Question 1

The slope of the aggregate expenditures curve is given by

Accepted Answer

A) aggregate expenditures ÷ ∆real GDP where ∆= change in. 
B) aggregate expenditures ÷ real GDP. 
C) ∆aggregate expenditures ÷ real GDP. 
D) ∆aggregate expenditures ÷ ∆real GDP. 
A) aggregate expenditures ÷ ∆real GDP where ∆= change in. 
B) aggregate expenditures ÷ real GDP. 
C) ∆aggregate expenditures ÷ real GDP. 
D) ∆aggregate expenditures ÷ ∆real GDP.

Question 2

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 marginal propensity to consume is 0.75?

Accepted Answer

A) 1 
B) 4 
C) 5 
D) infinity 
A) 1 
B) 4 
C) 5 
D) infinity

Question 3

Personal saving is real GDP not spent on consumption.

Accepted Answer

A) True 
 B)False

Question 4

Let Y = real GDP and Yd = disposable income.Suppose initially, Y = Yd and the marginal propensity to consume (MPC)
Is 0.8.All components of aggregate expenditures except consumption are autonomous.Now suppose the government imposes an income tax rate of 30% on real GDP.As a result, one additional dollar will increase consumption by

Accepted Answer

A) $0.24. 
B) $0.30. 
C) $0.56. 
D) $0.50. 
A) $0.24. 
B) $0.30. 
C) $0.56. 
D) $0.50.

Question 5

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

Accepted Answer

A) 0.25. 
B) 0.50. 
C) 0.60. 
D) cannot be determined without a savings function. 
A) 0.25. 
B) 0.50. 
C) 0.60. 
D) cannot be determined without a savings function.

Question 6

The sum of planned levels of consumption, investment, government purchases, and net exports, at a given price level, is called

Accepted Answer

A) total production. 
B) aggregate supply. 
C) aggregate demand. 
D) aggregate expenditures. 
A) total production. 
B) aggregate supply. 
C) aggregate demand. 
D) aggregate expenditures.

Question 7

Use the following to answer questions 
Exhibit: Aggregate Expenditures and Real GDP 2  
-(Exhibit: Aggregate Expenditures and Real GDP 2)
Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, IP = Planned Investment.Consider a simple economy where AE = C + IP, IP is autonomous and the consumption function is given by C = $1,000 billion + 0.75Y.What is the value of planned investment when real GDP is $6,000 billion?

Accepted Answer

A) $3,000 billion 
B) $1,500 billion 
C) $1,000 billion 
D) zero 
A) $3,000 billion 
B) $1,500 billion 
C) $1,000 billion 
D) zero

Question 8

Consider a simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption.The marginal propensity to consume is 0.75.Suppose the equilibrium level of real GDP at the prevailing price is $600 billion below potential real GDP.All else constant, by how much should autonomous aggregate expenditures be increased to reach potential output?

Accepted Answer

A) $150 billion 
B) $450 billion 
C) $600 billion 
D) $800 billion 
A) $150 billion 
B) $450 billion 
C) $600 billion 
D) $800 billion

Question 9

Planned investment is

Accepted Answer

A) equal to gross private domestic investment, less depreciation. 
B) equal to gross private domestic investment. 
C) the level of investment firms intend to make in a period. 
D) the level of investment government will require firms to make in a period. 
A) equal to gross private domestic investment, less depreciation. 
B) equal to gross private domestic investment. 
C) the level of investment firms intend to make in a period. 
D) the level of investment government will require firms to make in a period.

Question 10

Suppose at each price level, autonomous aggregate expenditures fall by $80 billion.As a result, the aggregate expenditures curve shifts

Accepted Answer

A) downward at each price level and results in a leftward shift in aggregate demand. 
B) upward at each price level and results in a rightward shift in aggregate demand. 
C) downward at each price level and results in a movement down along a given aggregate demand. 
D) upward at each price level and results in a movement up along a given aggregate demand. 
A) downward at each price level and results in a leftward shift in aggregate demand. 
B) upward at each price level and results in a rightward shift in aggregate demand. 
C) downward at each price level and results in a movement down along a given aggregate demand. 
D) upward at each price level and results in a movement up along a given aggregate demand.

Question 11

Use the following to answer questions 
Exhibit: Aggregate Expenditures and Real GDP 2  
-(Exhibit: Aggregate Expenditures and Real GDP 2)
Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, IP = Planned Investment.Consider a simple economy where AE = C + IP, IP is autonomous and the consumption function is given by C = $1,000 billion + 0.75Y.What is the value of consumption when real GDP is $6,000 billion?

