Deck 8: Aggregate Expenditure and Equilibrium Output

Question 1

Refer to the information provided in Figure 8.2 below to answer the questions that follow. Figure 8.2
Refer to Figure 8.2.The line segment BD represents Jerry's

A)consumption when income equals Y1.
B)saving when income equals zero.
C)saving when income is Y1.
D)consumption when income equals zero.

Answer 1

D

Question 2

Refer to the information provided in Figure 8.1 below to answer the questions that follow. Figure 8.1
Refer to Figure 8.1.The MPS for this household is ________ and the MPC is ________.

A)0.4;0.6
B)0.5;0.5
C)0.2;0.8
D)0.3;0.7

Answer 2

B

Question 3

The MPC is

A)the change in consumption divided by the change in income.
B)consumption divided by income.
C)the change in consumption divided by the change in saving.
D)the change in saving divided by the change in income.

Answer 3

A

Question 4

The MPS is

A)the change in saving divided by the change in income.
B)1 + MPC.
C)income divided by saving.
D)total saving divided by total income.

Question 5

Uncertainty about the future is likely to

A)increase current spending.
B)have no impact on current spending.
C)decrease current spending.
D)either increase or decrease current spending.

Question 6

In a closed economy with no government,aggregate expenditure is

A)consumption plus investment.
B)saving plus investment.
C)consumption plus the MPC.
D)MPC + MPS.

Question 7

Saving equals

A)Y - C.
B)Y - planned I.
C)Y - actual I.
D)inventory changes.

Question 8

If you earn additional $500 in disposable income one week for painting your neighbors house,

A)the total of your consumption and saving will increase by more than $500.
B)the total of your consumption and saving will increase by $500.
C)the total of your consumption and saving will increase by less than $500.
D)your consumption will increase by more than $500,even if your MPS is 0.1.

Question 9

Refer to the information provided in Figure 8.1 below to answer the questions that follow. Figure 8.1
Refer to Figure 8.1.The equation for this household's saving function is

A)S = -200 + 0.8Y.
B)S = -300 + 0.25Y.
C)S = -500 + 0.5Y.
D)S = -1,000 + 0.8Y.

Question 10

Refer to the information provided in Figure 8.1 below to answer the questions that follow. Figure 8.1
Refer to Figure 8.1.This household consumes $2,000 at an income level of

A)$3,000.
B)$2,275.
C)$2,000.
D)$1,840.

Question 11

Refer to the information provided in Figure 8.1 below to answer the questions that follow. Figure 8.1
Refer to Figure 8.1.This household's consumption function is

A)C = 200 + 0.2Y.
B)C = 300 + 0.75Y.
C)C = 500 + 0.5Y.
D)C = 1,000 + 0.2Y.

Question 12

Refer to the information provided in Figure 8.1 below to answer the questions that follow. Figure 8.1
Refer to Figure 8.1.At income level $1,500,this household's saving is ________ than (to)zero and this household's consumption is ________ zero.

A)less than;greater than
B)equal to;equal to
C)greater than;less than
D)greater than;greater than

Question 13

Consumption is

A)positively related to household income and wealth and households' expectations about the future,but negatively related to interest rates.
B)negatively related to household income and wealth,interest rates,and households' expectations about the future.
C)determined only by income.
D)positively related to household income and wealth,interest rates,and households' expectations about the future.

Question 14

Refer to the information provided in Figure 8.1 below to answer the questions that follow. Figure 8.1
Refer to Figure 8.1.An increase in the amount of consumption this household makes when this household's income is zero

A)makes the consumption function steeper.
B)makes the saving function flatter.
C)shifts the consumption function downward.
D)shifts the saving function downward.

Question 15

Refer to the information provided in Figure 8.1 below to answer the questions that follow. Figure 8.1
Refer to Figure 8.1.This household saves -$300 at an income level of

A)$400.
B)$300
C)$250.
D)$125.

