93. If equilibrium in the economy is merely a function of aggregate demand, the aggregate supply curve must be:
a.
upward-sloping.
b.
downward-sloping.
c.
in the Keynesian region.
d.
vertical.
e.
at the full-capacity level.
94. When the purchasing power of money declines:
a.
the demand for money increases and interest rates fall.
b.
the supply of bonds increases and interest rates fall.
c.
the demand for money increases and interest rates rise.
d.
the supply of bonds decreases and interest rates rise.
e.
the demand for money decreases and interest rates rise.
Moderate
MACR.BOYE.16.54 – ch. 10, 8
Aggregate Expenditures and Aggregate Demand
Comprehension
Revised
95. Which of the following will not increase aggregate expenditures?
a.
A decrease in domestic prices
b.
A decrease in the interest rate
c.
An increase in real wealth
d.
An increase in income taxes
e.
An increase in autonomous net exports
d
Easy
MACR.BOYE.16.54 – ch. 10, 8
Knowledge
96. Everything else constant, the international trade effect indicates that aggregate expenditures in the domestic economy
fall when:
Moderate
MACR.BOYE.16.54 – ch. 10, 8
Comprehension
a.
b.
c.
d.
e.
97. The aggregate demand curve shows:
a.
how the equilibrium level of aggregate expenditure changes in response to changes in production.
b.
the amount people spend at different real GDP levels.
c.
the positive relationship between the price level and real GDP.
d.
the negative relationship between aggregate expenditure and real GDP.
e.
how the equilibrium level of aggregate expenditure changes as the price level changes.
MACR.BOYE.16.54 – ch. 10, 8
Aggregate Expenditures and Aggregate Demand
98. Which of the following is associated with an increase in the average price level?
a.
A decrease in the aggregate quantity demanded
b.
An increase in the aggregate quantity demanded
c.
A leftward shift of the aggregate demand curve
d.
A decrease in the aggregate quantity supplied
e.
Aggregate quantity demanded remains unchanged but the aggregate expenditures curve shifts leftward.
MACR.BOYE.16.54 – ch. 10, 8
United States – Reflective Thinking
Aggregate Expenditures and Aggregate Demand
99. Suppose an appreciation of the French franc causes U.S. prices of French wine imports to rise sharply. On the other
hand, Californian wine becomes relatively inexpensive to French consumers. Other things equal, this will result in:
MACR.BOYE.16.54 – ch. 10, 8
Aggregate Expenditures and Aggregate Demand
a.
an increase in U.S. aggregate expenditures and an increase in the aggregate quantity of U.S. goods and
services demanded.
b.
a decrease in U.S. aggregate expenditures and a decrease in the aggregate quantity of U.S. goods and services
demanded.
c.
an increase in U.S. aggregate expenditures and a decrease in the aggregate quantity of U.S. goods and services
demanded.
d.
no change in either U.S. aggregate expenditures or the aggregate quantity of U.S. goods and services
demanded.
e.
a decrease in U.S. aggregate expenditures and an increase in the aggregate quantity of U.S. goods and services
demanded.
100. The Keynesian region of the aggregate supply curve is:
a.
horizontal.
b.
downward-sloping.
c.
upward-sloping.
d.
vertical.
e.
a 45-degree line.
Easy
MACR.BOYE.16.54 – ch. 10, 8
Aggregate Expenditures and Aggregate Demand
Knowledge
101. The Keynesian region of the aggregate supply curve represents an economy with:
a.
high unemployment and low inflation.
b.
low unemployment and low inflation.
c.
low unemployment and high inflation.
d.
high unemployment and high inflation.
e.
excess capacity but no unemployment or inflation.
Moderate
Challenging
MACR.BOYE.16.54 – ch. 10, 8
United States – Reflective Thinking
Aggregate Expenditures and Aggregate Demand
Application
Revised
102. When total planned expenditures are more than real GDP, there will be inventory accumulation.
a.
True
b.
False
False
Easy
MACR.BOYE.16.48 – ch. 10, 2
United States – Equilibrium
Equilibrium Income and Expenditures
Knowledge
103. If total planned expenditures exceed real GDP, the economy will contract, causing production of goods and services
to decrease and unplanned inventories to rise.
a.
True
b.
