Question 1

Difficulty: Medium Figure 13-4 P = Planned Investment. Suppose AE = C + IP. IP is autonomous and the consumption function is C = $1,000 billion + 0.5Y. What is the amount of consumption when real GDP is $6,000 billion? A)  1,000 billion B)  2,000 billion C)  3,000 billion D)  4,000 billion" 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. IP is autonomous and the consumption function is C = $1,000 billion + 0.5Y. What is the amount of consumption when real GDP is $6,000 billion?

Accepted Answer

A)   1,000 billion
B)   2,000 billion
C)   3,000 billion
D)   4,000 billionE) A) and C)
F) A) and D)

Question 2

The current income theory assumes that current consumption is based on the average
Jincome people expect to receive for the remainder of their lives.

Accepted Answer

A) True 
 B)False

Question 3

The amount of consumption at each level of disposable personal income, all other determinants of consumption unchanged, is shown by the

Accepted Answer

A)   aggregate demand curve.
B)   consumption function.
C)   price-consumption curve.
D)   income curve.E) A) and D)
F) C) and D)

Question 4

Let AE = Aggregate Expenditures, C = Consumption, IP = Planned Investment, JG =Government Purchases. Consider a simple aggregate expenditures model, where
JAE = C + IP + G, and all components of aggregate expenditures except consumption are autonomous. In this model, the multiplier is found using the formula

Accepted Answer

A)   ∆Y* ÷ initial ∆AE where Y* = equilibrium real GDP by the ∆ = change in, AE = aggregate expenditures.
B)   ∆AE ÷ ∆Y*.
C)   ∆Y* * MPC where MPC = marginal propensity to consume.
D)   1 ÷ MPC.E) None of the above
F) All of the above

Question 5

The average annual income that people expect to receive for the remainder of their lives is called

Accepted Answer

A)   lifetime income.
B)   permanent income.
C)   disposable personal income.
D)   current income.E) C) and D)
F) All of the above

Question 6

Let AE = Aggregate Expenditures, C = Consumption, IP = Planned Investment, JG =Government Purchases. Consider a simple aggregate expenditures model, where
JAE = C + IP + G and all components of aggregate expenditures except consumption are autonomous. If the MPS is 0.4, then the multiplier is

Accepted Answer

A)   1.33
B)   2.5
C)   5
D)   15E) None of the above
F) All of the above

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

Difficulty: Medium 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 = $5,000 billion, what is the amount of aggregate expenditures? A)  $4,500 billion B)  $5,000 billion C)  $5,500 billion D)  $6,000 billion" 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. IP is autonomous and the consumption function is C = $1,000 billion + 0.5Y. If real GDP = $5,000 billion, what is the amount of aggregate expenditures?

Accepted Answer

A)   $4,500 billion
B)   $5,000 billion
C)   $5,500 billion
D)   $6,000 billionE) A) and B)
F) A) and C)

Question 9

In the simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption, suppose when autonomous aggregate expenditures rise by $500 billion, equilibrium real GDP increases by $2,500 billion. Which of the following statements is true?

Accepted Answer

A)   The MPS = 0.8.
B)   The MPC = 0.2
C)   The MPS = 0.2.
D)   The MPC = 5.E) B) and C)
F) A) and D)

Question 10

Difficulty: Medium 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 IP = $2,000 billion, what is the equilibrium level of real GDP? A)  $4,500 billion B)  $6,000 billion C)  $7,500 billion D)  $9,000 billion" 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. IP is autonomous and the consumption function is C = $1,000 billion + 0.5Y. If IP = $2,000 billion, what is the equilibrium level of real GDP?

Accepted Answer

A)   $4,500 billion
B)   $6,000 billion
C)   $7,500 billion
D)   $9,000 billionE) B) and D)
F) A) and C)

Question 11

Aggregate expenditures are the

Accepted Answer

A)   sum of planned levels of consumption, investment, government purchases, and net exports, at a given price level, as they relate to real GDP.
B)   sum of consumption, saving, investment, government purchases, and net exports, at a given price level, as they relate to real GDP.
C)   total of all spending, and equal to the value of real GDP at all price levels.
D)   value of GDP, in nominal values, for all price levels, all other things unchanged.E) A) and D)
F) A) and C)

Question 12

The relationship between personal saving and the level of disposable personal income is shown by the

Accepted Answer

A)   supply of savings curve.
B)   consumption function.
C)   saving function.
D)   personal investment schedule.E) C) and D)
F) A) and C)

Question 13

Which of the following is true? 
I. 1 − MPS = MPC where MPS = marginal propensity to save and MPC = marginal propensity to consume.
II. personal saving + consumption = gross income
III. ∆disposable income = ∆saving + ∆consumption where ∆ = change in

Accepted Answer

A)   I, II, and III
B)   I and II only
C)   I and III only
D)   II and III onlyE) B) and C)
F) C) and D)

Question 14

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

Accepted Answer

A)   actual real output is less than equilibrium real output.
B)   employment increases.
C)   aggregate output increases.
D)   there will be unplanned increases in inventories.E) None of the above
F) B) and C)

Question 15

In the simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption, what is the value of the multiplier if the marginal propensity to consume is 0.75?

Accepted Answer

A)   1
B)   4
C)   5
D)   infinityE) B) and C)
F) A) and D)

Question 16

Table 13-3
All figures in billions of base-year dollars
 
-Refer to Table 13-3. If government purchases increase by $100 billion, the aggregate expenditures curve will shift up by $_______ billion.

Accepted Answer

A)   100
B)   250
C)   400
D)   500E) None of the above
F) C) and D)

Question 17

The marginal propensity to consume is the change in consumption divided by the change in
Jdisposable personal income.

