Question 1

The real exchange rate is defined to be the:

Accepted Answer

The real exchange rate measures the value of goods and services of one country relative to the value of the same set of goods and services in another country, after adjusting for differences in price levels between the two countries. The other options do not accurately describe the concept of real exchange rate.

Question 2

If transfer payments increase then we would most likely conclude what about government spending as a result of this increase?

Accepted Answer

The answer of If transfer payments increase then we would...

Question 3

Domestic income has a ______ relationship with net export spending.

Accepted Answer

According to the theory of the J-curve, there is a negative relationship between domestic income and net export spending. Initially, as income increases, there is an increase in imports due to higher consumer spending, which leads to a decrease in net exports. However, in the long run, as the domestic industries become more competitive and efficient, there is an increase in net exports, resulting in a positive relationship between income and net exports.

Question 4

Autonomous expenditure is spending that is:

Accepted Answer

Autonomous expenditure is spending that is not dependent on the level of income in an economy. It includes purchases of durable goods, government spending, and autonomous investment.

Question 5

If trade policies change, then we would expect aggregate expenditure to:

Accepted Answer

The effect of trade policy changes on aggregate expenditure depends on the specific details of the policy. Some trade policies, such as an increase in tariffs, may lead to a decrease in aggregate expenditure as imports become more expensive and consumers have less purchasing power. Other trade policies, such as reducing barriers to trade, may lead to an increase in aggregate expenditure as trade becomes easier and more efficient. Therefore, it's difficult to make a general prediction about the effect of trade policy changes on aggregate expenditure.

Question 6

Autonomous expenditure is spending that is:

Accepted Answer

Autonomous expenditure is spending that is not affected by changes in the level of income in the economy. Examples of autonomous expenditure include government spending on infrastructure, business investment, and exports.

Question 7

If the foreign income decrease, then we might expect net export spending to:

Accepted Answer

A decrease in foreign income could lead to a decrease in demand for imports from other countries, thus leading to a decrease in net export spending.

Question 8

Suppose that someone has a disposable annual income of $50,000 and an MPC=0.8. They allocate $10,000 of that for necessities. The remainder of the income is both spent and saved. Based on this information autonomous consumption is:

Accepted Answer

Autonomous consumption is the amount spent on necessities, which is $10,000 in this case.

Question 9

Net Exports are defined to be:

Accepted Answer

Net exports refer to the value of goods and services that a country exports minus the value of goods and services that it imports. Therefore, the correct equation for net exports is exports minus imports, which is option C.

Question 10

Which of the following is not a direct determinant of net export spending?

Accepted Answer

Interest rates are not a direct determinant of net export spending. The direct determinants are domestic income, foreign income, and exchange rates, which affect the demand for domestic goods and the ability of domestic firms to compete with foreign firms. Interest rates may indirectly affect net export spending by affecting domestic savings and investment, which can influence the exchange rate and ultimately affect export demand.

Question 11

Foreign income is defined to be income earned:

Accepted Answer

The answer of Foreign income is defined to be income...

Question 12

If the domestic income of a nation's citizens increase thus causing consumption spending to increase, then we generally expect net export spending to:

Accepted Answer

When domestic consumption spending increases, it is likely that citizens will buy more foreign goods and services as well, leading to an increase in imports. This increase in imports will cause net export spending to decrease, as the country is buying more than it is selling.

Question 13

If tastes for foreign goods and services go up, then we would expect imports to:

Accepted Answer

If tastes for foreign goods and services go up, it means people will want to purchase more of them, which would lead to an increase in imports.

Question 14

The real exchange rate generally has ______ relationship with aggregate expenditure.

Accepted Answer

As the real exchange rate increases, foreign goods become relatively cheaper and domestic goods become relatively more expensive, leading to a decrease in aggregate expenditure on domestic goods and an increase in aggregate expenditure on foreign goods. Therefore, there is a negative relationship between the real exchange rate and aggregate expenditure.

Question 15

Which of the following is not an example of a transfer payment?

Accepted Answer

Transfer payments are payments made by the government to individuals or groups without any expectation of receiving goods or services in return. Social security, unemployment benefits, and workman's compensation are all examples of transfer payments. Sales tax, on the other hand, is a tax on goods and services purchased and therefore not a transfer payment.

Question 16

If the domestic income of a nation's citizens increase, then we might expect net export spending to:

Accepted Answer

With an increase in domestic income, there will be a tendency for citizens to buy more imported goods and for foreigners to buy fewer domestic goods, which will lead to an increase in imports and a decrease in exports. Therefore, we can expect net export spending to decrease.

Question 17

If tastes for foreign goods and services go up, then we would expect aggregate expenditure to:

Accepted Answer

If tastes for foreign goods and services increase, domestic consumers will spend more on imports, leading to a decrease in aggregate expenditure on domestic goods and services.

Question 18

How would the real exchange rate need to change to get aggregate expenditure to increase?

Accepted Answer

A decrease in the real exchange rate makes domestic goods cheaper relative to foreign goods, increasing exports and reducing imports, which can lead to an increase in aggregate expenditure.

Question 19

The tastes for foreign goods and services generally has a ______ relationship with aggregate expenditure.

Accepted Answer

The answer of The tastes for foreign goods and services...

Question 20

We define autonomous expenditure to be expenditure that:

Accepted Answer

Autonomous expenditure is expenditure that is unaffected by the current level of income in the economy. This includes spending on items like government investment, exports, and planned investment by businesses. It is not tied to changes in income or guidance from the government, nor is it limited to any specific industry like the auto industry.

Quiz 11: Aggregate Expenditure

The real exchange rate is defined to be the:

If transfer payments increase then we would most likely conclude what about government spending as a result of this increase?

Domestic income has a ______ relationship with net export spending.

Autonomous expenditure is spending that is:

If trade policies change, then we would expect aggregate expenditure to:

Autonomous expenditure is spending that is:

If the foreign income decrease, then we might expect net export spending to:

Suppose that someone has a disposable annual income of $50,000 and an MPC=0.8. They allocate $10,000 of that for necessities. The remainder of the income is both spent and saved. Based on this information autonomous consumption is:

Net Exports are defined to be:

Which of the following is not a direct determinant of net export spending?

Foreign income is defined to be income earned:

If the domestic income of a nation's citizens increase thus causing consumption spending to increase, then we generally expect net export spending to:

If tastes for foreign goods and services go up, then we would expect imports to:

The real exchange rate generally has ______ relationship with aggregate expenditure.

Which of the following is not an example of a transfer payment?

If the domestic income of a nation's citizens increase, then we might expect net export spending to:

If tastes for foreign goods and services go up, then we would expect aggregate expenditure to:

How would the real exchange rate need to change to get aggregate expenditure to increase?

The tastes for foreign goods and services generally has a ______ relationship with aggregate expenditure.

We define autonomous expenditure to be expenditure that: