Question 1

A given change in disposable income would have the greatest effect on aggregate demand with which of the following marginal propensities to consume?

Accepted Answer

A)  0.2 
B)  0.4 
C)  0.6 
D)  0.8 
A)  0.2 
B)  0.4 
C)  0.6 
D)  0.8 D

Question 2

If Pat's income increased from $250,000 to $500,000 and his consumption increased from $200,000 to $300,000,what was his marginal propensity to consume?

Accepted Answer

A)  0.4 
B)  0.6 
C)  0.8 
D)  0.9 
A)  0.4 
B)  0.6 
C)  0.8 
D)  0.9 A

Question 3

Autonomous determinants of consumption expenditures are dependent on the level of current disposable income.

Accepted Answer

A) True 
 B)False  False

Question 4

A change in taxes of a given amount affects an individual's consumption spending by less than that amount,because the marginal propensity to consume is less than 1.

Accepted Answer

A) True 
 B)False

Question 5

Will MPC plus MPS always equal one? Explain why or why not.

Accepted Answer

Yes,MPC plus MPS will always equal one.T

Question 6

Which of the following is positively related to income?

Accepted Answer

A)  consumption 
B)  investment 
C)  government expenditures 
D)  all of the above 
A)  consumption 
B)  investment 
C)  government expenditures 
D)  all of the above

Question 7

When the Keynesian-cross model is in equilibrium,income equals output and aggregate expenditure equals output.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is not an autonomous determinant of consumption expenditures?

Accepted Answer

A)  real wealth 
B)  the interest rate 
C)  tastes and preferences 
D)  current disposable income 
A)  real wealth 
B)  the interest rate 
C)  tastes and preferences 
D)  current disposable income

Question 9

Which of the following is not true with regard to the aggregate expenditure model?

Accepted Answer

A)  It explains short-run business cycles. 
B)  It explains inflation. 
C)  It assumes that consumption spending is the primary determinant of aggregate demand. 
D)  It includes investment, government spending, and net exports. 
A)  It explains short-run business cycles. 
B)  It explains inflation. 
C)  It assumes that consumption spending is the primary determinant of aggregate demand. 
D)  It includes investment, government spending, and net exports.

Question 10

Unplanned inventory decreases:

Accepted Answer

A)  tend to result in a decrease in income. 
B)  tend to result in an increase in real output. 
C)  tend to further reduce production. 
D)  signal that demand was weaker than expected. 
A)  tend to result in a decrease in income. 
B)  tend to result in an increase in real output. 
C)  tend to further reduce production. 
D)  signal that demand was weaker than expected.

Question 11

If Oscar's MPC is 0.95 and he earns an additional $2,000,how much would he spend?

Accepted Answer

A)  $100 
B)  $1,900 
C)  $2,105 
D)  $40,000 
A)  $100 
B)  $1,900 
C)  $2,105 
D)  $40,000

Question 12

The Keynesian-cross model suggests that increased saving increases the economy's output.

Accepted Answer

A) True 
 B)False

Question 13

Unplanned inventory increases:

Accepted Answer

A)  tend to result in an increase in income. 
B)  tend to result in an increase in real output. 
C)  result in an increase in production. 
D)  signal that demand was weaker than expected. 
A)  tend to result in an increase in income. 
B)  tend to result in an increase in real output. 
C)  result in an increase in production. 
D)  signal that demand was weaker than expected.

Question 14

If George's MPS is 0.75 and he earns an additional $1,000,how much would he spend?

Accepted Answer

A)  $250 
B)  $750 
C)  $1,333 
D)  $4,000 
A)  $250 
B)  $750 
C)  $1,333 
D)  $4,000

Question 15

If the ____ is/are fixed,a change in nominal income is equivalent to a change in real income.

Accepted Answer

A)  price level 
B)  interest rates 
C)  tastes and preferences 
D)  future expectations 
A)  price level 
B)  interest rates 
C)  tastes and preferences 
D)  future expectations

Question 16

The slope of the consumption function is equal to:

Accepted Answer

A)  the MPC. 
B)  the MPS. 
C)  1/(1 - MP
C) . 
D)  MPC - MPS. 
A)  the MPC. 
B)  the MPS. 
C)  1/(1 - MP
C) . 
D)  MPC - MPS.

Question 17

The concept of cost-push inflation cannot be explained by the aggregate expenditure model.

Accepted Answer

A) True 
 B)False

Question 18

The marginal propensity to consume (MPC)is defined as:

Accepted Answer

A)  the additional consumption that results from one dollar increase in disposable income. 
B)  the fraction of total disposable income that households spend on consumption. 
C)  the fraction of total disposable income that households save. 
D)  the additional disposable income households earn in a given period. 
A)  the additional consumption that results from one dollar increase in disposable income. 
B)  the fraction of total disposable income that households spend on consumption. 
C)  the fraction of total disposable income that households save. 
D)  the additional disposable income households earn in a given period.

Question 19

The Keynesian-cross model implies that changes in aggregate supply cause fluctuations in real GDP.

Accepted Answer

A) True 
 B)False

Question 20

Marginal propensity to consume is equal to the change in ____ divided by the change in ____.

Accepted Answer

A)  consumption spending; total income 
B)  saving; total income 
C)  saving; disposable income 
D)  consumption spending; disposable income 
A)  consumption spending; total income 
B)  saving; total income 
C)  saving; disposable income 
D)  consumption spending; disposable income

Exam 23: The Aggregate Expenditure Model

A given change in disposable income would have the greatest effect on aggregate demand with which of the following marginal propensities to consume?

If Pat's income increased from $250,000 to $500,000 and his consumption increased from $200,000 to $300,000,what was his marginal propensity to consume?

Autonomous determinants of consumption expenditures are dependent on the level of current disposable income.

A change in taxes of a given amount affects an individual's consumption spending by less than that amount,because the marginal propensity to consume is less than 1.

Will MPC plus MPS always equal one? Explain why or why not.

Which of the following is positively related to income?

When the Keynesian-cross model is in equilibrium,income equals output and aggregate expenditure equals output.

Which of the following is not an autonomous determinant of consumption expenditures?

Which of the following is not true with regard to the aggregate expenditure model?

Unplanned inventory decreases:

If Oscar's MPC is 0.95 and he earns an additional $2,000,how much would he spend?

The Keynesian-cross model suggests that increased saving increases the economy's output.

Unplanned inventory increases:

If George's MPS is 0.75 and he earns an additional $1,000,how much would he spend?

If the ____ is/are fixed,a change in nominal income is equivalent to a change in real income.

The slope of the consumption function is equal to:

The concept of cost-push inflation cannot be explained by the aggregate expenditure model.

The marginal propensity to consume (MPC)is defined as:

The Keynesian-cross model implies that changes in aggregate supply cause fluctuations in real GDP.

Marginal propensity to consume is equal to the change in ____ divided by the change in ____.

The Role and Method of Economics

Economics: Eight Powerful Ideas

Scarcity, Trade-Offs, and Production Possibilities

Demand, Supply, and Market Equilibrium

Markets in Motion and Price Controls

Elasticities

Market Efficiency and Welfare

Market Failure

Public Finance and Public Choice

Consumer Choice Theory

The Firm: Production and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Product Differentiation

Oligopoly and Strategic Behavior

The Markets for Labor, Capital, and Land

Income, Poverty, and Health Care

Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Measuring Economic Performance

Economic Growth in the Global Economy

Financial Markets, Saving, and Investment

Aggregate Demand and Aggregate Supply

Monetary Institutions

The Federal Reserve System and Monetary Policy

Issues in Macroeconomic Theory and Policy

International Trade

International Finance

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