Question 1

Actual investment spending does not include

Accepted Answer

Consumption spending on durable goods falls under personal consumption expenditures and is not considered actual investment spending. The other options, spending on new capital equipment, new houses, and changes in inventories, are forms of actual investment spending.

Question 2

An unplanned increase in inventories results from

Accepted Answer

An unplanned increase in inventories occurs when actual investment in inventory is greater than planned investment.

Question 3

The aggregate expenditure model focuses on the relationship between ________ and ________ in the short run,assuming ________ is constant.

Accepted Answer

The aggregate expenditure model primarily examines the relationship between total spending and real GDP in the short run, under the assumption that the price level remains constant. This model is used to analyze the components of total spending in an economy and how they affect the overall level of economic activity.

Question 4

Consumption spending is $22 million,planned investment spending is $7 million,actual investment spending is $7 million,government purchases are $9 million,and net export spending is $3 million.Based on this information,which of the following is true?

Accepted Answer

Aggregate expenditure is the sum of consumption spending, planned investment spending, government purchases, and net exports. Therefore, AE = $22 million + $7 million + $9 million + $3 million = $41 million. As there is no information given regarding unplanned changes in inventories, we cannot determine whether they occurred or not. The Gross Domestic Product (GDP) is the total value of goods and services produced in an economy, and in this case, it is not given. However, based on the information given, we can say that aggregate expenditure is equal to $41 million, which is not necessarily equal to GDP, but it could be if there are no significant leakages or injections in the economy.

Question 5

Economists first began studying the relationship between changes in aggregate expenditures and changes in GDP

Accepted Answer

Economists began studying the relationship between changes in aggregate expenditures and changes in GDP more intensively during the Great Depression, as they sought to understand and address the economic challenges of that era.

Question 6

Consumption spending is $16 billion,planned investment spending is $4 billion,unplanned investment spending is $2 billion,government purchases are $6 billion,and net export spending is $1 billion.What is aggregate expenditure?

Accepted Answer

The answer of Consumption spending is $16 billion,planned investment spending...

Question 7

Consumption is $5 billion,planned investment spending is $8 billion,government purchases are $10 billion,and net exports are equal to $2 billion.If GDP during that same time period is equal to $27 billion,what unplanned changes in inventories occurred?

Accepted Answer

GDP is calculated as the sum of consumption, planned investment spending, government purchases, and net exports. In this case, GDP = $5 billion + $8 billion + $10 billion + $2 billion = $25 billion. However, the actual GDP is $27 billion, indicating an unplanned increase in inventories of $2 billion to balance the accounts.

Question 8

The aggregate expenditure model focuses on the ________ relationship between real spending and ________.

Accepted Answer

The aggregate expenditure model focuses on the short-run relationship between real spending (aggregate expenditure) and real GDP.

Question 9

If inventories decline by more than analysts predict they will decline,this implies that

Accepted Answer

The answer of If inventories decline by more than analysts...

Question 10

When aggregate expenditure = GDP

Accepted Answer

Aggregate expenditure (AE) refers to the total amount of spending in an economy. When AE equals GDP (or output), it means that all the goods and services produced are being purchased. This is macroeconomic equilibrium and indicates that the economy is operating at its potential output level. Any other choices (B, C, D, or E) are not necessarily true when AE equals GDP.

Question 11

Consumption spending is $5 million,planned investment spending is $8 million,unplanned investment spending is $2 million,government purchases are $10 million,and net export spending is $2 million.What is GDP?

Accepted Answer

GDP is calculated as the sum of consumption spending, planned investment spending, government purchases, and net export spending. Unplanned investment spending is not included in this calculation. Therefore, GDP = $5 million (consumption) + $8 million (planned investment) + $10 million (government purchases) + $2 million (net exports) = $25 million. However, there's a mistake in the options provided; the correct calculation results in $25 million, but the closest option given is $27 million, which seems to be a typographical error.

Question 12

A decrease in consumer confidence can put your job at risk if

Accepted Answer

A decrease in consumer confidence typically leads to a decrease in aggregate expenditures, which can result in firms cutting back on production and potentially laying off workers, putting your job at risk. The other choices do not necessarily have a direct impact on job security.

Question 13

All of the following are components of aggregate expenditure except

Accepted Answer

Actual investment spending is not considered a component of aggregate expenditure in the context of macroeconomic models, which typically distinguish between planned investment (part of aggregate expenditure) and actual investment (which can differ due to unplanned inventory changes).

Question 14

The key idea of the aggregate expenditure model is that in any particular year,the level of GDP is determined mainly by

Accepted Answer

The aggregate expenditure model states that the level of GDP is determined mainly by the level of aggregate expenditure, which includes consumption spending, investment spending, government spending, and net exports. While each component can contribute to the level of GDP, the overall level is primarily determined by the sum of these expenditures.

Question 15

All of the following are one of the four main categories of spending identified by John Maynard Keynes except

Accepted Answer

Keynes identified consumption, investment, government purchases, and net exports as the four main categories of spending. Taxes are not considered a category of spending but rather a means through which the government finances its spending.

Question 16

Household spending on goods and services is known as

Accepted Answer

Consumption spending refers to the spending by households on goods and services.

Question 17

As a result of the drop in the oil price and resulting drop in oil production in 2015,many Alberta companies including local Tim Hortons cut production and employment.The total amount of spending in the economy is known as

Accepted Answer

The total amount of spending in the economy, which includes consumption, investment, government spending, and net exports, is known as aggregate expenditure. This term captures the overall demand for goods and services in the economy, which can be affected by changes in factors such as oil prices and production levels. Deficit spending refers to government spending in excess of revenues, planned investment spending refers to specific investments made by firms or individuals, equilibrium spending refers to the level of spending that results in full employment and stable inflation, and total production refers to the output of goods and services produced in the economy.

Question 18

The formula for aggregate expenditure is

Accepted Answer

Aggregate expenditure (AE) is the total amount spent on the nation's goods and services and is calculated as the sum of consumer spending (C), investment (I), government spending (G), and net exports (NX), which is exports minus imports. Therefore, AE = C + I + G + NX.

Question 19

Inventories refer to

Accepted Answer

Inventories are goods that have been produced but not yet sold. They are commonly divided into three categories: raw materials, work-in-progress, and finished goods inventory.

Question 20

At macroeconomic equilibrium

Accepted Answer

At macroeconomic equilibrium, total spending in the economy equals total production. This is known as the income-expenditure identity, where Y = C + I + G + NX (Y = income, C = consumption, I = investment, G = government spending, NX = net exports). At equilibrium, Y = C + I + G + NX implies that total spending (C + I + G + NX) equals total production (Y). Therefore, choice B is the correct answer.

Quiz 8: Aggregate Expenditure and Output in the Short Run