Question 1

Under what conditions would the APC equal the MPC at all levels of disposable income?

Accepted Answer

A) When autonomous consumption equals 0. 
B) When there is saving at very high levels of disposable income. 
C) When disposable income is greater than consumption. 
D) When the aggregate expenditure line is horizontal. 
A) When autonomous consumption equals 0. 
B) When there is saving at very high levels of disposable income. 
C) When disposable income is greater than consumption. 
D) When the aggregate expenditure line is horizontal.

Question 2

The largest component of aggregate spending is government spending.
The largest component of aggregate spending is consumption of goods and services.

Accepted Answer

A) True 
 B)False

Question 3

A decrease in U.S.exports to Japan can be represented by

Accepted Answer

A) The aggregate expenditure curve shifting upward. 
B) The aggregate expenditure curve shifting downward. 
C) A rightward movement along the aggregate expenditure curve. 
D) A leftward movement along the aggregate expenditure curve. 
A) The aggregate expenditure curve shifting upward. 
B) The aggregate expenditure curve shifting downward. 
C) A rightward movement along the aggregate expenditure curve. 
D) A leftward movement along the aggregate expenditure curve.

Question 4

$$\begin{array}{l}
\begin{array} { | c | c | } 
\hline \begin{array} { c } 
\text { Disposable Income } \
\text { (Billions of dollars per year) }
\end{array} & \begin{array} { c } 
\text { Total Consumption } \
\text { (Billions of dollars per year) }
\end{array} \
\hline \$ 0 & \$ 50 \
\hline 200 & 210 \
\hline
\end{array}\
\text { Table } 9.1
\end{array}$$ What is the rate of saving when income equals $300 billion in Table 9.1?

Accepted Answer

A) Zero. 
B) $50 billion. 
C) $10 billion. 
D) -$290 billion. 
A) Zero. 
B) $50 billion. 
C) $10 billion. 
D) -$290 billion.

Question 5

Suppose a consumption function is given as C = $500 + 0.75YD.The marginal propensity to consume is

Accepted Answer

A) 200. 
B) 0.75. 
C) 0.25. 
D) -0.75. 
A) 200. 
B) 0.75. 
C) 0.25. 
D) -0.75.

Question 6

Total consumption consists entirely of two components: autonomous consumption and income-dependent consumption.
Autonomous consumption is independent of income,while the rest of consumption is strongly correlated to the level of income.

Accepted Answer

A) True 
 B)False

Question 7

$$\begin{array}{l}
\begin{array} { | c | c | } 
\hline \begin{array} { c } 
\text { Disposable Income } \
\text { (Billions of dollars per year) }
\end{array} & \begin{array} { c } 
\text { Total Consumption } \
\text { (Billions of dollars per year) }
\end{array} \
\hline \$ 0 & \$ 50 \
\hline 200 & 210 \
\hline
\end{array}\
\text { Table } 9.1
\end{array}$$ At which income level does consumption equal income in Table 9.1?

Accepted Answer

A) $150 billion. 
B) $600 billion. 
C) $900 billion. 
D) $250 billion. 
A) $150 billion. 
B) $600 billion. 
C) $900 billion. 
D) $250 billion.

Question 8

Unlike the classical economists,Keynes believed that the economy would automatically adjust to full employment.
Keynes believed the economy would not self-adjust and needed government intervention.

Accepted Answer

A) True 
 B)False

Question 9

In Figure 9.2,if the consumption function shifts from C1 to C2, it can be determined that the

Accepted Answer

A) MPC and APC have increased at each income level. 
B) MPC and APC have decreased at each income level. 
C) MPC has increased and the APC has stayed the same at each income level. 
D) APC has increased and the MPC has stayed the same at each income level. 
A) MPC and APC have increased at each income level. 
B) MPC and APC have decreased at each income level. 
C) MPC has increased and the APC has stayed the same at each income level. 
D) APC has increased and the MPC has stayed the same at each income level.

Question 10

In Figure 9.1,at an income level of $2,000 billion,

Accepted Answer

A) Consumption equals $1,500 billion. 
B) Saving equals $0. 
C) The MPC equals 0.80. 
D) There is dissaving. 
A) Consumption equals $1,500 billion. 
B) Saving equals $0. 
C) The MPC equals 0.80. 
D) There is dissaving.

Question 11

If,in the aggregate,consumers spend 75 cents of every extra dollar received,then the

Accepted Answer

A) APC is 1.25. 
B) APC is 0.75. 
C) MPC is 0.75. 
D) MPS is 0.75. 
A) APC is 1.25. 
B) APC is 0.75. 
C) MPC is 0.75. 
D) MPS is 0.75.

Question 12

In Figure 9.5,a movement from Point A to Point C would result from

Accepted Answer

A) An improvement in technology. 
B) An improvement in expectations for future sales. 
C) A decrease in the interest rates. 
D) An decrease in disposable income. 
A) An improvement in technology. 
B) An improvement in expectations for future sales. 
C) A decrease in the interest rates. 
D) An decrease in disposable income.

Question 13

Suppose the consumption function is C = $100 + 0.85YD.If disposable income is $400,saving is

Accepted Answer

A) -$40.00. 
B) $40.00. 
C) -$15.00. 
D) $15.00. 
A) -$40.00. 
B) $40.00. 
C) -$15.00. 
D) $15.00.

Question 14

$$\begin{array}{l}
\begin{array} { | c | c | } 
\hline \begin{array} { c } 
\text { Disposable Income } \
\text { (Billions of dollars per year) }
\end{array} & \begin{array} { c } 
\text { Total Consumption } \
\text { (Billions of dollars per year) }
\end{array} \
\hline \$ 0 & \$ 50 \
\hline 200 & 210 \
\hline
\end{array}\
\text { Table } 9.1
\end{array}$$ Which of the following represents the consumption function consistent with the data in Table 9.1?

