Exam 23: Aggregate Expenditure and Output in the Short Run

________ usually increase(s) when the U.S. economy is in a recession and decrease(s) when the U.S. economy is expanding.

Table 23-4 -Refer to Table 23-4. Given the consumption schedule in the table above, the marginal propensity to consume is

When we graph consumption as a function of national income rather than as a function of ________, the slope of this consumption function is the ________.

Which of the following leads to a decrease real GDP?

________ spending follows a smooth trend whereas, ________ spending is more volatile and subject to fluctuations.

The marginal propensity to consume measures the average amount of wealth that a consumer spends in a given period of time.

If firms are more pessimistic and believe that future profits will fall and remain weak for the next few years, then

The difference between GDP and net taxes is

Table 23-10 -At each of the three points in the following graph, indicate whether planned aggregate expenditure is greater than, equal to, or less than GDP?

If the consumption function is defined as C = 5,500 + 0.9Y, what is the marginal propensity to consume?

For all points above the 45-degree line, planned aggregate expenditure will be less than GDP.

If inflation in the United States is higher than inflation in other countries, what will be the effect on net exports for the United States?

When net exports equal zero, the economy is in macroeconomic equilibrium.

The sum of the marginal propensity to consume and the marginal propensity to save is always equal to

An increase in the price level in the United States will shift the aggregate expenditure line upward.

A stock market boom which causes stock prices to rise should cause

The five most important variables that determine the level of ________ are disposable income, wealth, expected future income, price level, and interest rate.

Article Summary Although growing at only half the average rate following the seven previous recessions, consumer spending has increased 9 percent since the end of the 2007-2009 recession, and consumer confidence has been on the rise as household finances, the job market, and the housing market continue to improve. The Federal Reserve projects a 3% - 3.5% growth rate for the economy in 2014, up from the recent average of 2%. Debt payments have fallen to an average of 15.69% of after-tax income for households, the lowest level in 30 years, and lower debt payments leave households with more to spend on consumer goods. Source: Neil Shah, "Pocketbooks Begin to Open As Household Wealth Grows," Wall Street Journal, June 25, 2013. -Refer to the Article Summary. The increase in consumer spending discussed in the article summary was due in part to lower debt payments which have resulted in an increase in disposable income. The increase in consumption resulting from the increase in disposable income caused a(n) ________ the aggregate expenditure curve.

Table 23-6 -Given Table 23-6 below, fill in the values for saving. Assume taxes = $800.

Table 23-5 -Given Table 23-5 below, fill in the values for saving. Assume there are no taxes.