Question 1

Suppose at each price level, autonomous aggregate expenditures increase by $50 billion. As a result, the aggregate expenditures curve shifts

Accepted Answer

A)   downward at each price level and results in a leftward shift in aggregate demand.
B)   upward at each price level and results in a rightward shift in aggregate demand.
C)   downward at each price level and results in a movement down along a given aggregate demand.
D)   upward at each price level and results in a movement up along a given aggregate demand.E) A) and B)
F) A) and C)

Question 2

Figure 13-5 P = Planned Investment. Consider a simple economy where AE = C + IP, IP is autonomous Jand 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? A)  $3,000 billion B)  $1,500 billion C)  $1,000 billion D)  zero" class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 13-5. Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, JIP = Planned Investment. Consider a simple economy where AE = C + IP, IP is autonomous
Jand 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)   zeroE) B) and C)
F) C) and D)

Question 3

If consumption increases by $75 billion when disposable personal income increases by
J$100, the marginal propensity to consume is 0.75.

Accepted Answer

A) True 
 B)False

Question 4

The aggregate demand curve can be derived from the aggregate expenditures curves by

Accepted Answer

A)   changing the income level and observing the equilibrium real GDP associated at a given price level.
B)   changing the price level and observing the size of the vertical shift in the aggregate expenditures curve.
C)   changing the price level and observing the equilibrium real GDP associated with each price level.
D)   changing the autonomous expenditure and observing the equilibrium real GDP associated at a given price level.E) B) and C)
F) A) and D)

Question 5

In graph that shows disposable income on the horizontal axis and consumption on the vertical axis, at every point on the 45-degree line,

Accepted Answer

A)   the value of disposable income equals the sum of personal saving and consumption.
B)   the value of disposable income equals consumption.
C)   the value of disposable income equals personal saving.
D)   the value of disposable income and consumption equals 1.E) A) and C)
F) All of the above

Question 6

Autonomous aggregate expenditures are those that automatically vary with real GDP,
Jwhereas induced expenditures only change in response to a change in an external factor.

Accepted Answer

A) True 
 B)False

Question 7

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.E) None of the above
F) A) and D)

Question 8

Which of the following statements is true about equilibrium in the aggregate expenditures model? 
I. Equilibrium is found at the level of real GDP at which the aggregate expenditures curve crosses the 45-degree line.
II. In equilibrium, real GDP produced equals aggregate expenditures.
III. In equilibrium, inventories equal zero.
IV. In equilibrium, real GDP produced equals potential real GDP.

Accepted Answer

A)   I only
B)   I and II only
C)   I, II, and III only
D)   I, II, III, and IVE) A) and B)
F) All of the above

Question 9

A decrease in the price level, all other things unchanged, shifts the aggregate expenditures
Jcurve upwards.

Accepted Answer

A) True 
 B)False

Question 10

Figure 13-5 P = Planned Investment. Consider a simple economy where AE = C + IP, IP is autonomous Jand the consumption function is given by C = $1,000 billion + 0.75Y. What is the value of consumption when real GDP is $6,000 billion? A)  $1,000 billion B)  $2,500 billion C)  $4,500 billion D)  $5,500 billion" class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 13-5. Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, JIP = Planned Investment. Consider a simple economy where AE = C + IP, IP is autonomous
Jand the consumption function is given by C = $1,000 billion + 0.75Y. What is the value of consumption when real GDP is $6,000 billion?

Accepted Answer

A)   $1,000 billion
B)   $2,500 billion
C)   $4,500 billion
D)   $5,500 billionE) A) and B)
F) B) and D)

Question 11

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 slope of the AE curve is the

Accepted Answer

A)   MPC and the multiplier is 1 ÷ (1 - MP
C)  .
B)   MPC and the multiplier is 1 ÷ MPC.
C)   multiplier and the multiplier is 1 ÷ MPS.
D)   MPC and the multiplier is ∆AE ÷ ∆Y where Y = real GDP.E) A) and C)
F) A) and B)

Question 12

Figure 13-5 P = Planned Investment. Consider a simple economy where AE = C + IP, and IP is autonomous. What is the value of autonomous AE? A)  $2,000 billion B)  $3,000 billion C)  $4,500 billion D)  $8,000 billion" class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 13-5. Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, JIP = Planned Investment. Consider a simple economy where AE = C + IP, and IP is autonomous. What is the value of autonomous AE?

