Deck 14: Aggregate Expenditure Multiplier

Question 1

As disposable income _{--------------------}planned consumption expenditure
_{--------------------}

A)decreases; remains the same, since it is autonomous expenditure
B)increases; increases
C)increases; decreases
D)increases; changes only if net taxes also change
E)decreases; increases

Answer 1

increases; increases

Question 2

When aggregate planned expenditure exceeds real GDP, there is

A)an unplanned decrease in inventories.
B)a planned decrease in inventories.
C)an unplanned decrease in the price level.
D)a planned increase in inventories.
E)an unplanned increase in inventories.

Answer 2

A

Question 3

In Germany, expected future income increased during 2010. This increase lead to

A)a movement downward along the consumption function.
B)no movement along the consumption function and no shift of the consumption function.
C)a downward shift of the consumption function.
D)a movement upward along the consumption function.
E)an upward shift of the consumption function.

Answer 3

E

Question 4

If the price level increases, the AE curve shifts

A)downward and there is a movement along the AD curve.
B)upward and the AD curve shifts rightward.
C)upward and there is a movement along the AD curve.
D)downward and the AD curve shifts rightward.
E)upward and the AD curve shifts leftward.

Question 5

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

A)increases by $0.60 million.
B)increases by $15 million.
C)increases by $3 million.
D)decreases by $15 million.
E)increases by $5 million.

Question 6

When the real interest rate falls, the consumption function

A)shifts upward.
B)does not shift and there is a movement downward along the consumption function.
C)does not shift and there is no movement along the consumption function.
D)does not shift and there is a movement upward along the consumption function.
E)shifts downward.

Question 7

Equilibrium expenditure is the level of expenditure at which

A)aggregate planned expenditure plus planned changes in inventories equals real GDP.
B)firms' inventories are zero.
C)firms' inventories are at the desired level.
D)aggregate planned expenditure minus planned changes in inventories equals real GDP.
E)firms produce more output than they sell.

Question 8

$\begin{array}{rccc}\hline &\text { Consumption }&&\text { Government }\\\text { Real GDP, } Y &\text { expenditure, } C& \text { Investment, } I& \text { expenditure, } G\\\text { (billions of } & \text { (billions of } & \text { (billions of } & \text { (billions of } \\\text { 2005 dollars) } & \text { 2005 dollars) } & \text { 2005 dollars) } & \text { 2005 dollars) }\\\hline15 & 6 & 5 & 5 \\20 & 10 & 5 & 5 \\25 & 14 & 5 & 5 \\30 & 18 & 5 & 5 \\35 & 22 & 5 & 5\\\hline\end{array}$
The above table contains information about the nation of Syldavia

- There are no income taxes or
Imports in this nation. The expenditure multiplier is equal to

A)10.
B)0.8.
C)5.
D)2.
E)1.25.

Question 9

$\begin{array} { c c c c c c } \hline \begin{array} { r } \text { Real GDP, } Y \\\text { (trillions of }\end{array} & \begin{array} { c } \text { Consumption } \\\text { expenditure, } C \\\text { (trillions of }\end{array} & \begin{array} { c } \text { Investment, } I \\\text { (trillions of }\end{array} & \begin{array} { c } \text { Government } \\\text { expenditure, } G \\\text { (trillions of }\end{array} & \begin{array} { c } \text { Exports, } X \\\text { (trillions of }\end{array} & \begin{array} { c } \text { Imports, } M \\\text { (trillions of }\end{array} \\\text { 2005 dollars) } & \text { 2005 dollars) } & \text { 2005 dollars) } & \text { 2005 dollars) } & \text { 2005 dollars) } & \text { 2005 dollars ) } \\\hline 0.00 & 0.00 & 1.75 & 1.00 & 0.75 & 0.00 \\3.00 & 2.00 & 1.75 & 1.00 & 0.75 & 0.75 \\6.00 & 4.00 & 1.75 & 1.00 & 0.75 & 1.50 \\9.00 & 6.00 & 1.75 & 1.00 & 0.75 & 2.25 \\12.00 & 8.00 & 1.75 & 1.00 & 0.75 & 3.00 \\\hline\end{array}$ The above table gives data for the nation of Mojo. At what level of real GDP is the unplanned inventory change equal to $1.75 trillion?

