Question 1

If planned aggregate expenditure is below potential GDP and planned aggregate expenditure equals GDP,then
A) actual inventory investment will be less than planned inventory investment.
B) actual inventory investment will be greater than planned inventory investment.
C) the economy is in a recession.
D) the economy is at full employment.

Accepted Answer

The answer of If planned aggregate expenditure is below potential...

Question 2

Figure 23-1
 
-Refer to Figure 23-1.At point L in the figure above,which of the following is true?
A) Aggregate expenditure is greater than GDP.
B) The economy has achieved macroeconomic equilibrium.
C) Actual inventories are greater than planned inventories.
D) GDP will be increasing.

Accepted Answer

The answer of Figure 23-1
 
-Refer to Figure 23-1.At point...

Question 3

If the economy is currently in equilibrium at a level of GDP that is below potential GDP,which of the following would move the economy back to potential GDP?
A) an increase in wealth
B) an increase in interest rates
C) a decrease in business confidence
D) an increase in the value of the dollar relative to other currencies

Accepted Answer

An increase in wealth typically leads to higher consumer spending, which can stimulate economic activity and move the economy towards its potential GDP by increasing demand for goods and services.

Question 4

If planned aggregate expenditure is less than total production,
A) actual inventories will equal planned inventories.
B) firms will experience an unplanned increase in inventories.
C) GDP will increase.
D) the economy is in equilibrium.

Accepted Answer

If planned aggregate expenditure is less than total production, it means that consumers are not spending as much as firms are producing. This will result in unplanned increases in inventories as firms try to sell their goods. Therefore, the best answer is B.

Question 5

Explain how a stock market crash has the potential to lead to a recession in an economy.

Accepted Answer

The answer of Explain how a stock market crash has...

Question 6

Given Table 23-3 below,fill in the values for saving.Assume there are no taxes.
Table 23-3

Accepted Answer

The answer of Given Table 23-3 below,fill in the values...

Question 7

Figure 23-1
 
-Refer to Figure 23-1.If the economy is at point L,what will happen?
A) Inventories have fallen below their desired level, and firms decrease production.
B) Inventories have fallen below their desired level, and firms increase production.
C) Inventories have risen above their desired level, and firms decrease production.
D) Inventories have risen above their desired level, and firms increase production.

Accepted Answer

The answer of Figure 23-1
 
-Refer to Figure 23-1.If the...

Question 8

Given Table 23-4 below,fill in the values of the marginal propensity to save (MPS)and the marginal propensity to consume (MPC).Show that MPC + MPS = 1.
Table 23-4

Accepted Answer

The answer of Given Table 23-4 below,fill in the values...

Question 9

On the 45-degree line diagram,the 45-degree line shows points where
A) real income equals real GDP.
B) real aggregate expenditure equals C + I.
C) real aggregate expenditure equals real GDP.
D) real aggregate output equals the quantity produced.

Accepted Answer

The 45-degree line on a diagram represents the points where real aggregate expenditure (C + I + G + NX) is equal to real GDP. This is because every dollar of income earned is either spent on consumption, investment, government purchases, or net exports, or saved. Therefore, the total spending on goods and services (aggregate expenditure) must equal the total output of goods and services (GDP) in the economy.

Question 10

Following three years of negative growth,restaurant sales in the United States were expected to increase 3.6 percent in 2011.If the increase in restaurant sales increases aggregate expenditure,
A) unplanned investment will decrease.
B) planned investment will decrease.
C) planned aggregate expenditure will be less than real GDP.
D) real GDP will be less than nominal GDP.

Accepted Answer

An increase in restaurant sales leading to higher aggregate expenditure suggests that businesses will experience less unplanned inventory accumulation, thus decreasing unplanned investment.

Question 11

Assume that inventories declined by more than analysts predicted.This implies that
A) planned aggregate expenditure was greater than real GDP.
B) planned aggregate expenditure was equal to real GDP.
C) planned aggregate expenditure was less than real GDP.
D) planned aggregate expenditure is unrelated to real GDP.

Accepted Answer

The answer of Assume that inventories declined by more than...

Question 12

If planned aggregate expenditure is less than total production,
A) actual inventories will equal planned inventories.
B) firms will experience an unplanned decrease in inventories.
C) GDP will decrease.
D) the economy is in equilibrium.

Accepted Answer

The answer of If planned aggregate expenditure is less than...