Accepted Answer

A) True 
 B)False

Question 18

Using the aggregate expenditures model, which of the following occurs if aggregate expenditures fall short of real GDP?
I. Actual investment exceeds planned investment.
II. Unemployment rises.
III. The price level will fall.
IV. The economy will experience a recessionary gap.

Accepted Answer

A)   I and II
B)   I and III
C)   I, II, and III
D)   I, II, III, and IVE) None of the above
F) A) and B)

Question 19

Difficulty: Medium 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 Y= $6,000 billion, what is the value of consumption and planned investment? 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" 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. 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 = zeroE) B) and C)
F) All of the above

Question 20

The marginal propensity to save is given by

Accepted Answer

A)   the change in saving divided by the change in consumption.
B)   saving divided by the change in disposable personal income.
C)   saving divided by disposable income.
D)   the change in saving divided by the change in disposable personal income.E) B) and C)
F) A) and C)

Exam 13: Consumption and the Aggregate Expenditures Model

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

Correct Answer
verified

The average annual income that people expect to receive for the remainder of their lives is called

Correct Answer
verified

The current income theory assumes that current consumption is based on the average Jincome people expect to receive for the remainder of their lives.

Correct Answer
verified

Correct Answer
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Correct Answer
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In the aggregate expenditures model, if aggregate expenditures are less than real GDP,

Correct Answer
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In the simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption, what is the value of the multiplier if the marginal propensity to consume is 0.75?

Correct Answer
verified

The marginal propensity to consume is the change in consumption divided by the change in Jdisposable personal income.

Correct Answer
verified

The marginal propensity to save is given by

Correct Answer
verified

Correct Answer
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Let AE = Aggregate Expenditures, C = Consumption, I_P = Planned Investment, JG =Government Purchases. Consider a simple aggregate expenditures model, where JAE = C + I_P + G and all components of aggregate expenditures except consumption are autonomous. If the MPS is 0.4, then the multiplier is

Correct Answer
verified

Correct Answer
verified

Using the aggregate expenditures model, which of the following occurs if aggregate expenditures fall short of real GDP? I. Actual investment exceeds planned investment. II. Unemployment rises. III. The price level will fall. IV. The economy will experience a recessionary gap.

Correct Answer
verified

The amount of consumption at each level of disposable personal income, all other determinants of consumption unchanged, is shown by the

Correct Answer
verified

Correct Answer
verified

Table 13-3 All figures in billions of base-year dollars -Refer to Table 13-3. If government purchases increase by $100 billion, the aggregate expenditures curve will shift up by $_______ billion.

Correct Answer
verified

Which of the following is true? I. 1 − MPS = MPC where MPS = marginal propensity to save and MPC = marginal propensity to consume. II. personal saving + consumption = gross income III. ∆disposable income = ∆saving + ∆consumption where ∆ = change in

Correct Answer
verified

The relationship between personal saving and the level of disposable personal income is shown by the

Correct Answer
verified

In the simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption, suppose when autonomous aggregate expenditures rise by $500 billion, equilibrium real GDP increases by $2,500 billion. Which of the following statements is true?

Correct Answer
verified

Aggregate expenditures are the

Correct Answer
verified

Exam 13: Consumption and the Aggregate Expenditures Model

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

Correct AnswerverifiedShow Answer

The average annual income that people expect to receive for the remainder of their lives is called

Correct AnswerverifiedShow Answer

The current income theory assumes that current consumption is based on the average Jincome people expect to receive for the remainder of their lives.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In the simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption, what is the value of the multiplier if the marginal propensity to consume is 0.75?

Correct AnswerverifiedShow Answer

The marginal propensity to consume is the change in consumption divided by the change in Jdisposable personal income.

Correct AnswerverifiedShow Answer

The marginal propensity to save is given by

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Let AE = Aggregate Expenditures, C = Consumption, IP = Planned Investment, JG =Government Purchases. Consider a simple aggregate expenditures model, where JAE = C + IP + G and all components of aggregate expenditures except consumption are autonomous. If the MPS is 0.4, then the multiplier is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Using the aggregate expenditures model, which of the following occurs if aggregate expenditures fall short of real GDP? I. Actual investment exceeds planned investment. II. Unemployment rises. III. The price level will fall. IV. The economy will experience a recessionary gap.

Correct AnswerverifiedShow Answer

The amount of consumption at each level of disposable personal income, all other determinants of consumption unchanged, is shown by the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Table 13-3 All figures in billions of base-year dollars -Refer to Table 13-3. If government purchases increase by $100 billion, the aggregate expenditures curve will shift up by $_______ billion.

Correct AnswerverifiedShow Answer

Which of the following is true? I. 1 − MPS = MPC where MPS = marginal propensity to save and MPC = marginal propensity to consume. II. personal saving + consumption = gross income III. ∆disposable income = ∆saving + ∆consumption where ∆ = change in

Correct AnswerverifiedShow Answer

The relationship between personal saving and the level of disposable personal income is shown by the

Correct AnswerverifiedShow Answer

In the simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption, suppose when autonomous aggregate expenditures rise by $500 billion, equilibrium real GDP increases by $2,500 billion. Which of the following statements is true?

Correct AnswerverifiedShow Answer

Aggregate expenditures are the

Correct AnswerverifiedShow Answer

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Let AE = Aggregate Expenditures, C = Consumption, I_P = Planned Investment, JG =Government Purchases. Consider a simple aggregate expenditures model, where JAE = C + I_P + G and all components of aggregate expenditures except consumption are autonomous. If the MPS is 0.4, then the multiplier is

Correct Answer
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