Accepted Answer

A) C = $160 billion + 0.91YD. 
B) C = $160 billion + 0.80YD. 
C) C = $50 billion + 0.76YD. 
D) C = $50 billion + 0.80YD. 
A) C = $160 billion + 0.91YD. 
B) C = $160 billion + 0.80YD. 
C) C = $50 billion + 0.76YD. 
D) C = $50 billion + 0.80YD.

Question 15

If there is an inflationary gap,then a 45-degree line exceeds the aggregate expenditure curve at the full-employment level of income.
The 45-degree line exceeds the aggregate expenditure when there is a recessionary gap and spending would be insufficient to purchase all output.

Accepted Answer

A) True 
 B)False

Question 16

If the economy depicted in Figure 9.9 produced at the full-employment output level of $150 billion instead of the equilibrium output level,inventory levels would

Accepted Answer

A) Remain constant. 
B) Increase by $50 billion. 
C) Increase by $25 billion. 
D) Decrease by $100 billion. 
A) Remain constant. 
B) Increase by $50 billion. 
C) Increase by $25 billion. 
D) Decrease by $100 billion.

Question 17

Assume there is a decrease in government purchases and exports.Currently there is a recessionary gap,which implies that

Accepted Answer

A) Inventories are accumulating. 
B) Inventories are being depleted. 
C) Desired spending is greater than output. 
D) Investment is greater than saving. 
A) Inventories are accumulating. 
B) Inventories are being depleted. 
C) Desired spending is greater than output. 
D) Investment is greater than saving.

Question 18

One In the News article titled "Consumer Confidence Index at All-Time Low" indicates that consumer confidence decreased.As a result,which of the following is most likely to happen?

Accepted Answer

A) Autonomous consumption will decrease. 
B) Total spending will increase. 
C) Investment will increase. 
D) Government spending will decrease. 
A) Autonomous consumption will decrease. 
B) Total spending will increase. 
C) Investment will increase. 
D) Government spending will decrease.

Question 19

Using Figure 9.9,and assuming the full-employment output level is $50 billion,

Accepted Answer

A) There is an inflationary gap of $50 billion income. 
B) There is a recessionary gap of $50 billion income. 
C) There is an inflationary gap of $25 billion income. 
D) The economy is at macro equilibrium. 
A) There is an inflationary gap of $50 billion income. 
B) There is a recessionary gap of $50 billion income. 
C) There is an inflationary gap of $25 billion income. 
D) The economy is at macro equilibrium.

Question 20

Which of the following will not cause an increase in U.S.gross exports?

Accepted Answer

A) An increase in foreign business investment. 
B) An increase in foreign wealth. 
C) An increase in foreign consumer income. 
D) A decrease in U.S.imports. 
A) An increase in foreign business investment. 
B) An increase in foreign wealth. 
C) An increase in foreign consumer income. 
D) A decrease in U.S.imports.

Exam 9: Aggregate Demand

Under what conditions would the APC equal the MPC at all levels of disposable income?

The largest component of aggregate spending is government spending. The largest component of aggregate spending is consumption of goods and services.

A decrease in U.S.exports to Japan can be represented by

Disposable Income (Billions of dollars per year) Total Consumption (Billions of dollars per year) \ 0 \ 50 200 210 Table 9.1 What is the rate of saving when income equals $300 billion in Table 9.1?

Suppose a consumption function is given as C = $500 + 0.75YD.The marginal propensity to consume is

Total consumption consists entirely of two components: autonomous consumption and income-dependent consumption. Autonomous consumption is independent of income,while the rest of consumption is strongly correlated to the level of income.

Disposable Income (Billions of dollars per year) Total Consumption (Billions of dollars per year) \ 0 \ 50 200 210 Table 9.1 At which income level does consumption equal income in Table 9.1?

Unlike the classical economists,Keynes believed that the economy would automatically adjust to full employment. Keynes believed the economy would not self-adjust and needed government intervention.

In Figure 9.2,if the consumption function shifts from C1 to C2, it can be determined that the

In Figure 9.1,at an income level of $2,000 billion,

If,in the aggregate,consumers spend 75 cents of every extra dollar received,then the

In Figure 9.5,a movement from Point A to Point C would result from

Suppose the consumption function is C = $100 + 0.85YD.If disposable income is $400,saving is

Disposable Income (Billions of dollars per year) Total Consumption (Billions of dollars per year) \ 0 \ 50 200 210 Table 9.1 Which of the following represents the consumption function consistent with the data in Table 9.1?

If there is an inflationary gap,then a 45-degree line exceeds the aggregate expenditure curve at the full-employment level of income. The 45-degree line exceeds the aggregate expenditure when there is a recessionary gap and spending would be insufficient to purchase all output.

If the economy depicted in Figure 9.9 produced at the full-employment output level of $150 billion instead of the equilibrium output level,inventory levels would

Assume there is a decrease in government purchases and exports.Currently there is a recessionary gap,which implies that

One In the News article titled "Consumer Confidence Index at All-Time Low" indicates that consumer confidence decreased.As a result,which of the following is most likely to happen?

Using Figure 9.9,and assuming the full-employment output level is $50 billion,

Which of the following will not cause an increase in U.S.gross exports?

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 a consumption function is given as C = $500 + 0.75Y_D.The marginal propensity to consume is

In Figure 9.2,if the consumption function shifts from C₁ to C_2, it can be determined that the

Suppose the consumption function is C = $100 + 0.85Y_D.If disposable income is $400,saving is