Question 1

Consider a simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption. If the consumption function is JC = $500 + 0.8Y, planned investment = $200, government purchases = $300,
Jnet exports = $100, and real GDP = $1,000, what is the amount of aggregate expenditures?

Accepted Answer

A)   $800
B)   $1,000
C)   $1,100
D)   $1,900E) All of the above
F) None of the above

Question 2

The assertion that consumption depends on expected average annual income is called

Accepted Answer

A)   permanent income.
B)   the current income hypothesis.
C)   current income.
D)   the permanent income hypothesis.E) A) and B)
F) C) and D)

Question 3

Disposable personal income is the total income households spend on consumption.

Accepted Answer

A) True 
 B)False

Question 4

In the aggregate expenditures model, if aggregate expenditures are greater than real GDP,

Accepted Answer

A)   there will be unplanned decreases in inventories.
B)   employment decreases.
C)   aggregate output decreases.
D)   actual real output is greater than equilibrium real output.E) All of the above
F) A) and B)

Question 5

Consider a simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption. The marginal propensity to consume is ⅔. Holding all else constant, if net exports increase by $50 billion, what happens to Jaggregate demand?

Accepted Answer

A)   It shifts left by $150 billion.
B)   There is a movement down along a given aggregate demand so that aggregate quantity demanded increases by $150 billion.
C)   It shifts right by $150 billion
D)   There is a movement down along a given aggregate demand so that aggregate quantity demanded increases by $50 billion.E) A) and B)
F) All of the above

Question 6

During an economic downturn, households respond to a decline in income by

Accepted Answer

A)   reducing taxes.
B)   reducing consumption.
C)   increasing the quantity of labor supplied.
D)   negotiating higher wages.E) All of the above
F) A) and B)

Question 7

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 billionE) None of the above
F) B) and C)

Question 8

The marginal propensity to consume is the

Accepted Answer

A)   slope of the saving function.
B)   slope of the consumption function.
C)   proportion of disposable personal income used for consumption.
D)   change in consumption divided by the change in saving.E) C) and D)
F) B) and D)

Question 9

The consumption function expresses the

Accepted Answer

A)   purposes of consumption.
B)   relationship between consumption and prices.
C)   relationship between consumption and saving.
D)   relationship between consumption and disposable personal income.E) A) and B)
F) A) and C)

Question 10

If C = $500 billion + .6Y, then, if Y = $1,000 billion, induced consumption will be equal to
J$1,100 billion.

Accepted Answer

A) True 
 B)False

Question 11

An increase in aggregate demand causes an increase in

Accepted Answer

A)   income, which in turn induces an increase in consumption.
B)   investment, which in turn induces an increase in consumption.
C)   government, which in turn induces an increase in net exports.
D)   consumption, which in turn induces an increase in price.E) None of the above
F) All of the above

Question 12

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)   0.8E) None of the above
F) B) and D)

Question 13

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.E) A) and C)
F) B) and C)

Question 14

Distinguish between planned and unplanned investment, and explain their relationship to
Jthe aggregate expenditures model and to equilibrium real GDP.

Accepted Answer

Planned investment refers to the investm...

Question 15

Figure 13-6 P = Planned Investment, G = Government Purchases. Further, IP and G are autonomous. If real GDP produced is $4,000, what is the amount of unplanned investment? A)  zero B)  $1,200 billion C)  $2,400 billion D)  $2,800 billion" class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 13-6. Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, JIP = Planned Investment, G = Government Purchases. Further, IP and G are autonomous. If real GDP produced is $4,000, what is the amount of unplanned investment?

Accepted Answer

A)   zero
B)   $1,200 billion
C)   $2,400 billion
D)   $2,800 billionE) A) and B)
F) B) and C)

Question 16

Suppose that your annual income has averaged $40,000 for the past 10 years and that you expect it will average $40,000 over the next 10 years. If your income this year increases to $50,000 but your consumption expenditures don't change, then you are most likely acting according to the

Accepted Answer

A)   transitory income theory of consumption.
B)   current income hypothesis.
C)   permanent income hypothesis.
D)   disposable personal income theory of consumption.E) A) and C)
F) All of the above

Question 17

Figure 13-6 P = 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. A)  AE = G + IP B)  AE = 800 + G + IP C)  AE = 800 + G + IP + 0.5Y D)  AE = 800 + 0.5Y" class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 13-6. Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, JIP = 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 + 0.5YE) A) and D)
F) A) and C)

Question 18

Personal saving equals

Accepted Answer

A)   gross domestic income − consumption.
B)   personal disposable income − consumption.
C)   gross domestic product − consumption.
D)   personal disposable income − taxes − consumption.E) B) and D)
F) B) and C)

Question 19

Table 13-3
All figures in billions of base-year dollars
 
-Refer to Table 13-3. What is the value of the multiplier?

