Question 1

Figure 13-3
  
-Refer to Figure 13-3.Upward shifts of the consumption function, for example from C0  to C1 to C2 demonstrate

Accepted Answer

A) an increase in the marginal propensity to save. 
B) increases in the amount of consumption for a given level of disposable income. 
C) increases in the amount of disposable income available for consumption. 
D) An increase in the marginal propensity to save. 
A) an increase in the marginal propensity to save. 
B) increases in the amount of consumption for a given level of disposable income. 
C) increases in the amount of disposable income available for consumption. 
D) An increase in the marginal propensity to save.

Question 2

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

Accepted Answer

A) shifts the aggregate expenditures curve upwards. 
B) shifts the aggregate expenditures curve downwards. 
C) causes a movement up along a given aggregate expenditures curve. 
D) causes a movement down a given aggregate expenditures curve. 
A) shifts the aggregate expenditures curve upwards. 
B) shifts the aggregate expenditures curve downwards. 
C) causes a movement up along a given aggregate expenditures curve. 
D) causes a movement down a given aggregate expenditures curve.

Question 3

Disposable personal income is

Accepted Answer

A) the income households receive after paying personal taxes and personal debt. 
B) the income households earn from supplying labor services for the production of aggregate output. 
C) the income households receive after paying personal taxes. 
D) the income households have leftover after paying personal taxes and purchasing necessities. 
A) the income households receive after paying personal taxes and personal debt. 
B) the income households earn from supplying labor services for the production of aggregate output. 
C) the income households receive after paying personal taxes. 
D) the income households have leftover after paying personal taxes and purchasing necessities.

Question 4

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

Accepted Answer

A) a ray from the origin. 
B) an upward sloping line with a positive vertical intercept. 
C) a 45-degree line. 
D) a horizontal line. 
A) a ray from the origin. 
B) an upward sloping line with a positive vertical intercept. 
C) a 45-degree line. 
D) a horizontal line.

Question 5

Figure 13-4
  
-Refer to Figure 13-4.Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption,
IP = Planned Investment.Suppose AE = C + IP.IP 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?

Accepted Answer

A) $6,000 billion 
B) $6,500 billion 
C) $7,000 billion 
D) $7,500 billion 
A) $6,000 billion 
B) $6,500 billion 
C) $7,000 billion 
D) $7,500 billion

Question 6

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.

Question 7

In general, an increase in the income tax rate will make the aggregate expenditures curve

Accepted Answer

A) steeper and the multiplier larger. 
B) steeper and the multiplier smaller. 
C) flatter and the multiplier larger. 
D) flatter and the multiplier smaller. 
A) steeper and the multiplier larger. 
B) steeper and the multiplier smaller. 
C) flatter and the multiplier larger. 
D) flatter and the multiplier smaller.

Question 8

Suppose the consumption function is C = $500 + 0.8Y.If Y = $1,000, then autonomous consumption is

Accepted Answer

A) $500. 
B) $800. 
C) $1,000. 
D) $1,300. 
A) $500. 
B) $800. 
C) $1,000. 
D) $1,300.

Question 9

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

Accepted Answer

A) causes a movement up along a given aggregate expenditures curve and raises the equilibrium real GDP. 
B) shifts the aggregate expenditures curve upwards and raises the equilibrium real GDP. 
C) causes a movement down a given aggregate expenditures curve and lowers the equilibrium real GDP. 
D) shifts the aggregate expenditures curve downwards and lowers the equilibrium real GDP. 
A) causes a movement up along a given aggregate expenditures curve and raises the equilibrium real GDP. 
B) shifts the aggregate expenditures curve upwards and raises the equilibrium real GDP. 
C) causes a movement down a given aggregate expenditures curve and lowers the equilibrium real GDP. 
D) shifts the aggregate expenditures curve downwards and lowers the equilibrium real GDP.

Question 10

In the simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption, the size of the multiplier depends on the

Accepted Answer

A) 45-degree line. 
B) height of the consumption function. 
C) slope of the aggregate demand curve. 
D) slope of the aggregate expenditures curve. 
A) 45-degree line. 
B) height of the consumption function. 
C) slope of the aggregate demand curve. 
D) slope of the aggregate expenditures curve.

Question 11

Aggregate expenditures that vary with real GDP are called induced aggregate expenditures.

Accepted Answer

A) True 
 B)False

Question 12

Suppose the slope of the aggregate expenditures curve is 0.75.An increase in autonomous investment expenditure of $6 billion would produce an ultimate increase in equilibrium real GDP of

Accepted Answer

A) $0.25 billion. 
B) $6 billion. 
C) $12 billion. 
D) $24 billion. 
A) $0.25 billion. 
B) $6 billion. 
C) $12 billion. 
D) $24 billion.

