Question 1

Suppose at each price level, autonomous aggregate expenditures fall by $80 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) None of the above
F) B) and D)

Question 2

Figure 13-5
 P = Planned Investment.Consider a simple economy where AE = C + IP, IP is autonomous And 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,
IP = Planned Investment.Consider a simple economy where AE = C + IP, IP is autonomous
And 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) All of the above

Question 3

The multiplier effect is triggered by a shift in the aggregate expenditures curve.

Accepted Answer

A) True 
 B)False

Question 4

Suppose that your annual income has averaged $20,000 for the past 10 years and that you expect it will average $20,000 over the next 10 years.If your income this year increases to $30,000 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) All of the above
F) None of the above

Question 5

Figure 13-6
 P = Planned Investment, G = Government Purchases.Further, IP and G are autonomous. If real GDP produced is $4,000, how will equilibrium be restored in the economy? A) Policymakers must conduct contractionary policies to move the economy toward its equilibrium real GDP. B) Firms will reduce their output in subsequent periods, moving the economy toward its equilibrium real GDP. C) The price level must rise to reduce aggregate expenditures and restore equilibrium. D) The price level must fall to increase aggregate expenditures and restore equilibrium." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 13-6.Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption,
IP = Planned Investment, G = Government Purchases.Further, IP and G are autonomous.
If real GDP produced is $4,000, how will equilibrium be restored in the economy?

Accepted Answer

A)  Policymakers must conduct contractionary policies to move the economy toward its equilibrium real GDP.
B)  Firms will reduce their output in subsequent periods, moving the economy toward its equilibrium real GDP.
C)  The price level must rise to reduce aggregate expenditures and restore equilibrium.
D)  The price level must fall to increase aggregate expenditures and restore equilibrium.E) C) and D)
F) A) and C)

Question 6

An increase in aggregate demand causes an increase in _______, which in turn induces an increase in _______.

Accepted Answer

A)  income, consumption
B)  investment, consumption
C)  government spending, net exports
D)  consumption, priceE) A) and D)
F) B) and C)

Question 7

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,
IP = 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) All of the above
F) A) and C)

Question 8

Consider a simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption.Which of the following causes the aggregate expenditures curve to shift downwards?

Accepted Answer

A)  a decrease in taxes
B)  an increase in imports
C)  an increase in government spending
D)  an increase in investmentE) A) and B)
F) B) and C)

Question 9

Consider a simple economy that is made up of three sectors: households, firms, and government.Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption,
IP = Planned Investment, G = Government Purchases.Further, IP and G are autonomous.
In this case, the slope of the aggregate expenditures curve is

Accepted Answer

A)  1.
B)  infinity (since the AE curve is horizontal) .
C)  equal to the marginal propensity to consume.
D)  the value of the multiplier.E) A) and B)
F) B) and C)

Question 10

Figure 13-1
 
-Refer to Figure 13-1.When disposable personal income is $2,000 billion,

Accepted Answer

A)  personal saving is $1,200 billion.
B)  consumption is $1,600 billion.
C)  saving is $800 billion.
D)  consumption is $800 billion.E) A) and C)
F) A) and D)

Question 11

Unplanned investment occurs when
I.aggregate expenditures exceed real GDP produced.
II.aggregate expenditures fall short of real GDP produced.
III.when real GDP produced is less than potential real GDP.
IV.when real GDP produced is greater than potential real GDP.

Accepted Answer

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

Question 12

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) A) and D)
F) All of the above

Question 13

An upward shift in the consumption function can be caused by

Accepted Answer

A)  expectations of product shortages.
B)  expectations of less income in the future.
C)  a decrease in consumer confidence.
D)  a reduction in the wealth of households.E) A) and C)
F) A) and D)

Question 14

In the aggregate expenditures model, in equilibrium,

Accepted Answer

A)  aggregate expenditures equal real GDP produced.
B)  inventory changes equal saving.
C)  inventory changes equal investment.
D)  aggregate expenditures equal consumption.E) B) and D)
F) A) and D)

Question 15

The aggregate demand traces

Accepted Answer

A)  the total spending by consumers, business firms, and government agencies at a given price level.
B)  the locus of equilibrium real GDP associated with each price level in the aggregate expenditures model.
C)  the locus of equilibrium aggregate expenditures-real GDP combinations in the aggregate expenditures model.
D)  the locus of equilibrium real GDP associated with each income level in the aggregate expenditures model.E) A) and B)
F) A) and C)

Question 16

Consider a simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption.Which of the following causes the aggregate expenditures curve to shift upwards?

Accepted Answer

A)  an increase in taxes
B)  an increase in exports
C)  a decrease in the national debt
D)  a decrease in interest rateE) B) and C)
F) B) and D)

Question 17

In the aggregate expenditures model, if aggregate expenditures equal $800 billion and real GDP equals $600 billion,

Accepted Answer

A)  unplanned inventory accumulation equals $200 billion.
B)  unplanned inventory depletion equals $200 billion.
C)  consumption plus investment equals $200 billion.
D)  net investment equals $200 billion.E) None of the above
F) A) and D)

Question 18

Figure 13-6
 
-Refer to Figure 13-6.What is the value of the multiplier?