Question 16

If the MPS is 0.60,MPC

A)is 1.60.
B)is 0.40.
C)is 0.30.
D)cannot be determined by the given information.

Question 17

If Logan received a $2,500 bonus and his MPS is 0.20,his consumption rises by $________ and his saving rises by $________.

A)500;100
B)2,500;200
C)2,000;500
D)2,500;20

Question 18

Higher interest rates are likely to

A)have no effect on consumer spending or saving.
B)decrease consumer spending and increase consumer saving.
C)decrease both consumer spending and consumer saving.
D)increase consumer spending and decrease consumer saving.

Question 19

Refer to the information provided in Figure 8.1 below to answer the questions that follow. Figure 8.1
Refer to Figure 8.1.An increase in the MPC

A)makes the consumption function flatter.
B)makes the saving function flatter.
C)shifts the consumption function upward.
D)shifts the saving function downward.

Question 20

If Wanda's income is reduced to zero after she loses her job,her consumption will be ________ and her saving will be ________.

A)less than zero;less than zero
B)greater than zero;greater than zero
C)less than zero;greater than zero
D)greater than zero;less than zero

Question 21

If Zander's saving function is of the form S = -150 + 0.5Y,his consumption equals his income at an income level of

A)150.
B)225.
C)300.
D)1,500.

Question 22

Refer to the information provided in Figure 8.2 below to answer the questions that follow. Figure 8.2
Refer to Figure 8.2.Positive saving occurs along the line segment

A)BC.
B)DC.
C)AC.
D)BA.

Question 23

Refer to the information provided in Figure 8.2 below to answer the questions that follow. Figure 8.2
Refer to Figure 8.2.Along the segment AB,Jerry's

A)consumption is less than his income.
B)saving is positive.
C)consumption equals his income.
D)saving is negative.

Question 24

Refer to the information provided in Figure 8.2 below to answer the questions that follow. Figure 8.2
Refer to Figure 8.2.Suppose Jerry's MPC increases,and the vertical intercept of the consumption function does not change.At income Y1,Jerry's

A)consumption will be greater than his income.
B)consumption will be less than his income.
C)saving will be zero.
D)all of the above

Question 25

If the consumption function is of the form C = 80 + 0.4Y,the MPS equals

A)-0.6.
B)-0.4.
C)0.4.
D)0.6.

Question 26

If the saving function is of the form S = -20 + 0.3Y,consumption at an income level of 200 is

A)80.
B)120.
C)160.
D)180.

Question 27

If the MPS is 0.22,the MPC is

A)-0.22.
B)0.66.
C)0.78.
D)1.22.

Question 28

Refer to the information provided in Figure 8.2 below to answer the questions that follow. Figure 8.2
Refer to Figure 8.2.An increase in Jerry's income is represented by

A)an upward shift in Jerry's consumption function.
B)an increase in the slope of Jerry's consumption function.
C)a movement from Point B to A.
D)none of the above

Question 29

If consumption is $10,000 when income is $10,000,and consumption increases to $11,000 when income increases to $12,000,the MPS is

A)0.10.
B)0.25.
C)0.50.
D)0.90.

Question 30

If Lily's consumption function is of the form C = 100 + 0.8Y,her saving equals zero at an income level of

A)180.
B)500.
C)800.
D)cannot be determined from the given information

Question 31

Refer to the information provided in Figure 8.2 below to answer the questions that follow. Figure 8.2
Refer to Figure 8.2.Jerry's saving equals zero at income level

A)zero.
B)Y1.
C)Y2.
D)Y2 - Y1.

Question 32

Refer to the information provided in Figure 8.2 below to answer the questions that follow. Figure 8.2
Refer to Figure 8.2.Jerry's consumption equals his income at Point

A)A.
B)B.
C)C.
D)D.

Question 33

Suppose saving is $1,400 when income is $10,000 and the MPC equals 0.8.When income increases to $12,000,saving is

A)$1,680.
B)$1,800.
C)$2,200.
D)$3,000.

