Question : 14.3   Expenditure Multipliers 1) The expenditure multiplier explains how a change : 1240565

14.3   Expenditure Multipliers

1) The expenditure multiplier explains how a change in

A) real GDP leads to a change in autonomous expenditure.

B) induced expenditure leads to a change in real GDP.

C) autonomous expenditure leads to a change in real GDP.

D) real GDP leads to a change in induced expenditure.

E) induced expenditure leads to a change in autonomous expenditure.

2) The expenditure multiplier measures the change in

A) equilibrium expenditure that results from a change in autonomous expenditure.

B) autonomous spending that results from a change in equilibrium expenditure.

C) equilibrium expenditure from a change in induced consumption.

D) consumption expenditure for a given change in disposable income.

E) the price level that results from a change in real GDP.

3) The idea of the multiplier is that a change in ________ expenditure changes real GDP, which then changes ________ expenditure. The change in total expenditure will be larger than the initial change in ________ expenditure.

A) induced; autonomous; induced

B) autonomous; induced; induced

C) induced; autonomous; autonomous

D) induced; induced; autonomous

E) autonomous; induced; autonomous

4) The expenditure multipliers occur because

A) a change in autonomous expenditure causes real GDP to change in the opposite direction.

B) government expenditure on goods and services change by a proportional amount to government taxes.

C) a change in autonomous expenditures changes households’ incomes.

D) any change in real GDP must also change the price level.

E) a change in households’ incomes changes autonomous expenditure.

5) In an economy in with no income taxes or imports, the multiplier equals

A) .

B) .

C) .

D) .

E) .

6) The expenditure multiplier is typically

A) less than 1 but greater than 0.

B) greater than 1.

C) equal to 1.

D) greater than 10.

E) negative.

7) According to the aggregate expenditure model, when autonomous expenditure increases, equilibrium expenditure

A) increases by a larger amount.

B) increases by an equal amount.

C) does not change because only induced expenditures increase equilibrium expenditure.

D) does not change because autonomous expenditures has no effect on equilibrium expenditure.

E) increases by a smaller amount.

8) When investment increases, the multiplier points out that

A) consumption decreases by a greater amount.

B) real GDP increases by a greater amount.

C) consumption increases by the same amount.

D) real GDP decreases by a greater amount.

E) ultimately investment increases by more than the initial increase.

9) If investment increases ,which of the following happens?

i.Aggregate expenditure increases.

ii.Real GDP increases.

iii.Consumption expenditure decreases.

A) i and ii

B) i only

C) ii only

D) ii and iii

E) i, ii, and iii

10) The multiplier means that an increase in investment results in ________ aggregate expenditure that is ________ the increase in investment.

A) increased; larger than

B) increased; the same size as

C) increased; smaller than

D) decreased; larger than

E) decreased; smaller than