chapter 10-1 - The Aggregate Expenditures Model Name: _...

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The Aggregate Expenditures Model Name: __________________________ Date: _____________ 1. The relationship between investment and GDP is shown by the: A) consumption of fixed capital schedule. B) saving schedule. C) investment schedule. D) consumption schedule. 2. In the aggregate expenditures model, it is assumed that investment: A) automatically changes in response to changes in real GDP. B) changes by less in percentage terms than changes in real GDP. C) does not respond to changes in interest rates. D) does not change when real GDP changes. 3. All else equal, a large decline in the real interest rate will shift the: A) investment demand curve leftward. B) investment demand curve rightward. C) investment schedule upward. D) investment schedule downward. Equilibrium GDP in private closed economy 4. The level of aggregate expenditures in the private closed economy is determined by the: A) expenditures of consumers and businesses. B) intersection of the saving schedule and the 45-degree line. C) equality of the MPC and MPS. D) intersection of the saving and consumption schedules. 5. The equilibrium level of GDP in a private closed economy is where: A) MPC = APC. B) unemployment is about 3 percent of the labor force. C) consumption equals saving. D) aggregate expenditures equal GDP. Page 1
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6. In a private closed economy, when aggregate expenditures exceed GDP: A) GDP will decline. B) business inventories will rise. C) saving will decline. D) business inventories will fall. 7. If an unintended increase in business inventories occurs: A) we can expect aggregate production to be unaffected. B)
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chapter 10-1 - The Aggregate Expenditures Model Name: _...

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