Question 1

If consumption is given by C = $10 billion + 0.5Y, and autonomous planned investment, government purchases, and net exports amount to $5 billion, then aggregate expenditures are
$20 billion if Y = $10 billion.

Accepted Answer

A) True 
 B)False

Question 2

Figure 13-6
 
-Refer to Figure 13-6.Suppose government purchases rise by $100.In the aggregate demand/aggregate supply model,

Accepted Answer

A) the aggregate demand curve shifts to the right by $100 at any given price level. 
B) the aggregate demand curve shifts to the right by ($100 *the multiplier)at any given price level. 
C) there is a downward movement along the aggregate demand curve such that real GDP demanded increases by $100. 
D) there is a downward movement along the aggregate demand curve such that real GDP demanded increases by ($100 * the multiplier).

Question 3

Figure 13-2
 
-Refer to Figure 13-2.If real GDP were $12 trillion, consumption equals

Accepted Answer

A) 5 trillion. 
B) 7 trillion. 
C) 9 trillion. 
D) 11 trillion.

Question 4

Figure 13-4
 
-Refer to Figure 13-4.Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption,
IP = Planned Investment.Suppose AE = C + IP.IP is autonomous and the consumption function is C = $1,000 billion + 0.5Y.If Y= $6,000 billion, what is the value of consumption and planned investment?

Accepted Answer

A) C = $3,000 billion, IP = $3,000 billion 
B) C = $4,000 billion, IP = $2,000 billion 
C) C = $5,000 billion, IP = $1,000 billion 
D) C = $6,000 billion, IP = zero

Question 5

Figure 13-4
 
-Refer to Figure 13-4.Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption,
IP = Planned Investment.Suppose AE = C + IP, and IP is autonomous.If the level of real GDP equals $7,000 billion, and if there are no changes in the consumption function or in planned investment, then we expect that, in the next period, real GDP will

Accepted Answer

A) rise. 
B) remain unchanged. 
C) fall. 
D) fall, but only if there is an offsetting change in autonomous consumption.

Question 6

Consider a simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption.The marginal propensity to consume is 0.8.Suppose the equilibrium level of real GDP at the prevailing price is $500 billion below potential real GDP.All else constant, by how much should autonomous aggregate expenditures be increased to reach potential output?

Accepted Answer

A) $625 billion 
B) $500 billion 
C) $400 billion 
D) $100 billion

Question 7

Figure 13-5
 
-Refer to Figure 13-5.Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption,
IP = Planned Investment.Consider a simple economy where AE = C + IP, IP is autonomous
And the consumption function is given by C = $1,000 billion + 0.75Y.What is the value of planned investment when real GDP is $6,000 billion?

Accepted Answer

A) $3,000 billion 
B) $1,500 billion 
C) $1,000 billion 
D) zero

Question 8

Personal saving is disposable personal income not spent on consumption.

Accepted Answer

A) True 
 B)False

Question 9

Unplanned investment is

Accepted Answer

A) the level of investment minus depreciation. 
B) the level of investment plus depreciation. 
C) investment that occurs that is unexpected by the government. 
D) investment that firms did not intend to make.

Question 10

Figure 13-6
 
-Refer to Figure 13-6.Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption,
IP = Planned Investment, G = Government Purchases.Further, IP and G are autonomous.What is the equation of the aggregate expenditures curve? All figures in billions of dollars.

Accepted Answer

A) AE = G + IP 
B) AE = 800 + G + IP 
C) AE = 800 + G + IP + 0.5Y 
D) AE = 800 + 0.5Y

Question 11

Which of the following statements is false?

Accepted Answer

A) Two individuals who have the same current income but different permanent incomes are likely to make very similar savings decisions. 
B) An individual with a relatively low current income but a high permanent income might save little or nothing now, expecting to save for retirement and for bequests later. 
C) A person with a relatively low income now with no expectation of higher income later might try to save some money now to provide for retirement or bequests later. 
D) A decision to save a certain amount determines how much will be available for future consumption.

