69) The above table gives data for the nation of South Hampton. There are no imports into
or exports from South Hampton. The equilibrium level of real GDP is
A) $500 billion.
B) $600 billion.
C) $700 billion.
D) $800 billion.
E) $400 billion.
Skill: Level 3: Using models
Section: Checkpoint 14.2
Status: Old
AACSB: Analytical thinking
70) The above table gives data for the nation of South Hampton. There are no imports into
or exports from South Hampton. Aggregate planned expenditure is less than actual
expenditure if real GDP is
A) $700 billion.
B) less than $700 billion.
C) more than $700 billion.
D) at the equilibrium level.
E) Both answers A and C are correct.
Skill: Level 3: Using models
Section: Checkpoint 14.2
Status: Old
AACSB: Analytical thinking
51
71) The above table gives data for the nation of South Hampton. There are no imports into
or exports from South Hampton. If real GDP is equal to $900 billion, then
A) aggregate planned expenditure is greater than real GDP.
B) aggregate planned expenditure is less than real GDP.
C) this is the equilibrium level of real GDP.
D) aggregate planned expenditure is equal to real GDP.
E) aggregate planned expenditure will need to decrease to reach the equilibrium.
Skill: Level 3: Using models
Section: Checkpoint 14.2
Status: Old
AACSB: Analytical thinking
72) The table above gives data for the nation of Mosh. The MPC of the economy is
A) 1.
B) .75.
C) .80.
D) .90.
E) indeterminate with the information provided.
Skill: Level 4: Applying models
Section: Checkpoint 14.2
Status: Old
AACSB: Analytical thinking
52
73) The table above gives data for the nation of Mosh. The amount of autonomous
expenditure is
A) $4 trillion.
B) $1.5 trillion.
C) $4.5 trillion.
D) $9.0 trillion.
E) not shown in this table.
Skill: Level 4: Applying models
Section: Checkpoint 14.2
Status: Old
AACSB: Analytical thinking
74) The table above gives data for the nation of Mosh. If real GDP is $6 trillion, then
A) irms decrease production because inventories exceed their target levels.
B) irms increase production because inventories are less than their target levels.
C) the economy has reached equilibrium and no change in production will occur.
D) irms increase production because inventories exceed their target levels.
E) We need more information to determine whether irms increase, decrease, or do not
change their production.
Skill: Level 4: Applying models
Section: Checkpoint 14.2
Status: Old
AACSB: Analytical thinking
75) The table above gives data for the nation of Mosh. If real GDP is $10 trillion, then
A) irms decrease production because inventories exceed their target levels.
B) irms increase production because inventories are less than their target levels.
C) the economy has reached equilibrium and no change in production will occur.
D) irms decrease production because inventories are less than their target levels.
E) We need more information to determine whether irms increase, decrease, or do not
change their production.
Skill: Level 4: Applying models
Section: Checkpoint 14.2
Status: Old
AACSB: Analytical thinking
53
76) The table above gives data for the nation of Mosh. In Mosh, equilibrium expenditure
equals
A) $4 trillion.
B) $6 trillion.
C) $9 trillion.
D) $7 trillion.
E) $10 trillion.
Skill: Level 4: Applying models
Section: Checkpoint 14.2
Status: Old
AACSB: Analytical thinking
77) The table above gives data for the nation of Mosh. If we graphed these data, we would
see that when GDP equals
A) $6 trillion, the AE curve is below the 45° line.
B) $10 trillion, the 45° line is above the AE curve.
C) $9 trillion, the AE curve intersects the 45° line.
D) $4 trillion, the AE curve intersects the 45° line.
E) $10 trillion, the AE curve intersects the 45° line.
Skill: Level 4: Applying models
Section: Checkpoint 14.2
Status: Old
AACSB: Analytical thinking
78) The table above gives data for the nation of Mosh. If real GDP is $9 trillion, then
unplanned inventory change equals
A) 0.
B) $5.5 trillion.
C) $1.25 trillion.
D) $5 trillion.
E) $9 trillion.
Skill: Level 4: Applying models
Section: Checkpoint 14.2
Status: Old
AACSB: Analytical thinking
54
79) In the igure above, if real GDP is $20 trillion, aggregate planned expenditure is
________ $20 trillion and unplanned inventory changes are ________.
A) less than; positive
B) equal to; equals to zero
C) less than; negative
D) equal to; negative
E) equal to; positive
Skill: Level 3: Using models
Section: Checkpoint 14.2
Status: Old
AACSB: Analytical thinking
80) In the igure above, if real GDP is $10 trillion, aggregate planned expenditure is
A) less than $10 trillion and unplanned inventory changes are positive.
B) equal to $10 trillion and there are no unplanned inventory changes.
C) more than $10 trillion and unplanned inventory changes are negative.
D) equal to $10 trillion and unplanned inventory changes are negative.
E) equal to $10 trillion and unplanned inventory changes are positive.
Skill: Level 3: Using models
Section: Checkpoint 14.2
Status: Old
AACSB: Analytical thinking
55
81) In the above igure, equilibrium expenditure is equal to
A) $5 trillion.
B) $10 trillion.
C) $15 trillion.
D) $20 trillion.
E) None of the above answers is correct
Skill: Level 4: Applying models
Section: Checkpoint 14.2
Status: Old
AACSB: Analytical thinking
82) If exports increase, then the aggregate expenditure curve shifts ________ and
equilibrium expenditure ________.