False
False
Moderate
MACR.BOYE.16.48 – ch. 10, 2
United States – Equilibrium
Equilibrium Income and Expenditures
104. When the aggregate expenditures function of a closed economy is plotted against real GDP, any point on the 45–
degree line represents C + I + G = Y, where C = Consumption, I = Investment, G = Government spending, and Y = Real
GDP.
a.
True
b.
False
True
Easy
MACR.BOYE.16.48 – ch. 10, 2
United States – Equilibrium
Equilibrium Income and Expenditures
Knowledge
105. Injections represent outflows of planned expenditures from the real GDP stream.
a.
True
b.
False
False
MACR.BOYE.16.49 – ch. 10, 3
United States – Equilibrium
Comprehension
Revised
106. Injections to the economy include consumption, investment, and government spending.
a.
True
b.
False
False
Easy
MACR.BOYE.16.49 – ch. 10, 3
United States – Equilibrium
Equilibrium Income and Expenditures
Knowledge
107. Leakages are greater than injections when total planned expenditures exceed real GDP.
a.
True
b.
False
False
Moderate
MACR.BOYE.16.49 – ch. 10, 3
Equilibrium Income and Expenditures
Knowledge
108. Other things equal, a reduction in personal income taxes will decrease consumption and will have an expansionary
effect on real GDP.
a.
True
b.
False
False
Easy
MACR.BOYE.16.49 – ch. 10, 3
United States – Equilibrium
Equilibrium Income and Expenditures
109. Suppose for an economy, investment = $40; saving = $50, government spending + exports = 100; and taxes +
imports = $110. Then for this economy, total leakages exceed total injections by $20, so there will be pressure for the
economy to contract.
a.
True
b.
False
True
MACR.BOYE.16.49 – ch. 10, 3
United States – Reflective Thinking
Equilibrium Income and Expenditures
Knowledge
110. The paradox of thrift explains that increased savings by households could actually lower savings for the economy as
a whole.
a.
True
b.
False
True
Moderate
MACR.BOYE.16.49 – ch. 10, 3
Equilibrium Income and Expenditures
111. A marginal propensity to consume of 0.75 and a marginal propensity to import of 0.05 are associated with an open-
economy spending multiplier of 3.33.
a.
True
b.
False
True
Moderate
MACR.BOYE.16.50 – ch. 10, 4
Changes in Equilibrium Income and Expenditures
Application
112. In general, autonomous spending increases have a lower multiplier effect on real GDP when the economy is open to
international trade.
a.
True
b.
False
True
Challenging
MACR.BOYE.16.50 – ch. 10, 4
United States – Reflective Thinking
Changes in Equilibrium Income and Expenditures
Comprehension
113. If the MPS equals 0.25 and the MPI is 0.15, then an initial change in investment spending of $250 million will result
in a total change in equilibrium real GDP of $625 million.
a.
True
b.
False
Moderate
United States – Equilibrium
Equilibrium Income and Expenditures
Application
114. Given a constant GDP gap, the higher the spending multiplier, the smaller will be the recessionary gap.
a.
True
b.
False
True
Easy
MACR.BOYE.16.52 – ch. 10, 6
Changes in Equilibrium Income and Expenditures
Knowledge
115. The recessionary gap is given by the difference between potential GDP and real GDP.
a.
True
b.
False
False
Easy
MACR.BOYE.16.52 – ch. 10, 6
United States – Equilibrium
Changes in Equilibrium Income and Expenditures
Knowledge
116. If the spending multiplier equals 6 and equilibrium real GDP is $32 billion below potential real GDP, then total
planned expenditures need to decrease by approximately $5.33 billion to close the recessionary gap.
a.
True
b.
False
False
Moderate
MACR.BOYE.16.52 – ch. 10, 6
Application
117. Foreign repercussions of changes in domestic imports cause the true domestic spending multiplier to be less than
1/(MPS+MPI)
a.
True
b.
False
False
MACR.BOYE.16.53 – ch. 10, 7
United States – Equilibrium
United States – Reflective Thinking
Changes in Equilibrium Income and Expenditures
Application
118. Suppose the multiplier effect for Japan is 0.8 for any $1 billion change in U.S. government purchases. Therefore,
Japanese real GDP will rise by $8 billion when U.S. government spending rises by $10 billion.
a.
True
b.
