Question 1

Suppose the consumption function is C = $200 + 0.85YD.If disposable income is $400,consumption is

Accepted Answer

A) $200. 
B) $540. 
C) $340. 
D) $185. 
A) $200. 
B) $540. 
C) $340. 
D) $185. B

Question 2

What are the two types of consumer spending as identified by Keynes,and what are the determinants of each?

Accepted Answer

Consumer spending can be classified as autonomous consumption and income-dependent consumption.Autonomous consumption is consumption that occurs independent of income.It is determined by factors such as expectations,wealth,credit,taxes,and price level.Income-dependent consumption is determined by current income only.

Question 3

Using the output at which the aggregate expenditure curve intersects the 45-degree line,we can identify

Accepted Answer

A) Equilibrium (macro)at the intersection point. 
B) Dissaving to the right of the intersection point. 
C) Full employment to the left of the intersection point if there is a recessionary gap. 
D) A consumption shortfall at the intersection point. 
A) Equilibrium (macro)at the intersection point. 
B) Dissaving to the right of the intersection point. 
C) Full employment to the left of the intersection point if there is a recessionary gap. 
D) A consumption shortfall at the intersection point. A

Question 4

If an increase in disposable income causes consumption to increase from $4,000 to $10,000 and causes saving to increase from $2,000 to $4,000,it can be inferred that the MPC equals

Accepted Answer

A) 0.4. 
B) 0.6. 
C) 0.5. 
D) 0.75. 
A) 0.4. 
B) 0.6. 
C) 0.5. 
D) 0.75.

Question 5

The components of aggregate demand are

Accepted Answer

A) Consumption,government spending,net exports,and investment. 
B) Consumption,exports,imports,and disposable income. 
C) Consumption,inventory,government spending,and disposable income. 
D) Exports,imports,investment,and disposable income. 
A) Consumption,government spending,net exports,and investment. 
B) Consumption,exports,imports,and disposable income. 
C) Consumption,inventory,government spending,and disposable income. 
D) Exports,imports,investment,and disposable income.

Question 6

In Figure 9.2,if the consumption function shifts from C2 to C1, autonomous consumption

Accepted Answer

A) Increases,and aggregate demand shifts to the right. 
B) Decreases,and aggregate demand shifts to the right. 
C) Increases,and aggregate demand shifts to the left. 
D) Decreases,and aggregate demand shifts to the left. 
A) Increases,and aggregate demand shifts to the right. 
B) Decreases,and aggregate demand shifts to the right. 
C) Increases,and aggregate demand shifts to the left. 
D) Decreases,and aggregate demand shifts to the left.

Question 7

If consumption is $340 and saving is $20,then disposable income

Accepted Answer

A) Is $340. 
B) Is $360. 
C) Is $320. 
D) Cannot be determined from the information given. 
A) Is $340. 
B) Is $360. 
C) Is $320. 
D) Cannot be determined from the information given.

Question 8

Which of the following lists all the components that are included in aggregate demand?

Accepted Answer

A) Consumption,government spending,net exports,and investment. 
B) Government spending,saving,consumption,and investment. 
C) Investment,imports,exports,consumption,and taxes. 
D) Net exports,government spending,consumption,and transfer payments. 
A) Consumption,government spending,net exports,and investment. 
B) Government spending,saving,consumption,and investment. 
C) Investment,imports,exports,consumption,and taxes. 
D) Net exports,government spending,consumption,and transfer payments.

Question 9

Which of the following occurs when the spending on final goods and services exceeds full-employment GDP?

Accepted Answer

A) Inventory accumulation. 
B) Unemployment. 
C) Inflationary gap. 
D) Recessionary gap. 
A) Inventory accumulation. 
B) Unemployment. 
C) Inflationary gap. 
D) Recessionary gap.

Question 10

The four components of aggregate spending are consumption,saving,imports,and taxes.
The four components of aggregate spending are consumption,investment,government expenditures,and net exports.

Accepted Answer

A) True 
 B)False

Question 11

If the availability of credit increases,then

Accepted Answer

A) There will be a movement to the left along the AD curve. 
B) There will be a movement to the right along the AD curve. 
C) The AD curve will shift to the left. 
D) The AD curve will shift to the right. 
A) There will be a movement to the left along the AD curve. 
B) There will be a movement to the right along the AD curve. 
C) The AD curve will shift to the left. 
D) The AD curve will shift to the right.

