Exam 28: Consumption and the Aggregate Expenditures Model

In the simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption, suppose when autonomous aggregate expenditures rise by $500 billion, equilibrium real GDP increases by $2,500 billion.Which of the following statements is true?

If C = $400 billion + 0.75(Y_d)and if real GDP is $1,000 billion, then for any positive tax rate, C =$1,150 billion.

If an economy is in equilibrium,

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

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 ___ and the multiplier is _____.

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

Figure 13-2 -Refer to Figure 13-2.If real GDP is $8 trillion, saving equals

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

A change in aggregate demand causes a change in income, which in turn induces an increase in consumption.

An increase in autonomous aggregate expenditures

Aggregate expenditures are the

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 consume?

Planned investment is

According to the current income hypothesis,

Suppose the consumption function is C = $500 + 0.8Y.If Y = $1,000, what is the amount of consumption?

The average annual income that people expect to receive for the remainder of their lives is called

The consumption function shows the negative relationship between consumption and disposable personal income.

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

May has been holding her retirement savings in a safe in her house.If the economy is currently experiencing a falling price level,

The income households receive less the personal income taxes they pay is