A)$9.0 trillion
B)$3.0 trillion
C)$6.0 trillion
D)$12.0 trillion
E)$0.0 trillion

Question 10

In the range of disposable income where the consumption function lies above the 45° line,

A)induced consumption is zero.
B)disposable income is negative.
C)saving is negative.
D)saving is positive.
E)disposable income equals planned expenditures.

Question 11

The MPC is equal to the

A)level of consumption expenditure divided by the level of total disposable income that brought it about.
B)level of consumption divided by the change in disposable income that brought it about.
C)change in consumption expenditure divided by the total disposable income that brought it about.
D)change in disposable income divided by the change in consumption expenditure.
E)change in consumption expenditure divided by the change in disposable income that brought it about.

Question 12

Real GDP is $13 trillion and aggregate planned expenditure is $14 trillion. As a result, unplanned inventory change is _{--------------------} and real GDP
_{--------------------}.

A)negative; decreases
B)negative; does not change
C)positive; increases
D)negative; increases
E)positive; decreases

Question 13

If aggregate planned expenditures are less than real GDP, then

A)there is no equilibrium level of real GDP.
B)inventories decrease below their planned levels and businesses increase their production.
C)inventories increase above their planned levels and businesses decrease their production.
D)unplanned inventory changes equal zero.
E)inventories increase above their planned levels and businesses increase their production.

Question 14

What is the key difference between the aggregate expenditure model and the aggregate
Demand/aggregate supply model?

A)the aggregate expenditure model assumes that real GDP is fixed
B)monetary and real factors interact in the aggregate demand/aggregate supply model
C)the aggregate expenditure model examines monetary policy whereas the aggregate demand/aggregate supply model does not
D)the aggregate demand/aggregate supply model assumes that the price level is fixed
E)the aggregate expenditure model assumes that the price level is fixed

Question 15

$\begin{array}{rccc}\hline &\text { Consumption }&&\text { Government }\\\text { Real GDP, } Y &\text { expenditure, } C& \text { Investment, } I& \text { expenditure, } G\\\text { (billions of } & \text { (billions of } & \text { (billions of } & \text { (billions of } \\\text { 2005 dollars) } & \text { 2005 dollars) } & \text { 2005 dollars) } & \text { 2005 dollars) }\\\hline15 & 6 & 5 & 5 \\20 & 10 & 5 & 5 \\25 & 14 & 5 & 5 \\30 & 18 & 5 & 5 \\35 & 22 & 5 & 5\\\hline\end{array}$

-

The above table gives data for the nation of Mouseville. There are no imports into or exports from Mouseville. Unplanned inventory changes are zero when real GDP equals

A)$500 billion.
B)$900 billion.
C)$300 billion.
D)$800 billion.
E)$700 billion.

Question 16

$\begin{array}{rccc}\hline &\text { Consumption }&&\text { Government }\\\text { Real GDP, } Y &\text { expenditure, } C& \text { Investment, } I& \text { expenditure, } G\\\text { (billions of } & \text { (billions of } & \text { (billions of } & \text { (billions of } \\\text { 2005 dollars) } & \text { 2005 dollars) } & \text { 2005 dollars) } & \text { 2005 dollars) }\\\hline15 & 6 & 5 & 5 \\20 & 10 & 5 & 5 \\25 & 14 & 5 & 5 \\30 & 18 & 5 & 5 \\35 & 22 & 5 & 5\\\hline\end{array}$
The above table contains information about the nation of Syldavia.

-There are no income taxes or imports in this nation. The equilibrium expenditure is

A)$15 billion.
B)$25 billion.
C)$30 billion.
D)$10 billion.
E)$20 billion.

Question 17

During 2012, a country has consumption expenditures of $3.0 trillion, investment expenditures of
$1.5 trillion, government expenditure of $1.5 trillion, exports of $1.0 trillion, and imports of $1.5
Trillion. Aggregate expenditure for the country is

A)$6.0 trillion.
B)$6.5 trillion.
C)$8.5 trillion.
D)$5.5 trillion.
E)$7.0 trillion.

Question 18

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

A)10.0.
B)0.20.
C)1.25.
D)5.00.
E)0.80.

Question 19

An economy has no imports or income taxes. An increase in autonomous expenditure of $40 billion
Increases equilibrium expenditure by $160 billion. The expenditure multiplier equals

A)16.
B)2.
C)4.
D)8.
E)6.

