2. 28
EXPENDITURE MULTIPLIERS
C l i c k e r Q u e s t i o n s

3. Q1: Consumption expenditure depends on ________.
A the price level, expected future income, and the real interest rate
B wealth and the propensity to save
C real GDP and expected future income
D disposable income, expected future income, and the real interest rate
D disposable income, expected future income, and the real interest rate
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4. Q2: Suppose that the consumption function is given by the equation C = YD, where YD is disposable income. What is the marginal propensity to consume?
A 0.2
B 0.8
C 2.0
D 100
B 0.8
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5. A equilibrium expenditure curve B consumption function
Q3: The curve that shows how total planned expenditure changes as real GDP changes is the ________.
A equilibrium expenditure curve
B consumption function
C saving function
D aggregate expenditure curve
D aggregate expenditure curve.
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6. Q4: At the equilibrium expenditure, ________.
A there can be unplanned inventory accumulation
B purchasers will be prone to bid up prices
C aggregate planned expenditure equals the amount of real GDP that is produced
D an increase in planned expenditure cannot increase real GDP
C aggregate planned expenditure equals the amount of real GDP that is produced
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7. Q5: If real GDP exceeds aggregate planned expenditure, _____.
A investment increases and aggregate planned expenditure increase until it equals real GDP
B equilibrium expenditure increases until it equals real GDP
C inventories accumulate and real GDP decreases
D investment increases and aggregate planned expenditure increases
C inventories accumulate and real GDP decreases
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8. Q6: The multiplier effect occurs because a change in ________.
A the price level induces a change in consumption and investment
B autonomous expenditure induces a change in consumption expenditure
C induced expenditure creates a change in government expenditure
D income taxes induces a change in government expenditure
B autonomous expenditure induces a change in consumption expenditure
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9. Q7: The value of the multiplier will increase if the ____.
A marginal propensity to import increases
B marginal tax rate increases
C marginal propensity to consume decreases
D marginal propensity to save decreases
D marginal propensity to save decreases
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10. Q8: Which of the following events will shift both the AE curve and the AD curve? I. a decrease in investment II. a change in the price level III. an increase in exports
A I and II
B III but not I and II
C II and III
D I and III
D I and III
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11. Q9: A fall in the price level shifts the AE curve ________ and ________ equilibrium expenditure.
A upward; increases
B upward; decreases
C downward; increases
D downward; decreases
A upward; increases
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12. Q10: As the world economy recovered from the global recession, China’s exports started to increase. China’s AE curve shifted ________. If China’s exports remain strong in the long run, real GDP in China will be ________ potential GDP.
A downward; below
B downward; equal to
C upward; above
D upward; equal to
D downward; equal to
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