Question 1

How does an increase in the price level affect the aggregate expenditure curve and the aggregate demand curve?

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Question 2

"If the income tax rate is high enough, the multiplier can be negative." Is the previous statement correct or incorrect?

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Question 3

How do imports and income taxes affect the multiplier? Why do they have this effect?

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Question 4

-The above table has data on the consumption function in the nation of Mojo.
a)What is the amount of autonomous consumption expenditure?
b)What is the marginal propensity to consume?

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-The above table has data on the...

Question 5

What is the relationship between the slope of the aggregate expenditure curve and the multiplier?

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Question 6

-The above figure shows the AE curve and 45° line for an economy.
a)If real GDP equals $8 trillion, how do firms' inventories compare to their planned inventories?
b)If real GDP equals $16 trillion, how do firms' inventories compare to their planned inventories?
c)What is the equilibrium level of expenditure? Why is this amount the equilibrium?

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-The above figure shows the AE curve...

Question 7

"When the price level increases, aggregate planned expenditure increases and equilibrium expenditure increases." Is the preceding statement correct or incorrect? Briefly explain your answer.

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Question 8

What is the relationship between the MPC and the slope of the AE curve?

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Question 9

Suppose the MPC = 0.90 and there are no taxes or imports. What dos the multiplier equal? If the initial equilibrium aggregate expenditure is $12 trillion, what will be the effect on aggregate expenditure of a $100 billion increase in investment?

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Question 10

How does the concept of the multiplier help explain business cycle turning points?

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Question 11

-When Audrey's disposable income is $40,000, her consumption expenditure is $39,000. When her disposable income is $50,000, Audrey's consumption expenditure is $47,000. What is Audrey's marginal propensity to consume?

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-When Audrey's disposable income is $40,000, her...

Question 12

An increase in the price level shifts the aggregate expenditure curve downward and results in a movement along the aggregate demand curve. Why does an increase in the price level result in a shift in the aggregate expenditure curve rather than a movement along it?

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Question 13

Discuss how the marginal propensity to consume, imports, and income tax rates influence the multiplier.

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Question 14

What is the mathematical formula for the multiplier? Why is there a multiplier?

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Question 15

List and explain factors that determine the size of the multiplier in the aggregate expenditure model when prices are constant.

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Question 16

What is the relationship between the aggregate expenditure curve and the aggregate demand curve? Explain the relationship.

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Question 17

-The above table gives information for the nation of North Hampton. There are no imports to or exports from North Hampton.
a)Find aggregate planned expenditure for each level of real GDP.
b)What is the equilibrium level of real GDP?

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-The above table gives information for the...

Question 18

-When disposal income is $5.0 trillion, consumption expenditure is $4.5 trillion. When disposal income is $6.0 trillion, consumption expenditure is $5.0 trillion. What is the marginal propensity to consume?

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-When disposal income is $5.0 trillion, consumption...

Question 19

Discuss the relationship between the business cycle and changes in autonomous expenditures.

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Question 20

Explain what happens to equilibrium expenditure if autonomous expenditure increases by $100 million.

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Quiz 11: Expenditure Multipliers