Accepted Answer

A)   $2,000 billion
B)   $3,000 billion
C)   $4,500 billion
D)   $8,000 billionE) C) and D)
F) All of the above

Question 13

Suppose when disposable personal income increases from $10,000 to $15,000, consumption increases from $9,000 to $12,000. What is the marginal propensity to consume?

Accepted Answer

A)   0.2
B)   0.4
C)   0.6
D)   0.8E) B) and D)
F) A) and B)

Question 14

Figure 13-6 P = Planned Investment, G = Government Purchases. Further, IP and G are autonomous. Suppose government purchases rise by $100. As a result, A)  the aggregate expenditures curve shifts upward by $100. B)  there is a movement along the aggregate expenditures curve from $1,600 to $1,700. C)  the aggregate expenditures curve shifts upward by $100 * the multiplier. D)  there is a movement along the aggregate expenditures curve from $1,600 to an amount equal to [$1,600 + ($100 * the multiplier) ]." 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. Suppose government purchases rise by $100. As a result,

Accepted Answer

A)   the aggregate expenditures curve shifts upward by $100.
B)   there is a movement along the aggregate expenditures curve from $1,600 to $1,700.
C)   the aggregate expenditures curve shifts upward by $100 * the multiplier.
D)   there is a movement along the aggregate expenditures curve from $1,600 to an amount equal to [$1,600 + ($100 * the multiplier) ].E) C) and D)
F) None of the above

Question 15

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

Accepted Answer

A)   0.5
B)   0.6
C)   ⅔
D)   0.75E) All of the above
F) B) and C)

Question 16

In general, we expect that a reduction 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.E) B) and C)
F) All of the above

Question 17

Let real GDP =Y = Yd, and the consumption function is C = $1,000 + .06Y. JWhat is the value of autonomous consumption (A)  and what is the marginal propensity to consume (MPC) ?

Accepted Answer

A)   A = $600; MPC = 0.4
B)   A = $1,000; MPC = 0.6
C)   A = $1,600; MPC = 2.5
D)   A = $2,500; MPC = 0.6E) None of the above
F) A) and C)

Question 18

Difficulty: Medium Figure 13-4 P = Planned Investment and Y* = equilibrium real GDP. Suppose AE = C + IP, IP is autonomous and the consumption function is C = $1,000 billion + 0.5Y. If firms produced a real GDP greater than the Y*, A)  AE would be greater than real GDP. B)  AE would fall short of real GDP. C)  actual investment would be less than IP. D)  there would be an excess demand for real GDP." 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 and Y* = equilibrium real GDP. Suppose AE = C + IP, IP is autonomous and the consumption function is C = $1,000 billion + 0.5Y. If firms produced a real GDP greater than the Y*,

Accepted Answer

A)   AE would be greater than real GDP.
B)   AE would fall short of real GDP.
C)   actual investment would be less than IP.
D)   there would be an excess demand for real GDP.E) A) and B)
F) C) and D)

Question 19

Figure 13-3 1. Which of the following will cause a downward shift to curve C1? A)  a stock market crash that decreases household wealth B)  a decrease in price level C)  an increase in withholding tax rate D)  rising optimism about economic conditions" class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 13-3. Suppose the consumption function is given by curve C1. Which of the following will cause a downward shift to curve C1?

Accepted Answer

A)   a stock market crash that decreases household wealth
B)   a decrease in price level
C)   an increase in withholding tax rate
D)   rising optimism about economic conditionsE) A) and B)
F) B) and D)

Question 20

Figure 13-2 
-Refer to Figure 13-2. An equation for the consumption function is

Accepted Answer

A)   C = 1 + Y.
B)   C = Y.
C)   C = 1 + 2Y.
D)   C = 1 + 0.5Y.E) B) and C)
F) None of the above

Exam 13: Consumption and the Aggregate Expenditures Model

Correct Answer
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Correct Answer
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Figure 13-3 -Refer to Figure 13-3. Suppose the consumption function is given by curve C₁. Which of the following will cause a downward shift to curve C₁?

