Question : 54) ________ can trigger a recession. A) An increase in autonomous : 1240570

 

54) ________ can trigger a recession.

A) An increase in autonomous expenditure

B) A decrease in autonomous expenditure

C) Equality between aggregate expenditure and real GDP

D) An increase in the expenditure multiplier

E) An increase in induced expenditure

 

55) ________ can trigger an expansion.

A) An increase in autonomous expenditure

B) A decrease in autonomous expenditure

C) Equality between aggregate expenditure and real GDP

D) A decrease in induced expenditure

E) A downward shift of the AE line

 

56) The multiplier effect

A) explains what causes a recession.

B) explains what causes an expansion.

C) explains how the economy recovers from a recession.

D) reinforces the negative effects of any reduction in spending.

E) has no impact on equilibrium expenditure.

57) If the economy is in the expansion phase of a business cycle and investment increases, when the multiplier effect kicks in, the expansion

A) picks up speed.

B) slows down.

C) peaks.

D) is not effected.

E) reverses.

 

58) An insight into business cycles is gained by the fact that

A) at a peak, autonomous expenditure increases, thereby leading to a recession.

B) at a trough, induced expenditure decreases, thereby leading to an expansion.

C) at a peak, a decrease in autonomous expenditure leads to a decrease in induced expenditure.

D) changes in real GDP result in changes in autonomous expenditures.

E) autonomous expenditure does not change at either a peak or a trough.

 

59) The expenditure multiplier is equal to the change in ________ divided by the change in ________.

A) autonomous expenditure; equilibrium expenditure

B) dependent expenditure; autonomous expenditure

C) real GDP; equilibrium expenditure

D) equilibrium expenditure; autonomous expenditure

E) the price level; real GDP

60) The expenditure multiplier is larger than one because

A) an increase in autonomous expenditure induces further increases in aggregate expenditure.

B) additional expenditure induces lower incomes.

C) an increase in autonomous expenditure brings about a reduction in the real interest rate.

D) an increase in autonomous expenditure induces further decreases in aggregate expenditure.

E) the price level rises, thereby reinforcing the initial effect.

 

61) The expenditure multiplier equals 5 and there is a $3 million increase in investment. Equilibrium expenditure

A) decreases by $15 million.

B) increases by $3 million.

C) increases by $5 million.

D) increases by $15 million.

E) increases by $0.60 million.

 

62) In an economy with no income taxes or imports, the marginal propensity to consume is 0.80. The expenditure multiplier is

A) 0.20.

B) 0.80.

C) 1.25.

D) 5.00.

E) 10.0.

63) An increase in the marginal tax rate

A) increases the expenditure multiplier.

B) decreases the expenditure multiplier but cannot make it negative.

C) has no effect on the expenditure multiplier.

D) can either increase or decrease the expenditure multiplier.

E) decreases the expenditure multiplier and can make it negative.

 

64) Which of the following increases the size of the expenditure multiplier?

A) a decrease in the marginal propensity to consume

B) an increase in autonomous spending

C) an increase in the marginal income tax rate

D) a decrease in the marginal propensity to import

E) an increase in investment

 

65) If the slope of the aggregate expenditure curve is 0.5, then the expenditure multiplier equals

A) 5.

B) 4.

C) 3.

D) 2.

E) 0.5.

 

66) At the beginning of a recession, the expenditure multiplier

A) offsets the initial cut in autonomous expenditure and slows the recession.

B) reinforces the initial cut in autonomous expenditure and adds force to the recession.

C) offsets the initial cut in autonomous expenditure and reverses the recession.

D) reinforces the initial cut in autonomous expenditure and reverses the recession.

E) has no effect on the recession.