Question 1

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

Accepted Answer

A)  2.5 
B)  3 
C)  5 
D)  15 
A)  2.5 
B)  3 
C)  5 
D)  15

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, and IP is autonomous. At a real GDP of $5,000 billion,

Accepted Answer

A)  planned investment is greater than actual investment. 
B)  planned investment equals actual investment. 
C)  planned investment is less than actual investment. 
D)  there will be no unplanned investment. 
A)  planned investment is greater than actual investment. 
B)  planned investment equals actual investment. 
C)  planned investment is less than actual investment. 
D)  there will be no unplanned investment.

Question 3

Consider a simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption. If the consumption function is JC = $500 + 0.8Y, planned investment = $200, government purchases = $300,
Jnet exports = $100, and real GDP = $1,000, what is the amount of aggregate expenditures?

Accepted Answer

A)  $800 
B)  $1,000 
C)  $1,100 
D)  $1,900 
A)  $800 
B)  $1,000 
C)  $1,100 
D)  $1,900

Question 4

Consider a simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption. The marginal propensity to consume is ⅔. Holding all else constant, if net exports increase by $50 billion, what happens to Jaggregate demand?

Accepted Answer

A)  It shifts left by $150 billion. 
B)  There is a movement down along a given aggregate demand so that aggregate quantity demanded increases by $150 billion. 
C)  It shifts right by $150 billion 
D)  There is a movement down along a given aggregate demand so that aggregate quantity demanded increases by $50 billion. 
A)  It shifts left by $150 billion. 
B)  There is a movement down along a given aggregate demand so that aggregate quantity demanded increases by $150 billion. 
C)  It shifts right by $150 billion 
D)  There is a movement down along a given aggregate demand so that aggregate quantity demanded increases by $50 billion.

Question 5

If C = $500 billion + .6Y, then, if Y = $1,000 billion, induced consumption will be equal to
J$1,100 billion.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

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

Question 7

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 save?

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 8

Disposable personal income is the total income households spend on consumption.

Accepted Answer

A) True 
 B)False

Question 9

Personal saving equals

Accepted Answer

A)  gross domestic income − consumption. 
B)  personal disposable income − consumption. 
C)  gross domestic product − consumption. 
D)  personal disposable income − taxes − consumption. 
A)  gross domestic income − consumption. 
B)  personal disposable income − consumption. 
C)  gross domestic product − consumption. 
D)  personal disposable income − taxes − consumption.

Question 10

Suppose that your annual income has averaged $40,000 for the past 10 years and that you expect it will average $40,000 over the next 10 years. If your income this year increases to $50,000 but your consumption expenditures don't change, then you are most likely acting according to the

Accepted Answer

A)  transitory income theory of consumption. 
B)  current income hypothesis. 
C)  permanent income hypothesis. 
D)  disposable personal income theory of consumption. 
A)  transitory income theory of consumption. 
B)  current income hypothesis. 
C)  permanent income hypothesis. 
D)  disposable personal income theory of consumption.

Question 11

Figure 13-6  
-Refer to Figure 13-6. Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, JIP = Planned Investment, G = Government Purchases. Further, IP and G are autonomous. If real GDP produced is $4,000, what is the amount of unplanned investment?

Accepted Answer

A)  zero 
B)  $1,200 billion 
C)  $2,400 billion 
D)  $2,800 billion 
A)  zero 
B)  $1,200 billion 
C)  $2,400 billion 
D)  $2,800 billion

Question 12

The assertion that consumption depends on expected average annual income is called

Accepted Answer

A)  permanent income. 
B)  the current income hypothesis. 
C)  current income. 
D)  the permanent income hypothesis. 
A)  permanent income. 
B)  the current income hypothesis. 
C)  current income. 
D)  the permanent income hypothesis.

Question 13

The marginal propensity to consume is the

Accepted Answer

A)  slope of the saving function. 
B)  slope of the consumption function. 
C)  proportion of disposable personal income used for consumption. 
D)  change in consumption divided by the change in saving. 
A)  slope of the saving function. 
B)  slope of the consumption function. 
C)  proportion of disposable personal income used for consumption. 
D)  change in consumption divided by the change in saving.

Question 14

Distinguish between planned and unplanned investment, and explain their relationship to
Jthe aggregate expenditures model and to equilibrium real GDP.

Accepted Answer

Planned investment refers to the investm

Question 15

An increase in aggregate demand causes an increase in

Accepted Answer

A)  income, which in turn induces an increase in consumption. 
B)  investment, which in turn induces an increase in consumption. 
C)  government, which in turn induces an increase in net exports. 
D)  consumption, which in turn induces an increase in price. 
A)  income, which in turn induces an increase in consumption. 
B)  investment, which in turn induces an increase in consumption. 
C)  government, which in turn induces an increase in net exports. 
D)  consumption, which in turn induces an increase in price.

Question 16

Figure 13-6  
-Refer to Figure 13-6. Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, JIP = Planned Investment, G = Government Purchases. Further, IP and G are autonomous. What is the equation of the aggregate expenditures curve? All figures in billions of dollars.