Question 34

The fraction of a change in income that is consumed or spent is called

A)the marginal propensity of income.
B)the marginal propensity to save.
C)the marginal propensity to consume.
D)average consumption.

Question 35

If consumption is $30,000 when income is $35,000,and consumption increases to $36,000 when income increases to $43,000,the MPC is

A)0.65.
B)0.75.
C)0.80.
D)0.95.

Question 36

Suppose consumption is $60,000 when income is $90,000 and the MPS equals 0.25.When income increases to $100,000,consumption is

A)$90,250.
B)$85,000.
C)$70,000.
D)$67,500.

Question 37

Suppose consumption is $5,000 when income is $8,000 and the MPC equals 0.9.When income increases to $10,000,consumption is

A)$2,700.
B)$4,500.
C)$6,800.
D)$7,200.

Question 38

If you save $80 when you experience a $400 rise in your income,

A)your MPS is 0.25.
B)your MPC is 0.80.
C)your MPC is 0.85.
D)your MPS is 0.40.

Question 39

If the MPS is 0.05,the MPC is

A)-0.05.
B)0.95.
C)1.05.
D)2.25.

Question 40

Refer to the information provided in Figure 8.2 below to answer the questions that follow. Figure 8.2
Refer to Figure 8.2.Along the line segment AC,Jerry's

A)consumption equals his income.
B)consumption is greater than his income.
C)saving is zero.
D)saving is positive.

Question 41

Refer to the information provided in Table 8.1 below to answer the questions that follow.
Table 8.1
Refer to Table 8.1.Assuming society's MPC is constant at an aggregate of income of $300,aggregate consumption would be

A)$425.
B)$350.
C)$325.
D)$305.

Question 42

Refer to the information provided in Table 8.1 below to answer the questions that follow.
Table 8.1
Refer to Table 8.1.The equation for the aggregate consumption function is

A)C = 80 + 0.95Y.
B)C = 80 + 0.9Y.
C)C = 80 + 0.75Y.
D)C = -80 + 0.45Y.

Question 43

Refer to the information provided in Figure 8.4 below to answer the questions that follow. Figure 8.4
Refer to Figure 8.4.Which consumption function has the largest MPC?

A)C1.
B)C2.
C)C3.
D)cannot be determined from the figure

Question 44

Refer to the information provided in Table 8.2 below to answer the questions that follow.
Table 8.2
Refer to Table 8.2.Assuming society's MPC is constant,at an aggregate income level of $900,aggregate consumption would be

A)$665.
B)$910.
C)$1,200.
D)$1,750.

Question 45

Refer to the information provided in Figure 8.4 below to answer the questions that follow. Figure 8.4
Refer to Figure 8.4.Suppose the consumption function for C1 = 20 + 0.5Y,the consumption function that best fits C3 is

A)C3 = 20 + 0.8Y.
B)C3 = 20 + 0.4Y.
C)C3 = 40 + 0.5Y.
D)C3 = 40 + 0.4Y.

Question 46

Refer to the information provided in Figure 8.3 below to answer the questions that follow. Figure 8.3
Refer to Figure 8.3.The equation for the aggregate saving function is

A)S = -60 + 0.3Y.
B)S = -200 + 0.6Y.
C)S = -140 + 0.5Y.
D)S = -80 + 0.4Y

Question 47

Refer to the information provided in Figure 8.3 below to answer the questions that follow. Figure 8.3
Refer to Figure 8.3.For this society,aggregate saving is positive if aggregate income is

A)above zero.
B)between $0 and $150 billion.
C)equal to $200 billion.
D)above $200 billion.

Question 48

Refer to the information provided in Table 8.2 below to answer the questions that follow.
Table 8.2
Refer to Table 8.2.The equation for the aggregate saving function is

A)S = -100 + 0.15Y.
B)S = -100 + 0.1Y.
C)S = -150 + 0.2Y.
D)S = -150 + 0.85Y.

