Exam 13: Consumption and the Aggregate Expenditures Model

Let AE = Aggregate Expenditures, C = Consumption, I_P = Planned Investment, G = Government Purchases. Consider a simple aggregate expenditures model, where AE = C + I_P + G and all components of aggregate expenditures except consumption are autonomous. All other things unchanged, a decrease in the price level

In the aggregate expenditures model, if a $40 billion increase in autonomous investment leads to an increase in equilibrium real GDP of $100 billion at the initial price level, then the multiplier is 2.5.

Use the following to answer questions . Exhibit: Aggregate Expenditures and Real GDP 1 -(Exhibit: Aggregate Expenditures and Real GDP 1) Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, I_P = Planned Investment. Suppose AE = C + I_P. I_P is autonomous and the consumption function is C = $1,000 billion + 0.5Y. If real GDP = $7,000 billion, what is the amount of aggregate expenditures?

Use the following to answer questions . Exhibit: Consumption and Disposable Personal Income -(Exhibit: Consumption and Disposable Personal Income) When disposable personal income is $1,200 billion, consumption is

What is the difference between the aggregate expenditures curve and the aggregate demand curve?

Use the following to answer questions . Exhibit: Consumption and Real GDP -(Exhibit: Consumption and Real GDP) If real GDP is $4 trillion, consumption equals

Use the following to answer questions . Exhibit: Aggregate Expenditures and Real GDP 1 -(Exhibit: Aggregate Expenditures and Real GDP 1) Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, I_P = Planned Investment. Suppose AE = C + I_P, and I_P is autonomous. What is the value of AE when Y = $12,000 billion?

In the simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption, what is the value of the multiplier if the marginal propensity to consume is 0.75?

Let AE = Aggregate Expenditures, C = Consumption, I_P = Planned Investment, G = Government Purchases. Consider a simple aggregate expenditures model, where AE = 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,

Disposable personal income is

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

The current income theory assumes that current consumption is based on the average income people expect to receive for the remainder of their lives.

Use the following to answer questions . Exhibit: Aggregate Expenditures and Real GDP 2 -(Exhibit: Aggregate Expenditures and Real GDP 2) Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, I_P = Planned Investment. Consider a simple economy where AE = C + I_P, I_P is autonomous and the consumption function is given by C = $1,000 billion + 0.75Y. What is the value of the multiplier?

Use the following to answer questions . Exhibit: Consumption Functions Figure 13-3 -(Exhibit: Consumption Functions) Suppose the consumption function is given by curve C₁. Which of the following will cause a downward shift to curve C₁?

Use the following to answer questions . Exhibit: Income and Consumption -(Exhibit: Income and Consumption) Negative personal saving occurs when disposable personal income is

Use the following to answer questions . Exhibit: Consumption and Disposable Personal Income -(Exhibit: Consumption and Disposable Personal Income) When disposable personal income is $2,000 billion, consumption is

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.

The marginal propensity to consume is the change in consumption divided by the change in disposable personal income.

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