Accepted Answer

A)  1
B)  2
C)  3
D)  5E) A) and D)
F) C) and D)

Question 19

Let real GDP =Y = Yd, and the consumption function is C = $1,000 + .06Y.
What 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 B)

Exam 28: Consumption and the Aggregate Expenditures Model

An increase in aggregate demand causes an increase in _, which in turn induces an increase in _.

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

Correct Answer
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The aggregate demand traces

Correct Answer
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Correct Answer
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Unplanned investment occurs when I.aggregate expenditures exceed real GDP produced. II.aggregate expenditures fall short of real GDP produced. III.when real GDP produced is less than potential real GDP. IV.when real GDP produced is greater than potential real GDP.

Correct Answer
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Consider a simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption.Which of the following causes the aggregate expenditures curve to shift downwards?

Correct Answer
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Figure 13-6 -Refer to Figure 13-6.What is the value of the multiplier?

Correct Answer
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Figure 13-1 -Refer to Figure 13-1.When disposable personal income is $2,000 billion,

Correct Answer
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The multiplier effect is triggered by a shift in the aggregate expenditures curve.

Correct Answer
verified

Figure 13-6 -Refer to Figure 13-6.Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, I_P = Planned Investment, G = Government Purchases.Further, I_P and G are autonomous. If real GDP produced is $4,000, how will equilibrium be restored in the economy?

Correct Answer
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In the aggregate expenditures model, if aggregate expenditures equal $800 billion and real GDP equals $600 billion,

Correct Answer
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An upward shift in the consumption function can be caused by

Correct Answer
verified

Suppose at each price level, autonomous aggregate expenditures fall by $80 billion.As a result, the aggregate expenditures curve shifts

Correct Answer
verified

In the aggregate expenditures model, in equilibrium,

Correct Answer
verified

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

Correct Answer
verified

Suppose that your annual income has averaged $20,000 for the past 10 years and that you expect it will average $20,000 over the next 10 years.If your income this year increases to $30,000 but your consumption expenditures don't change, then you are most likely acting according to the

Correct Answer
verified

Consider a simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption.Which of the following causes the aggregate expenditures curve to shift upwards?

Correct Answer
verified

Figure 13-6 -Refer to Figure 13-6.Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, I_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 28: Consumption and the Aggregate Expenditures Model

An increase in aggregate demand causes an increase in _______, which in turn induces an increase in _______.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The aggregate demand traces

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Unplanned investment occurs when I.aggregate expenditures exceed real GDP produced. II.aggregate expenditures fall short of real GDP produced. III.when real GDP produced is less than potential real GDP. IV.when real GDP produced is greater than potential real GDP.

Correct AnswerverifiedShow Answer

Consider a simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption.Which of the following causes the aggregate expenditures curve to shift downwards?

Correct AnswerverifiedShow Answer

Figure 13-6 -Refer to Figure 13-6.What is the value of the multiplier?

Correct AnswerverifiedShow Answer

Figure 13-1 -Refer to Figure 13-1.When disposable personal income is $2,000 billion,

Correct AnswerverifiedShow Answer

The multiplier effect is triggered by a shift in the aggregate expenditures curve.

Correct AnswerverifiedShow Answer

Figure 13-6 -Refer to Figure 13-6.Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, IP = Planned Investment, G = Government Purchases.Further, IP and G are autonomous. If real GDP produced is $4,000, how will equilibrium be restored in the economy?

Correct AnswerverifiedShow Answer

In the aggregate expenditures model, if aggregate expenditures equal $800 billion and real GDP equals $600 billion,

Correct AnswerverifiedShow Answer

An upward shift in the consumption function can be caused by

Correct AnswerverifiedShow Answer

Suppose at each price level, autonomous aggregate expenditures fall by $80 billion.As a result, the aggregate expenditures curve shifts

Correct AnswerverifiedShow Answer

In the aggregate expenditures model, in equilibrium,

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

Correct AnswerverifiedShow Answer

Suppose that your annual income has averaged $20,000 for the past 10 years and that you expect it will average $20,000 over the next 10 years.If your income this year increases to $30,000 but your consumption expenditures don't change, then you are most likely acting according to the

Correct AnswerverifiedShow Answer

Consider a simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption.Which of the following causes the aggregate expenditures curve to shift upwards?

Correct AnswerverifiedShow Answer

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

An increase in aggregate demand causes an increase in _, which in turn induces an increase in _.

Correct Answer
verified

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

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Figure 13-6 -Refer to Figure 13-6.Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, I_P = Planned Investment, G = Government Purchases.Further, I_P and G are autonomous. If real GDP produced is $4,000, how will equilibrium be restored in the economy?

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