Question 12

The relationship between aggregate expenditures and real GDP is shown by the

Accepted Answer

A) aggregate expenditures curve. 
B) consumption function. 
C) aggregate demand curve. 
D) autonomous expenditures curve.

Question 13

Suppose when disposable personal income increases from $10,000 to $15,000, consumption increases from $9,000 to $13,000.What is the marginal propensity to save?

Accepted Answer

A) 0.2 
B) 0.4 
C) 0.6 
D) 0.8

Question 14

In the aggregate expenditures model, if a $50 billion increase in investment leads to an increase in equilibrium real GDP of $250 billion at the initial price level, then the multiplier is 4.

Accepted Answer

A) True 
 B)False

Question 15

Consider a simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption.Which of the following events causes the aggregate expenditures curve to shift upwards? If government purchases increases by $200 billion, the aggregate expenditures curve will shift up by

Accepted Answer

A) $200 billion. 
B) $200 billion xthe multiplier. 
C) $200 billion xmarginal propensity to consume. 
D) $200 billion x(1 ÷ marginal propensity to consume).

Question 16

Figure 13-5
 
-Refer to Figure 13-5.Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption,
IP = Planned Investment.Consider a simple economy where AE = C + IP, IP is autonomous
And the consumption function is given by C = $1,000 billion + 0.75Y.What is the value of the multiplier?

Accepted Answer

A) 0.75 
B) 1.33 
C) 4 
D) It depends on the ∆AE and the ∆Y since the multiplier formula is ∆AE ÷∆Y.

Question 17

In the aggregate expenditures model, if a $40 billion increase in autonomous investment leads to an increase in equilibrium real GDP of $100 billion at the initial price level, then the multiplier is 2.5.

Accepted Answer

A) True 
 B)False

Question 18

If the economy spends 80% of any increase in real GDP, then an increase in autonomous investment of $1 billion would result ultimately in an increase in equilibrium real GDP of

Accepted Answer

A) $0.8 billion. 
B) $1.0 billion. 
C) $1.8 billion. 
D) $5.0 billion.

Question 19

In the simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption, if the slope of the aggregate expenditures curve increases, the multiplier

Accepted Answer

A) increases. 
B) decreases. 
C) remains constant. 
D) is undefined.

Question 20

Figure 13-6
 
-Refer to Figure 13-6.Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption,
IP = Planned Investment, G = Government Purchases.Further, IP and G are autonomous.What is the level of autonomous aggregate expenditures?

Accepted Answer

A) $800 billion 
B) $1,000 billion 
C) $1,600 billion 
D) $3,200 billion

Exam 28: Consumption and the Aggregate Expenditures Model

If consumption is given by C = $10 billion + 0.5Y, and autonomous planned investment, government purchases, and net exports amount to $5 billion, then aggregate expenditures are $20 billion if Y = $10 billion.

Figure 13-6 -Refer to Figure 13-6.Suppose government purchases rise by $100.In the aggregate demand/aggregate supply model,

Figure 13-2 -Refer to Figure 13-2.If real GDP were $12 trillion, consumption equals

Figure 13-4 -Refer to Figure 13-4.Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, I_P = Planned Investment.Suppose AE = C + I_P.I_P is autonomous and the consumption function is C = $1,000 billion + 0.5Y.If Y= $6,000 billion, what is the value of consumption and planned investment?

Personal saving is disposable personal income not spent on consumption.

Unplanned investment is

Figure 13-6 -Refer to Figure 13-6.Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, I_P = Planned Investment, G = Government Purchases.Further, I_P and G are autonomous.What is the equation of the aggregate expenditures curve? All figures in billions of dollars.

Which of the following statements is false?

The relationship between aggregate expenditures and real GDP is shown by the

Suppose when disposable personal income increases from $10,000 to $15,000, consumption increases from $9,000 to $13,000.What is the marginal propensity to save?

In the aggregate expenditures model, if a $50 billion increase in investment leads to an increase in equilibrium real GDP of $250 billion at the initial price level, then the multiplier is 4.

