Question 1

Unplanned investment is

Accepted Answer

A) the level of investment minus depreciation. 
B) the level of investment plus depreciation. 
C) investment that occurs that is unexpected by the government. 
D) investment that firms did not intend to make. 
A) the level of investment minus depreciation. 
B) the level of investment plus depreciation. 
C) investment that occurs that is unexpected by the government. 
D) investment that firms did not intend to make.

Question 2

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 induced expenditures?

Accepted Answer

A) $500 
B) $800 
C) $1,100 
D) $1,900 
A) $500 
B) $800 
C) $1,100 
D) $1,900

Question 3

Personal saving is disposable personal income not spent on consumption.

Accepted Answer

A) True 
 B)False

Question 4

Use the following to answer questions 
Exhibit: Consumption and Disposable Personal Income  
-(Exhibit: Consumption and Disposable Personal Income)
When disposable personal income goes up by $400 billion, personal saving increases by

Accepted Answer

A) $0. 
B) $100 billion. 
C) $200 billion. 
D) $400 billion. 
A) $0. 
B) $100 billion. 
C) $200 billion. 
D) $400 billion.

Question 5

Using the aggregate expenditures model, which of the following occurs if aggregate expenditures fall short of real GDP?
I.Actual investment exceeds planned investment.
II.Unemployment rises.
III.The price level will fall.
IV.The economy will experience a recessionary gap.

Accepted Answer

A) I and II 
B) I and III 
C) I, II, and III 
D) I, II, III, and IV 
A) I and II 
B) I and III 
C) I, II, and III 
D) I, II, III, and IV

Question 6

Use the following to answer questions 
Exhibit: Consumption and Real GDP  
-According to the permanent income hypothesis,

Accepted Answer

A) consumption in any period depends on the stable annual income that people expect to earn in their jobs. 
B) the amount of income that people require depends on the amount of consumption they need and want to undertake. 
C) consumption in any period depends on the average annual income people expect to receive for the rest of their lives. 
D) the amount of personal saving depends on the amount of consumption people plan to undertake when they retire. 
A) consumption in any period depends on the stable annual income that people expect to earn in their jobs. 
B) the amount of income that people require depends on the amount of consumption they need and want to undertake. 
C) consumption in any period depends on the average annual income people expect to receive for the rest of their lives. 
D) the amount of personal saving depends on the amount of consumption people plan to undertake when they retire.

Question 7

Use the following to answer questions 
Exhibit: Consumption and Disposable Personal Income  
-(Exhibit: Consumption and Disposable Personal Income)
The marginal propensity to consume is

Accepted Answer

A) 0.25. 
B) 0.50. 
C) 0.60. 
D) 0.67. 
A) 0.25. 
B) 0.50. 
C) 0.60. 
D) 0.67.

Question 8

Use the following to answer questions 
Exhibit: Real GDP and the Multiplier
  
-(Exhibit: Real GDP and the Multiplier)
Holding everything else constant, if government purchases increase by $100 billion, equilibrium real GDP will increase by

Accepted Answer

A) $100 billion. 
B) $200 billion. 
C) $250 billion. 
D) $300 billion. 
A) $100 billion. 
B) $200 billion. 
C) $250 billion. 
D) $300 billion.

Question 9

Using the aggregate expenditures model, which of the following occurs if aggregate expenditures exceed real GDP?
I.The economy will expand causing an increase in employment.
II.The economy will experience an inflationary gap.
III.The price level will rise.
IV.Actual investment will be less than planned investment.

Accepted Answer

A) I, II, and IV 
B) I, III, and IV 
C) I and IV 
D) I, II, III, and IV 
A) I, II, and IV 
B) I, III, and IV 
C) I and IV 
D) I, II, III, and IV

Question 10

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?

Accepted Answer

A) Firms become optimistic about future profits and increase investment spending. 
B) The government reduces property tax rates. 
C) The government cuts spending on education. 
D) Households save a greater portion of any change in disposable income. 
A) Firms become optimistic about future profits and increase investment spending. 
B) The government reduces property tax rates. 
C) The government cuts spending on education. 
D) Households save a greater portion of any change in disposable income.

Question 11

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, 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 12

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.The MPC is 0.6.If investment expenditures rise by $100 billion, the equilibrium level of real GDP of rises by

Accepted Answer

A) $250 billion. 
B) $300 billion. 
C) $500 billion. 
D) $1,500 billion. 
A) $250 billion. 
B) $300 billion. 
C) $500 billion. 
D) $1,500 billion.

Question 13

Use the following to answer questions 
Exhibit: Consumption and Disposable Personal Income  
-(Exhibit: Consumption and Disposable Personal Income)
Assuming that the relationship between consumption and disposable personal income remains linear throughout its entire range, if disposable personal income were zero, what would personal saving be?

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 14

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 15

The amount of consumption at each level of disposable personal income, all other determinants of consumption unchanged, is shown by the

Accepted Answer

A) aggregate demand curve. 
B) consumption function. 
C) price-consumption curve. 
D) income curve. 
A) aggregate demand curve. 
B) consumption function. 
C) price-consumption curve. 
D) income curve.

