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Exam 13: Consumption and the Aggregate Expenditures Model

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Question 41

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The bulk of aggregate demand in the United States consists of

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

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Question 42

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Autonomous aggregate expenditures are those that automatically vary with real GDP, whereas induced expenditures only change in response to a change in an external factor.

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Question 43

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Use the following to answer questions Exhibit: Aggregate Expenditures and Real GDP 2 -(Exhibit: Aggregate Expenditures and Real GDP 2) 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 autonomous AE?

Use the following to answer questions Exhibit: Aggregate Expenditures and Real GDP 1 -(Exhibit: Aggregate Expenditures and Real GDP 1) Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, I_P = Planned Investment.Suppose AE = C + I_P.I_P is autonomous and the consumption function is C = $1,000 billion + 0.5Y.What is the amount of consumption when real GDP is $6,000 billion?

Suppose when disposable personal income increases from $10,000 to $15,000, consumption increases from $9,000 to $12,000.What is the marginal propensity to consume?

Use the following to answer questions Exhibit: Aggregate Expenditures and Real GDP 2 -(Exhibit: Aggregate Expenditures and Real GDP 2) Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, I_P = Planned Investment.Consider a simple economy where AE = C + I_P, I_P is autonomous and the consumption function is given by C = $1,000 billion + 0.75Y.If potential real GDP is $9,000 billion, by how much must planned investment change to reach potential real GDP?

Aggregate expenditures are the

In the aggregate expenditures model, if a $50 billion increase in investment leads to an increase in equilibrium real GDP of $250 billion at the initial price level, then the multiplier is 4.

Unplanned investment occurs when I.aggregate expenditures exceed real GDP produced. II.aggregate expenditures fall short of real GDP produced. III.when real GDP produced is less than potential real GDP. IV.when real GDP produced is greater than potential real GDP.

In the simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption, suppose when autonomous aggregate expenditures rise by $1,000 billion, equilibrium real GDP increases by $2,500 billion.Which of the following statements is true?

Use the following to answer questions Exhibit: Income and Consumption -Let real GDP =Y = Y_d, and the consumption function is C = $1,000 + .06Y. What is the value of autonomous consumption (A) And what is the marginal propensity to consume (MPC) ?

The relationship between personal saving and the level of disposable personal income is shown by the

In the simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption, if the slope of the aggregate expenditures curve decreases, the multiplier

Use the following to answer questions Exhibit: Aggregate Expenditures Curve Figure 13-6 -(Exhibit: Aggregate Expenditures Curve) 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 aggregate expenditures?

If prices of the goods and services in the domestic market rise relative to those in foreign markets

Use the following to answer questions Exhibit: Consumption Functions Figure 13-3 -(Exhibit: Consumption Functions) Upward shifts of the consumption function, for example from C₀ to C₁ to C₂ demonstrate

The marginal propensity to consume is the change in consumption divided by the change in disposable personal income.

Use the following to answer questions Exhibit: Consumption and Real GDP -The assertion that consumption depends on expected average annual income is called

Let AE = Aggregate Expenditures, C = Consumption, I_P = Planned Investment, G =Government Purchases.Consider a simple aggregate expenditures model, where AE = C + I_P + G and all components of aggregate expenditures except consumption are autonomous.If the MPS is 0.4, then the multiplier is

The amount of consumption that takes place when real GDP equals zero is called induced consumption.