Question 1

The income households receive less the personal income taxes they pay is

Accepted Answer

A)  net savings. 
B)  disposable personal income. 
C)  gross private domestic investment. 
D)  gersonal consumption. 
A)  net savings. 
B)  disposable personal income. 
C)  gross private domestic investment. 
D)  gersonal consumption. B

Question 2

In general, an increase in the income tax rate will make the aggregate expenditures curve

Accepted Answer

A)  steeper and the multiplier larger. 
B)  steeper and the multiplier smaller. 
C)  flatter and the multiplier larger. 
D)  flatter and the multiplier smaller. 
A)  steeper and the multiplier larger. 
B)  steeper and the multiplier smaller. 
C)  flatter and the multiplier larger. 
D)  flatter and the multiplier smaller. D

Question 3

Table 13-1
  
-Refer to Table 13-1. When disposable personal income is $300, what is the amount of personal saving?

Accepted Answer

A)  −$40 
B)  −$20 
C)  $0 
D)  $20 
A)  −$40 
B)  −$20 
C)  $0 
D)  $20 C

Question 4

Figure 13-1  
-Refer to Figure 13-1. The marginal propensity to consume is

Accepted Answer

A)  0.25. 
B)  0.50. 
C)  0.60. 
D)  0.67. 
A)  0.25. 
B)  0.50. 
C)  0.60. 
D)  0.67.

Question 5

The multiplier effect indicates that

Accepted Answer

A)  the aggregate demand curve is downward sloping. 
B)  a change in any autonomous component of aggregate expenditure is buffered by the multiplier effect 
C)  a change in income causes a magnified change in investment. 
D)  a change in any autonomous component of aggregate expenditure brings about a magnified change in income. 
A)  the aggregate demand curve is downward sloping. 
B)  a change in any autonomous component of aggregate expenditure is buffered by the multiplier effect 
C)  a change in income causes a magnified change in investment. 
D)  a change in any autonomous component of aggregate expenditure brings about a magnified change in income.

Question 6

Difficulty: Medium Figure 13-4  
-Refer to Figure 13-4. Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, JIP = Planned Investment. Suppose AE = C + IP, and IP is autonomous. Which of the following statements is true?

Accepted Answer

A)  The multiplier = 0.5 
B)  The multiplier = (1 − 0.5)/1 = 0.5 
C)  The multiplier = 2 
D)  The multiplier = ∆AE ÷ ∆Y 
A)  The multiplier = 0.5 
B)  The multiplier = (1 − 0.5)/1 = 0.5 
C)  The multiplier = 2 
D)  The multiplier = ∆AE ÷ ∆Y

Question 7

Table 13-1
  
-Refer to Table 13-1. When disposable personal income is $400, what is the amount of personal saving?

Accepted Answer

A)  −$40 
B)  −$20 
C)  $0 
D)  $20 
A)  −$40 
B)  −$20 
C)  $0 
D)  $20

Question 8

Suppose at each price level, autonomous aggregate expenditures fall by $80 billion. As a result, the aggregate expenditures curve shifts

Accepted Answer

A)  downward at each price level and results in a leftward shift in aggregate demand. 
B)  upward at each price level and results in a rightward shift in aggregate demand. 
C)  downward at each price level and results in a movement down along a given aggregate demand. 
D)  upward at each price level and results in a movement up along a given aggregate demand. 
A)  downward at each price level and results in a leftward shift in aggregate demand. 
B)  upward at each price level and results in a rightward shift in aggregate demand. 
C)  downward at each price level and results in a movement down along a given aggregate demand. 
D)  upward at each price level and results in a movement up along a given aggregate demand.

Question 9

Suppose the consumption function is C = $500 + 0.8Y. If Y = $1,000, then induced consumption is

Accepted Answer

A)  $500. 
B)  $800. 
C)  $1,000. 
D)  $1,300. 
A)  $500. 
B)  $800. 
C)  $1,000. 
D)  $1,300.

Question 10

Using the aggregate expenditures model, which of the following occurs if aggregate expenditures exceed real GDP? 
I. The economy will expand causing an increase in employment.
II. The economy will experience an inflationary gap.
III. The price level will rise.
IV. Actual investment will be less than planned investment.

Accepted Answer

A)  I, II, and IV 
B)  I, III, and IV 
C)  I and IV 
D)  I, II, III, and IV 
A)  I, II, and IV 
B)  I, III, and IV 
C)  I and IV 
D)  I, II, III, and IV

Question 11

If the economy spends 80% of any increase in real GDP, then an increase in autonomous investment of $1 billion would result ultimately in an increase in equilibrium real GDP of

Accepted Answer

A)  $0.8 billion. 
B)  $1.0 billion. 
C)  $1.8 billion. 
D)  $5.0 billion. 
A)  $0.8 billion. 
B)  $1.0 billion. 
C)  $1.8 billion. 
D)  $5.0 billion.

