Deck 8: Aggregate Expenditure and Equilibrium Output

Question 1

Saving equals

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

Answer 1

A

Question 2

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

Answer 2

C

Question 3

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.

Answer 3

A

Question 4

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

Question 5

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 6

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 7

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 8

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 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. 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 11

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 12

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.

Question 13

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 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 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 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. 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 16

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 17

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 ________ for this household is 0.5 and the ________ is also 0.5.

A) MPC; MPS
B) MPC; consumption function
C) MPS; saving function
D) consumption function; saving function

Question 18

If you earn additional $500 in disposable income one week for painting your neighbor's 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 19

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 20

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 21

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 ________ at an income level of $3,000.

A) $1,000
B) $1,450
C) $2,000
D) $3,500

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. 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 23

Refer to the information provided in Figure 8.1 below to answer the questions that follow. Figure 8.1
Refer to Figure 8.1. [-500 + 0.5Y] is this household's

A) MPC.
B) MPS.
C) saving function.
D) consumption.

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. Jerry's ________ equals his ________ at Point A.

A) consumption; saving
B) consumption; income
C) saving; income
D) all of the above

Question 25

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 ________ at an income level of $400.

A) -$300
B) -$250
C) $0
D) $250

Question 26

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 27

Refer to the information provided in Figure 8.1 below to answer the questions that follow. Figure 8.1
Refer to Figure 8.1. [500 + 0.5Y] is this household's

A) MPC.
B) MPS.
C) saving function.
D) consumption function.

Question 28

Refer to the information provided in Figure 8.1 below to answer the questions that follow. Figure 8.1
Refer to Figure 8.1. A(n) ________ in the amount of ________ this household makes when this household's income is zero shifts the saving function downward.

A) decrease; consumption
B) decrease; spending
C) increase; saving
D) increase; consumption

Question 29

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 30

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 ________ represents Jerry's consumption when income equals zero.

A) BA
B) DA
C) BC
D) BD

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 consumption equals his income at Point

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

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. 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 33

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 is positive along the line segment

A) BD.
B) DA.
C) BA.
D) AC.

Question 34

Refer to the information provided in Figure 8.1 below to answer the questions that follow. Figure 8.1
Refer to Figure 8.1. A decrease in the MPS

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 35

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 is negative along the line segment

A) AY₁.
B) AB.
C) CY₂.
D) AC.

Question 36

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 37

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 ________, this household's saving is greater than zero and this household's consumption is greater than zero.

A) -$200
B) $800
C) $1,000
D) $1,500

Question 38

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 ________ equals ________ at income level Y₁.

A) consumption; saving
B) saving; zero
C) consumption; investment
D) consumption; zero

Question 39

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.

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. 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 41

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 42

Refer to the information provided in Figure 8.2 below to answer the questions that follow. Figure 8.2
Refer to Figure 8.2. Negative saving is represented by the area

A) DBCY₂.
B) DBAY₁.
C) DBAD.
D) ACY₂Y₁.

Question 43

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 44

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 45

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 46

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 47

If the MPS is 0.22, the MPC is

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

Question 48

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 49

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 50

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 51

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 52

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

A) an upward shift in Jerry's consumption function.
B) a decrease in the slope of Jerry's consumption function.
C) a movement from Point B to A.
D) a movement from Point C to A.

Question 53

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 54

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 decreases. 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 55

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 56

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 57

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 58

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 59

If the MPS is 0.05, the MPC is

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

Question 60

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 61

Refer to the information provided in Figure 8.3 below to answer the questions that follow. Figure 8.3
Refer to Figure 8.3. [-60 + 0.3Y] is this society's

A) MPC.
B) MPS.
C) saving function.
D) consumption function.

Question 62

Refer to the information provided in Figure 8.3 below to answer the questions that follow. Figure 8.3
Refer to Figure 8.3. Aggregate saving is $240 if aggregate income is

A) $300.
B) $500.
C) $800.
D) $1,000.

Question 63

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 64

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 65

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 true?

A) Aggregate saving is negative for all income levels below $400.
B) For all aggregate income levels above $200, aggregate consumption is greater than aggregate income.
C) If consumption is the only expenditure, this economy would be in equilibrium at an aggregate income level of $300.
D) Saving is negative at all income levels below $200.

Question 66

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 67

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 68

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, if income is $200 aggregate saving will be

A) $0.
B) $130.
C) $200.
D) $270.

Question 69

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 70

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 71

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 ________ if aggregate income is above $200.

A) negative
B) positive
C) zero
D) equal to aggregate consumption

Question 72

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 73

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 74

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 75

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 76

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 77

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 78

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 79

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 80

Refer to the information provided in Figure 8.3 below to answer the questions that follow. Figure 8.3
Refer to Figure 8.3. [60 + 0.7Y] is this society's

A) MPC.
B) MPS.
C) saving function.
D) consumption function.