Exam 12: Consumption, Real GDP, and the Multiplier

If the average propensity to consume is initially 1.0, the marginal propensity to consume is 0.75, and real disposable income increases by $1000, the new value of saving is

In the graph for the consumption function, the 45-degree line

Which of the following is a simplifying assumption associated with the short-run Keynesian model of equilibrium real Gross Domestic Product (GDP) determination?

If we observe that interest rates rise but real investment spending still increases, what must have happened to the function relating investment to the interest rate?

The multiplier tells us the relationship between

-In the above table, the marginal propensity to save is ________.

In the Keynesian model, planned investment is inversely related to

If the aggregate supply curve is upward sloping, then an increase in autonomous consumption leads to a(n)

By definition, disposable income is equal to

-According to the above table, as the level of real disposable income increases,

The life-cycle theory of consumption predicts that when a person anticipates a higher income in the future, then that person will

-According to the above table, the marginal propensity to consume is

Suppose that the marginal propensity to consume (MPC) is .75 and there is an increase in investment spending of $100,000. As a result, equilibrium real Gross Domestic Product (GDP) would increase by

Which of the following is considered investment?

Real consumption is a function of real disposable income, but the simple Keynesian model uses real GDP instead of real disposable income. This is appropriate since

Expenditures by firms on new machines and buildings that are expected to yield a future stream of income is known as

According to the permanet income hypothesis, a person's consumption increases only when

-Use the above table. The MPS is

-According to the above figure, autonomous consumption equals

The marginal propensity to consume explains how much of the next dollar of disposable income