expenditures = $12.0 trillion
C) real GDP = $15.0 trillion and aggregate planned expenditures = $14.0 trillion
D) real GDP = $15.0 trillion and aggregate planned expenditures = $16.0 trillion
E) Both answers A and C are correct.
Skill: Level 1: Deinition
Section: Checkpoint 14.2
Status: Old
AACSB: Analytical thinking
57) 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,
A) unplanned inventory changes by -$1.0 trillion.
B) unplanned inventory changes by $1.0 trillion.
C) planned inventory changes by $1.0 trillion.
D) planned inventory changes by -$1.0 trillion.
E) both planned and unplanned inventory changes are -$1.0 trillion.
Skill: Level 2: Using deinitions
Section: Checkpoint 14.2
Status: Old
AACSB: Analytical thinking
58) During 2015, a country reports aggregate planned expenditures of $5 trillion and an
actual real GDP of $4 trillion. During 2015,
A) inventories are less than planned.
B) inventories are greater than planned.
C) inventories are unafected.
D) actual aggregate expenditures are greater than real GDP.
E) actual aggregate expenditures are less than real GDP.
Skill: Level 2: Using deinitions
Section: Checkpoint 14.2
Status: Old
AACSB: Analytical thinking
46
59) The above table gives real GDP and the aggregate expenditure schedule. Equilibrium
real GDP is
A) $11 billion.
B) $12 billion.
C) $13 billion.
D) $14 billion.
E) $10 billion.
Skill: Level 3: Using models
Section: Checkpoint 14.2
Status: Old
AACSB: Analytical thinking
60) The above table gives real GDP and the aggregate expenditure schedule. When real
GDP is $15 billion, the amount of unplanned investment is
A) $0.75 billion.
B) $14.25 billion.
C) $29.25 billion.
D) $15 billion.
E) unknown.
Skill: Level 3: Using models
Section: Checkpoint 14.2
Status: Old
AACSB: Analytical thinking
61) The above table gives real GDP and the aggregate expenditure schedule. When real
GDP is $10 billion, the amount of unplanned investment is
A) -$0.5 billion.
B) $0.5 billion.
C) $20.5 billion.
D) -$20.5 billion.
E) unknown.
Skill: Level 3: Using models
Section: Checkpoint 14.2
Status: Old
AACSB: Analytical thinking
47
62) The above table gives data for the nation of Mojo. At what level of real GDP is the
economy at equilibrium expenditure?
A) $3.0 trillion
B) $6.0 trillion
C) $9.0 trillion
D) $12.0 trillion
E) more than $12.0 trillion.
Skill: Level 3: Using models
Section: Checkpoint 14.2
Status: Old
AACSB: Analytical thinking
63) The above table gives data for the nation of Mojo. At what level of real GDP is the
unplanned inventory change equal to $1.75 trillion?
A) $3.0 trillion
B) $6.0 trillion
C) $9.0 trillion
D) $12.0 trillion
E) $0.0 trillion
Skill: Level 4: Applying models
Section: Checkpoint 14.2
Status: Old
AACSB: Analytical thinking
64) The above table gives data for the nation of Mouseville. There are no imports into or
exports from Mouseville. The equilibrium level of real GDP is
48
A) $800 billion.
B) $100 billion.
C) $500 billion.
D) $700 billion.
E) $900 billion.
Skill: Level 3: Using models
Section: Checkpoint 14.2
Status: Old
AACSB: Analytical thinking
65) The above table gives data for the nation of Mouseville. There are no imports into or
exports from Mouseville. Aggregate planned expenditure is less than actual expenditure if
real GDP is
A) more than $800 billion.
B) less than $800 billion.
C) $800 billion.
D) more than $700 billion.
E) less than $700 billion.
Skill: Level 3: Using models
Section: Checkpoint 14.2
Status: Old
AACSB: Analytical thinking
49
66) The above table gives data for the nation of Mouseville. There are no imports into or
exports from Mouseville. If real GDP is equal to $400 billion then,
A) unplanned inventory is -$200 billion.
B) unplanned inventory is $200 billion.
C) unplanned inventory is -$300 billion.
D) aggregate expenditure is equal to consumption expenditure.
E) aggregate expenditure is $450 billion.
Skill: Level 3: Using models
Section: Checkpoint 14.2
Status: Old
AACSB: Analytical thinking
67) 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
A) $800 billion.
B) $900 billion.
C) $300 billion.
D) $500 billion.
E) $700 billion.
Skill: Level 3: Using models
Section: Checkpoint 14.2
Status: Old
AACSB: Analytical thinking
68) The above table gives data for the nation of Mouseville. There are no imports into or
exports from Mouseville. Unplanned inventory changes equal $50 billion when real GDP
equals
A) $900 billion.
B) $800 billion.
C) $300 billion.
D) $500 billion.
E) $700 billion.
Skill: Level 3: Using models
Section: Checkpoint 14.2
Status: Old
AACSB: Analytical thinking
50