Question 12

In Figure 9.6,if full employment occurs at QS1U1B1CS1U1B0, then aggregate demand is

Accepted Answer

A) Too great,causing cyclical unemployment. 
B) Too small,causing demand-pull inflation. 
C) Too small,causing cyclical unemployment. 
D) Just right. 
A) Too great,causing cyclical unemployment. 
B) Too small,causing demand-pull inflation. 
C) Too small,causing cyclical unemployment. 
D) Just right.

Question 13

Given that autonomous consumption equals $1,000,disposable income equals $20,000,and the MPC equals 0.80,the level of

Accepted Answer

A) Saving equals $4,000. 
B) Saving equals $19,000. 
C) Consumption equals $17,000. 
D) Consumption equals $16,000. 
A) Saving equals $4,000. 
B) Saving equals $19,000. 
C) Consumption equals $17,000. 
D) Consumption equals $16,000.

Question 14

The four components of aggregate demand include all of the following except

Accepted Answer

A) Consumption. 
B) Saving. 
C) Investment. 
D) Net exports. 
A) Consumption. 
B) Saving. 
C) Investment. 
D) Net exports.

Question 15

Using Figure 9.1,the amount of autonomous consumption is

Accepted Answer

A) $500 billion. 
B) $750 billion. 
C) Different at every income level. 
D) Equal to disposable income when the consumption line crosses the 45-degree line. 
A) $500 billion. 
B) $750 billion. 
C) Different at every income level. 
D) Equal to disposable income when the consumption line crosses the 45-degree line.

Question 16

In Figure 9.6,if full employment occurs at QA, then aggregate demand is

Accepted Answer

A) Just right,causing no cyclical unemployment. 
B) Too great,causing an inflationary gap. 
C) Too small,causing an inflationary gap. 
D) Too great,causing a recessionary gap. 
A) Just right,causing no cyclical unemployment. 
B) Too great,causing an inflationary gap. 
C) Too small,causing an inflationary gap. 
D) Too great,causing a recessionary gap.

Question 17

If an increase in disposable income causes consumption to increase from $4,000 to $10,000 and causes saving to increase from $1,000 to $5,000,then it can be inferred that the MPS equals

Accepted Answer

A) 0.60. 
B) 0.40. 
C) 0.05. 
D) -0.60. 
A) 0.60. 
B) 0.40. 
C) 0.05. 
D) -0.60.

Question 18

Complete Table 9.2.(Data are expressed in billions of dollars.) $\begin{array}{cccc}
\text { Full Employment } & \text { Consumers } & \text { Investors Desire } & \text { Total Private } \
\text { Income (Output) } & \text { Desire to Spend } & \text { to Spend } & \text { Spending }&\text { Total Saving }\\hline
\$ 500 & \$ 300 & \$ 250&\$\_\_\_&\$\_\_\_ \
600 & 375 & 250&\$\_\_\_&\$\_\_\_ \
700 & 450 & 250&\$\_\_\_&\$\_\_\_ \
800 & 525 & 250&\$\_\_\_&\$\_\_\_
\end{array}$

$\text { Table } 9.2$ Given the information in Table 9.2,saving equals investment at an income of

Accepted Answer

A) $500 billion. 
B) $600 billion. 
C) $700 billion. 
D) $800 billion. 
A) $500 billion. 
B) $600 billion. 
C) $700 billion. 
D) $800 billion.

Question 19

If autonomous consumption decreases,then

Accepted Answer

A) The AD curve will shift to the right. 
B) The AD curve will shift to the left. 
C) There will be a movement to the left along the AD curve. 
D) The AD curve will not be affecteD.In this case,the autonomous consumption category falls,so the AD curve would decrease,thereby shifting to the left. 
A) The AD curve will shift to the right. 
B) The AD curve will shift to the left. 
C) There will be a movement to the left along the AD curve. 
D) The AD curve will not be affecteD.In this case,the autonomous consumption category falls,so the AD curve would decrease,thereby shifting to the left.

Question 20

In response to changing inventories in Figure 9.8,if the economy produces at full employment of $400 billion,firms will attempt to

Accepted Answer

A) Lower production rates and hire more workers. 
B) Lower production rates and lay off workers. 
C) Raise production rates and hire more workers. 
D) Raise production rates and lay off workers. 
A) Lower production rates and hire more workers. 
B) Lower production rates and lay off workers. 
C) Raise production rates and hire more workers. 
D) Raise production rates and lay off workers.