Question 49

Refer to the information provided in Table 8.1 below to answer the questions that follow.
Table 8.1
Refer to Table 8.1.At an aggregate income level of $100,aggregate saving would be

A)-$70.
B)-$30.
C)$50.
D)$70.

Question 50

Refer to the information provided in Figure 8.3 below to answer the questions that follow. Figure 8.3
Refer to Figure 8.3.The equation for the aggregate consumption function is

A)C = 140 + 0.5Y.
B)C = 60 + 0.7Y.
C)C = 80 + 0.6Y.
D)C = 60 + 0.4Y.

Question 51

Refer to the information provided in Figure 8.3 below to answer the questions that follow. Figure 8.3
Refer to Figure 8.3.Which of the following statements is FALSE?

A)Aggregate saving is negative for all income levels below $400 billion.
B)For all aggregate income levels above $200 billion,aggregate consumption is less than aggregate income.
C)If consumption is the only expenditure,this economy would be in equilibrium at an aggregate income level of $200 billion.
D)Saving is negative at all income levels below $200 billion.

Question 52

Refer to the information provided in Table 8.1 below to answer the questions that follow.
Table 8.1
Refer to Table 8.1.Society's MPS is

A)0.05.
B)0.10.
C)0.20.
D)0.95.

Question 53

Refer to the information provided in Figure 8.3 below to answer the questions that follow. Figure 8.3
Refer to Figure 8.3.If aggregate income is $1,000 billion,then in this society aggregate saving is ________ billion.

A)$240
B)$300
C)$320
D)$550

Question 54

Refer to the information provided in Table 8.2 below to answer the questions that follow.
Table 8.2
Refer to Table 8.2.Assuming society's MPC is constant,at an aggregate income of $1,200 aggregate saving would be

A)$0.
B)$20.
C)$55.
D)$150.

Question 55

Refer to the information provided in Figure 8.4 below to answer the questions that follow. Figure 8.4
Refer to Figure 8.4.The aggregate consumption functions C1 and C2

A)have the same MPC values.
B)imply different MPS values.
C)have the same autonomous consumption values.
D)have the same break-even values.

Question 56

Refer to the information provided in Figure 8.3 below to answer the questions that follow. Figure 8.3
Refer to Figure 8.3.In this economy,aggregate saving will be zero if income is

A)$100 billion.
B)$200 billion.
C)$300 billion.
D)$400 billion.

Question 57

Refer to the information provided in Table 8.2 below to answer the questions that follow.
Table 8.2
Refer to Table 8.2.Society's MPC is

A)0.1.
B)0.2.
C)0.8.
D)0.9.

Question 58

Refer to the information provided in Table 8.2 below to answer the questions that follow.
Table 8.2
Refer to Table 8.2.Society's MPS is

A)0.1.
B)0.2.
C)0.3.
D)0.9.

Question 59

Refer to the information provided in Table 8.1 below to answer the questions that follow.
Table 8.1
Refer to Table 8.1.Society's MPC is

A)0.95.
B)0.90.
C)0.80.
D)0.05.

Question 60

Refer to the information provided in Figure 8.4 below to answer the questions that follow. Figure 8.4
Refer to Figure 8.4.Suppose the consumption function for C1 = 10 + 0.8Y,the consumption function that best fits C2 is

A)C2 = 20 + 0.8Y.
B)C2 = 10 + 0.4Y.
C)C2 = 40 + 0.5Y.
D)C2 = 20 + 0.1Y.

Question 61

Refer to the information provided in Figure 8.4 below to answer the questions that follow. Figure 8.4
Refer to Figure 8.4.If income is Y1,aggregate consumption is the greatest when the aggregate consumption function is

A)C3.
B)C2.
C)C1.
D)cannot be determined from the figure

Question 62

An expected permanent tax increase is likely to increase current spending.

