Exam 21: The Simplest Short-Run Macro Model

Consider a simple macro model with a constant price level and demand-determined output. If national income is above its equilibrium level, it is likely that inventories are , and so national income tends to )

Consider the following aggregate expenditure function: AE = $300 billion + 0.87)Y. Assuming that we have no government, no international trade and desired investment is autonomous and is equal to $56 billion, then which of the following is the correct statement of the consumption function?

Which of the following correctly describes the meaning of the aggregate expenditure AE) function?

Suppose disposable income for an entire economy rises from $400 billion to $440 billion and desired consumption rises from $350 billion to $380 billion. We can conclude that the marginal propensity to consume for this economy is

Consider the following information describing a closed economy with no government and where aggregate output is demand determined. All dollar figures are in billions. 1. the equilibrium condition is Y = C + I 2. the marginal propensity to consume is 0.90 3. the autonomous part of C is $300 4. investment is autonomous and is $100 TABLE 21-3 -Refer to Table 21-3. Suppose this economy is in equilibrium. There is then a significant decline in house prices across the country. The likely effect is

In a simple model of the economy, without government or taxes, a shock that causes an upward shift of the aggregate consumption function also causes shift of the saving function.

Consider the following information describing an economy with demand -determined output. There is no government or foreign trade. All dollar figures are in billions. 1. equilibrium condition is Y = C + I 2. marginal propensity to save = 0.20 3. the autonomous part of C is $50 4. investment is autonomous and equals $25 TABLE 21-5 -Consider a simple macro model with a constant price level and demand-determined output. Suppose the level of actual national income is less than desired aggregate expenditure. In this case,

Consider the equation: AE = C + I + G + X - IM). Which of the following statements correctly describes this sum?

If the Jones familyʹs disposable income increases from $1200 to $1700 and their desired saving increases from -$100 to +$100, then the familyʹs

Suppose the price level is constant, output is demand-determined, and the economy is closed with no government. If the saving function is S = -100 + 0.4)Y, the simple multiplier is

FIGURE 21-1 -Refer to Figure 21-1. The marginal propensity to consume is equal to

Consider the following information describing an economy with demand -determined output. There is no government or foreign trade. All dollar figures are in billions. 1. equilibrium condition is Y = C + I 2. marginal propensity to save = 0.20 3. the autonomous part of C is $50 4. investment is autonomous and equals $25 TABLE 21-5 -Refer to Table 21-5. At the equilibrium level of national income, the level of desired saving will be

FIGURE 21-3 -Refer to Figure 21-3. If national income is Y1 and the aggregate expenditure function is AE1,

Consider the following information for an economy with demand-determined output and a constant price level. There is no government or foreign trade. 1. Y = C + I 2. C = 100 + 0.8Y 3. I = 200 TABLE 21-8 -Refer to Table 21-8. This economyʹs equilibrium level of national income is

FIGURE 21-2 -Refer to Figure 21-2. The amount of desired consumption expenditure that is unrelated to the level of disposable income is

Consider a simple macro model with a constant price level and demand-determined output. If the marginal propensity to spend in such a model is 0.8, the simple multiplier is

On a graph of a consumption function, what is the significance of the 45 -degree line?

FIGURE 21-2 -Refer to Figure 21-2. The slope of the consumption function in the figure is equal to

If a familyʹs annual disposable income rose from $60 000 to $65 000 and their desired consumption expenditures rose from $50 000 to $54 000, it can be concluded that the familyʹs

Suppose the price level is constant, output is demand-determined, and the economy is closed with no government. If the saving function is S = -100 + 0.2)Y, the simple multiplier is