False
True
Moderate
MACR.BOYE.16.53 – ch. 10, 7
119. In reality, the simple spending multiplier [1/(MPS+MPI)] is applicable only to countries whose imports are a
substantial fraction of income in foreign countries.
a.
True
b.
False
False
Easy
MACR.BOYE.16.53 – ch. 10, 7
Changes in Equilibrium Income and Expenditures
Knowledge
120. An increase in U.S. imports from Mexico will cause a decrease in income for Mexican individuals and businesses.
a.
True
b.
False
False
Easy
MACR.BOYE.16.53 – ch. 10, 7
Application
121. If German imports of French products are very important in determining the volume of German exports to France,
we would expect the actual German spending multiplier to be larger than 1/(marginal propensity to save + marginal
propensity to import).
a.
True
b.
False
Challenging
United States – Equilibrium
Changes in Equilibrium Income and Expenditures
Knowledge
122. The Keynesian aggregate expenditures model assumes that price level is constant.
a.
True
b.
False
True
Easy
MACR.BOYE.16.54 – ch. 10, 8
Aggregate Expenditures and Aggregate Demand
Knowledge
123. A change in the price level in an economy will be depicted by a movement along the AE curve and not by a leftward
or rightward movement of the curve.
a.
True
b.
False
False
Easy
MACR.BOYE.16.54 – ch. 10, 8
Knowledge
124. Wealth is considered to be a nonincome determinant of consumption.
a.
True
b.
False
True
Easy
MACR.BOYE.16.54 – ch. 10, 8
Knowledge
125. A depreciation of the U.S. dollar will result in an increase in aggregate expenditures in the country.
a.
True
b.
False
True
Moderate
Aggregate Expenditures and Aggregate Demand
United States – Reflective Thinking
Changes in Equilibrium Income and Expenditures
Analysis
126. When the price level in an economy falls, the demand for bonds and other nonmonetary financial assets rises.
a.
True
b.
False
True
Moderate
MACR.BOYE.16.54 – ch. 10, 8
Aggregate Expenditures and Aggregate Demand
Comprehension
127. The aggregate demand curve depicts a negative relationship between real GDP and the general price level.
a.
True
b.
False
True
Easy
MACR.BOYE.16.54 – ch. 10, 8
United States – Reflective Thinking
Aggregate Expenditures and Aggregate Demand
Knowledge
128. Ceteris paribus, a decline in the general price level in the United States will make foreign-produced goods relatively
more expensive to the U.S. residents and increase the aggregate demand of domestic goods.
a.
True
b.
False
True
Moderate
MACR.BOYE.16.54 – ch. 10, 8
United States – Reflective Thinking
Aggregate Expenditures and Aggregate Demand
Application
129. A decrease in the general price level is associated with an upward shift in the aggregate expenditures function.
a.
True
b.
False
True
Moderate
MACR.BOYE.16.54 – ch. 10, 8
Aggregate Expenditures and Aggregate Demand
Knowledge
130. If the equilibrium level of income is solely a function of aggregate supply, then the aggregate supply curve must be
in the Keynesian region.
a.
True
b.
False
131. The portion of the aggregate supply curve that is a positive function of the general price level represents excess
capacity and unemployed resources.
a.
True
b.
False
False
Moderate
MACR.BOYE.16.54 – ch. 10, 8
Aggregate Expenditures and Aggregate Demand
Comprehension
132. A horizontal aggregate supply curve indicates that equilibrium real GDP is determined by aggregate supply.
a.
True
b.
False
False
Easy
MACR.BOYE.16.54 – ch. 10, 8
Knowledge
133. According to economists, the fixed-price model of macroeconomic equilibrium depicts the modern economy most
closely because it assumes that aggregate supply is independent of price.
a.
True
b.
False
False
Moderate
MACR.BOYE.16.54 – ch. 10, 8
False
Easy
MACR.BOYE.16.54 – ch. 10, 8
Aggregate Expenditures and Aggregate Demand
Knowledge
134. A major drawback of the Keynesian approach to macroeconomic equilibrium is the assumption that the supply of
goods and services in the economy always adjusts to aggregate expenditures
a.
True
b.
False
Moderate
Aggregate Expenditures and Aggregate Demand
Aggregate Expenditures and Aggregate Demand
Knowledge