Question 1

In a graph with real GDP on the horizontal axis and aggregate expenditures on the vertical axis, induced aggregate expenditures are represented by

Accepted Answer

A)  a ray from the origin.
B)  an upward sloping line with a positive vertical intercept.
C)  a 45-degree line.
D)  a horizontal line.

Question 2

If consumption is $80 billion when income is $100, the most likely value for the marginal propensity to consume is 0.8.

Accepted Answer

A) True 
 B)False

Question 3

According to the interest-rate effect, higher prices

Accepted Answer

A)  increase the value of money holdings which reduces consumption and investment spending.
B)  decrease the value of money which decreases consumption and investment spending.
C)  lower the real quantity of money, which causes interest rates to rise and investment to fall.
D)  lead to higher interest rates which stimulate investment spending.

Question 4

Suppose the consumption function is C = $500 + 0.8Y.If Y = $1,000, then autonomous consumption is

Accepted Answer

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

Question 5

Let AE = Aggregate Expenditures, C = Consumption, IP = Planned Investment,
G = Government Purchases.Consider a simple aggregate expenditures model, where
AE = C + IP + G and all components of aggregate expenditures except consumption are autonomous.All other things unchanged, an increase in the price level,

Accepted Answer

A)  causes a movement up along a given aggregate expenditures curve and raises the equilibrium real GDP.
B)  causes a movement down a given aggregate expenditures curve and lowers the equilibrium real GDP.
C)  shifts the aggregate expenditures curve upwards and raises the equilibrium real GDP.
D)  shifts the aggregate expenditures curve downwards and lowers the equilibrium real GDP.

Question 6

The saving function shows

Accepted Answer

A)  the amount of saving at each level of aggregate demand, holding all other determinants of saving constant.
B)  the amount of saving on at each level of disposable income, holding all other determinants of saving constant.
C)  the amount of saving at each price level, holding all other determinants of saving constant.
D)  the amount of saving at each wage rate, holding all other determinants of saving constant.

Question 7

Let AE = Aggregate Expenditures, C = Consumption, IP = Planned Investment,
G = Government Purchases.Consider a simple aggregate expenditures model, where
AE = C + IP + G and all components of aggregate expenditures except consumption are autonomous.All other things unchanged, a decrease in the price level

Accepted Answer

A)  causes a movement up along a given aggregate expenditures curve and raises the equilibrium real GDP.
B)  shifts the aggregate expenditures curve upwards and raises the equilibrium real GDP.
C)  causes a movement down a given aggregate expenditures curve and lowers the equilibrium real GDP.
D)  shifts the aggregate expenditures curve downwards and lowers the equilibrium real GDP.

Question 8

The marginal propensity to consume is the

Accepted Answer

A)  slope of the saving function.
B)  slope of the consumption-saving curve.
C)  slope of the saving-investment curve.
D)  change in consumption divided by the change in disposable personal income.

Question 9

In a graph with real GDP on the horizontal axis and aggregate expenditures on the vertical axis, autonomous aggregate expenditures are represented by

Accepted Answer

A)  a ray from the origin.
B)  an upward sloping line with a positive vertical intercept.
C)  a 45-degree line.
D)  a horizontal line.

Question 10

In general, an increase in the income tax rate will make the aggregate expenditures curve

Accepted Answer

A)  steeper and the multiplier larger.
B)  steeper and the multiplier smaller.
C)  flatter and the multiplier larger.
D)  flatter and the multiplier smaller.

Question 11

Let AE = Aggregate Expenditures, C = Consumption, IP = Planned Investment,
G = Government Purchases.Consider a simple aggregate expenditures model, where
AE = C + IP + G and all components of aggregate expenditures except consumption are autonomous.All other things unchanged, an increase in the price level,

Accepted Answer

A)  shifts the aggregate expenditures curve upwards.
B)  shifts the aggregate expenditures curve downwards.
C)  causes a movement up along a given aggregate expenditures curve.
D)  causes a movement down a given aggregate expenditures curve.

Question 12

Aggregate expenditures that vary with real GDP are called induced aggregate expenditures.

Accepted Answer

A) True 
 B)False

Question 13

Figure 13-3
 0  to C1 to C2 demonstrate A) an increase in the marginal propensity to save. B) increases in the amount of consumption for a given level of disposable income. C) increases in the amount of disposable income available for consumption. D) An increase in the marginal propensity to save." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 13-3.Upward shifts of the consumption function, for example from C0  to C1 to C2 demonstrate

Accepted Answer

A)  an increase in the marginal propensity to save.
B)  increases in the amount of consumption for a given level of disposable income.
C)  increases in the amount of disposable income available for consumption.
D)  An increase in the marginal propensity to save.

Question 14

Figure 13-4
 P = Planned Investment.Suppose AE = C + IP, and IP is autonomous.If the level of real GDP equals $5,000 billion, and if there are no changes in the consumption function or in planned investment, then we can expect that, in the next period, real GDP will A) rise. B) remain unchanged. C) fall. D) fall, but only if there is an offsetting change in autonomous consumption." class="answers-bank-image d-inline" rel="preload" >
-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 $5,000 billion, and if there are no changes in the consumption function or in planned investment, then we can 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 15

Disposable personal income is

Accepted Answer

A)  the income households receive after paying personal taxes and personal debt.
B)  the income households earn from supplying labor services for the production of aggregate output.
C)  the income households receive after paying personal taxes.
D)  the income households have leftover after paying personal taxes and purchasing necessities.

