Question 1

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 billion

Question 2

Figure 13-1 
-Refer to Figure 13-1. Assuming that the relationship between consumption and disposable personal income remains linear throughout its entire range, if disposable personal income were zero, what would personal saving be?

Accepted Answer

A)   −$200 billion
B)   $0
C)   $200 billion
D)   $400 billion

Question 3

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 equilibrium real GDP (Y*) ? A)  $2,000 billion B)  $6,000 billion C)  $7,500 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,
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 equilibrium real GDP (Y*) ?

Accepted Answer

A)   $2,000 billion
B)   $6,000 billion
C)   $7,500 billion
D)   $8,000 billion

Question 4

May has been holding her retirement savings in a safe in her house. If the economy is currently experiencing a falling price level,

Accepted Answer

A)   the real purchasing power of her money remains constant.
B)   the real value of her savings is decreasing as long as the price level is falling.
C)   the real value of her savings is increasing as long as the price level is falling.
D)   the nominal value of her savings remains constant.

Question 5

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.

Question 6

The marginal propensity to consume is the

Accepted Answer

A)   slope of the saving function.
B)   slope of the consumption-saving curve.
C)   slope of the saving-investment curve.
D)   change in consumption divided by the change in disposable personal income.

Question 7

During an economic downturn, households respond to a decline in income by

Accepted Answer

A)   reducing taxes.
B)   reducing consumption.
C)   increasing the quantity of labor supplied.
D)   negotiating higher wages.

Question 8

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 conditions

Question 9

According to the real wealth effect, if you are living in a period of rising price levels, the cost of the goods and services you buy

Accepted Answer

A)   decreases and your real income increases.
B)   increases and your real income increases.
C)   increases and your real income remains the same.
D)   increases and your real income decreases.

Question 10

If consumption is given by C = $10 billion + 0.5Y, and autonomous planned investment,
government purchases, and net exports amount to $5 billion, then aggregate expenditures are
$20 billion if Y = $10 billion.

Accepted Answer

A) True 
 B)False

Question 11

According to the permanent income hypothesis,

Accepted Answer

A)   consumption in any period depends on the stable annual income that people expect to earn in their jobs.
B)   the amount of income that people require depends on the amount of consumption they need and want to undertake.
C)   consumption in any period depends on the average annual income people expect to receive for the rest of their lives.
D)   the amount of personal saving depends on the amount of consumption people plan to undertake when they retire.

Question 12

The multiplier effect indicates that

Accepted Answer

A)   the aggregate demand curve is downward sloping.
B)   a change in any autonomous component of aggregate expenditure is buffered by the multiplier effect
C)   a change in income causes a magnified change in investment.
D)   a change in any autonomous component of aggregate expenditure brings about a magnified change in income.

Question 13

Aggregate expenditures that do not vary with real GDP are called autonomous aggregate
expenditures.

Accepted Answer

A) True 
 B)False

Question 14

The interest rate effect suggests that

Accepted Answer

A)   domestic investments fall when foreign interest rates rise relative to domestic interest rates.
B)   changes in the price level affect the real purchasing power of money and therefore the money supply.
C)   changes in the price level affect the real quantity of money held by households and firms and therefore the interest rate.
D)   changes in the price level affect the level of real income and therefore consumption.

Question 15

The amount of consumption that would take place if real GDP were zero is called

Accepted Answer

A)   induced consumption.
B)   exogenous consumption.
C)   autonomous consumption.
D)   break even consumption.

Question 16

Suppose the consumption function is C = $500 + 0.8Y. If Y = $1,000, what is the amount of consumption?

Accepted Answer

A)   $300
B)   $500
C)   $1,000
D)   $1,300

Question 17

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.

Question 18

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 = $7,000 billion, what is the amount of aggregate expenditures? A)  $6,000 billion B)  $6,500 billion C)  $7,000 billion D)  $7,500 billion" 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. IP is autonomous and the consumption function is C = $1,000 billion + 0.5Y. If real GDP = $7,000 billion, what is the amount of aggregate expenditures?

Accepted Answer

A)   $6,000 billion
B)   $6,500 billion
C)   $7,000 billion
D)   $7,500 billion

Question 19

Figure 13-6 
-Refer to Figure 13-6. Suppose the government purchases economy rise by $100. What is the new equilibrium level of real GDP?

