Subject: Economics / Accounting
The Aggregate Expenditure model is built around the idea that

Question 1 options:

A) income is greater than output in the long run

B) Say’s law is flawed

C) equilibrium GDP is always at potential

D) households save a fraction of the next dollar received, and consume the balance

SaveQuestion 2 (1 point)
The marginal propensity to consume represents

Question 2 options:

A) the fraction of any additional dollar that a household will save after autonomous consumption

B) the effect of one more dollar of income on prices

C) the fraction of any additional dollar that a household will consume after autonomous consumption

D) the marginal effect of taxes

SaveQuestion 3 (1 point)
In the Aggregate Expenditure model, the slope of the Expenditure curve is explained by

Question 3 options:

A) autonomous consumption

B) the expenditure multiplier

C) the marginal propensity to save

D) the marginal propensity to consume

SaveQuestion 4 (1 point)
Equilibrium GDP in the AE model is

Question 4 options:

A) found where the expenditure curve and the supply curve intersect

B) is in nominal terms

C) is always above potential GDP

D) always at potential GDP

SaveQuestion 5 (1 point)
The expenditure multiplier ensures that one dollar more spent

Question 5 options:

A) results in exactly one dollar increase in GDP

B) results in more than a one dollar increase in GDP

C) results in less than a one dollar increase in GDP

D) Decreases the tax burden by one more dollar

SaveQuestion 6 (1 point)
If autonomous consumption is $400, government spending is $100, business investment is $200, and there is no international trade, then autonomous expenditures (a) are

Question 6 options:

A) $500

B) $800

C) $700

D) Not represented, because we don’t know the mpc

SaveQuestion 7 (1 point)
If the current mpc=0.7 and the government uses fiscal policy, increasing spending by $1 billion, what is the projected effect on GDP (using the multiplier)?

Question 7 options:

A) $3.33 billion

B) $2.67 billion

C) $1.7 billion

D) $700 million

SaveQuestion 8 (1 point)
Let the mpc=0.5 in an economy. These households are

Question 8 options:

A) saving a relatively low amount

B) saving a relatively high amount

C) importing a lot of goods

D) overly taxed

SaveQuestion 9 (1 point)
Fiscal policy typically consists of changing ___ and ____.

Question 9 options:

A) government spending and taxes

B) taxes and tariffs

C) government spending and investment

D) government spending and the money supply

SaveQuestion 10 (1 point)
In general, the effect of increasing government spending on GDP is ____ that of lowing taxes.

Question 10 options:

A) greater than

B) essentially the same as

C) less than

D) incomparable with

SaveQuestion 11 (1 point)
If GDP is $400 billion less than potential, and the mpc is 0.80, how much should the government increase spending by in order to get back to potential?

Question 11 options:

$80 billion

$100 billion

$250 billion

$40 billion


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