Exam 13: Consumption and the Aggregate Expenditures Model

Use the following to answer questions Exhibit: Aggregate Expenditures and Real GDP 2 -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 relationship between aggregate expenditures and real GDP is shown by the

The marginal propensity to save is given by

Use the following to answer questions Exhibit: Real GDP and the Multiplier -(Exhibit: Real GDP and the Multiplier) Suppose the equilibrium level of real GDP at the prevailing price is $500 billion below potential real GDP.All else constant, by how much should autonomous aggregate expenditures be increased to reach potential output?

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

The smaller the marginal propensity to consume,

Use the following to answer questions Exhibit: Consumption Functions Figure 13-3 -An increase in the price level, all other things unchanged, will

Use the following to answer questions Exhibit: Consumption Functions Figure 13-3 -An upward shift in the consumption function can be caused by

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

Use the following to answer questions Exhibit: Consumption Functions Figure 13-3 -(Exhibit: Consumption Functions) Which of the following statements is false?

Use the following to answer questions Exhibit: Consumption and Real GDP -Suppose that your annual income has averaged $40,000 for the past 10 years and that you expect it will average $40,000 over the next 10 years.If your income this year increases to $50,000 but your consumption expenditures don't change, then you are most likely acting according to the

Consider a simple economy that is made up of three sectors: households, firms, and government.Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, I_P = Planned Investment, G = Government Purchases.Further, I_P and G are autonomous. In this case, the slope of the aggregate expenditures curve is

The interest rate effect suggests that

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, an increase in the price level,

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 and Y* = equilibrium real GDP.Suppose AE = C + I_P, I_P is autonomous and the consumption function is C = $1,000 billion + 0.5Y.If firms produced a real GDP greater than the Y*,

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

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, an increase in the price level,

Use the following to answer questions Exhibit: Aggregate Expenditures Curve Figure 13-6 -(Exhibit: Aggregate Expenditures Curve) 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?

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

The wealth effect is the tendency for