Question 16

The aggregate demand traces

Accepted Answer

A) the total spending by consumers, business firms, and government agencies at a given price level. 
B) the locus of equilibrium real GDP associated with each price level in the aggregate expenditures model. 
C) the locus of equilibrium aggregate expenditures-real GDP combinations in the aggregate expenditures model. 
D) the locus of equilibrium real GDP associated with each income level in the aggregate expenditures model. 
A) the total spending by consumers, business firms, and government agencies at a given price level. 
B) the locus of equilibrium real GDP associated with each price level in the aggregate expenditures model. 
C) the locus of equilibrium aggregate expenditures-real GDP combinations in the aggregate expenditures model. 
D) the locus of equilibrium real GDP associated with each income level in the aggregate expenditures model.

Question 17

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?

Accepted Answer

A) Foreign economies go into a recession and buy less domestically produced goods. 
B) Households become more present oriented and decrease the autonomous component of saving. 
C) Firms expect future profits to fall and cut investments accordingly. 
D) The government cuts spending on healthcare. 
A) Foreign economies go into a recession and buy less domestically produced goods. 
B) Households become more present oriented and decrease the autonomous component of saving. 
C) Firms expect future profits to fall and cut investments accordingly. 
D) The government cuts spending on healthcare.

Question 18

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

Accepted Answer

A) expectations of product shortages. 
B) expectations of more income in the future. 
C) a decrease in consumer confidence. 
D) rising property values that increases households' net worth. 
A) expectations of product shortages. 
B) expectations of more income in the future. 
C) a decrease in consumer confidence. 
D) rising property values that increases households' net worth.

Question 19

Investment equals

Accepted Answer

A) planned investment plus unplanned investment. 
B) planned investment minus unplanned investment. 
C) unplanned investment minus planned investment. 
D) planned investment in a free market economy. 
A) planned investment plus unplanned investment. 
B) planned investment minus unplanned investment. 
C) unplanned investment minus planned investment. 
D) planned investment in a free market economy.

Question 20

Use the following to answer questions 
Exhibit: Consumption and Disposable Personal Income  
-(Exhibit: Consumption and Disposable Personal Income)
Assuming that the relationship between consumption and disposable personal income remains linear throughout its entire range, what would the level of consumption be if disposable personal income were zero?

Accepted Answer

A) −$200 billion 
B) $0 
C) $100 billion 
D) $200 billion 
A) −$200 billion 
B) $0 
C) $100 billion 
D) $200 billion

Unplanned investment is

Personal saving is disposable personal income not spent on consumption.

Use the following to answer questions Exhibit: Consumption and Disposable Personal Income -(Exhibit: Consumption and Disposable Personal Income) When disposable personal income goes up by $400 billion, personal saving increases by

Using the aggregate expenditures model, which of the following occurs if aggregate expenditures fall short of real GDP? I.Actual investment exceeds planned investment. II.Unemployment rises. III.The price level will fall. IV.The economy will experience a recessionary gap.

Use the following to answer questions Exhibit: Consumption and Real GDP -According to the permanent income hypothesis,

Use the following to answer questions Exhibit: Consumption and Disposable Personal Income -(Exhibit: Consumption and Disposable Personal Income) The marginal propensity to consume is

Use the following to answer questions Exhibit: Real GDP and the Multiplier -(Exhibit: Real GDP and the Multiplier) Holding everything else constant, if government purchases increase by $100 billion, equilibrium real GDP will increase by

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?

The saving function shows

The amount of consumption at each level of disposable personal income, all other determinants of consumption unchanged, is shown by the

The aggregate demand traces

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?

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

Investment equals

Economics: the Study of Choice

Confronting Scarcity: Choices in Production

Demand and Supply

Applications of Supply and Demand

Macroeconomics: the Big Picture

Measuring Total Output and Income

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

Inflation and Unemployment

A Brief History of Macroeconomic Thought and Policy

Inequality, Poverty, and Discrimination

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Exam 13: Consumption and the Aggregate Expenditures Model

Unplanned investment is

Personal saving is disposable personal income not spent on consumption.

Use the following to answer questions Exhibit: Consumption and Disposable Personal Income -(Exhibit: Consumption and Disposable Personal Income) When disposable personal income goes up by $400 billion, personal saving increases by

Using the aggregate expenditures model, which of the following occurs if aggregate expenditures fall short of real GDP? I.Actual investment exceeds planned investment. II.Unemployment rises. III.The price level will fall. IV.The economy will experience a recessionary gap.

Use the following to answer questions Exhibit: Consumption and Real GDP -According to the permanent income hypothesis,

Use the following to answer questions Exhibit: Consumption and Disposable Personal Income -(Exhibit: Consumption and Disposable Personal Income) The marginal propensity to consume is

Use the following to answer questions Exhibit: Real GDP and the Multiplier -(Exhibit: Real GDP and the Multiplier) Holding everything else constant, if government purchases increase by $100 billion, equilibrium real GDP will increase by

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?

The saving function shows

The amount of consumption at each level of disposable personal income, all other determinants of consumption unchanged, is shown by the

The aggregate demand traces

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?

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

Investment equals

Economics: the Study of Choice

Confronting Scarcity: Choices in Production

Demand and Supply

Applications of Supply and Demand

Macroeconomics: the Big Picture

Measuring Total Output and Income

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

Inflation and Unemployment

A Brief History of Macroeconomic Thought and Policy

Inequality, Poverty, and Discrimination

Filters