Question 1

Consider a simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption. The marginal propensity to consume is 0.8. Suppose the equilibrium level of real GDP at the prevailing price is $500 billion below potential real GDP. All else constant, by how much should autonomous aggregate expenditures be increased to reach potential output?

Accepted Answer

A)   $625 billion
B)   $500 billion
C)   $400 billion
D)   $100 billionE) B) and C)
F) B) and D)

Question 2

In the summer of 2001, tax rebate checks of $300 per single taxpayer and $600 for married couples were distributed to 92 million people in the U.S. Economic researchers found that over a nine-month period spending increased to about 40% of the rebate. These findings support

Accepted Answer

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

Question 3

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) A) and B)
F) C) and D)

Question 4

Figure 13-5 P = Planned Investment. Consider a simple economy where AE = C + IP, and IP is autonomous. What is the value of AE when Y = $12,000 billion? A)  $2,000 billion B)  $8,000 billion C)  $11,000 billion D)  $12,000 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, and IP is autonomous. What is the value of AE when Y = $12,000 billion?

Accepted Answer

A)   $2,000 billion
B)   $8,000 billion
C)   $11,000 billion
D)   $12,000 billionE) A) and B)
F) B) and D)

Question 5

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) None of the above
F) All of the above

Question 6

Suppose the slope of the aggregate expenditures curve is 0.75. An increase in autonomous investment expenditure of $6 billion would produce an ultimate increase in equilibrium real GDP of

Accepted Answer

A)   $0.25 billion.
B)   $6 billion.
C)   $12 billion.
D)   $24 billion.E) None of the above
F) C) and D)

Question 7

What is the marginal propensity to consume? Explain why the sum of marginal propensity
to consume and marginal propensity to save must equal 1.

Accepted Answer

The marginal propensity to consume (MPC)...

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

The bulk of aggregate demand in the United States consists of

Accepted Answer

A)   consumption.
B)   investment.
C)   government spending.
D)   net exports.E) A) and D)
F) A) and C)

Question 10

In the aggregate expenditures model, if real GDP equals $700 billion and aggregate expenditures equal $400 billion,

Accepted Answer

A)   consumption plus investment equals $300 billion.
B)   planned investment equals $300 billion.
C)   investment plus saving equals $300 billion.
D)   unplanned inventory accumulation equals $300 billion.E) C) and D)
F) A) and D)

Question 11

Figure 13-3 
-Refer to Figure 13-3. Which of the following statements is false?

Accepted Answer

A)   At points j, k, and m, consumers spend all their disposable income on consumption.
B)   The amount of consumption is positive even when disposable income equals zero.
C)   The slope of the consumption function is the marginal propensity to consume.
D)   At points j, k, and m, the marginal propensity to save equals zero.E) C) and D)
F) All of the above

Question 12

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

Accepted Answer

A)   shifts the aggregate expenditures curve upwards.
B)   shifts the aggregate expenditures curve downwards.
C)   causes a movement up along a given aggregate expenditures curve.
D)   causes a movement down a given aggregate expenditures curve.E) B) and C)
F) A) and B)

Question 13

Figure 13-2 
-Refer to Figure 13-2. If real GDP is $4 trillion, consumption equals

Accepted Answer

A)   0.75 trillion.
B)   1 trillion.
C)   3 trillion.
D)   4 trillion.E) A) and B)
F) None of the above

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) C) and D)
F) A) and B)

Question 15

Figure 13-6 P = Planned Investment, G = Government Purchases. Further, IP and G are autonomous. The equilibrium level of real GDP is A)  $800 billion. B)  $1,000 billion. C)  $1,600 billion. D)  $3,200 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. The equilibrium level of real GDP is

Accepted Answer

A)   $800 billion.
B)   $1,000 billion.
C)   $1,600 billion.
D)   $3,200 billion.E) None of the above
F) All of the above

Question 16

Figure 13-2 
-Refer to Figure 13-2. If real GDP were $12 trillion, consumption equals

Accepted Answer

A)   5 trillion.
B)   7 trillion.
C)   9 trillion.
D)   11 trillion.E) B) and D)
F) B) and C)

