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Exam 13: Consumption and the Aggregate Expenditures Model

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Question 41

Multiple Choice

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

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) None of the above
F) A) and B)

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Question 42

Multiple Choice

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

A) permanent income.
B) the current income hypothesis.
C) current income.
D) the permanent income hypothesis.

E) A) and D)
F) B) and D)

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Question 43

Multiple Choice

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

An increase in autonomous aggregate expenditures

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

Use the following to answer questions . Exhibit: Aggregate Expenditures Curve Figure 13-6 -(Exhibit: Aggregate Expenditures Curve) 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.

An increase in the slope of the aggregate expenditures curve leads to a decrease in the value of the multiplier.

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

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

Use the following to answer questions . Exhibit: Consumption Functions Figure 13-3 -(Exhibit: Consumption Functions) Which of the following statements is false?

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

Use the following to answer questions . Exhibit: Aggregate Expenditures and Real GDP 2 -(Exhibit: Aggregate Expenditures and Real GDP 2) Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, I_P = Planned Investment. Consider a simple economy where AE = C + I_P, and I_P is autonomous. What is the value of AE when Y = $12,000 billion?

Use the following to answer questions . Exhibit: Aggregate Expenditures and Real GDP 2 -(Exhibit: Aggregate Expenditures and Real GDP 2) Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, I_P = Planned Investment. Consider a simple economy where AE = C + I_P, and I_P is autonomous. What is the value of autonomous AE?

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

Use the following to answer questions . Exhibit: Aggregate Expenditures Curve Figure 13-6 -(Exhibit: Aggregate Expenditures Curve) What is the value of the multiplier?

Use the following to answer questions . Exhibit: Aggregate Expenditures and Real GDP 1 -(Exhibit: Aggregate Expenditures and Real GDP 1) Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, I_P = Planned Investment. Suppose AE = C + I_P, and I_P 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

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

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

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

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