Ch 11 Quiz

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1.
An unplanned increase in inventories results in
A) an increase in planned investment.
B) a decrease in planned investment.
C) actual investment that is greater than planned investment. D) actual investment that is less than planned investment.

2.
The ratio of the increase in ________ to the increase in ________ is called the multiplier. A) equilibrium nominal GDP; autonomous expenditure
B) equilibrium real GDP; autonomous expenditure
C) autonomous expenditure; equilibrium real GDP
D) induced expenditure; equilibrium real GDP

3.
An example of assets that are included in household wealth would be A) stocks, bonds, and savings accounts.
B) stocks, loans owed, and savings accounts.
C) stocks, bonds, and mortgages.
D) stocks, credit cards, and savings accounts.

4.
Which of the following best explains why Cisco Systems earned an accounting profit of $2.1 billion in 2000 but a loss of $1 billion by 2002? A) The recession of 2001 sharply reduced spending on information technology. B) Cisco Systems underestimated the future profitability of the information technology industry. C) Consumer spending on information technology rose dramatically between 2000 and 2002. D) None of these can explain the reduction in Cisco's profits.

5.
Figure 11-4

Refer to Figure 11-4. Potential GDP equals $100 billion. The economy is currently producing GDP1 which is equal to $90 billion. If the MPC is .8, then how much must autonomous spending change for the economy to move to potential GDP? A) -$2 billion

B) $2 billion
C) $18 billion
D) -$18 billion

6.
Consumption spending is $5 million, planned investment spending is $8 million, unplanned investment spending is $2 million, government purchases are $10 million, and net export spending is $2 million. What is GDP? A) $15 million

B) $23 million
C) $27 million
D) $25 million

7.
Increases in the price level will
A) lower consumption because goods and services are less affordable. B) raise...
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