Question 20

$\begin{array} { c c } \hline \begin{array} { c } \text { Disposable income } \\\text { (trillions of 2005 dollars) }\end{array} & \begin{array} { c } \text { Consumption expenditure } \\\text { (trillions of 2005 dollars) }\end{array} \\\hline 0.0 & 1.5 \\2.0 & 3.0 \\4.0 & 4.5 \\6.0 & 6.0 \\8.0 & 7.5 \\\hline\end{array}$

-
The above table has data from the nation of Atlantica. Based on these data, when disposable income equals 2.0 there is

A)savings of $1.0 trillion.
B)dissavings of $3.0 trillion.
C)savings of $3.0 trillion.
D)dissavings of $1.0 trillion.
E)dissavings of $5.0 trillion.

Question 21

When aggregate planned expenditure _{--------------------} real GDP, there are unplanned _{--------------------} in inventories, and firms _{--------------------} production, therefore decreasing real GDP.

A)exceeds; increases; increase
B)is less than; increases; decrease
C)is less than; increases; increase
D)exceeds; decreases; decrease
E)is less than; decreases; decrease

Question 22

When aggregate planned expenditure exceeds real GDP, there are unplanned
_{--------------------} in inventories, and firms _{--------------------} production, so that real GDP _{--------------------}.

A)decreases; decrease; increases
B)increases; increase; increases
C)decreases; increase; increases
D)increases; decrease; decreases
E)decreases; decrease; decreases

Question 23

When aggregate planned expenditure is less than GDP,

A)the economy definitely is at its equilibrium expenditure and firms do not change production.
B)firms increase production until the economy reaches equilibrium expenditure.
C)the economy might be at its equilibrium expenditure and if it is, firms do not change their production.
D)the economy definitely is at its equilibrium expenditure but even so, firms decrease production.
E)firms decrease production until the economy reaches equilibrium expenditure.

Question 24

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

A)increases by a smaller amount.
B)does not change because autonomous expenditures has no effect on equilibrium expenditure.
C)increases by a larger amount.
D)increases by an equal amount.
E)does not change because only induced expenditures increase equilibrium expenditure.

Question 25

When real GDP exceeds aggregate planned expenditure

A)an unplanned decrease in inventories occurs.
B)real GDP increases.
C)firms increase production.
D)an unplanned increase in inventories occurs.
E)real GDP remains at its equilibrium.

Question 26

When disposable income increases, consumption expenditure

A)also increases, but by less.
B)also increases and by more.
C)decreases by the same amount.
D)also increases and by an equal amount.
E)does not change.

Question 27

In the figure above, if real GDP is $6 trillion, aggregate planned expenditure is

A)less than $6 trillion and unplanned inventory changes are positive.
B)equal to $6 trillion and unplanned inventory changes are positive.
C)equal to $6 trillion and there are no unplanned inventory changes.
D)more than $6 trillion and unplanned inventory changes are negative.
E)equal to $6 trillion and unplanned inventory changes are negative.

Question 28

The MPC is 0.90 and there are no income taxes or imports. If government expenditures on goods and services increases by $2.0 billion, after the multiplier effect works out, aggregate expenditure increases by

A)$20 billion.
B)$1.8 billion.
C)$2.22 billion.
D)$2.0 billion.
E)$10 billion.

Question 29

An increase in the marginal tax rate

A)can either increase or decrease the expenditure multiplier.
B)has no effect on the expenditure multiplier.
C)decreases the expenditure multiplier and can make it negative.
D)increases the expenditure multiplier.
E)decreases the expenditure multiplier but cannot make it negative.

Question 30

As a household's disposable income increases, its autonomous expenditures _ and its induced expenditures .

A)do not change; increase by a smaller amount than the increase in income
B)increase; increase by a smaller amount than the increase in income
C)do not change; increase by an amount equal to the increase in income
D)increase; do not change
E)decrease; do not change

Question 31

The expenditure multiplier is larger than one because

A)an increase in autonomous expenditure induces further decreases in aggregate expenditure.
B)additional expenditure induces lower incomes.
C)an increase in autonomous expenditure induces further increases in aggregate expenditure.
D)the price level rises, thereby reinforcing the initial effect.
E)an increase in autonomous expenditure brings about a reduction in the real interest rate.

