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 D

Question 2

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

Question 3

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

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

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

Question 6

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.

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

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

Accepted Answer

Yes,MPC plus MPS will always equal one.T...

Question 9

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.

Question 10

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.

Question 11

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

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

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.

Question 15

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

Accepted Answer

A) True 
 B)False  False

Question 16

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

Question 17

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

Question 18

Which of the following is positively related to income?

Accepted Answer

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

Question 19

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 20

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.

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?

Correct AnswerverifiedD

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Unplanned inventory increases:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedYes,MPC plus MPS will always equal one.T...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The slope of the consumption function is equal to:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedFalse

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

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedA

Which of the following is positively related to income?

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

Unplanned inventory decreases:

Correct AnswerverifiedShow Answer

Correct Answer
verified
D

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Yes,MPC plus MPS will always equal one.T...
View Answer

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
False

Correct Answer
verified

Correct Answer
verified
A

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified