Exam 13: Consumption and the Aggregate Expenditures Model

Suppose when disposable personal income increases from $10,000 to $15,000, consumption increases from $9,000 to $12,000.What is the marginal propensity to save?

Use the following to answer questions Exhibit: Consumption Functions Figure 13-3 -In the summer of 2001, tax rebate checks of $300 per single taxpayer and $600 for married couples were distributed to 92 million people in the U.S.Economic researchers found that over a nine-month period spending increased to about 40% of the rebate.These findings support

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 equation of the aggregate expenditures curve? All figures in billions of dollars.

If C = $500 billion + .6Y, then, if Y = $1,000 billion, induced consumption will be equal to $1,100 billion.

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.The equilibrium level of real GDP is

The consumption function shows the negative relationship between consumption and disposable personal income.

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.Suppose AE = C + I_P.I_P is autonomous and the consumption function is C = $1,000 billion + 0.5Y.If Y= $6,000 billion, what is the value of consumption and planned investment?

An increase in wealth is likely to shift the consumption function curve upward.

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

Disposable personal income is

In the aggregate expenditures model, if aggregate expenditures equal $800 billion and real GDP equals $600 billion,

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

Use the following to answer questions Exhibit: Income and Consumption -(Exhibit: Income and Consumption) When disposable personal income is $300, what is the amount of personal saving?

Use the following to answer questions Exhibit: Income and Consumption -Suppose the consumption function is C = $500 + 0.8Y.If Y = $1,000, then induced consumption is

Personal saving is

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

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.Suppose AE = C + I_P.I_P is autonomous and the consumption function is C = $1,000 billion + 0.5Y.If I_P = $2,000 billion, what is the equilibrium level of real GDP?

Which of the following is true? I.1 − MPS = MPC where MPS = marginal propensity to save and MPC = marginal propensity to consume. II.personal saving + consumption = gross income III.∆disposable income = ∆saving + ∆consumption where ∆ = change in

Use the following to answer questions Exhibit: Consumption Functions Figure 13-3 -(Exhibit: Consumption Functions) Suppose the consumption function is given by curve C₁.Which of the following will cause an upward shift to curve C₂?