Question 1

In the aggregate expenditures model, if aggregate expenditures equal $800 billion and real GDP equals $600 billion,

Accepted Answer

A)  unplanned inventory accumulation equals $200 billion. 
B)  unplanned inventory depletion equals $200 billion. 
C)  consumption plus investment equals $200 billion. 
D)  net investment equals $200 billion. 
A)  unplanned inventory accumulation equals $200 billion. 
B)  unplanned inventory depletion equals $200 billion. 
C)  consumption plus investment equals $200 billion. 
D)  net investment equals $200 billion.

Question 2

Suppose the slope of the aggregate expenditures curve is 0.75. An increase in autonomous investment expenditure of $6 billion would produce an ultimate increase in equilibrium real GDP of

Accepted Answer

A)  $0.25 billion. 
B)  $6 billion. 
C)  $12 billion. 
D)  $24 billion. 
A)  $0.25 billion. 
B)  $6 billion. 
C)  $12 billion. 
D)  $24 billion.

Question 3

May has been holding her retirement savings in a safe in her house. If the economy is currently experiencing a falling price level,

Accepted Answer

A)  the real purchasing power of her money remains constant. 
B)  the real value of her savings is decreasing as long as the price level is falling. 
C)  the real value of her savings is increasing as long as the price level is falling. 
D)  the nominal value of her savings remains constant. 
A)  the real purchasing power of her money remains constant. 
B)  the real value of her savings is decreasing as long as the price level is falling. 
C)  the real value of her savings is increasing as long as the price level is falling. 
D)  the nominal value of her savings remains constant.

Question 4

Figure 13-6  
-Refer to Figure 13-6. Suppose the government purchases economy rise by $100. What is the new equilibrium level of real GDP?

Accepted Answer

A)  $1,700 
B)  $1,800 
C)  $1,900 
D)  $2,100 
A)  $1,700 
B)  $1,800 
C)  $1,900 
D)  $2,100

Question 5

Table 13-3
All figures in billions of base-year dollars
  
-Refer to Table 13-3. Holding everything else constant, if government purchases increase by $100 billion, equilibrium real GDP will increase by

Accepted Answer

A)  $100 billion. 
B)  $200 billion. 
C)  $250 billion. 
D)  $300 billion. 
A)  $100 billion. 
B)  $200 billion. 
C)  $250 billion. 
D)  $300 billion.

Question 6

Suppose when disposable personal income increases from $10,000 to $15,000, consumption increases from $9,000 to $13,000. What is the marginal propensity to consume?

Accepted Answer

A)  0.2 
B)  0.4 
C)  0.6 
D)  0.8 
A)  0.2 
B)  0.4 
C)  0.6 
D)  0.8

Question 7

Table 13-1
  
-Refer to Table 13-1. Calculate the marginal propensity to consume based on the information in the table.

Accepted Answer

A)  0.00 
B)  0.20 
C)  0.80 
D)  1.40 
A)  0.00 
B)  0.20 
C)  0.80 
D)  1.40

Question 8

Figure 13-2  
-Refer to Figure 13-2. If real GDP is $8 trillion, saving equals

Accepted Answer

A)  $4 trillion. 
B)  $3 trillion. 
C)  $2 trillion. 
D)  $1 trillion. 
A)  $4 trillion. 
B)  $3 trillion. 
C)  $2 trillion. 
D)  $1 trillion.

Question 9

Table 13-1
  
-Refer to Table 13-1. Negative personal saving occurs when disposable personal income is

Accepted Answer

A)  equal to $300. 
B)  greater than $300. 
C)  less than $300. 
D)  between $300 and $400. 
A)  equal to $300. 
B)  greater than $300. 
C)  less than $300. 
D)  between $300 and $400.

Question 10

A downward shift in the consumption function can be caused by

Accepted Answer

A)  expectations of product shortages. 
B)  expectations of more income in the future. 
C)  a decrease in consumer confidence. 
D)  rising property values that increases households' net worth. 
A)  expectations of product shortages. 
B)  expectations of more income in the future. 
C)  a decrease in consumer confidence. 
D)  rising property values that increases households' net worth.

