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Chapter 11 - The Aggregate Expenditures Model
1. John Maynard Keynes created the aggregate expenditures model based primarily on what
historical event?
2. The aggregate expenditures model is built upon which of the following assumptions?
Chapter 11 - The Aggregate Expenditures Model
3. A private closed economy includes:
4. In the United States from 1929 to 1933, real GDP ____________, and the unemployment
rate _______________.
5. In the aggregate expenditures model, it is assumed that investment:
Chapter 11 - The Aggregate Expenditures Model
6. All else equal, a large decline in the real interest rate will shift the:
7. Refer to the above diagrams. Curve A:
Chapter 11 - The Aggregate Expenditures Model
8. Refer to the above diagrams. Other things equal, curve B will shift upward when:
9. Refer to the above diagrams. Other things equal, an interest rate decrease will:
10. Refer to the above diagrams. Other things equal, an interest rate increase will:
Chapter 11 - The Aggregate Expenditures Model
11. Refer to the above diagram. Other things equal, an interest rate reduction coupled with a
rightward shift in curve A will:
12. Refer to the above diagram. The location of curve B depends on the:
13. The level of aggregate expenditures in the private closed economy is determined by the:
Chapter 11 - The Aggregate Expenditures Model
Answer the question on the basis of the following data for a private closed economy.
14. Refer to the above data. The MPS is:
15. Refer to the above data. At the $370 billion level of DI the APS is approximately:
Chapter 11 - The Aggregate Expenditures Model
16. Refer to the above data for a private closed economy. If gross investment is $12 billion,
the equilibrium level of GDP will be:
Chapter 11 - The Aggregate Expenditures Model
17. Refer to the above diagram for a private closed economy. The equilibrium level of GDP
is:
18. Refer to the above diagram for a private closed economy. At the equilibrium level of
GDP, investment and saving are both:
19. Refer to the above diagram for a private closed economy. The $400 level of GDP is:
Chapter 11 - The Aggregate Expenditures Model
20. Refer to the above diagram for a private closed economy. Unplanned changes in
inventories will be zero:
Chapter 11 - The Aggregate Expenditures Model
21. Refer to the above diagram that applies to a private closed economy. The APC is equal to
1 at income level:
22. Refer to the above diagram that applies to a private closed economy. If aggregate
expenditures are C + Ig2, the amount of saving at income level J is:
23. Refer to the above diagram that applies to a private closed economy. If gross investment is
Ig1, the equilibrium GDP and the level of consumption will be:
Chapter 11 - The Aggregate Expenditures Model
24. Other things equal, the slope of the aggregate expenditures schedule will increase as a
result of:
25. In a private closed economy, when aggregate expenditures equal GDP:
26. In a private closed economy, when aggregate expenditures exceed GDP:
Chapter 11 - The Aggregate Expenditures Model
11-12
27. If an unintended increase in business inventories occurs at some level of GDP, then GDP:
28. The equilibrium level of GDP is associated with:
Chapter 11 - The Aggregate Expenditures Model
29. Which aggregate expenditure schedule AE in the above diagram for a private closed
economy implies the largest MPC, assuming investment is the same at each level of income?
30. Which two aggregate expenditure schedules AE in the above diagram for a private closed
economy have the same MPC, assuming investment is the same at each level of income?
Chapter 11 - The Aggregate Expenditures Model
31. Which aggregate expenditure schedule(s) AE in the above diagram for a private closed
economy represent the highest level of investment, assuming investment is the same at each
level of income and the level of consumption at zero income is the same for each schedule?
32. If at some level of GDP the economy is experiencing an unintended decrease in
inventories:
33. If an unintended increase in business inventories occurs:
Chapter 11 - The Aggregate Expenditures Model
34. Assume that in a private closed economy consumption is $240 billion and investment is
$50 billion, both at the $280 billion level of domestic output. Thus:
35. A private closed economy will expand when:
36. If aggregate expenditures exceed GDP in a private closed economy:
Chapter 11 - The Aggregate Expenditures Model
37. For a private closed economy, an unintended decline in inventories suggests that:
38. Refer to the above diagram for a private closed economy. The equilibrium GDP is:
Chapter 11 - The Aggregate Expenditures Model
39. Refer to the above diagram for a private closed economy. In this economy investment:
40. Refer to the above diagram for a private closed economy. In this economy aggregate
expenditures:
41. Refer to the above diagram for a private closed economy. Aggregate saving in this
economy will be zero when:
Chapter 11 - The Aggregate Expenditures Model
42. Refer to the above data. The equilibrium level of income (Y) is:
43. Refer to the above data. In equilibrium the level of consumption spending will be:
Chapter 11 - The Aggregate Expenditures Model
44. Refer to the above data. In equilibrium the level of saving will be:
(Advanced analysis) Answer the question on the basis of the following data for a private
closed economy. The letters Y, C, S, and I are used to represent real GDP, consumption,
saving, and investment respectively.
45. The equation representing the consumption schedule for the above economy is:
Chapter 11 - The Aggregate Expenditures Model
46. The equation representing the investment schedule for the above economy is:
47. Refer to the above data. Equilibrium Y (= GDP) is:
48. When investment remains the same at each level of GDP in a private closed economy, the
slope of the aggregate expenditures schedule:
