Exam 13: Consumption and the Aggregate Expenditures Model

Figure 13-6 -Refer to Figure 13-6. Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, JI_P = Planned Investment, G = Government Purchases. Further, I_P and G are autonomous. JIf real GDP produced is $4,000, how will equilibrium be restored in the economy?

If an economy is in equilibrium,

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

In the aggregate expenditures model, if a $50 billion increase in investment leads to an increase in equilibrium real GDP of $250 billion at the initial price level, then the multiplier is 4.

In the summer of 2001, tax rebate checks of $300 per single taxpayer and $600 for married couples were distributed to 92 million people in the U.S. Economic researchers found that over a nine-month period spending increased to about 40% of the rebate. These findings support

Let Y = real GDP and Y_d = disposable income. Suppose initially, Y = Y_d and the marginal propensity to consume (MPC) is 0.9. All components of aggregate expenditures except consumption are autonomous. Now suppose the government imposes an income tax rate of 20% on real GDP. What is the marginal propensity to consume following the imposition of an income tax?

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. What is the value of autonomous AE?

Figure 13-1 -Refer to Figure 13-1. When disposable personal income is $2,000 billion, consumption is

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. All other things unchanged, a decrease in the price level

Figure 13-3 -Refer to Figure 13-3. Which of the following statements is false?

In the aggregate expenditures model, if real GDP equals $700 billion and aggregate expenditures equal $400 billion,

The amount of consumption that takes place when real GDP equals zero is called induced Jconsumption.

Consider a simple economy that is made up of three sectors: households, firms, and government. Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, JI_P = Planned Investment, G = Government Purchases. Further, I_P and G are autonomous. JIn this case, the slope of the aggregate expenditures curve is

A change in autonomous aggregate expenditures will shift aggregate demand by an amount Jequal to the change in autonomous aggregate expenditures times the multiplier.

If real GDP increases from $2,000 to $2,500 and aggregate expenditures increase from $1,900 to $2,200, the slope of the aggregate expenditures curve is

Table 13-3 All figures in billions of base-year dollars -Refer to Table 13-3. Suppose the equilibrium level of real GDP at the prevailing price is $500 billion below potential real GDP. All else constant, by how much should autonomous aggregate expenditures be increased to reach potential output?

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. The MPC is 0.6. If investment expenditures rise by $100 billion, the equilibrium level of real GDP of rises by

Figure 13-6 -Refer to Figure 13-6. What is the value of the multiplier?

An upward shift in the consumption function can be caused 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. What is the value of AE when Y = $12,000 billion?