Question 32

When the AE curve shifts upward because the price level falls, the corresponding effect on the aggregate demand curve is

A)nothing because aggregate demand does respond to changes in the price level.
B)a movement downward along the aggregate demand curve.
C)a movement upward along the aggregate demand curve.
D)a shift rightward of the aggregate demand curve.
E)a shift leftward of the aggregate demand curve.

Question 33

The smaller the amount saved out of a change in disposable income, the

A)larger the MPC.
B)smaller is autonomous consumption.
C)more net taxes affect consumption.
D)more horizontal the consumption function.
E)smaller the MPC.

Question 34

If autonomous imports increase, then the aggregate expenditure curve shifts
_{--------------------} and equilibrium real GDP _{--------------------} .

A)downward; decreases
B)downward; does not change
C)downward; increases
D)upward; decreases
E)upward; increases

Question 35

The size of the expenditure multiplier is influenced by
I. the marginal propensity to consume.
Ii. autonomous spending. iii. the marginal tax rate.

A)i only
B)i and iii
C)ii only
D)ii and iii
E)iii only

Question 36

The figure above shows a nation's consumption function. If disposable income is $2 trillion, then the MPC is _{--------------------} and saving is _{--------------------}.

A)positive; positive
B)negative; positive
C)positive; negative
D)negative; negative
E)positive; zero

Question 37

At which of the following points is the unplanned inventory change the largest positive amount?

A)point F
B)point E
C)point C
D)point B
E)point D

Question 38

A shift in the aggregate planned expenditure curve as a result of an increase in the price level results in

A)a downward movement along the aggregate demand curve.
B)a rightward shift in the aggregate demand curve.
C)no movement along the aggregate demand curve and no shift in the aggregate demand curve.
D)an upward movement along the aggregate demand curve.
E)a leftward shift in the aggregate demand curve.

Question 39

The AE curve illustrates the relationship between

A)the interest rate and aggregate planned expenditure.
B)real GDP and actual expenditure.
C)real GDP and the interest rate.
D)the quantity of real GDP demanded and the price level.
E)aggregate planned expenditure and real GDP.

Question 40

When the real interest rate falls, there is

A)a decrease in the slope of the consumption function.
B)a movement upward along the consumption function.
C)an increase in the slope of the consumption function.
D)an upward shift of the consumption function.
E)a downward shift of the consumption function.

Question 41

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

A)3.
B)2.
C)5.
D)4.
E)0.5.

Question 42

Induced expenditure is any expenditure that

A)is fixed for all levels of the interest rate.
B)changes when real GDP changes.
C)is fixed for all levels of real GDP.
D)is fixed for all price levels.
E)changes when the interest rate changes.

Question 43

Based on data from the U.S. economy, the marginal propensity to consume is about

A)0.60.
B)0.75.
C)0.95.
D)0.87.
E)1.10.

Question 44

Autonomous expenditure includes

A)investment, government expenditure on goods and services, and exports.
B)investment, government expenditure for goods and services, and imports.
C)consumption expenditure, investment, and net taxes.
D)consumption expenditures, investment, and exports.
E)consumption expenditure, investment, and imports.

Question 45

The consumption function is the relationship between _{--------------------}, other things remaining the same.

A)consumption expenditure and saving
B)consumption expenditure and the price level
C)net taxes and disposable income
D)consumption expenditure and net taxes
E)consumption expenditure and disposable income

Question 46

When the price level _{--------------------} , equilibrium expenditure _{--------------------}and the quantity of real GDP demanded _{--------------------}.

A)rises; increases; increases
B)rises; decreases; increases
C)falls; increases; decreases
D)rises; increases; decreases
E)falls; increases; increases

Question 47

When disposable income increases from $9 trillion to $10 trillion, consumption expenditure increases from $6 trillion to $6.8 trillion. The MPC is

A)$6.8 trillion.
B)0.68.
C)0.80.
D)1.00.
E)0.60.

Question 48

Using the aggregate expenditure model, the equilibrium level of the aggregate expenditure can
Occur when the economy is producing

A)only at below full employment.
B)at either below full employment or at full employment but never at above full employment.
C)only at full employment.
D)only at above full employment.
E)at full employment, above full employment, or below full employment.

Question 49

When the multiplier is _{--------------------} , an autonomous decrease in investment of $200 billion decreases equilibrium real GDP by $400 billion. When the multiplier is _{--------------------} , an autonomous decrease in
Investment of $200 billion decreases equilibrium real GDP by $800 billion.

