Exam 13: Consumption and the Aggregate Expenditures Model

Figure 13-5 -Refer to Figure 13-5. Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, JI_P = Planned Investment. Consider a simple economy where AE = C + I_P, and I_P is autonomous. What is the value of AE when Y = $12,000 billion?

What is the international trade effect?

According to the permanent income hypothesis,

The marginal propensity to consume is given by

In the simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption, what is the value of the multiplier if the marginal propensity to save is 0.1?

According to the current income hypothesis,

The interest rate effect suggests that

In the aggregate expenditures model, if a $40 billion increase in autonomous investment leads to an increase in equilibrium real GDP of $100 billion at the initial price level, then the multiplier is 2.5.

Table 13-1 -Refer to Table 13-1. When disposable personal income is $100, what is the amount of personal saving?

Figure 13-1 -Refer to Figure 13-1. Assuming that the relationship between consumption and disposable personal income remains linear throughout its entire range, if disposable personal income were zero, what would personal saving be?

Consumption spending in any one period that is determined by income in that period is explained by the

Table 13-2 -Refer to Table 13-2. Consider a simple economy that is made up of only two sectors, households and firms, and that investment is autonomous. Further, disposable personal income = real GDP. Suppose that actual real GDP in this economy is $300 billion in a particular period. We would expect to see

The slope of the aggregate expenditures curve is given by

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. At a real GDP of $7,000 billion

Figure 13-3 -Refer to Figure 13-3. Suppose the consumption function is given by curve C₁. What will cause an upward shift to curve C₂?

Which of the following statements is false?

According to the permanent income hypothesis,

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

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