Exam 13: Consumption and the Aggregate Expenditures Model

In the simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption, the size of the multiplier depends on the

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, I_P is autonomous Jand the consumption function is given by C = $1,000 billion + 0.75Y. What is the value of planned investment when real GDP is $6,000 billion?

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, I_P is autonomous Jand the consumption function is given by C = $1,000 billion + 0.75Y. What is the value of consumption when real GDP is $6,000 billion?

Autonomous aggregate expenditures are those that automatically vary with real GDP, Jwhereas induced expenditures only change in response to a change in an external factor.

Let real GDP =Y = Y_d, and the consumption function is C = $1,000 + .06Y. JWhat is the value of autonomous consumption (A) and what is the marginal propensity to consume (MPC)?

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 slope of the AE curve is the

In graph that shows disposable income on the horizontal axis and consumption on the vertical axis, at every point on the 45-degree line,

If consumption increases by $75 billion when disposable personal income increases by J$100, the marginal propensity to consume is 0.75.

Which of the following statements is true about equilibrium in the aggregate expenditures model? I. Equilibrium is found at the level of real GDP at which the aggregate expenditures curve crosses the 45-degree line. II. In equilibrium, real GDP produced equals aggregate expenditures. III. In equilibrium, inventories equal zero. IV. In equilibrium, real GDP produced equals potential real GDP.

Table 13-3 All figures in billions of base-year dollars -Refer to Table 13-3. What is the value of the marginal propensity to consume?

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. Suppose government purchases rise by $100. As a result,

Figure 13-3 -Refer to Figure 13-3. Suppose the consumption function is given by curve C₁. Which of the following will cause a downward shift to curve C₁?

A decrease in the price level, all other things unchanged, shifts the aggregate expenditures Jcurve upwards.

Suppose when disposable personal income increases from $10,000 to $15,000, consumption increases from $9,000 to $12,000. What is the marginal propensity to consume?

In general, we expect that a reduction in the income tax rate will make the aggregate expenditures curve

The aggregate demand curve can be derived from the aggregate expenditures curves by

Difficulty: Medium Figure 13-4 -Refer to Figure 13-4. Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, JI_P = Planned Investment and Y* = equilibrium real GDP. Suppose AE = C + I_P, I_P is autonomous and the consumption function is C = $1,000 billion + 0.5Y. If firms produced a real GDP greater than the Y*,

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 autonomous AE?

Figure 13-2 -Refer to Figure 13-2. An equation for the consumption function is

Suppose at each price level, autonomous aggregate expenditures increase by $50 billion. As a result, the aggregate expenditures curve shifts