Question 16

Figure 13-1
 
-Refer to Figure 13-1.If disposable personal income is $400 billion, what is the amount of personal saving?

Accepted Answer

A)  −$200 billion
B)  $0
C)  $200 billion
D)  $400 billion

Question 17

Figure 13-4
 P = Planned Investment.Suppose AE = C + IP.IP is autonomous and the consumption function is C = $1,000 billion + 0.5Y.If real GDP = $7,000 billion, what is the amount of aggregate expenditures? A) $6,000 billion B) $6,500 billion C) $7,000 billion D) $7,500 billion" class="answers-bank-image d-inline" rel="preload" >
-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 real GDP = $7,000 billion, what is the amount of aggregate expenditures?

Accepted Answer

A)  $6,000 billion
B)  $6,500 billion
C)  $7,000 billion
D)  $7,500 billion

Question 18

In the simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption, the size of the multiplier depends on the

Accepted Answer

A)  45-degree line.
B)  height of the consumption function.
C)  slope of the aggregate demand curve.
D)  slope of the aggregate expenditures curve.

Question 19

If an economy spends 90% 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)  $1.0 billion.
B)  $1.9 billion.
C)  $10 billion.
D)  $100 billion.

Question 20

Suppose the slope of the aggregate expenditures curve is 0.75.An increase in autonomous investment expenditure of $6 billion would produce an ultimate increase in equilibrium real GDP of

Accepted Answer

A)  $0.25 billion.
B)  $6 billion.
C)  $12 billion.
D)  $24 billion.

Exam 28: Consumption and the Aggregate Expenditures Model

According to the interest-rate effect, higher prices

Correct Answer
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Aggregate expenditures that vary with real GDP are called induced aggregate expenditures.

Correct Answer
verified

Correct Answer
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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 real GDP = $7,000 billion, what is the amount of aggregate expenditures?

Correct Answer
verified

If an economy spends 90% 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

Correct Answer
verified

Figure 13-1 -Refer to Figure 13-1.If disposable personal income is $400 billion, what is the amount of personal saving?

Correct Answer
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In a graph with real GDP on the horizontal axis and aggregate expenditures on the vertical axis, autonomous aggregate expenditures are represented by

Correct Answer
verified

In the simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption, the size of the multiplier depends on the

Correct Answer
verified

Correct Answer
verified

If consumption is $80 billion when income is $100, the most likely value for the marginal propensity to consume is 0.8.

Correct Answer
verified

Correct Answer
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In a graph with real GDP on the horizontal axis and aggregate expenditures on the vertical axis, induced aggregate expenditures are represented by

Correct Answer
verified

Figure 13-3 -Refer to Figure 13-3.Upward shifts of the consumption function, for example from C₀ to C₁ to C₂demonstrate

Correct Answer
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Correct Answer
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Disposable personal income is

Correct Answer
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The saving function shows

Correct Answer
verified

In general, an increase in the income tax rate will make the aggregate expenditures curve

Correct Answer
verified

The marginal propensity to consume is the

Correct Answer
verified

Suppose the slope of the aggregate expenditures curve is 0.75.An increase in autonomous investment expenditure of $6 billion would produce an ultimate increase in equilibrium real GDP of

Correct Answer
verified

Suppose the consumption function is C = $500 + 0.8Y.If Y = $1,000, then autonomous consumption is

Correct Answer
verified

Exam 28: Consumption and the Aggregate Expenditures Model

According to the interest-rate effect, higher prices

Correct AnswerverifiedShow Answer

Aggregate expenditures that vary with real GDP are called induced aggregate expenditures.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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 real GDP = $7,000 billion, what is the amount of aggregate expenditures?

Correct AnswerverifiedShow Answer

If an economy spends 90% 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

Correct AnswerverifiedShow Answer

Figure 13-1 -Refer to Figure 13-1.If disposable personal income is $400 billion, what is the amount of personal saving?

Correct AnswerverifiedShow Answer

In a graph with real GDP on the horizontal axis and aggregate expenditures on the vertical axis, autonomous aggregate expenditures are represented by

Correct AnswerverifiedShow Answer

In the simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption, the size of the multiplier depends on the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If consumption is $80 billion when income is $100, the most likely value for the marginal propensity to consume is 0.8.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In a graph with real GDP on the horizontal axis and aggregate expenditures on the vertical axis, induced aggregate expenditures are represented by

Correct AnswerverifiedShow Answer

Figure 13-3 -Refer to Figure 13-3.Upward shifts of the consumption function, for example from C0 to C1 to C2 demonstrate

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Disposable personal income is

Correct AnswerverifiedShow Answer

The saving function shows

Correct AnswerverifiedShow Answer

In general, an increase in the income tax rate will make the aggregate expenditures curve

Correct AnswerverifiedShow Answer

The marginal propensity to consume is the

Correct AnswerverifiedShow Answer

Suppose the slope of the aggregate expenditures curve is 0.75.An increase in autonomous investment expenditure of $6 billion would produce an ultimate increase in equilibrium real GDP of

Correct AnswerverifiedShow Answer

Suppose the consumption function is C = $500 + 0.8Y.If Y = $1,000, then autonomous consumption is

Correct AnswerverifiedShow Answer

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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 real GDP = $7,000 billion, what is the amount of aggregate expenditures?

Correct Answer
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Figure 13-3 -Refer to Figure 13-3.Upward shifts of the consumption function, for example from C₀ to C₁ to C₂demonstrate

Correct Answer
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