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1
What does the multiplier effect indicate?
A)That a small increase in income will generate a large decrease in aggregate expenditures
B)That a change in autonomous expenditures will cause income to change by a larger amount
C)That a small increase in income will generate a large increase in aggregate expenditures
D)That a change in induced expenditures will cause income to change by a larger amount
2
What is the marginal propensity to expend?
A)It is the fraction of income that is not spent.
B)It is the ratio of change in income that results from a change in expenditures.
C)It is the ratio of change in expenditures that results from a change in income.
D)It is the fraction of income that is taxed.
3
What is the effect of a decrease in government spending?
A)It leads to an even larger increase in income.
B)It leads to an even larger decrease in income.
C)It leads to a smaller increase in income.
D)It leads to a smaller decrease in income.
4
What effect does an increase in exports have?
A)It leads to an even larger increase in income.
B)It leads to an even larger decrease in income.
C)It leads to a smaller increase in income.
D)It leads to a smaller decrease in income.
5
What is the effect of a decrease in the MTR?
A)The MLR will increase, and the multiplier will increase.
B)The MLR will decrease, and the multiplier will increase.
C)The MLR will increase, and the multiplier will decrease.
D)The MLR will decrease, and the multiplier will decrease.
6
What is the most important determinant of the level of consumption?
A)The level of prices
B)Consumer expectations
C)The stock of wealth
D)The level of income
7
What circumstance will lead to a smaller multiplier?
A)If the MPS becomes bigger
B)If the MPC becomes bigger
C)If the MPM becomes smaller
D)If the MLR becomes smaller
8
All of the following statements concerning the equilibrium level of income are correct, except one. Which is incorrect?
A)There will be no tendency for firms to increase or decrease production.
B)The government’s budget will be balanced.
C)Unplanned investment in inventories will not occur.
D)Leakages equal injections.
E)Aggregate expenditures equal income.
9

Refer to Figure 6.11 to answer this question. What could cause a change from a to b?
A)An increase in American income
B)An increase in government spending
C)A decrease in interest rates
D)An increase in Canadian income
E)A decrease in autonomous taxes
10

Refer to Figure 6.11 to answer this question. All of the following, except one, could cause a change from a to c. Which is the exception?
A)An increase in Canadian income
B)A decrease in interest rates
C)A decrease in the Canadian exchange rate
D)A decrease in autonomous taxes
E)An increase in American income
11
What are induced consumption and the marginal propensity to consume, respectively?
A)The amount of income that results from higher levels of consumption and the change in income divided by the change in consumption
B)The amount of consumption that results from higher levels of income and the change in consumption divided by the change in income
C)The amount of consumption that occurs at zero income and the change in consumption divided by the change in income
D)The amount of consumption that occurs at zero income and the change in income divided by the change in consumption
12
How is the AE function placed onto the 45° graph?
A)It starts at zero income and rises with a slope equal to the MPE.
B)It starts on the vertical axis at the level of autonomous expenditures and rises with a slope equal to the MPE.
C)It starts at zero income and falls with a slope equal to the MPE.
D)It starts on the vertical axis at the level of autonomous expenditures and falls with a slope equal to the MPE.





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