Page 72
370.
The belief that a higher rate of growth in real GDP will lead to higher planned
investment spending is known as:
A)
the accelerator principle.
B)
the multiplier effect.
C)
fiscal policy with an emphasis on government spending.
D)
unplanned investment spending.
371.
Planned investment spending is:
A)
investment that firms intend to make during a given period.
B)
inventory investment changes.
C)
not considered part of GDP.
D)
dependent only on interest rates.
372.
The multiplier process assumes that:
A)
aggregate prices are perfectly flexible.
B)
the economy is open and there is free trade.
C)
the economy is operating with sticky aggregate price levels.
D)
interest rates are constantly changing.
373.
Suppose the level of planned aggregate expenditure in an economy is $1,000 and real
GDP is $800. According to the simple model developed in this chapter, in which the
aggregate price level is assumed to be constant, we can expect:
A)
inventories to stay the same, since this is part of planned investment.
B)
inventories to decrease.
C)
inventories to increase.
D)
real GDP to fall further.
374.
If unplanned inventory investment is positive, probably:
A)
the economy is growing rapidly.
B)
aggregate expenditures on goods and services are less than forecast.
C)
the economy is doing the same, since inventory changes do not affect the economy.
D)
the stock of inventories is declining.
375.
In the income–expenditure model, inventories are:
A)
fixed and therefore provide little insight into the direction of the economy.
B)
a long-run event that aids forecasters in understanding where long-run real GDP is.
C)
constantly changing and provide insight into the future of the economy.
D)
often positive, suggesting that additions to inventory stocks are a long-run goal.
Page 73
376.
If the marginal propensity to consume equals 0.75, then based on the simple model
presented in this chapter, one would expect a $100 decrease in investment spending to
lead to a total _____ in spending of _____.
A)
increase; $100
B)
increase; $400
C)
decrease; $100
D)
decrease; $400
377.
A country is closed. It has no government sector, and its aggregate price levels and
interest rates are fixed. Furthermore, the marginal propensity to consume is constant and
the country’s consumption function is as follows: C = 200 + 0.75YD, where YD is
disposable income and C is consumption. Assume that planned investment equals 75. If
this country’s income increased by $10,000, consumption would increase by:
A)
$10,000.
B)
$7,500.
C)
$200.
D)
$7,700.
378.
A country is closed. It has no government sector, and its aggregate price levels and
interest rates are fixed. Furthermore, the marginal propensity to consume is constant and
the country’s consumption function is as follows: C = 200 + 0.75YD, where YD is
disposable income and C is consumption. Assume that planned investment equals 75.
When real GDP equals $900:
A)
planned investment equals $900.
B)
unplanned inventory investment is negative.
C)
autonomous consumption equals $900.
D)
the economy is in income–expenditure equilibrium.
379.
A country is closed. It has no government sector, and its aggregate price levels and
interest rates are fixed. Furthermore, the marginal propensity to consume is constant and
the country’s consumption function is as follows: C = 200 + 0.75YD, where YD is
disposable income and C is consumption. Assume that planned investment equals 75.
What is the income–expenditure equilibrium for this country?
A)
$900
B)
$1,100
C)
$275
D)
$200
Page 74
380.
A country is closed. It has no government sector, and its aggregate price levels and
interest rates are fixed. Furthermore, the marginal propensity to consume is constant and
the country’s consumption function is as follows: C = 200 + 0.75YD, where YD is
disposable income and C is consumption. Assume that planned investment equals 75.
Holding everything else constant, what will happen if aggregate wealth decreases by
$100?
A)
The aggregate expenditures curve will shift downward.
B)
The income–expenditure equilibrium real GDP will increase by more than $100.
C)
There will be no multiplier effect on real GDP, since there is a drop in aggregate
wealth.
D)
Planned investment will increase.
381.
A country is closed. It has no government sector, and its aggregate price levels and
interest rates are fixed. Furthermore, the marginal propensity to consume is constant and
the country’s consumption function is as follows: C = 200 + 0.75YD, where YD is
disposable income and C is consumption. Assume that planned investment equals 75. If
real GDP is $1,100:
A)
unplanned investment equals zero.
B)
planned investment equals zero.
C)
the aggregate expenditures curve shifts up.
D)
the marginal propensity to consume decreases.
