Question 1

The relationship between personal saving and the level of disposable personal income is shown by the

Accepted Answer

A)  supply of savings curve. 
B)  consumption function. 
C)  saving function. 
D)  personal investment schedule. 
A)  supply of savings curve. 
B)  consumption function. 
C)  saving function. 
D)  personal investment schedule.

Question 2

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. IP is autonomous and the consumption function is C = $1,000 billion + 0.5Y. If real GDP = $5,000 billion, what is the amount of aggregate expenditures?

Accepted Answer

A)  $4,500 billion 
B)  $5,000 billion 
C)  $5,500 billion 
D)  $6,000 billion 
A)  $4,500 billion 
B)  $5,000 billion 
C)  $5,500 billion 
D)  $6,000 billion

Question 3

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. IP is autonomous and the consumption function is C = $1,000 billion + 0.5Y. What is the amount of consumption when real GDP is $6,000 billion?

Accepted Answer

A)  1,000 billion 
B)  2,000 billion 
C)  3,000 billion 
D)  4,000 billion 
A)  1,000 billion 
B)  2,000 billion 
C)  3,000 billion 
D)  4,000 billion

Question 4

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 consume is 0.75?

Accepted Answer

A)  1 
B)  4 
C)  5 
D)  infinity 
A)  1 
B)  4 
C)  5 
D)  infinity

Question 5

In the simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption, suppose when autonomous aggregate expenditures rise by $500 billion, equilibrium real GDP increases by $2,500 billion. Which of the following statements is true?

Accepted Answer

A)  The MPS = 0.8. 
B)  The MPC = 0.2 
C)  The MPS = 0.2. 
D)  The MPC = 5. 
A)  The MPS = 0.8. 
B)  The MPC = 0.2 
C)  The MPS = 0.2. 
D)  The MPC = 5.

Question 6

Aggregate expenditures that vary with real GDP are called induced aggregate expenditures.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is true? 
I. 1 − MPS = MPC where MPS = marginal propensity to save and MPC = marginal propensity to consume.
II. personal saving + consumption = gross income
III. ∆disposable income = ∆saving + ∆consumption where ∆ = change in

Accepted Answer

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

Question 8

The marginal propensity to save is given by

Accepted Answer

A)  the change in saving divided by the change in consumption. 
B)  saving divided by the change in disposable personal income. 
C)  saving divided by disposable income. 
D)  the change in saving divided by the change in disposable personal income. 
A)  the change in saving divided by the change in consumption. 
B)  saving divided by the change in disposable personal income. 
C)  saving divided by disposable income. 
D)  the change in saving divided by the change in disposable personal income.

Question 9

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. IP is autonomous and the consumption function is C = $1,000 billion + 0.5Y. If IP = $2,000 billion, what is the equilibrium level of real GDP?

Accepted Answer

A)  $4,500 billion 
B)  $6,000 billion 
C)  $7,500 billion 
D)  $9,000 billion 
A)  $4,500 billion 
B)  $6,000 billion 
C)  $7,500 billion 
D)  $9,000 billion

Question 10

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. IP is autonomous and the consumption function is C = $1,000 billion + 0.5Y. If Y= $6,000 billion, what is the value of consumption and planned investment?

Accepted Answer

A)  C = $3,000 billion, IP = $3,000 billion 
B)  C = $4,000 billion, IP = $2,000 billion 
C)  C = $5,000 billion, IP = $1,000 billion 
D)  C = $6,000 billion, IP = zero 
A)  C = $3,000 billion, IP = $3,000 billion 
B)  C = $4,000 billion, IP = $2,000 billion 
C)  C = $5,000 billion, IP = $1,000 billion 
D)  C = $6,000 billion, IP = zero

Question 11

Using the aggregate expenditures model, which of the following occurs if aggregate expenditures fall short of real GDP?
I. Actual investment exceeds planned investment.
II. Unemployment rises.
III. The price level will fall.
IV. The economy will experience a recessionary gap.

Accepted Answer

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

Question 12

Table 13-3
All figures in billions of base-year dollars
  
-Refer to Table 13-3. If government purchases increase by $100 billion, the aggregate expenditures curve will shift up by $_______ billion.

Accepted Answer

A)  100 
B)  250 
C)  400 
D)  500 
A)  100 
B)  250 
C)  400 
D)  500

Question 13

The marginal propensity to consume is the change in consumption divided by the change in
Jdisposable personal income.

Accepted Answer

A) True 
 B)False

Question 14

The current income theory assumes that current consumption is based on the average
Jincome people expect to receive for the remainder of their lives.

Accepted Answer

A) True 
 B)False

Question 15

Aggregate expenditures are the

Accepted Answer

A)  sum of planned levels of consumption, investment, government purchases, and net exports, at a given price level, as they relate to real GDP. 
B)  sum of consumption, saving, investment, government purchases, and net exports, at a given price level, as they relate to real GDP. 
C)  total of all spending, and equal to the value of real GDP at all price levels. 
D)  value of GDP, in nominal values, for all price levels, all other things unchanged. 
A)  sum of planned levels of consumption, investment, government purchases, and net exports, at a given price level, as they relate to real GDP. 
B)  sum of consumption, saving, investment, government purchases, and net exports, at a given price level, as they relate to real GDP. 
C)  total of all spending, and equal to the value of real GDP at all price levels. 
D)  value of GDP, in nominal values, for all price levels, all other things unchanged.