A)0.4; 0.2
B)2.0; 4.0
C)4.0; 8.0
D)$400 billion; $800 billion
E)0.2; 0.4

Question 50

$\begin{array} { c c c c } \hline \begin{array} { c } \text { Real GDP, } Y \\\text { (billions of 2005 dollars) }\end{array} & \begin{array} { c } \text { Consumption expenditure, } C \\\text { (billions of 2005 dollars) }\end{array} & \begin{array} { c } \text { Investment, } I \\\text { (billions of 2005 dollars) }\end{array} & \begin{array} { c } \text { Government expenditure, } G \\\text { (billions of 2005 dollars) }\end{array} \\\hline 100 & 150 & 150 & 100 \\200 & 200 & 150 & 100 \\300 & 250 & 150 & 100 \\400 & 300 & 150 & 100 \\500 & 350 & 150 & 100 \\600 & 400 & 150 & 100 \\700 & 450 & 150 & 100 \\800 & 500 & 150 & 100 \\900 & 550 & 150 & 100 \\\hline\end{array}$
The above table gives data for the nation of South Hampton. There are no imports into or exports from South Hampton. Aggregate planned expenditure is less than actual expenditure if real GDP is

A)$700 billion.
B)more than $700 billion.
C)less than $700 billion.
D)at the equilibrium level.
E)Both answers A and C are correct.

Question 51

$\begin{array} { c c } \hline \begin{array} { c } \text { Disposable income } \\\text { (trillions of 2005 dollars) }\end{array} & \begin{array} { c } \text { Consumption expenditure } \\\text { (trillions of 2005 dollars) }\end{array} \\\hline 0.0 & 1.5 \\2.0 & 3.0 \\4.0 & 4.5 \\6.0 & 6.0 \\8.0 & 7.5 \\\hline\end{array}$

-
The above table has data from the nation of Media. Based on these data, the marginal propensity to consume is

A)0.67.
B)1.33.
C)1.50.
D)0.25.
E)0.75.

Question 52

Which of the following variables is fixed in the aggregate expenditure model?

A)consumption
B)output
C)price level
D)investment
E)real GDP

Question 53

An economy has no imports or income taxes. The MPC is 0.75 and real GDP is $120 billion. businesses increase investment by $4 billion. The multiplier is _{--------------------} and the change in real GDP from the increase in investment is
_{--------------------} billion.

A)5; $25
B)5; $16
C)0.75; $3
D)4; $16
E)4; $25

Question 54

Which of the following situations lead firms to increase production?

A)real GDP = $12.0 trillion and aggregate planned expenditures = $12.0 trillion
B)real GDP = $15.0 trillion and aggregate planned expenditures = $14.0 trillion
C)real GDP = $16.0 trillion and aggregate planned expenditures = $15.0 trillion
D)real GDP = $15.0 trillion and aggregate planned expenditures = $16.0 trillion
E)Both answers A and C are correct.

Question 55

A decrease in wealth

A)increases; shifts the consumption function upward
B)decreases; shifts the consumption function downward
C)decreases; shifts the consumption function upward
D)decreases; results in a movement downward along the consumption function
E)increases; shifts the consumption function downward

Question 56

When investment increases, the multiplier points out that

A)real GDP decreases by a greater amount.
B)real GDP increases by a greater amount.
C)consumption increases by the same amount.
D)ultimately investment increases by more than the initial increase.
E)consumption decreases by a greater amount.

Question 57

$\begin{array} { c c } \hline \begin{array} { c } \text { Real GDP } \\\text { (billions of 2005 dollars) }\end{array} & \begin{array} { c } \text { Aggregate expenditure } \\\text { (billions of 2005 dollars) }\end{array} \\\hline 10 & 10.50 \\11 & 11.25 \\12 & 12.00 \\13 & 12.75 \\14 & 13.50 \\15 & 14.25 \\\hline\end{array}$
The above table gives real GDP and the aggregate expenditure schedule. When real GDP is $10 billion, the amount of unplanned investment is

A)$0.5 billion.
B)$20.5 billion.
C)-$20.5 billion.
D)-$0.5 billion.
E)unknown.

Question 58

Jack Nelson, a supervisor in the hardware department at Sears, received a $3,000 increase in his
Annual disposable income. Suppose his marginal propensity to consume is 0.80. How much of the
$3,000 increase will Jack spend on consumption?