Question 11

If prices of the goods and services in the domestic market rise relative to those in foreign markets

Accepted Answer

A)  households and firms will buy more foreign products and less domestic products, thereby decreasing net exports. 
B)  households and firms will buy more foreign products and less domestic products, thereby increasing net exports. 
C)  exports will rise and imports will fall, leading to an increase in net exports. 
D)  the exchange rate will rise, leading to an increase in exports. 
A)  households and firms will buy more foreign products and less domestic products, thereby decreasing net exports. 
B)  households and firms will buy more foreign products and less domestic products, thereby increasing net exports. 
C)  exports will rise and imports will fall, leading to an increase in net exports. 
D)  the exchange rate will rise, leading to an increase in exports.

Question 12

In the simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption, if the slope of the aggregate expenditures curve increases, 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 13

Table 13-3
All figures in billions of base-year dollars
  
-Refer to Table 13-3. What is the equilibrium level of GDP?

Accepted Answer

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

Question 14

What is the marginal propensity to consume? Explain why the sum of marginal propensity
Jto consume and marginal propensity to save must equal 1.

Accepted Answer

The marginal propensity to consume (MPC)

Question 15

The bulk of aggregate demand in the United States consists of

Accepted Answer

A)  consumption. 
B)  investment. 
C)  government spending. 
D)  net exports. 
A)  consumption. 
B)  investment. 
C)  government spending. 
D)  net exports.

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. All other things unchanged, an increase in the price level,

Accepted Answer

A)  shifts the aggregate expenditures curve upwards. 
B)  shifts the aggregate expenditures curve downwards. 
C)  causes a movement up along a given aggregate expenditures curve. 
D)  causes a movement down a given aggregate expenditures curve. 
A)  shifts the aggregate expenditures curve upwards. 
B)  shifts the aggregate expenditures curve downwards. 
C)  causes a movement up along a given aggregate expenditures curve. 
D)  causes a movement down a given aggregate expenditures curve.

Question 17

Figure 13-5  
-Refer to Figure 13-5. Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, JIP = Planned Investment. Consider a simple economy where AE = C + IP, IP is autonomous
Jand the consumption function is given by C = $1,000 billion + 0.75Y. If potential real GDP is $9,000 billion, by how much must planned investment change to reach potential real GDP?
J

Accepted Answer

A)  IP must increase by $250 billion. 
B)  IP must decrease by $250 billion. 
C)  IP must increase by $1,000 billion. 
D)  IP must decrease by $1,000 billion. 
A)  IP must increase by $250 billion. 
B)  IP must decrease by $250 billion. 
C)  IP must increase by $1,000 billion. 
D)  IP must decrease by $1,000 billion.

Question 18

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 _____.

Accepted Answer

A)  1 ÷ (1 -MPS) where MPS = marginal propensity to save 
B)  1 ÷ MPC where MPC = marginal propensity to consume 
C)  1 ÷ MPS where MPS = marginal propensity to save 
D)  MPC ÷ MPS ÷ ∆Y 
A)  1 ÷ (1 -MPS) where MPS = marginal propensity to save 
B)  1 ÷ MPC where MPC = marginal propensity to consume 
C)  1 ÷ MPS where MPS = marginal propensity to save 
D)  MPC ÷ MPS ÷ ∆Y

Question 19

Suppose the consumption function is C = $500 + 0.8Y. If Y = $1,000, what is the amount of consumption?

