Question 1

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

Accepted Answer

The APS must be negative if the APC is g...

Question 2

If consumption and investment spending decline,then state and local government spending is likely to

Accepted Answer

A)  Decline,leading to more economic instability.
B)  Increase,leading to more economic instability.
C)  Decline,leading to less economic instability.
D)  Increase, leading to less economic instability. A

Question 3

Assume there is a decrease in government purchases and exports.Currently there is a recessionary gap,which implies that

Accepted Answer

A)  Inventories are accumulating.
B)  Inventories are being depleted.
C)  Desired spending is greater than output.
D)  Investment is greater than saving.

Question 4

Which government sector has the ability to respond countercyclically to the economy?

Accepted Answer

A)  State only.
B)  Federal only.
C)  Local only.
D)  Federal, state, and local.

Question 5

Given a consumption function of C = $25 + 0.75YD,the average propensity to consume equals 1 when disposable income equals

Accepted Answer

A)  $25.
B)  $75.
C)  $100.
D)  -$300.

Question 6

The change in total spending from additional income is

Accepted Answer

A)  MPC.
B)  MPS.
C)  APC.
D)  APS.

Question 7

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

Accepted Answer

A)  APC is 1.25.
B)  APC is 0.75.
C)  MPC is 0.75.
D)  MPS is 0.75.

Question 8

Use the following table to answer the questions : Table9.2:
F) in Table 9.2 is $800 billion, A) The economy is in equilibrium. B) There is a recessionary gap of $25 billion. C) There is an inflationary gap of $250 billion. D) There is a recessionary gap of $275 billion. " class="answers-bank-image d-inline" rel="preload" > 
-Complete Table 9.2.(Data are expressed in billions of dollars. )   the full-employment level of income (YF) in Table 9.2 is $800 billion,

Accepted Answer

A)  The economy is in equilibrium.
B)  There is a recessionary gap of $25 billion.
C)  There is an inflationary gap of $250 billion.
D)  There is a recessionary gap of $275 billion.

Question 9

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

Accepted Answer

A)  $2,000 billion.
B)  $800 billion.
C)  $1,200 billion.
D)  It is always equal to or greater than 1.

Question 10

Total consumption consists entirely of two components: autonomous consumption and income-dependent consumption.

Accepted Answer

A) True 
 B)False

Question 11

Unlike the classical economists,Keynes believed that the economy would automatically adjust to full employment.

Accepted Answer

A) True 
 B)False

Question 12

A sudden increase in confidence by the business community could best be represented by

Accepted Answer

A)  The consumption curve shifting downward.
B)  The AS curve shifting downward.
C)  An aggregate expenditure curve shifting upward.
D)  An aggregate expenditure curve shifting downward. C

Question 13

Consumption expenditures

Accepted Answer

A)  Account for approximately two-thirds of total spending.
B)  Include purchases of new and used goods by consumers.
C)  Are equal to disposable personal income plus personal saving.
D)  Are equal to consumer spending plus transfer payments. A

Question 14

Investment spending includes expenditures on all of the following except

Accepted Answer

A)  Stocks and bonds.
B)  Equipment.
C)  Inventory.
D)  Plants or office buildings.

Question 15

Full-employment income is the same as the potential GDP of the economy.

Accepted Answer

A) True 
 B)False

Question 16

Use the following figure to answer the questions : Figure9.3:
 
-the MPC in the economy depicted in Figure 9.3

Accepted Answer

A)  Is constant.
B)  Increases steadily as disposable income increases.
C)  Decreases steadily as disposable income increases.
D)  Equals 1.0.

Question 17

Autonomous consumption depends on all of the following except

Accepted Answer

A)  Innovation.
B)  Wealth.
C)  Credit.
D)  Expectations.

Question 18

Using the disposable income level at which the consumption function intersects the 45-degree line,we can identify

Accepted Answer

A)  Full employment at the intersection point.
B)  An inflationary gap to the right of the intersection point.
C)  Dissaving to the left of the intersection point.
D)  Dissaving to the right of the intersection point.

Question 19

The MPC + MPS must always equal

Accepted Answer

A)  The slope of the consumption function.
B)  1.
C)  The APC.
D)  0.

Question 20

APC is equal to

Accepted Answer

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.

Exam 9: Aggregate Demand Appendix: the Keynesian Cross

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

Correct AnswerverifiedThe APS must be negative if the APC is g...View AnswerShow Answer

If consumption and investment spending decline,then state and local government spending is likely to

Correct AnswerverifiedA

Assume there is a decrease in government purchases and exports.Currently there is a recessionary gap,which implies that

Correct AnswerverifiedShow Answer

Which government sector has the ability to respond countercyclically to the economy?

Correct AnswerverifiedShow Answer

Given a consumption function of C = $25 + 0.75YD,the average propensity to consume equals 1 when disposable income equals

Correct AnswerverifiedShow Answer

The change in total spending from additional income is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Use the following table to answer the questions : Table9.2: -Complete Table 9.2.(Data are expressed in billions of dollars. ) the full-employment level of income (YF) in Table 9.2 is $800 billion,

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Total consumption consists entirely of two components: autonomous consumption and income-dependent consumption.

Correct AnswerverifiedShow Answer

Unlike the classical economists,Keynes believed that the economy would automatically adjust to full employment.

Correct AnswerverifiedShow Answer

A sudden increase in confidence by the business community could best be represented by

Correct AnswerverifiedC

Consumption expenditures

Correct AnswerverifiedA

Investment spending includes expenditures on all of the following except

Correct AnswerverifiedShow Answer

Full-employment income is the same as the potential GDP of the economy.

Correct AnswerverifiedShow Answer

Use the following figure to answer the questions : Figure9.3: -the MPC in the economy depicted in Figure 9.3

Correct AnswerverifiedShow Answer

Autonomous consumption depends on all of the following except

Correct AnswerverifiedShow Answer

Using the disposable income level at which the consumption function intersects the 45-degree line,we can identify

Correct AnswerverifiedShow Answer

The MPC + MPS must always equal

Correct AnswerverifiedShow Answer

APC is equal to

Correct AnswerverifiedShow Answer

Correct Answer
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The APS must be negative if the APC is g...
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Given a consumption function of C = $25 + 0.75Y_D,the average propensity to consume equals 1 when disposable income equals

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Use the following table to answer the questions : Table9.2: -Complete Table 9.2.(Data are expressed in billions of dollars. ) the full-employment level of income (Y_F) in Table 9.2 is $800 billion,

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C

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A

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