A)$2,500
B)$3,000
C)$2,400
D)$2,750
E)$2,200

Question 59

For each one dollar increase in real GDP, aggregate planned expenditure

A)increases by less than a dollar.
B)is unaffected.
C)increases by one dollar.
D)increases only if autonomous expenditure increases.
E)increases by more than a dollar.

Question 60

When disposable income is $8 trillion, consumption expenditure is $5 trillion; when disposable income is $5 trillion, consumption expenditure is $3 trillion. The MPC is

A)(5 + 3)÷ (8 - 5)= 2.667.
B)(5/8 + 3/5)= 1.225.
C)(8 - 5)÷ (5 - 3)= 1.333.
D)(5 + 3)÷ (8 + 5)= 0.615.
E)(5 - 3)÷ (8 - 5)= 0.667.

Question 61

A country reports that when real GDP is $13.0 trillion, aggregate planned expenditure is $14.0 trillion. When real GDP equals $13.0 trillion,

A)planned inventory changes by -$1.0 trillion.
B)planned inventory changes by $1.0 trillion.
C)unplanned inventory changes by -$1.0 trillion.
D)both planned and unplanned inventory changes are -$1.0 trillion.
E)unplanned inventory changes by $1.0 trillion.

Question 62

The expenditure multiplier explains how a change in

A)autonomous expenditure leads to a change in real GDP.
B)induced expenditure leads to a change in autonomous expenditure.
C)real GDP leads to a change in induced expenditure.
D)real GDP leads to a change in autonomous expenditure.
E)induced expenditure leads to a change in real GDP.

Question 63

The marginal propensity to import is larger in Mexico than in the United States. As a result,

A)there is more autonomous expenditure in Mexico.
B)there is less autonomous investment in Mexico.
C)induced expenditure is larger in Mexico.
D)the expenditure multiplier is larger in Mexico.
E)the expenditure multiplier is larger in the United States.

Question 64

As disposable income_{--------------------}, planned consumption expenditure_{--------------------} by a _{--------------------}_mount.

A)increases; decreases; smaller
B)increases; increases; larger
C)decreases; increases; larger
D)increases; increases; smaller
E)decreases; increases; smaller

Question 65

If firms' inventories exceed their planned inventories, firms

A)increase GDP.
B)increase income.
C)decrease production.
D)increase production.
E)increase employment.

Question 66

If aggregate planned expenditure exceeds real GDP, then

A)aggregate planned expenditure must decrease to restore the equilibrium.
B)unplanned inventory changes are negative.
C)real GDP will decrease.
D)unplanned inventory changes are positive.
E)planned inventory changes must be negative.

Question 67

Equilibrium expenditure is the level of aggregate expenditure at which

A)aggregate production equals real GDP.
B)planned inventory investment equals zero.
C)aggregate actual expenditure equals real GDP.
D)aggregate planned expenditure equals real GDP.
E)aggregate private expenditure equals real GDP.

Question 68

The level of equilibrium expenditure at each price level determines

A)the price level.
B)the points on the AE curve.
C)aggregate planned production.
D)full employment.
E)the points on the AD curve.

Question 69

If the level of real GDP is $14 trillion while aggregate planned expenditure is $15 trillion, then

A)inventories rise more than planned, leading firms to increase production.
B)inventories rise more than planned, leading firms to cut production.
C)aggregate planned expenditure decreases to reach the equilibrium of $14 trillion.
D)inventories fall more than planned, leading firms to increase production.
E)real GDP increases and planned expenditure decreases reaching equilibrium in the middle.

Question 70

An economy has no imports or income taxes. The MPC is 0.75 and real GDP is $120 billion. businesses increase investment by $4 billion. The new level of real GDP is

A)$136 billion.
B)$140 billion.
C)$128 billion.
D)$132 billion.
E)$124 billion.

Question 71

When U.S. real GDP increases, U.S. imports

A)increase by more than the change in real GDP.
B)decrease by less than the change in real GDP.
C)increase by less than the change in real GDP.
D)decrease by the same amount.
E)increase by the same amount.

Question 72

The slope of the consumption function is

A)equal to the MPC and is greater than 1.
B)not equal to the MPC and is less than 1.
C)not equal to the MPC and is equal to 1.
D)equal to the MPC and is less than 1.
E)equal to the MPC and is equal to 1.