Figure 13-5 -Refer to Figure 13-5.Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, I_P = Planned Investment.Consider a simple economy where AE = C + I_P, I_P is autonomous And the consumption function is given by C = $1,000 billion + 0.75Y.What is the value of the multiplier?

In the aggregate expenditures model, if a $40 billion increase in autonomous investment leads to an increase in equilibrium real GDP of $100 billion at the initial price level, then the multiplier is 2.5.

If the economy spends 80% of any increase in real GDP, then an increase in autonomous investment of $1 billion would result ultimately in an increase in equilibrium real GDP of

In the simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption, if the slope of the aggregate expenditures curve increases, the multiplier

Figure 13-6 -Refer to Figure 13-6.Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, I_P = Planned Investment, G = Government Purchases.Further, I_P and G are autonomous.What is the level of autonomous aggregate expenditures?

Exam 28: Consumption and the Aggregate Expenditures Model

If consumption is given by C = $10 billion + 0.5Y, and autonomous planned investment, government purchases, and net exports amount to $5 billion, then aggregate expenditures are $20 billion if Y = $10 billion.

Figure 13-6 -Refer to Figure 13-6.Suppose government purchases rise by $100.In the aggregate demand/aggregate supply model,

Figure 13-2 -Refer to Figure 13-2.If real GDP were $12 trillion, consumption equals

Figure 13-4 -Refer to Figure 13-4.Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, IP = Planned Investment.Suppose AE = C + IP.IP is autonomous and the consumption function is C = $1,000 billion + 0.5Y.If Y= $6,000 billion, what is the value of consumption and planned investment?

Personal saving is disposable personal income not spent on consumption.

Unplanned investment is

Figure 13-6 -Refer to Figure 13-6.Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, IP = Planned Investment, G = Government Purchases.Further, IP and G are autonomous.What is the equation of the aggregate expenditures curve? All figures in billions of dollars.

Which of the following statements is false?

The relationship between aggregate expenditures and real GDP is shown by the

Suppose when disposable personal income increases from $10,000 to $15,000, consumption increases from $9,000 to $13,000.What is the marginal propensity to save?

In the aggregate expenditures model, if a $50 billion increase in investment leads to an increase in equilibrium real GDP of $250 billion at the initial price level, then the multiplier is 4.

Figure 13-5 -Refer to Figure 13-5.Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, IP = Planned Investment.Consider a simple economy where AE = C + IP, IP is autonomous And the consumption function is given by C = $1,000 billion + 0.75Y.What is the value of the multiplier?

In the aggregate expenditures model, if a $40 billion increase in autonomous investment leads to an increase in equilibrium real GDP of $100 billion at the initial price level, then the multiplier is 2.5.

If the economy spends 80% of any increase in real GDP, then an increase in autonomous investment of $1 billion would result ultimately in an increase in equilibrium real GDP of

In the simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption, if the slope of the aggregate expenditures curve increases, the multiplier

Figure 13-6 -Refer to Figure 13-6.Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, IP = Planned Investment, G = Government Purchases.Further, IP and G are autonomous.What is the level of autonomous aggregate expenditures?

Figure 13-4 -Refer to Figure 13-4.Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, I_P = Planned Investment.Suppose AE = C + I_P.I_P is autonomous and the consumption function is C = $1,000 billion + 0.5Y.If Y= $6,000 billion, what is the value of consumption and planned investment?

Figure 13-6 -Refer to Figure 13-6.Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, I_P = Planned Investment, G = Government Purchases.Further, I_P and G are autonomous.What is the equation of the aggregate expenditures curve? All figures in billions of dollars.

Figure 13-5 -Refer to Figure 13-5.Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, I_P = Planned Investment.Consider a simple economy where AE = C + I_P, I_P is autonomous And the consumption function is given by C = $1,000 billion + 0.75Y.What is the value of the multiplier?

Figure 13-6 -Refer to Figure 13-6.Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, I_P = Planned Investment, G = Government Purchases.Further, I_P and G are autonomous.What is the level of autonomous aggregate expenditures?