Suppose the consumption function is C = $200 + 0.85Y_D.If disposable income is $400,consumption is

What are the two types of consumer spending as identified by Keynes,and what are the determinants of each?

Using the output at which the aggregate expenditure curve intersects the 45-degree line,we can identify

If an increase in disposable income causes consumption to increase from $4,000 to $10,000 and causes saving to increase from $2,000 to $4,000,it can be inferred that the MPC equals

The components of aggregate demand are

In Figure 9.2,if the consumption function shifts from C₂ to C_1, autonomous consumption

If consumption is $340 and saving is $20,then disposable income

Which of the following lists all the components that are included in aggregate demand?

Which of the following occurs when the spending on final goods and services exceeds full-employment GDP?

The four components of aggregate spending are consumption,saving,imports,and taxes. The four components of aggregate spending are consumption,investment,government expenditures,and net exports.

If the availability of credit increases,then

In Figure 9.6,if full employment occurs at Q_C, then aggregate demand is

Given that autonomous consumption equals $1,000,disposable income equals $20,000,and the MPC equals 0.80,the level of

The four components of aggregate demand include all of the following except

Using Figure 9.1,the amount of autonomous consumption is

In Figure 9.6,if full employment occurs at Q_A, then aggregate demand is

If an increase in disposable income causes consumption to increase from $4,000 to $10,000 and causes saving to increase from $1,000 to $5,000,then it can be inferred that the MPS equals

If autonomous consumption decreases,then

In response to changing inventories in Figure 9.8,if the economy produces at full employment of $400 billion,firms will attempt to

Economics: The Core Issues

The Us Economy: A Global View

Supply and Demand

The Role of Government

National Income Accounting

Unemployment

Inflation

The Business Cycle

Self-Adjustment or Instability

Fiscal Policy

Deficits and Debt

Money and Banks

The Federal Reserve System

Monetary Policy

Supply-Side Policy: Short-Run Options

Growth and Productivity: Long-Run Possibilities

Theory Versus Reality

International Trade

International Finance

Global Poverty

Filters

Exam 9: Aggregate Demand

Suppose the consumption function is C = $200 + 0.85YD.If disposable income is $400,consumption is

What are the two types of consumer spending as identified by Keynes,and what are the determinants of each?

Using the output at which the aggregate expenditure curve intersects the 45-degree line,we can identify

If an increase in disposable income causes consumption to increase from $4,000 to $10,000 and causes saving to increase from $2,000 to $4,000,it can be inferred that the MPC equals

The components of aggregate demand are

In Figure 9.2,if the consumption function shifts from C2 to C1, autonomous consumption

If consumption is $340 and saving is $20,then disposable income

Which of the following lists all the components that are included in aggregate demand?

Which of the following occurs when the spending on final goods and services exceeds full-employment GDP?

The four components of aggregate spending are consumption,saving,imports,and taxes. The four components of aggregate spending are consumption,investment,government expenditures,and net exports.

If the availability of credit increases,then

In Figure 9.6,if full employment occurs at QC, then aggregate demand is

Given that autonomous consumption equals $1,000,disposable income equals $20,000,and the MPC equals 0.80,the level of

The four components of aggregate demand include all of the following except

Using Figure 9.1,the amount of autonomous consumption is

In Figure 9.6,if full employment occurs at QA, then aggregate demand is

If an increase in disposable income causes consumption to increase from $4,000 to $10,000 and causes saving to increase from $1,000 to $5,000,then it can be inferred that the MPS equals

If autonomous consumption decreases,then

In response to changing inventories in Figure 9.8,if the economy produces at full employment of $400 billion,firms will attempt to

Economics: The Core Issues

The Us Economy: A Global View

Supply and Demand

The Role of Government

National Income Accounting

Unemployment

Inflation

The Business Cycle

Self-Adjustment or Instability

Fiscal Policy

Deficits and Debt

Money and Banks

The Federal Reserve System

Monetary Policy

Supply-Side Policy: Short-Run Options

Growth and Productivity: Long-Run Possibilities

Theory Versus Reality

International Trade

International Finance

Global Poverty

Filters

Suppose the consumption function is C = $200 + 0.85Y_D.If disposable income is $400,consumption is

In Figure 9.2,if the consumption function shifts from C₂ to C_1, autonomous consumption

In Figure 9.6,if full employment occurs at Q_C, then aggregate demand is

In Figure 9.6,if full employment occurs at Q_A, then aggregate demand is