Aggregate Expenditure Model MCQs
Aggregate Expenditure Model MCQs
Our team has conducted extensive research to compile a set of Aggregate Expenditure Model MCQs. We encourage you to test your Aggregate Expenditure Model knowledge by answering these multiple-choice questions provided below.
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1: Autonomous determinants of consumption expenditures not dependent on the level of current disposable income that can result from factors such as real wealth, the Interest rate, household debt, expectations, and tastes and preferences
A. True
B. False
2: The multiplier that only considers the impact of consumption changes on aggregate expenditures is known as expenditure multiplier
A. True
B. False
3: Marginal propensity to consume is additional consumption that results from an additional dollar of income
A. True
B. False
4: Marginal propensity to save is the ____ saving that results from an additional dollar of income
A. Additional
B. Subtraction
C. Positive
D. All of these
5: Unplanned inventory investment changes in inventories that firms did not anticipate.
A. True
B. False
6: Which economist created the aggregate expenditure model?
A. Jeremy Bentham
B. Alfred Marshall
C. John Maynard Keynes
D. Adam Smith
7: What type of expenditures are the largest single component of demand for final goods?
A. Business
B. Household
C. Government
D. Investment
8: Which of the following is an autonomous factor that, when decreased, causes consumer spending to rise?
A. Real wealth
B. The interest rate
C. Consumer confidence
D. Income
9: The additional saving that results from an additional dollar of income is known as marginal propensity to ______.
A. Consume
B. Invest
C. Save
D. Hoard
10: Which of the following is TRUE of the sum of marginal propensity to consume and marginal propensity to spend?
A. It always equals 1.
B. It always equals 0.
C. It varies depending on consumer tastes and preferences.
D. It varies over the course of a consumer’s life.
11: Which of the following refers to the point at which aggregate expenditure equals output?
A. The margin
B. Autonomy
C. Recession
D. Equilibrium
12: Which variable in the following equation refers to the money allocated in the federal budget?
A. AE ≡ C + I + G + (X – M)
B. C
C. I
D. G
E. X – M
13: Which of the following is considered an autonomous expenditure that may be added to the consumption function?
A. Personal debt
B. Household consumption
C. Investment
D. Net imports
14: Which of the following responds most dramatically to perceptions of future changes in economic activity?
A. Planned investment
B. Government spending
C. Net exports
D. Unplanned investment
15: Which of the following explains why an increase in business investment of a given amount can create an increase in output equal to many times the investment increase?
A. Autonomous determinants of consumption expenditure
B. Expenditure multiplier
C. Marginal propensity to save
D. Unplanned inventory investment
16: The idea of the expenditure multiplier is that ______ increases in spending in one part of the economy lead to increased spending by others in the economy as well.
A. Early
B. Enormous
C. Permanent
D. Unexpected
17: The expenditure multiplier equals 1 ______ the marginal propensity to save.
A. Plus
B. Minus
C. Multiplied by
D. Divided by
18: What happens to the level of aggregate expenditure as the price level decreases?
A. It increases.
B. It decreases.
C. It remains constant.
D. It drops to zero.
19: What happens to the aggregate demand curve when aggregate expenditure decreases?
A. It shifts left.
B. It shifts right.
C. It remains unchanged.
D. It becomes steeper.
20: Which of the following does the aggregate expenditure model fail to account for?
A. Demand
B. Imports
C. Inflation
D. Unplanned investment
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Aggregate Expenditure Model MCQs