Correct Answer
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In graph that shows disposable income on the horizontal axis and consumption on the vertical axis, at every point on the 45-degree line,

Correct Answer
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Autonomous aggregate expenditures are those that automatically vary with real GDP, Jwhereas induced expenditures only change in response to a change in an external factor.

Correct Answer
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Correct Answer
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A decrease in the price level, all other things unchanged, shifts the aggregate expenditures Jcurve upwards.

Correct Answer
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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
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If consumption increases by $75 billion when disposable personal income increases by J$100, the marginal propensity to consume is 0.75.

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 marginal propensity to consume?

Correct Answer
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In general, we expect that a reduction in the income tax rate will make the aggregate expenditures curve

Correct Answer
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Suppose at each price level, autonomous aggregate expenditures increase by $50 billion. As a result, the aggregate expenditures curve shifts

Correct Answer
verified

Suppose when disposable personal income increases from $10,000 to $15,000, consumption increases from $9,000 to $12,000. What is the marginal propensity to consume?

Correct Answer
verified

Correct Answer
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The aggregate demand curve can be derived from the aggregate expenditures curves by

Correct Answer
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Figure 13-2 -Refer to Figure 13-2. An equation for the consumption function is

Correct Answer
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Figure 13-5 -Refer to Figure 13-5. Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, JI_P = Planned Investment. Consider a simple economy where AE = C + I_P, and I_P is autonomous. What is the value of autonomous AE?

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. Suppose government purchases rise by $100. As a result,

Correct Answer
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Let real GDP =Y = Y_d, and the consumption function is C = $1,000 + .06Y. JWhat is the value of autonomous consumption (A) and what is the marginal propensity to consume (MPC) ?

Correct Answer
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Exam 13: Consumption and the Aggregate Expenditures Model

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Figure 13-3 -Refer to Figure 13-3. Suppose the consumption function is given by curve C1. Which of the following will cause a downward shift to curve C1?

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Correct AnswerverifiedShow Answer

In graph that shows disposable income on the horizontal axis and consumption on the vertical axis, at every point on the 45-degree line,

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Autonomous aggregate expenditures are those that automatically vary with real GDP, Jwhereas induced expenditures only change in response to a change in an external factor.

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Correct AnswerverifiedShow Answer

A decrease in the price level, all other things unchanged, shifts the aggregate expenditures Jcurve upwards.

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

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If consumption increases by $75 billion when disposable personal income increases by J$100, the marginal propensity to consume is 0.75.

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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 marginal propensity to consume?

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In general, we expect that a reduction in the income tax rate will make the aggregate expenditures curve

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Suppose at each price level, autonomous aggregate expenditures increase by $50 billion. As a result, the aggregate expenditures curve shifts

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Suppose when disposable personal income increases from $10,000 to $15,000, consumption increases from $9,000 to $12,000. What is the marginal propensity to consume?

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The aggregate demand curve can be derived from the aggregate expenditures curves by

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Figure 13-2 -Refer to Figure 13-2. An equation for the consumption function is

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Figure 13-5 -Refer to Figure 13-5. Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, JIP = Planned Investment. Consider a simple economy where AE = C + IP, and IP is autonomous. What is the value of autonomous AE?

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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. Suppose government purchases rise by $100. As a result,

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Let real GDP =Y = Yd, and the consumption function is C = $1,000 + .06Y. JWhat is the value of autonomous consumption (A) and what is the marginal propensity to consume (MPC) ?

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Figure 13-3 -Refer to Figure 13-3. Suppose the consumption function is given by curve C₁. Which of the following will cause a downward shift to curve C₁?

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Figure 13-5 -Refer to Figure 13-5. Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, JI_P = Planned Investment. Consider a simple economy where AE = C + I_P, and I_P is autonomous. What is the value of autonomous AE?

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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. Suppose government purchases rise by $100. As a result,

Correct Answer
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Let real GDP =Y = Y_d, and the consumption function is C = $1,000 + .06Y. JWhat is the value of autonomous consumption (A) and what is the marginal propensity to consume (MPC) ?

Correct Answer
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