Question 16

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. In this model, the multiplier is found using the formula

Accepted Answer

A)  ∆Y* ÷ initial ∆AE where Y* = equilibrium real GDP by the ∆ = change in, AE = aggregate expenditures. 
B)  ∆AE ÷ ∆Y*. 
C)  ∆Y* * MPC where MPC = marginal propensity to consume. 
D)  1 ÷ MPC. 
A)  ∆Y* ÷ initial ∆AE where Y* = equilibrium real GDP by the ∆ = change in, AE = aggregate expenditures. 
B)  ∆AE ÷ ∆Y*. 
C)  ∆Y* * MPC where MPC = marginal propensity to consume. 
D)  1 ÷ MPC.

Question 17

The amount of consumption at each level of disposable personal income, all other determinants of consumption unchanged, is shown by the

Accepted Answer

A)  aggregate demand curve. 
B)  consumption function. 
C)  price-consumption curve. 
D)  income curve. 
A)  aggregate demand curve. 
B)  consumption function. 
C)  price-consumption curve. 
D)  income curve.

Question 18

The average annual income that people expect to receive for the remainder of their lives is called

Accepted Answer

A)  lifetime income. 
B)  permanent income. 
C)  disposable personal income. 
D)  current income. 
A)  lifetime income. 
B)  permanent income. 
C)  disposable personal income. 
D)  current income.

Question 19

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. If the MPS is 0.4, then the multiplier is

Accepted Answer

A)  1.33 
B)  2.5 
C)  5 
D)  15 
A)  1.33 
B)  2.5 
C)  5 
D)  15

Question 20

In the aggregate expenditures model, if aggregate expenditures are less than real GDP,

Accepted Answer

A)  actual real output is less than equilibrium real output. 
B)  employment increases. 
C)  aggregate output increases. 
D)  there will be unplanned increases in inventories. 
A)  actual real output is less than equilibrium real output. 
B)  employment increases. 
C)  aggregate output increases. 
D)  there will be unplanned increases in inventories.

The relationship between personal saving and the level of disposable personal income is shown by the

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 consume is 0.75?

In the simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption, suppose when autonomous aggregate expenditures rise by $500 billion, equilibrium real GDP increases by $2,500 billion. Which of the following statements is true?

Aggregate expenditures that vary with real GDP are called induced aggregate expenditures.

Which of the following is true? I. 1 − MPS = MPC where MPS = marginal propensity to save and MPC = marginal propensity to consume. II. personal saving + consumption = gross income III. ∆disposable income = ∆saving + ∆consumption where ∆ = change in

The marginal propensity to save is given by

Using the aggregate expenditures model, which of the following occurs if aggregate expenditures fall short of real GDP? I. Actual investment exceeds planned investment. II. Unemployment rises. III. The price level will fall. IV. The economy will experience a recessionary gap.

Table 13-3 All figures in billions of base-year dollars -Refer to Table 13-3. If government purchases increase by $100 billion, the aggregate expenditures curve will shift up by $_______ billion.

The marginal propensity to consume is the change in consumption divided by the change in Jdisposable personal income.

The current income theory assumes that current consumption is based on the average Jincome people expect to receive for the remainder of their lives.

Aggregate expenditures are the

The amount of consumption at each level of disposable personal income, all other determinants of consumption unchanged, is shown by the

The average annual income that people expect to receive for the remainder of their lives is called

Let AE = Aggregate Expenditures, C = Consumption, I_P = Planned Investment, JG =Government Purchases. Consider a simple aggregate expenditures model, where JAE = C + I_P + G and all components of aggregate expenditures except consumption are autonomous. If the MPS is 0.4, then the multiplier is

In the aggregate expenditures model, if aggregate expenditures are less than real GDP,

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 relationship between personal saving and the level of disposable personal income is shown by the

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 consume is 0.75?

In the simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption, suppose when autonomous aggregate expenditures rise by $500 billion, equilibrium real GDP increases by $2,500 billion. Which of the following statements is true?

Aggregate expenditures that vary with real GDP are called induced aggregate expenditures.

Which of the following is true? I. 1 − MPS = MPC where MPS = marginal propensity to save and MPC = marginal propensity to consume. II. personal saving + consumption = gross income III. ∆disposable income = ∆saving + ∆consumption where ∆ = change in

The marginal propensity to save is given by

Using the aggregate expenditures model, which of the following occurs if aggregate expenditures fall short of real GDP? I. Actual investment exceeds planned investment. II. Unemployment rises. III. The price level will fall. IV. The economy will experience a recessionary gap.

Table 13-3 All figures in billions of base-year dollars -Refer to Table 13-3. If government purchases increase by $100 billion, the aggregate expenditures curve will shift up by $_______ billion.

The marginal propensity to consume is the change in consumption divided by the change in Jdisposable personal income.

The current income theory assumes that current consumption is based on the average Jincome people expect to receive for the remainder of their lives.

Aggregate expenditures are the

The amount of consumption at each level of disposable personal income, all other determinants of consumption unchanged, is shown by the

The average annual income that people expect to receive for the remainder of their lives is called

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. If the MPS is 0.4, then the multiplier is

In the aggregate expenditures model, if aggregate expenditures are less than real GDP,

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

Let AE = Aggregate Expenditures, C = Consumption, I_P = Planned Investment, JG =Government Purchases. Consider a simple aggregate expenditures model, where JAE = C + I_P + G and all components of aggregate expenditures except consumption are autonomous. If the MPS is 0.4, then the multiplier is