Exam 13: Consumption and the Aggregate Expenditures Model

In a graph with real GDP on the horizontal axis and aggregate expenditures on the vertical axis, autonomous aggregate expenditures are represented by

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

Table 13-3 All figures in billions of base-year dollars -Refer to Table 13-3. Holding everything else constant, if net exports fall by $400 billion, equilibrium real GDP will decrease

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. If potential real GDP is $7,000 billion, what must happen to planned investment for the economy to reach its potential real GDP?

The multiplier is found by dividing the change in equilibrium real GDP by the change in autonomous aggregate expenditures.

Expenditures that vary with the level of real GDP are called

The ratio of the change in equilibrium real GDP to the change in autonomous aggregate expenditures that produced it is the:

The smaller the marginal propensity to consume,

Figure 13-1 -Refer to Figure 13-1. When disposable personal income is $1,200 billion, consumption is

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. If the level of real GDP equals $5,000 billion, and if there are no changes in the consumption function or in planned investment, then we can expect that, in the next period, real GDP will

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 the multiplier?

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. If real GDP produced is $4,000, what is the amount of aggregate expenditures?

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

Figure 13-2 -Refer to Figure 13-2. The marginal propensity to consume equals

The saving function expresses the relationship between

If consumption is $80 billion when income is $100, the most likely value for the marginal propensity to consume is 0.8.

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 save?

The marginal propensity to consume is the

Figure 13-1 -Refer to Figure 13-1. The marginal propensity to save is

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 $500 billion in a particular period. We would expect to see