Aggregate Expenditures Quiz

What is the main difference between the short-run and the long-run in economics?

• In the short-run, potential production is considered, while in the long-run, current production is the focus.

• In the short-run, some variables are fixed, while in the long-run, everything is variable.

• In the short-run, the economy is self-correcting, while in the long-run, demand and supply forces adjust to full employment.

• In the short-run, the economy is stable, while in the long-run, it is volatile.

Imagine you're in a thrilling economics quiz competition. The host asks, 'Who is known as the father of macroeconomics and launched a critique of classical economics?' What would be your answer?

• Friedrich Hayek

• Adam Smith

• John Maynard Keynes

• David Ricardo

Bert and Ernie are playing a trivia game. They stumbled upon a question: 'What is the largest component of aggregate expenditures, representing nearly 70% of GDP?' Can you help them answer it?

• Consumption

• Net exports

• Government spending

• Investment

Bert and Ernie are having a debate about economics. Bert insists that he knows the equation for the Keynesian consumption function. Can you help them settle the debate?

• Bert says it's C = C + S

• Ernie thinks it's C = Co + (MPC)(Yd)

• Big Bird argues that it's Y = C + S

• Or is it Y = C + I + G + (X - M) as suggested by their economics professor?

What is the formula for calculating the multiplier?

• 1 / (MPC - 1)

• 1 / (1 + MPC)

• 1 / (MPC + 1)

• 1 / (1 - MPC)

What is the balanced budget multiplier when equal changes in government spending and taxation lead to an equal change in income?

• 0.5

• 2

• 1.5

• 1

What is the term for the gap between where GDP currently is and where GDP would be at full employment assuming that the economy is currently underperforming?

• Recessionary gap

• Equilibrium gap

• Inflationary gap

• Stimulus gap

Imagine Aria, Elijah, and Harper are in a debate club. They are discussing the actions of Congress and the President in 2009. What was the reason they passed a massive stimulus package that year?

• Was it to decrease tax revenue?

• Or perhaps, to stabilize a distressed economy?

• Could it be to increase unemployment?

• Or was it to reduce government debt?

How does a recovery in new housing construction affect the economy as a result of the multiplier effect?

• It has no effect on the economy

• It leads to increased income through the multiplier process

• It leads to reduced income through the multiplier process

• It causes inflation

Abigail, Emma, and William are having a debate about economics. They are discussing what factors might affect consumption. Abigail thinks it's interest rates, Emma believes it's expectations about future sales, and William argues it's changes in technology. Who do you think is correct?

• Abigail (Interest rates)

• Emma (Expectations about future sales)

• William (Changes in technology)