Question 63

Refer to the information provided in Figure 8.5 below to answer the questions that follow. Figure 8.5
Refer to Figure 8.5.If aggregate income is $900 billion,aggregate consumption

A)is $25 billion.
B)is $800 billion.
C)is $875 billion.
D)cannot be determined from this information.

Question 64

Assume that in Jabara,planned investment is $30 billion,but actual investment is $45 billion.Unplanned inventory investment is

A)-$75 billion.
B)-$15 billion.
C)$15 billion.
D)$75 billion.

Question 65

Refer to the information provided in Figure 8.6 below to answer the questions that follow. Figure 8.6
Refer to Figure 8.6.If aggregate income is $1,000,aggregate consumption is

A)$850.
B)$910.
C)$920.
D)$960.

Question 66

Assume that in Scandia,planned investment is $80 billion but actual investment is $60 billion.Unplanned inventory investment is

A)-$20 billion.
B)-$10 billion.
C)$70 billion.
D)$140 billion.

Question 67

The Jackson Tool Company manufactures only tools.In 2012 Jackson Tools manufactured 20,000 tools,but sold 21,000 tools.In 2012 Jackson Tools' change in inventory was

A)-2,000 tools.
B)-1,000 tools.
C)1,000 tools.
D)3,000 tools.

Question 68

Refer to the information provided in Figure 8.6 below to answer the questions that follow. Figure 8.6
Refer to Figure 8.6.The MPS for this saving function is

A)0.4.
B)0.25.
C)0.2.
D)0.1.

Question 69

If the marginal propensity to consume is 0.8,the marginal propensity to save is 8.

Question 70

Which of the following is an investment?

A)the purchase of a new printing press by a business
B)the purchase of a corporate bond by a household
C)the purchase of a share of stock by a household
D)a leveraged buyout of one corporation by another

Question 71

Refer to the information provided in Figure 8.5 below to answer the questions that follow. Figure 8.5
Refer to Figure 8.5.If aggregate income is $400 billion,aggregate saving is ________ billion.

A)-$300
B)-$100
C)$0
D)$500

Question 72

The Tiny Tots Toy Company manufactures only sleds.In 2012 Tiny Tots manufactured 10,000 sleds,but sold only 8,000 sleds.In 2012 Tiny Tots' change in inventory was

A)-2,000 sleds.
B)1,000 sleds.
C)2,000 sleds.
D)3,000 sleds.

Question 73

As interest rates fall,spending decreases.

Question 74

Which of the following is NOT considered investment?

A)the acquisition of capital goods
B)the purchase of government bonds
C)the increase in planned inventories
D)the construction of a new factory

Question 75

Refer to the information provided in Figure 8.5 below to answer the questions that follow. Figure 8.5
Refer to Figure 8.5.The MPS for this saving function is

A)5.
B)4.
C)0.5.
D)0.25.

Question 76

The marginal propensity to consume is the change in consumption per change in income.

Question 77

Over which component of investment do firms have the least amount of control?

A)purchases of new equipment
B)construction of new factories
C)changes in inventories
D)building new machines

Question 78

If the consumption function is below the 45-degree line,

A)consumption is less than income and saving is positive.
B)consumption is less than income and saving is negative.
C)consumption exceeds income and saving is positive.
D)consumption exceeds income and saving is negative.

Question 79

Refer to the information provided in Figure 8.4 below to answer the questions that follow. Figure 8.4
Refer to Figure 8.4.If income is Y2

A)the society's saving is negative along C1,C2,and C3.
B)the society's consumption is equal along C2 and C3.
C)the society's saving is positive along C2 and C3.
D)the society's savings is negative along C1.

Question 80

Refer to the information provided in Figure 8.6 below to answer the questions that follow. Figure 8.6
Refer to Figure 8.6.If aggregate income is $800,aggregate saving is

A)-$100.
B)-$20.
C)$20.
D)$40.