Accepted Answer

A)   2.5
B)   3
C)   5
D)   15E) All of the above
F) C) and D)

Question 20

Difficulty: Medium Figure 13-4 P = Planned Investment. Suppose AE = C + IP, and IP is autonomous. At a real GDP of $5,000 billion, A)  planned investment is greater than actual investment. B)  planned investment equals actual investment. C)  planned investment is less than actual investment. D)  there will be no unplanned investment." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 13-4. Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, JIP = Planned Investment. Suppose AE = C + IP, and IP is autonomous. At a real GDP of $5,000 billion,

Accepted Answer

A)   planned investment is greater than actual investment.
B)   planned investment equals actual investment.
C)   planned investment is less than actual investment.
D)   there will be no unplanned investment.E) B) and C)
F) A) and C)

Exam 13: Consumption and the Aggregate Expenditures Model

The saving function shows

Correct Answer
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Difficulty: Medium Figure 13-4 -Refer to Figure 13-4. Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, JI_P = Planned Investment. Suppose AE = C + I_P, and I_P is autonomous. At a real GDP of $5,000 billion,

Correct Answer
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Table 13-3 All figures in billions of base-year dollars -Refer to Table 13-3. What is the value of the multiplier?

Correct Answer
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Suppose that your annual income has averaged $40,000 for the past 10 years and that you expect it will average $40,000 over the next 10 years. If your income this year increases to $50,000 but your consumption expenditures don't change, then you are most likely acting according to the

Correct Answer
verified

The assertion that consumption depends on expected average annual income is called

Correct Answer
verified

Distinguish between planned and unplanned investment, and explain their relationship to Jthe aggregate expenditures model and to equilibrium real GDP.

Correct Answer
Answered by ExamLex AI
Planned investment refers to the investm...
View Answer

Consider a simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption. The marginal propensity to consume is ⅔. Holding all else constant, if net exports increase by $50 billion, what happens to Jaggregate demand?

Correct Answer
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Figure 13-6 -Refer to Figure 13-6. Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, JI_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.

Correct Answer
verified

If C = $500 billion + .6Y, then, if Y = $1,000 billion, induced consumption will be equal to J$1,100 billion.

Correct Answer
verified

During an economic downturn, households respond to a decline in income by

Correct Answer
verified

The marginal propensity to consume is the

Correct Answer
verified

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?

Correct Answer
verified

An increase in aggregate demand causes an increase in

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
verified

Disposable personal income is the total income households spend on consumption.

Correct Answer
verified

Personal saving equals

Correct Answer
verified

The consumption function expresses the

Correct Answer
verified

In the aggregate expenditures model, if aggregate expenditures are greater than real GDP,

Correct Answer
verified

Correct Answer
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Figure 13-6 -Refer to Figure 13-6. Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, JI_P = Planned Investment, G = Government Purchases. Further, I_P and G are autonomous. If real GDP produced is $4,000, what is the amount of unplanned investment?

Correct Answer
verified

Exam 13: Consumption and the Aggregate Expenditures Model

The saving function shows

Correct AnswerverifiedShow Answer

Difficulty: Medium Figure 13-4 -Refer to Figure 13-4. Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, JIP = Planned Investment. Suppose AE = C + IP, and IP is autonomous. At a real GDP of $5,000 billion,

Correct AnswerverifiedShow Answer

Table 13-3 All figures in billions of base-year dollars -Refer to Table 13-3. What is the value of the multiplier?

Correct AnswerverifiedShow Answer

Suppose that your annual income has averaged $40,000 for the past 10 years and that you expect it will average $40,000 over the next 10 years. If your income this year increases to $50,000 but your consumption expenditures don't change, then you are most likely acting according to the

Correct AnswerverifiedShow Answer

The assertion that consumption depends on expected average annual income is called

Correct AnswerverifiedShow Answer

Distinguish between planned and unplanned investment, and explain their relationship to Jthe aggregate expenditures model and to equilibrium real GDP.

Correct AnswerAnswered by ExamLex AIPlanned investment refers to the investm...View AnswerShow Answer

Consider a simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption. The marginal propensity to consume is ⅔. Holding all else constant, if net exports increase by $50 billion, what happens to Jaggregate demand?

Correct AnswerverifiedShow Answer

Figure 13-6 -Refer to Figure 13-6. Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, JIP = 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.

Correct AnswerverifiedShow Answer

If C = $500 billion + .6Y, then, if Y = $1,000 billion, induced consumption will be equal to J$1,100 billion.

Correct AnswerverifiedShow Answer

During an economic downturn, households respond to a decline in income by

Correct AnswerverifiedShow Answer

The marginal propensity to consume is the

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

An increase in aggregate demand causes an increase in

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

Disposable personal income is the total income households spend on consumption.

Correct AnswerverifiedShow Answer

Personal saving equals

Correct AnswerverifiedShow Answer

The consumption function expresses the

Correct AnswerverifiedShow Answer

In the aggregate expenditures model, if aggregate expenditures are greater than real GDP,

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 13-6 -Refer to Figure 13-6. Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, JIP = Planned Investment, G = Government Purchases. Further, IP and G are autonomous. If real GDP produced is $4,000, what is the amount of unplanned investment?

Correct AnswerverifiedShow Answer

Correct Answer
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Difficulty: Medium Figure 13-4 -Refer to Figure 13-4. Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, JI_P = Planned Investment. Suppose AE = C + I_P, and I_P is autonomous. At a real GDP of $5,000 billion,

Correct Answer
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Correct Answer
Answered by ExamLex AI
Planned investment refers to the investm...
View Answer

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Figure 13-6 -Refer to Figure 13-6. Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, JI_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.

Correct Answer
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Figure 13-6 -Refer to Figure 13-6. Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, JI_P = Planned Investment, G = Government Purchases. Further, I_P and G are autonomous. If real GDP produced is $4,000, what is the amount of unplanned investment?

Correct Answer
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