Question 12

Suppose that your annual income has averaged $40,000 for the past 10 years and that you expect it will average $40,000 over the next 10 years. If your income this year increases to $50,000 and you increase your consumption expenditures by $10,000, then you are most likely acting according to the

Accepted Answer

A)  transitory income theory of consumption. 
B)  current income hypothesis. 
C)  permanent income hypothesis. 
D)  disposable personal income theory of consumption. 
A)  transitory income theory of consumption. 
B)  current income hypothesis. 
C)  permanent income hypothesis. 
D)  disposable personal income theory of consumption.

Question 13

Consider a simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption. Which of the following causes the aggregate expenditures curve to shift upwards?

Accepted Answer

A)  an increase in taxes 
B)  an increase in exports 
C)  a decrease in the national debt 
D)  a decrease in interest rate 
A)  an increase in taxes 
B)  an increase in exports 
C)  a decrease in the national debt 
D)  a decrease in interest rate

Question 14

An increase in the slope of the aggregate expenditures curve leads to a decrease in the
Jvalue of the multiplier.

Accepted Answer

A) True 
 B)False

Question 15

Let AE = Aggregate Expenditures, C = Consumption, IP = Planned Investment, JG = Government Purchases. Consider a simple aggregate expenditures model, where
JAE = C + IP + G and all components of aggregate expenditures except consumption are autonomous. All other things unchanged, an increase in the price level,

Accepted Answer

A)  causes a movement up along a given aggregate expenditures curve and raises the equilibrium real GDP. 
B)  causes a movement down a given aggregate expenditures curve and lowers the equilibrium real GDP. 
C)  shifts the aggregate expenditures curve upwards and raises the equilibrium real GDP. 
D)  shifts the aggregate expenditures curve downwards and lowers the equilibrium real GDP. 
A)  causes a movement up along a given aggregate expenditures curve and raises the equilibrium real GDP. 
B)  causes a movement down a given aggregate expenditures curve and lowers the equilibrium real GDP. 
C)  shifts the aggregate expenditures curve upwards and raises the equilibrium real GDP. 
D)  shifts the aggregate expenditures curve downwards and lowers the equilibrium real GDP.

Question 16

Figure 13-3  
-Refer to Figure 13-3. Upward shifts of the consumption function, for example from C0  to C1 to C2 demonstrate

Accepted Answer

A)  an increase in the marginal propensity to save. 
B)  increases in the amount of consumption for a given level of disposable income. 
C)  increases in the amount of disposable income available for consumption. 
D)  an increase in the marginal propensity to save 
A)  an increase in the marginal propensity to save. 
B)  increases in the amount of consumption for a given level of disposable income. 
C)  increases in the amount of disposable income available for consumption. 
D)  an increase in the marginal propensity to save

Question 17

Figure 13-6  
-Refer to Figure 13-6. Suppose government purchases rise by $100. In the aggregate demand/aggregate supply model,

Accepted Answer

A)  the aggregate demand curve shifts to the right by $100 at any given price level. 
B)  the aggregate demand curve shifts to the right by ($100 * the multiplier) at any given price level. 
C)  there is a downward movement along the aggregate demand curve such that real GDP demanded increases by $100. 
D)  there is a downward movement along the aggregate demand curve such that real GDP demanded increases by ($100 * the multiplier). 
A)  the aggregate demand curve shifts to the right by $100 at any given price level. 
B)  the aggregate demand curve shifts to the right by ($100 * the multiplier) at any given price level. 
C)  there is a downward movement along the aggregate demand curve such that real GDP demanded increases by $100. 
D)  there is a downward movement along the aggregate demand curve such that real GDP demanded increases by ($100 * the multiplier).

Question 18

Figure 13-1  
-Refer to Figure 13-1. When disposable personal income goes up by $400 billion, personal saving increases by

Accepted Answer

A)  $0. 
B)  $100 billion. 
C)  $200 billion. 
D)  $400 billion. 
A)  $0. 
B)  $100 billion. 
C)  $200 billion. 
D)  $400 billion.

Question 19

In the simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption, if the slope of the aggregate expenditures curve decreases, the multiplier

Accepted Answer

A)  increases. 
B)  decreases. 
C)  remains constant. 
D)  is undefined. 
A)  increases. 
B)  decreases. 
C)  remains constant. 
D)  is undefined.

Question 20

Investment equals

Accepted Answer

A)  planned investment plus unplanned investment. 
B)  planned investment minus unplanned investment. 
C)  unplanned investment minus planned investment. 
D)  planned investment in a free market economy. 
A)  planned investment plus unplanned investment. 
B)  planned investment minus unplanned investment. 
C)  unplanned investment minus planned investment. 
D)  planned investment in a free market economy.

The income households receive less the personal income taxes they pay is

In general, an increase in the income tax rate will make the aggregate expenditures curve

Table 13-1 -Refer to Table 13-1. When disposable personal income is $300, what is the amount of personal saving?