Accepted Answer

A)  AE = G + IP 
B)  AE = 800 + G + IP 
C)  AE = 800 + G + IP + 0.5Y 
D)  AE = 800 + 0.5Y 
A)  AE = G + IP 
B)  AE = 800 + G + IP 
C)  AE = 800 + G + IP + 0.5Y 
D)  AE = 800 + 0.5Y

Question 17

Figure 13-1  
-Refer to Figure 13-1. If disposable personal income is $400 billion, what is the amount of personal saving?

Accepted Answer

A)  −$200 billion 
B)  $0 
C)  $200 billion 
D)  $400 billion 
A)  −$200 billion 
B)  $0 
C)  $200 billion 
D)  $400 billion

Question 18

During an economic downturn, households respond to a decline in income by

Accepted Answer

A)  reducing taxes. 
B)  reducing consumption. 
C)  increasing the quantity of labor supplied. 
D)  negotiating higher wages. 
A)  reducing taxes. 
B)  reducing consumption. 
C)  increasing the quantity of labor supplied. 
D)  negotiating higher wages.

Question 19

The consumption function expresses the

Accepted Answer

A)  purposes of consumption. 
B)  relationship between consumption and prices. 
C)  relationship between consumption and saving. 
D)  relationship between consumption and disposable personal income. 
A)  purposes of consumption. 
B)  relationship between consumption and prices. 
C)  relationship between consumption and saving. 
D)  relationship between consumption and disposable personal income.

Question 20

The saving function shows

Accepted Answer

A)  the amount of saving at each level of aggregate demand, holding all other determinants of saving constant. 
B)  the amount of saving on at each level of disposable income, holding all other determinants of saving constant. 
C)  the amount of saving at each price level, holding all other determinants of saving constant. 
D)  the amount of saving at each wage rate, holding all other determinants of saving constant. 
A)  the amount of saving at each level of aggregate demand, holding all other determinants of saving constant. 
B)  the amount of saving on at each level of disposable income, holding all other determinants of saving constant. 
C)  the amount of saving at each price level, holding all other determinants of saving constant. 
D)  the amount of saving at each wage rate, holding all other determinants of saving constant.

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

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. At a real GDP of $5,000 billion,

Consider a simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption. The marginal propensity to consume is ⅔. Holding all else constant, if net exports increase by $50 billion, what happens to Jaggregate demand?

If C = $500 billion + .6Y, then, if Y = $1,000 billion, induced consumption will be equal to J$1,100 billion.

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

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 save?

Disposable personal income is the total income households spend on consumption.

Personal saving equals

Suppose that your annual income has averaged $40,000 for the past 10 years and that you expect it will average $40,000 over the next 10 years. If your income this year increases to $50,000 but your consumption expenditures don't change, then you are most likely acting according to the

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 unplanned investment?

The assertion that consumption depends on expected average annual income is called

The marginal propensity to consume is the

Distinguish between planned and unplanned investment, and explain their relationship to Jthe aggregate expenditures model and to equilibrium real GDP.

An increase in aggregate demand causes an increase in

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. What is the equation of the aggregate expenditures curve? All figures in billions of dollars.

Figure 13-1 -Refer to Figure 13-1. If disposable personal income is $400 billion, what is the amount of personal saving?

During an economic downturn, households respond to a decline in income by

The consumption function expresses the

The saving function shows

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

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

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, and IP is autonomous. At a real GDP of $5,000 billion,

Consider a simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption. The marginal propensity to consume is ⅔. Holding all else constant, if net exports increase by $50 billion, what happens to Jaggregate demand?

If C = $500 billion + .6Y, then, if Y = $1,000 billion, induced consumption will be equal to J$1,100 billion.

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

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 save?

Disposable personal income is the total income households spend on consumption.

Personal saving equals

Suppose that your annual income has averaged $40,000 for the past 10 years and that you expect it will average $40,000 over the next 10 years. If your income this year increases to $50,000 but your consumption expenditures don't change, then you are most likely acting according to the

Figure 13-6 -Refer to Figure 13-6. Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, JIP = Planned Investment, G = Government Purchases. Further, IP and G are autonomous. If real GDP produced is $4,000, what is the amount of unplanned investment?

The assertion that consumption depends on expected average annual income is called

The marginal propensity to consume is the

Distinguish between planned and unplanned investment, and explain their relationship to Jthe aggregate expenditures model and to equilibrium real GDP.

An increase in aggregate demand causes an increase in

Figure 13-6 -Refer to Figure 13-6. Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, JIP = Planned Investment, G = Government Purchases. Further, IP and G are autonomous. What is the equation of the aggregate expenditures curve? All figures in billions of dollars.

Figure 13-1 -Refer to Figure 13-1. If disposable personal income is $400 billion, what is the amount of personal saving?

During an economic downturn, households respond to a decline in income by

The consumption function expresses the

The saving function shows

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

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. At a real GDP of $5,000 billion,

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 unplanned investment?

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. What is the equation of the aggregate expenditures curve? All figures in billions of dollars.