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Exam 9: Aggregate Demand

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Question 41

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If the MPC is 0.60 and disposable income increases from $20,000 billion to $22,000 billion,consumption will increase by

A) $2,000 billion.
B) $800 billion.
C) $1,200 billion.
D) $600 billion.

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Question 42

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APC is equal to

A) The change in total consumption divided by the change in total disposable income.
B) The change in total saving divided by the change in total disposable income.
C) Total consumption divided by total disposable income.
D) Total saving divided by total disposable income.

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Question 43

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A recessionary gap

If an increase in disposable income causes consumption to increase from $4,000 to $10,000 and causes saving to increase from $2,000 to $4,000,it can be inferred that the MPC equals

Consumption expenditures

The MPC + MPS must always equal

Refer to Table 9.2.(Data are expressed in billions of dollars. ) Table 9.2 $\begin{array}{|r|r|r|c|c|}\hline \begin{array}{r}\text { Full Employment } \\\text { Income (Output) }\end{array} & \begin{array}{c}\text { Consumers } \\\text { Desire to Spend }\end{array} & \begin{array}{c}\text { Investors Desire } \\\text { to Spend }\end{array} & \begin{array}{c}\text { Total Private } \\\text { Spending }\end{array} & \begin{array}{c}\text { Total } \\\text { Saving }\end{array} \\\hline \$ 500 & \$ 300 & \$ 250 & \$ & \$ \\\hline 600 & 375 & 250 & \$ & \$ \\\hline 700 & 450 & 250 & \$ & \$ \\\hline 800 & 525 & 250 & \$ & \$ \\\hline\end{array}$ If the full-employment level of income (Y_F) in Table 9.2 is $800 billion,

If,in the aggregate,consumers spend 75 cents of every extra dollar received,then the

A recessionary gap implies that

What must the value of the average propensity to save (APS)be if the average propensity to consume (APC)is greater than 1? Why?

The change in total spending from additional income is

What are the two types of consumer spending as identified by Keynes,and what are the determinants of each?

In a graph with disposable income on the horizontal axis and consumption on the vertical axis,the intersection of the 45-degree line with the

Table 9.1 $\begin{array} { | l | c | } \hline \begin{array} { c } \text { Disposable Income } \\\text { (Billions of dollars per year) }\end{array} & \begin{array} { c } \text { Total Consumption } \\\text { (Billions of dollars per year) }\end{array} \\\hline \text { \$0 } & \$ 50 \\\hline 200 & 210 \\\hline\end{array}$ What is the marginal propensity to save in Table 9.1?

Keynes asserted that wealth was the most important determinant of consumer spending.

The investment demand curve would shift to the left because of

If tax policies become less favorable,then

The combination of price level and real output that is compatible with both aggregate demand and aggregate supply is the definition of

If autonomous consumption decreases,then

Table 9.1 $\begin{array} { | l | c | } \hline \begin{array} { c } \text { Disposable Income } \\\text { (Billions of dollars per year) }\end{array} & \begin{array} { c } \text { Total Consumption } \\\text { (Billions of dollars per year) }\end{array} \\\hline \text { \$0 } & \$ 50 \\\hline 200 & 210 \\\hline\end{array}$ What is the rate of saving when income equals $300 billion in Table 9.1?