Accepted Answer

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

Question 20

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, a decrease in the price level

Accepted Answer

A)  shifts the aggregate expenditures curve upwards and causes the aggregate demand curve to shift right. 
B)  shifts the aggregate expenditures curve downwards and causes the aggregate demand curve to shift left. 
C)  shifts the aggregate expenditures curve downwards and causes a movement up along a given aggregate demand curve. 
D)  shifts the aggregate expenditures curve upwards and causes a movement down along a given aggregate demand curve. 
A)  shifts the aggregate expenditures curve upwards and causes the aggregate demand curve to shift right. 
B)  shifts the aggregate expenditures curve downwards and causes the aggregate demand curve to shift left. 
C)  shifts the aggregate expenditures curve downwards and causes a movement up along a given aggregate demand curve. 
D)  shifts the aggregate expenditures curve upwards and causes a movement down along a given aggregate demand curve.

In the aggregate expenditures model, if aggregate expenditures equal $800 billion and real GDP equals $600 billion,

Suppose the slope of the aggregate expenditures curve is 0.75. An increase in autonomous investment expenditure of $6 billion would produce an ultimate increase in equilibrium real GDP of

May has been holding her retirement savings in a safe in her house. If the economy is currently experiencing a falling price level,

Figure 13-6 -Refer to Figure 13-6. Suppose the government purchases economy rise by $100. What is the new equilibrium level of real GDP?

Table 13-3 All figures in billions of base-year dollars -Refer to Table 13-3. Holding everything else constant, if government purchases increase by $100 billion, equilibrium real GDP will increase by

Suppose when disposable personal income increases from $10,000 to $15,000, consumption increases from $9,000 to $13,000. What is the marginal propensity to consume?

Table 13-1 -Refer to Table 13-1. Calculate the marginal propensity to consume based on the information in the table.

Figure 13-2 -Refer to Figure 13-2. If real GDP is $8 trillion, saving equals

Table 13-1 -Refer to Table 13-1. Negative personal saving occurs when disposable personal income is

A downward shift in the consumption function can be caused by

If prices of the goods and services in the domestic market rise relative to those in foreign markets

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

Table 13-3 All figures in billions of base-year dollars -Refer to Table 13-3. What is the equilibrium level of GDP?

What is the marginal propensity to consume? Explain why the sum of marginal propensity Jto consume and marginal propensity to save must equal 1.

The bulk of aggregate demand in the United States consists of

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. In this model, the multiplier is _____.

Suppose the consumption function is C = $500 + 0.8Y. If Y = $1,000, what is the amount of consumption?

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

In the aggregate expenditures model, if aggregate expenditures equal $800 billion and real GDP equals $600 billion,

Suppose the slope of the aggregate expenditures curve is 0.75. An increase in autonomous investment expenditure of $6 billion would produce an ultimate increase in equilibrium real GDP of

May has been holding her retirement savings in a safe in her house. If the economy is currently experiencing a falling price level,

Figure 13-6 -Refer to Figure 13-6. Suppose the government purchases economy rise by $100. What is the new equilibrium level of real GDP?

Table 13-3 All figures in billions of base-year dollars -Refer to Table 13-3. Holding everything else constant, if government purchases increase by $100 billion, equilibrium real GDP will increase by

Suppose when disposable personal income increases from $10,000 to $15,000, consumption increases from $9,000 to $13,000. What is the marginal propensity to consume?

Table 13-1 -Refer to Table 13-1. Calculate the marginal propensity to consume based on the information in the table.

Figure 13-2 -Refer to Figure 13-2. If real GDP is $8 trillion, saving equals

Table 13-1 -Refer to Table 13-1. Negative personal saving occurs when disposable personal income is

A downward shift in the consumption function can be caused by

If prices of the goods and services in the domestic market rise relative to those in foreign markets

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

Table 13-3 All figures in billions of base-year dollars -Refer to Table 13-3. What is the equilibrium level of GDP?

What is the marginal propensity to consume? Explain why the sum of marginal propensity Jto consume and marginal propensity to save must equal 1.

The bulk of aggregate demand in the United States consists of

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 _____.

Suppose the consumption function is C = $500 + 0.8Y. If Y = $1,000, what is the amount of consumption?

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. In this model, the multiplier is _____.