Figure 13-1 -Refer to Figure 13-1. The marginal propensity to consume is

The multiplier effect indicates that

Difficulty: Medium Figure 13-4 -Refer to Figure 13-4. Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, JI_P = Planned Investment. Suppose AE = C + I_P, and I_P is autonomous. Which of the following statements is true?

Table 13-1 -Refer to Table 13-1. When disposable personal income is $400, what is the amount of personal saving?

Suppose at each price level, autonomous aggregate expenditures fall by $80 billion. As a result, the aggregate expenditures curve shifts

Suppose the consumption function is C = $500 + 0.8Y. If Y = $1,000, then induced consumption is

If the economy spends 80% of any increase in real GDP, then an increase in autonomous investment of $1 billion would result ultimately in an increase in equilibrium real GDP of

Suppose that your annual income has averaged $40,000 for the past 10 years and that you expect it will average $40,000 over the next 10 years. If your income this year increases to $50,000 and you increase your consumption expenditures by $10,000, then you are most likely acting according to the

Consider a simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption. Which of the following causes the aggregate expenditures curve to shift upwards?

An increase in the slope of the aggregate expenditures curve leads to a decrease in the Jvalue of the multiplier.

Figure 13-3 -Refer to Figure 13-3. Upward shifts of the consumption function, for example from C₀ to C₁ to C₂demonstrate

Figure 13-6 -Refer to Figure 13-6. Suppose government purchases rise by $100. In the aggregate demand/aggregate supply model,

Figure 13-1 -Refer to Figure 13-1. When disposable personal income goes up by $400 billion, personal saving increases by

In the simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption, if the slope of the aggregate expenditures curve decreases, the multiplier

Investment equals

Economics: the Study of Choice

Demand and Supply

Applications of Demand and Supply

Macroeconomics: the Big Picture

Measuring Total Output and Income

Aggregate Demand and Aggregate Supply

Economic Growth

The Nature and Creation of Money

Financial Markets and the Economy

Monetary Policy and the Fed

Government and Fiscal Policy

Investment and Economic Activity

Net Exports and International Finance

Inflation and Unemployment

A Brief History of Macroeconomic Thought and Policy

Inequality, Poverty, and Discrimination

Economic Development

Socialist Economies in Transition

Filters

Exam 13: Consumption and the Aggregate Expenditures Model

The income households receive less the personal income taxes they pay is

In general, an increase in the income tax rate will make the aggregate expenditures curve

Table 13-1 -Refer to Table 13-1. When disposable personal income is $300, what is the amount of personal saving?

Figure 13-1 -Refer to Figure 13-1. The marginal propensity to consume is

The multiplier effect indicates that

Difficulty: Medium Figure 13-4 -Refer to Figure 13-4. Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, JIP = Planned Investment. Suppose AE = C + IP, and IP is autonomous. Which of the following statements is true?

Table 13-1 -Refer to Table 13-1. When disposable personal income is $400, what is the amount of personal saving?

Suppose at each price level, autonomous aggregate expenditures fall by $80 billion. As a result, the aggregate expenditures curve shifts

Suppose the consumption function is C = $500 + 0.8Y. If Y = $1,000, then induced consumption is

If the economy spends 80% of any increase in real GDP, then an increase in autonomous investment of $1 billion would result ultimately in an increase in equilibrium real GDP of

Suppose that your annual income has averaged $40,000 for the past 10 years and that you expect it will average $40,000 over the next 10 years. If your income this year increases to $50,000 and you increase your consumption expenditures by $10,000, then you are most likely acting according to the

Consider a simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption. Which of the following causes the aggregate expenditures curve to shift upwards?

An increase in the slope of the aggregate expenditures curve leads to a decrease in the Jvalue of the multiplier.

Figure 13-3 -Refer to Figure 13-3. Upward shifts of the consumption function, for example from C0 to C1 to C2 demonstrate

Figure 13-6 -Refer to Figure 13-6. Suppose government purchases rise by $100. In the aggregate demand/aggregate supply model,

Figure 13-1 -Refer to Figure 13-1. When disposable personal income goes up by $400 billion, personal saving increases by

In the simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption, if the slope of the aggregate expenditures curve decreases, the multiplier

Investment equals

Economics: the Study of Choice

Demand and Supply

Applications of Demand and Supply

Macroeconomics: the Big Picture

Measuring Total Output and Income

Aggregate Demand and Aggregate Supply

Economic Growth

The Nature and Creation of Money

Financial Markets and the Economy

Monetary Policy and the Fed

Government and Fiscal Policy

Investment and Economic Activity

Net Exports and International Finance

Inflation and Unemployment

A Brief History of Macroeconomic Thought and Policy

Inequality, Poverty, and Discrimination

Economic Development

Socialist Economies in Transition

Filters

Difficulty: Medium Figure 13-4 -Refer to Figure 13-4. Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, JI_P = Planned Investment. Suppose AE = C + I_P, and I_P is autonomous. Which of the following statements is true?

Figure 13-3 -Refer to Figure 13-3. Upward shifts of the consumption function, for example from C₀ to C₁ to C₂demonstrate