Question 17

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

Question 18

According to the permanent income hypothesis,

Accepted Answer

A)   a change in income regarded as permanent will have a greater impact on saving than on consumption.
B)   a change in income regarded as temporary will have a greater impact on saving than on consumption.
C)   regardless of whether a change in disposable personal income is permanent or temporary; people will change consumption by moving along the consumption function.
D)   a change in income regarded as temporary will not affect consumption much since it will have little effect on average lifetime income.E) B) and C)
F) A) and D)

Question 19

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,
IP = 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) C) and D)
F) B) and D)

Question 20

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

Exam 28: Monetary Policy and Bank Regulation

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

Correct Answer
verified

In the summer of 2001, tax rebate checks of $300 per single taxpayer and $600 for married couples were distributed to 92 million people in the U.S. Economic researchers found that over a nine-month period spending increased to about 40% of the rebate. These findings support

Correct Answer
verified

Difficulty: Medium Figure 13-4 -Refer to Figure 13-4. Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, I_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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What is the marginal propensity to consume? Explain why the sum of marginal propensity to consume and marginal propensity to save must equal 1.

Correct Answer
Answered by ExamLex AI
The marginal propensity to consume (MPC)...
View Answer

Figure 13-5 -Refer to Figure 13-5. 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?

Correct Answer
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Figure 13-3 -Refer to Figure 13-3. Which of the following statements is false?

Correct Answer
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According to the permanent income hypothesis,

Correct Answer
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Personal saving equals

Correct Answer
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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

Suppose the slope of the aggregate expenditures curve is 0.75. An increase in autonomous investment expenditure of $6 billion would produce an ultimate increase in equilibrium real GDP of

Correct Answer
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The consumption function expresses the

Correct Answer
verified

Correct Answer
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In the aggregate expenditures model, if real GDP equals $700 billion and aggregate expenditures equal $400 billion,

Correct Answer
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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. The equilibrium level of real GDP is

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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Figure 13-2 -Refer to Figure 13-2. If real GDP is $4 trillion, consumption equals

Correct Answer
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Figure 13-2 -Refer to Figure 13-2. If real GDP were $12 trillion, consumption equals

Correct Answer
verified

Correct Answer
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The bulk of aggregate demand in the United States consists of

Correct Answer
verified

In the aggregate expenditures model, in equilibrium,

Correct Answer
verified

Exam 28: Monetary Policy and Bank Regulation

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

Correct AnswerverifiedShow Answer

In the summer of 2001, tax rebate checks of $300 per single taxpayer and $600 for married couples were distributed to 92 million people in the U.S. Economic researchers found that over a nine-month period spending increased to about 40% of the rebate. These findings support

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

What is the marginal propensity to consume? Explain why the sum of marginal propensity to consume and marginal propensity to save must equal 1.

Correct AnswerAnswered by ExamLex AIThe marginal propensity to consume (MPC)...View AnswerShow Answer

Figure 13-5 -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, and IP is autonomous. What is the value of AE when Y = $12,000 billion?

Correct AnswerverifiedShow Answer

Figure 13-3 -Refer to Figure 13-3. Which of the following statements is false?

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According to the permanent income hypothesis,

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Personal saving equals

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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

Suppose the slope of the aggregate expenditures curve is 0.75. An increase in autonomous investment expenditure of $6 billion would produce an ultimate increase in equilibrium real GDP of

Correct AnswerverifiedShow Answer

The consumption function expresses the

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Correct AnswerverifiedShow Answer

In the aggregate expenditures model, if real GDP equals $700 billion and aggregate expenditures equal $400 billion,

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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. The equilibrium level of real GDP is

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 marginal propensity to consume?

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Figure 13-2 -Refer to Figure 13-2. If real GDP is $4 trillion, consumption equals

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Figure 13-2 -Refer to Figure 13-2. If real GDP were $12 trillion, consumption equals

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The bulk of aggregate demand in the United States consists of

Correct AnswerverifiedShow Answer

In the aggregate expenditures model, in equilibrium,

Correct AnswerverifiedShow Answer

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

Correct Answer
verified

Correct Answer
Answered by ExamLex AI
The marginal propensity to consume (MPC)...
View Answer

Figure 13-5 -Refer to Figure 13-5. 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?

Correct Answer
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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. The equilibrium level of real GDP is

Correct Answer
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