Question 13

Suppose the United States experiences a long period of inflation relative to other countries.How will this affect U.S.net exports?

Accepted Answer

The answer of Suppose the United States experiences a long...

Question 14

Which of the following leads to an increase real GDP?
A) a decrease in government spending
B) a decrease in the inflation rate in other countries, relative to the inflation in the United States
C) a decrease in interest rates
D) households have increasingly pessimistic expectations about future income

Accepted Answer

A decrease in interest rates typically encourages borrowing and spending by businesses and consumers, which can lead to an increase in real GDP.

Question 15

On the 45-degree line diagram,for points that lie below the 45-degree line,
A) planned aggregate expenditure is greater than GDP.
B) planned aggregate expenditure is less than GDP.
C) planned aggregate expenditure is equal to GDP.
D) planned aggregate expenditure is less than aggregate income.

Accepted Answer

The 45-degree line represents the equality between GDP and aggregate expenditure. Points below the line represent situations where GDP is greater than planned aggregate expenditure, indicating that demand for goods and services is lower than the current level of economic production. This could lead to a surplus of supply and potentially lower prices.

Question 16

How does a decrease in government spending affect the aggregate expenditure line?
A) It shifts the aggregate expenditure line upward.
B) It shifts the aggregate expenditure line downward.
C) It increases the slope of the aggregate expenditure line.
D) It decreases the slope of the aggregate expenditure line.

Accepted Answer

A decrease in government spending would shift the aggregate expenditure line downward as it would decrease overall spending in the economy.

Question 17

Ceteris paribus,how does a recession in the United States affect U.S.net exports?

Accepted Answer

The answer of Ceteris paribus,how does a recession in the...

Question 18

Figure 23-1
 
-Refer to Figure 23-1.According to the figure above,at what point is aggregate expenditure greater than GDP?
A) J
B) K
C) L
D) none of the above

Accepted Answer

The answer of Figure 23-1
 
-Refer to Figure 23-1.According to...

Question 19

Figure 23-1
 
-Refer to Figure 23-1.If the economy is at a level of aggregate expenditure given by point K,
A) the economy is in equilibrium.
B) production is greater than spending.
C) production is less than spending.
D) inventories will increase above their desired level.

Accepted Answer

At point K, the aggregate expenditure equals the aggregate production, indicating that the economy is in equilibrium. Therefore, choice A is the correct answer. Choices B, C, and D are all incorrect because they imply a mismatch between production and spending, which is not the case at point K.

Question 20

Given Table 23-3 below,fill in the values for saving.Assume taxes = $800.
Table 23-3

Accepted Answer

The answer of Given Table 23-3 below,fill in the values...

Quiz 12: Aggregate Expenditure and Output in the Short Run

If planned aggregate expenditure is below potential GDP and planned aggregate expenditure equals GDP,then

Figure 23-1 -Refer to Figure 23-1.At point L in the figure above,which of the following is true?

If the economy is currently in equilibrium at a level of GDP that is below potential GDP,which of the following would move the economy back to potential GDP?

If planned aggregate expenditure is less than total production,

Explain how a stock market crash has the potential to lead to a recession in an economy.

Given Table 23-3 below,fill in the values for saving.Assume there are no taxes. Table 23-3

Figure 23-1 -Refer to Figure 23-1.If the economy is at point L,what will happen?

Given Table 23-4 below,fill in the values of the marginal propensity to save (MPS)and the marginal propensity to consume (MPC).Show that MPC + MPS = 1. Table 23-4

On the 45-degree line diagram,the 45-degree line shows points where

Following three years of negative growth,restaurant sales in the United States were expected to increase 3.6 percent in 2011.If the increase in restaurant sales increases aggregate expenditure,

Assume that inventories declined by more than analysts predicted.This implies that

If planned aggregate expenditure is less than total production,

Suppose the United States experiences a long period of inflation relative to other countries.How will this affect U.S.net exports?

Which of the following leads to an increase real GDP?

On the 45-degree line diagram,for points that lie below the 45-degree line,

How does a decrease in government spending affect the aggregate expenditure line?

Ceteris paribus,how does a recession in the United States affect U.S.net exports?

Figure 23-1 -Refer to Figure 23-1.According to the figure above,at what point is aggregate expenditure greater than GDP?

Figure 23-1 -Refer to Figure 23-1.If the economy is at a level of aggregate expenditure given by point K,

Given Table 23-3 below,fill in the values for saving.Assume taxes = $800. Table 23-3