Exam 28: Consumption and the Aggregate Expenditures Model

Let Y = real GDP and Y_d = disposable income.Suppose initially, Y = Y_d and the marginal propensity to consume (MPC)is 0.9.All components of aggregate expenditures except consumption are autonomous.Now suppose the government imposes an income tax rate of 20% on real GDP.What is the marginal propensity to consume following the imposition of an income tax?

The wealth effect is the tendency for

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 Aggregate demand?

If prices of the goods and services in the domestic market rise relative to those in foreign markets

Figure 13-2 -Refer to Figure 13-2.If real GDP is $4 trillion, consumption equals

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

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 slope of the aggregate expenditures curve is 0.8?

Figure 13-5 -Refer to Figure 13-5.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 equilibrium real GDP (Y*)?

The marginal propensity to consume is given by

Aggregate expenditures that do not vary with real GDP are called autonomous aggregate expenditures.

Holding all else constant, a change in autonomous aggregate expenditures will shift in aggregate demand by an amount equal to

The relationship between personal saving and the level of disposable personal income is shown by the

Figure 13-6 -Refer to Figure 13-6.Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, I_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 aggregate expenditures?

Figure 13-6 -Refer to Figure 13-6.Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, I_P = Planned Investment, G = Government Purchases.Further, I_P and G are autonomous.What is the marginal propensity to consume?

An increase in the slope of the aggregate expenditures curve leads to a decrease in the value of the multiplier.

Consider a simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption.Which of the following events causes the aggregate expenditures curve to shift upwards?

Consider a simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption.Which of the following events causes the aggregate expenditures curve to shift downwards?

According to the permanent income hypothesis,

The interest rate effect suggests that

Figure 13-2 -Refer to Figure 13-2.An equation for the consumption function is