Accepted Answer

A) $1,000 billion 
B) $2,500 billion 
C) $4,500 billion 
D) $5,500 billion 
A) $1,000 billion 
B) $2,500 billion 
C) $4,500 billion 
D) $5,500 billion

Question 12

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 = $5,000 billion, what is the amount of aggregate expenditures?

Accepted Answer

A) $4,500 billion 
B) $5,000 billion 
C) $5,500 billion 
D) $6,000 billion 
A) $4,500 billion 
B) $5,000 billion 
C) $5,500 billion 
D) $6,000 billion

Question 13

If consumption increases by $75 billion when disposable personal income increases by
$100, the marginal propensity to consume is 0.75.

Accepted Answer

A) True 
 B)False

Question 14

Use the following to answer questions 
Exhibit: Income and Consumption
  
-(Exhibit: Income and Consumption)
When disposable personal income is $400, what is the amount of personal saving?

Accepted Answer

A) −$40 
B) −$20 
C) $0 
D) $20 
A) −$40 
B) −$20 
C) $0 
D) $20

Question 15

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 16

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?

Accepted Answer

A) It shifts left by $150 billion. 
B) There is a movement down along a given aggregate demand so that aggregate quantity demanded increases by $150 billion. 
C) It shifts right by $150 billion 
D) There is a movement down along a given aggregate demand so that aggregate quantity demanded increases by $50 billion. 
A) It shifts left by $150 billion. 
B) There is a movement down along a given aggregate demand so that aggregate quantity demanded increases by $150 billion. 
C) It shifts right by $150 billion 
D) There is a movement down along a given aggregate demand so that aggregate quantity demanded increases by $50 billion.

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

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, IP = Planned Investment, G = Government Purchases.Further, IP and G are autonomous.If real GDP produced is $4,000, what is the amount of unplanned investment?

Accepted Answer

A) zero 
B) $1,200 billion 
C) $2,400 billion 
D) $2,800 billion 
A) zero 
B) $1,200 billion 
C) $2,400 billion 
D) $2,800 billion

Question 19

Use the following to answer questions 
Exhibit: Aggregate Expenditures Curve
Figure 13-6  
-(Exhibit: Aggregate Expenditures Curve)
What is the value of the multiplier?

Accepted Answer

A) 1 
B) 2 
C) 3 
D) 5 
A) 1 
B) 2 
C) 3 
D) 5

Question 20

Use the following to answer questions 
Exhibit: Consumption and Real GDP  
-(Exhibit: Consumption and Real GDP)
If real GDP is $8 trillion, saving equals

Accepted Answer

A) $4 trillion. 
B) $3 trillion. 
C) $2 trillion. 
D) $1 trillion. 
A) $4 trillion. 
B) $3 trillion. 
C) $2 trillion. 
D) $1 trillion.

The slope of the aggregate expenditures curve is given by

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 marginal propensity to consume is 0.75?

Personal saving is real GDP not spent on consumption.

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

The sum of planned levels of consumption, investment, government purchases, and net exports, at a given price level, is called

Planned investment is

Suppose at each price level, autonomous aggregate expenditures fall by $80 billion.As a result, the aggregate expenditures curve shifts

If consumption increases by $75 billion when disposable personal income increases by $100, the marginal propensity to consume is 0.75.

Use the following to answer questions Exhibit: Income and Consumption -(Exhibit: Income and Consumption) When disposable personal income is $400, what is the amount of personal saving?

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

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?

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

Use the following to answer questions Exhibit: Aggregate Expenditures Curve Figure 13-6 -(Exhibit: Aggregate Expenditures Curve) What is the value of the multiplier?

Use the following to answer questions Exhibit: Consumption and Real GDP -(Exhibit: Consumption and Real GDP) If real GDP is $8 trillion, saving 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

Exam 13: Consumption and the Aggregate Expenditures Model

The slope of the aggregate expenditures curve is given by

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 marginal propensity to consume is 0.75?

Personal saving is real GDP not spent on consumption.

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

The sum of planned levels of consumption, investment, government purchases, and net exports, at a given price level, is called

Planned investment is

Suppose at each price level, autonomous aggregate expenditures fall by $80 billion.As a result, the aggregate expenditures curve shifts

If consumption increases by $75 billion when disposable personal income increases by $100, the marginal propensity to consume is 0.75.

Use the following to answer questions Exhibit: Income and Consumption -(Exhibit: Income and Consumption) When disposable personal income is $400, what is the amount of personal saving?

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

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?

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

Use the following to answer questions Exhibit: Aggregate Expenditures Curve Figure 13-6 -(Exhibit: Aggregate Expenditures Curve) What is the value of the multiplier?

Use the following to answer questions Exhibit: Consumption and Real GDP -(Exhibit: Consumption and Real GDP) If real GDP is $8 trillion, saving 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