Accepted Answer

A)   $1,700
B)   $1,800
C)   $1,900
D)   $2,100

Question 20

Figure 13-2 
-Refer to Figure 13-2. The marginal propensity to consume equals

Accepted Answer

A)   0.
B)   0.5.
C)   1.0.
D)   2.0.

Exam 13: Consumption and the Aggregate Expenditures Model

Figure 13-6 -Refer to Figure 13-6. Suppose the government purchases economy rise by $100. What is the new equilibrium level of real GDP?

Correct Answer
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The marginal propensity to save is given by

Correct Answer
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Figure 13-1 -Refer to Figure 13-1. Assuming that the relationship between consumption and disposable personal income remains linear throughout its entire range, if disposable personal income were zero, what would personal saving be?

Correct Answer
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According to the permanent income hypothesis,

Correct Answer
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If consumption is given by C = $10 billion + 0.5Y, and autonomous planned investment, government purchases, and net exports amount to $5 billion, then aggregate expenditures are $20 billion if Y = $10 billion.

Correct Answer
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The interest rate effect suggests that

Correct Answer
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The multiplier effect indicates that

Correct Answer
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Figure 13-2 -Refer to Figure 13-2. The marginal propensity to consume equals

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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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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Aggregate expenditures that do not vary with real GDP are called autonomous aggregate expenditures.

Correct Answer
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Suppose the consumption function is C = $500 + 0.8Y. If Y = $1,000, what is the amount of consumption?

Correct Answer
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During an economic downturn, households respond to a decline in income by

Correct Answer
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May has been holding her retirement savings in a safe in her house. If the economy is currently experiencing a falling price level,

Correct Answer
verified

According to the real wealth effect, if you are living in a period of rising price levels, the cost of the goods and services you buy

Correct Answer
verified

An upward shift in the consumption function can be caused by

Correct Answer
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Correct Answer
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The marginal propensity to consume is the

Correct Answer
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The amount of consumption that would take place if real GDP were zero is called

Correct Answer
verified

Exam 13: Consumption and the Aggregate Expenditures Model

Figure 13-6 -Refer to Figure 13-6. Suppose the government purchases economy rise by $100. What is the new equilibrium level of real GDP?

Correct AnswerverifiedShow Answer

The marginal propensity to save is given by

Correct AnswerverifiedShow Answer

Figure 13-1 -Refer to Figure 13-1. Assuming that the relationship between consumption and disposable personal income remains linear throughout its entire range, if disposable personal income were zero, what would personal saving be?

Correct AnswerverifiedShow Answer

According to the permanent income hypothesis,

Correct AnswerverifiedShow Answer

If consumption is given by C = $10 billion + 0.5Y, and autonomous planned investment, government purchases, and net exports amount to $5 billion, then aggregate expenditures are $20 billion if Y = $10 billion.

Correct AnswerverifiedShow Answer

The interest rate effect suggests that

Correct AnswerverifiedShow Answer

The multiplier effect indicates that

Correct AnswerverifiedShow Answer

Figure 13-2 -Refer to Figure 13-2. The marginal propensity to consume equals

Correct AnswerverifiedShow Answer

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 AnswerverifiedShow Answer

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

Aggregate expenditures that do not vary with real GDP are called autonomous aggregate expenditures.

Correct AnswerverifiedShow Answer

Suppose the consumption function is C = $500 + 0.8Y. If Y = $1,000, what is the amount of consumption?

Correct AnswerverifiedShow Answer

During an economic downturn, households respond to a decline in income by

Correct AnswerverifiedShow Answer

May has been holding her retirement savings in a safe in her house. If the economy is currently experiencing a falling price level,

Correct AnswerverifiedShow Answer

According to the real wealth effect, if you are living in a period of rising price levels, the cost of the goods and services you buy

Correct AnswerverifiedShow Answer

An upward shift in the consumption function can be caused by

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The marginal propensity to consume is the

Correct AnswerverifiedShow Answer

The amount of consumption that would take place if real GDP were zero is called

Correct AnswerverifiedShow 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?

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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?

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