A) upward; decreases
B) upward; increases
C) downward; decreases
D) downward; increases
E) upward; does not change
Skill: Level 2: Using deinitions
Section: Checkpoint 14.2
Status: Old
AACSB: Analytical thinking
83) If autonomous imports increase, then the aggregate expenditure curve shifts ________
and equilibrium real GDP ________.
A) upward; decreases
B) upward; increases
C) downward; decreases
D) downward; increases
E) downward; does not change
Skill: Level 2: Using deinitions
Section: Checkpoint 14.2
Status: Old
AACSB: Analytical thinking
56
84) According to John Maynard Keynes,
A) Say’s Law is always correct.
B) a free market economy automatically inds equilibrium at full employment.
C) prices and wages move up and down freely.
D) efective demand determines real GDP.
E) supply creates its own demand.
Skill: Level 2: Using deinitions
Section: Checkpoint 14.2
Status: Old
AACSB: Relective thinking
85) When aggregate planned expenditure exceeds real GDP, there is
A) a planned decrease in inventories.
B) a planned increase in inventories.
C) an unplanned decrease in inventories.
D) an unplanned increase in inventories.
E) an unplanned decrease in the price level.
Skill: Level 1: Deinition
Section: Checkpoint 14.2
Status: Old
AACSB: Relective thinking
86) If aggregate planned expenditure is greater than real GDP,
A) an unplanned decrease in inventories leads to an increase in production.
B) an unplanned increase in inventories leads to a decrease in production.
C) a planned decrease in inventories leads to a decrease in production.
D) a planned increase in inventories leads to an increase in production.
E) an unplanned decrease in inventories leads to an increase in the price level.
Skill: Level 2: Using deinitions
Section: Checkpoint 14.2
Status: Old
AACSB: Relective thinking
57
87) If real GDP equals aggregate planned expenditure, then inventories
A) rise above their target levels.
B) fall below their target levels.
C) equal their target levels.
D) are either above or below their target levels depending on whether planned inventories
are above or below their target levels.
E) None of the above answers is necessarily correct because there is no relationship
between inventories and aggregate planned expenditure.
Skill: Level 2: Using deinitions
Section: Checkpoint 14.2
Status: Old
AACSB: Relective thinking
88) Equilibrium expenditure is the level of expenditure at which
A) irms’ inventories are zero.
B) irms’ inventories are at the desired level.
C) irms produce more output than they sell.
D) aggregate planned expenditure minus planned changes in inventories equals real GDP.
E) aggregate planned expenditure plus planned changes in inventories equals real GDP.
Skill: Level 1: Deinition
Section: Checkpoint 14.2
Status: Old
AACSB: Relective thinking
14.3 Expenditure Multipliers
1) The expenditure multiplier explains how a change in
A) real GDP leads to a change in autonomous expenditure.
B) induced expenditure leads to a change in real GDP.
C) autonomous expenditure leads to a change in real GDP.
D) real GDP leads to a change in induced expenditure.
E) induced expenditure leads to a change in autonomous expenditure.
Skill: Level 1: Deinition
Section: Checkpoint 14.3
Status: Old
AACSB: Relective thinking
58
2) The expenditure multiplier measures the change in
A) equilibrium expenditure that results from a change in autonomous expenditure.
B) autonomous spending that results from a change in equilibrium expenditure.
C) equilibrium expenditure from a change in induced consumption.
D) consumption expenditure for a given change in disposable income.
E) the price level that results from a change in real GDP.
Skill: Level 1: Deinition
Section: Checkpoint 14.3
Status: Old
AACSB: Relective thinking
3) The idea of the multiplier is that a change in ________ expenditure changes real GDP,
which then changes ________ expenditure. The change in total expenditure will be larger
than the initial change in ________ expenditure.
A) induced; autonomous; induced
B) autonomous; induced; induced
C) induced; autonomous; autonomous
D) induced; induced; autonomous
E) autonomous; induced; autonomous
Skill: Level 2: Using deinitions
Section: Checkpoint 14.3
Status: Old
AACSB: Relective thinking
4) The expenditure multipliers occur because
A) a change in autonomous expenditure causes real GDP to change in the opposite
direction.
B) government expenditure on goods and services change by a proportional amount to
government taxes.
C) a change in autonomous expenditures changes households’ incomes.
D) any change in real GDP must also change the price level.
E) a change in households’ incomes changes autonomous expenditure.
Skill: Level 1: Deinition
Section: Checkpoint 14.3
Status: Old
AACSB: Relective thinking
59
5) In an economy in with no income taxes or imports, the multiplier equals
A) .
B) .
C) .
D) .
E) .
Skill: Level 3: Using models
Section: Checkpoint 14.3
Status: Old
AACSB: Analytical thinking
6) The expenditure multiplier is typically
A) less than 1 but greater than 0.
B) greater than 1.
C) equal to 1.
D) greater than 10.
E) negative.
Skill: Level 1: Deinition
Section: Checkpoint 14.3
Status: Old
AACSB: Relective thinking
7) According to the aggregate expenditure model, when autonomous expenditure
increases, equilibrium expenditure
A) increases by a larger amount.
B) increases by an equal amount.
C) does not change because only induced expenditures increase equilibrium expenditure.
D) does not change because autonomous expenditures has no efect on equilibrium
expenditure.
E) increases by a smaller amount.
Skill: Level 2: Using deinitions
Section: Checkpoint 14.3
Status: Old
AACSB: Relective thinking
60