Question 13

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

Accepted Answer

A) causes a movement up along a given aggregate expenditures curve and raises the equilibrium real GDP. 
B) causes a movement down a given aggregate expenditures curve and lowers the equilibrium real GDP. 
C) shifts the aggregate expenditures curve upwards and raises the equilibrium real GDP. 
D) shifts the aggregate expenditures curve downwards and lowers the equilibrium real GDP. 
A) causes a movement up along a given aggregate expenditures curve and raises the equilibrium real GDP. 
B) causes a movement down a given aggregate expenditures curve and lowers the equilibrium real GDP. 
C) shifts the aggregate expenditures curve upwards and raises the equilibrium real GDP. 
D) shifts the aggregate expenditures curve downwards and lowers the equilibrium real GDP.

Question 14

According to the interest-rate effect, higher prices

Accepted Answer

A) increase the value of money holdings which reduces consumption and investment spending. 
B) decrease the value of money which decreases consumption and investment spending. 
C) lower the real quantity of money, which causes interest rates to rise and investment to fall. 
D) lead to higher interest rates which stimulate investment spending. 
A) increase the value of money holdings which reduces consumption and investment spending. 
B) decrease the value of money which decreases consumption and investment spending. 
C) lower the real quantity of money, which causes interest rates to rise and investment to fall. 
D) lead to higher interest rates which stimulate investment spending.

Question 15

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 16

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

Accepted Answer

A) a ray from the origin. 
B) an upward sloping line with a positive vertical intercept. 
C) a 45-degree line. 
D) a horizontal line. 
A) a ray from the origin. 
B) an upward sloping line with a positive vertical intercept. 
C) a 45-degree line. 
D) a horizontal line.

Question 17

The marginal propensity to consume is the

Accepted Answer

A) slope of the saving function. 
B) slope of the consumption-saving curve. 
C) slope of the saving-investment curve. 
D) change in consumption divided by the change in disposable personal income. 
A) slope of the saving function. 
B) slope of the consumption-saving curve. 
C) slope of the saving-investment curve. 
D) change in consumption divided by the change in disposable personal income.

Question 18

If an economy spends 90% of any increase in real GDP, then an increase in autonomous investment of $1 billion would result ultimately in an increase in equilibrium real GDP of

Accepted Answer

A) $1.0 billion. 
B) $1.9 billion. 
C) $10 billion. 
D) $100 billion. 
A) $1.0 billion. 
B) $1.9 billion. 
C) $10 billion. 
D) $100 billion.

Question 19

Figure 13-4
  
-Refer to Figure 13-4.Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption,
IP = Planned Investment.Suppose AE = C + IP, and IP 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

Accepted Answer

A) rise. 
B) remain unchanged. 
C) fall. 
D) fall, but only if there is an offsetting change in autonomous consumption. 
A) rise. 
B) remain unchanged. 
C) fall. 
D) fall, but only if there is an offsetting change in autonomous consumption.

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 28: Consumption and the Aggregate Expenditures Model

Figure 13-3 -Refer to Figure 13-3.Upward shifts of the consumption function, for example from C0 to C1 to C2 demonstrate

Disposable personal income is

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

Figure 13-4 -Refer to Figure 13-4.Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, IP = Planned Investment.Suppose AE = C + IP.IP 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?

The saving function shows

In general, an increase in the income tax rate will make the aggregate expenditures curve

Suppose the consumption function is C = $500 + 0.8Y.If Y = $1,000, then autonomous consumption is

In the simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption, the size of the multiplier depends on the

Aggregate expenditures that vary with real GDP are called induced aggregate expenditures.

Suppose the slope of the aggregate expenditures curve is 0.75.An increase in autonomous investment expenditure of $6 billion would produce an ultimate increase in equilibrium real GDP of

According to the interest-rate effect, higher prices

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

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

The marginal propensity to consume is the

If an economy spends 90% of any increase in real GDP, then an increase in autonomous investment of $1 billion would result ultimately in an increase in equilibrium real GDP of

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

Economics: the Study of Choice

Confronting Scarcity: Choices in Production

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

Monopoly

The World of Imperfect Competition

Wages and Employment in Perfect Competition

Interest Rates and the Markets for Capital and Natural Resources

Imperfectly Competitive Markets for Factors of Production

Public Finance and Public Choice

Inflation and Unemployment

International Trade

The Economics of the Environment

Inequality, Poverty, and Discrimination

Macroeconomics: the Big Picture

Measuring Total Income and Output

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

Macro Inflation and Unemployment

Macro a Brief History of Macroeconomic Thought and Policy

Economic Development

Socialist Economies in Transition

Filters

Figure 13-3 -Refer to Figure 13-3.Upward shifts of the consumption function, for example from C₀ to C₁ to C₂demonstrate

Figure 13-4 -Refer to Figure 13-4.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?