Answer Key
Page 76
45.
A
46.
D
47.
D
48.
C
49.
C
50.
D
51.
B
52.
C
53.
A
54.
B
55.
A
56.
B
57.
D
58.
B
59.
D
60.
B
61.
C
62.
D
63.
A
64.
B
65.
C
66.
B
67.
C
68.
B
69.
B
70.
B
71.
C
72.
A
73.
C
74.
A
75.
D
76.
A
77.
C
78.
D
79.
B
80.
C
81.
B
82.
C
83.
A
84.
D
85.
D
86.
A
87.
C
88.
D
89.
C
90.
C
Page 77
91.
C
92.
C
93.
C
94.
D
95.
B
96.
A
97.
C
98.
B
99.
A
100.
A
101.
B
102.
D
103.
D
104.
B
105.
B
106.
C
107.
C
108.
B
109.
A
110.
C
111.
C
112.
B
113.
A
114.
B
115.
B
116.
D
117.
B
118.
A
119.
C
120.
A
121.
B
122.
C
123.
A
124.
A
125.
B
126.
A
127.
C
128.
A
129.
D
130.
B
131.
D
132.
A
133.
D
134.
C
135.
B
136.
C
Page 78
137.
B
138.
B
139.
B
140.
A
141.
B
142.
D
143.
B
144.
A
145.
C
146.
B
147.
A
148.
A
149.
D
150.
D
151.
B
152.
C
153.
A
154.
B
155.
A
156.
D
157.
B
158.
C
159.
C
160.
B
161.
B
162.
C
163.
C
164.
D
165.
A
166.
A
167.
C
168.
A
169.
B
170.
B
171.
A
172.
C
173.
D
174.
A
175.
A
176.
B
177.
D
178.
B
179.
B
180.
D
181.
A
182.
A
Page 79
183.
D
184.
C
185.
A
186.
A
187.
B
188.
A
189.
D
190.
B
191.
D
192.
B
193.
B
194.
D
195.
A
196.
A
197.
A
198.
A
199.
B
200.
C
201.
A
202.
A
203.
D
204.
D
205.
D
206.
C
207.
A
208.
B
209.
B
210.
A
211.
A
212.
A
213.
B
214.
A
215.
D
216.
B
217.
C
218.
D
219.
C
220.
B
221.
B
222.
A
223.
C
224.
A
225.
A
226.
B
227.
D
228.
A
Page 80
229.
A
230.
A
231.
A
232.
D
233.
C
234.
D
235.
D
236.
C
237.
D
238.
B
239.
A
240.
D
241.
B
242.
D
243.
A
244.
B
245.
C
246.
C
247.
D
248.
A
249.
C
250.
D
251.
C
252.
D
253.
C
254.
C
255.
C
256.
D
257.
B
258.
C
259.
A
260.
B
261.
A
262.
C
263.
C
264.
D
265.
B
266.
C
267.
B
268.
B
269.
A
270.
B
271.
B
272.
C
273.
C
274.
C
Page 81
275.
A
276.
C
277.
D
278.
A
279.
B
280.
C
281.
D
282.
A
283.
B
284.
A
285.
B
286.
A
287.
B
288.
B
289.
A
290.
A
291.
B
292.
A
293.
B
294.
A
295.
B
296.
A
297.
B
298.
A
299.
B
300.
A
301.
B
302.
A
303.
B
304.
A
305.
B
306.
A
307.
B
308.
B
309.
B
310.
A
311.
B
312.
A
313.
A
314.
B
315.
A
316.
B
317.
A
318.
B
319.
A
320.
B
Page 82
321.
B
322.
B
323.
A
324.
B
325.
A
326.
A
327.
A
328.
B
329.
A
330.
B
331.
A
332.
B
333.
A
334.
B
335.
A
336.
B
337.
B
338.
A
339.
A
340.
341.
342.
343.
344.
345.
346.
347.
348.
349.
350.
351.
352.
D
353.
A
354.
C
355.
C
356.
A
357.
B
358.
A
359.
A
360.
A
361.
A
362.
A
363.
A
364.
A
365.
B
366.
A
Page 83
367.
B
368.
B
369.
B
370.
A
371.
A
372.
C
373.
B
374.
B
375.
C
376.
D
377.
B
378.
B
379.
B
380.
A
381.
A