Question 1

Suppose disposable income for an entire economy rises from $400 billion to $440 billion and desired consumption rises from $350 billion to $380 billion. We can conclude that the marginal propensity to consume for this economy is

Accepted Answer

A)   0.65.
B)   0.75.
C)   0.80.
D)   0.90.
E)   1.33.F) C) and D)
G) All of the above

Question 2

FIGURE 21-3
-Refer to Figure 21-3. If national income is Y1 and the aggregate expenditure function is AE1,

Accepted Answer

A)   the economy is in equilibrium.
B)   there is unintended inventory accumulation and income will rise.
C)   there is unintended inventory accumulation and income will fall.
D)   there is unintended inventory decumulation and income will rise.
E)   there is unintended inventory decumulation and income will fall.F) C) and D)
G) A) and C)

Question 3

Consider the following information describing an economy with demand -determined output. There is no government or foreign trade. All dollar figures are in billions.
1. equilibrium condition is Y = C + I
2. marginal propensity to save = 0.20
3. the autonomous part of C is $50
4. investment is autonomous and equals $25
TABLE 21-5
-Consider a simple macro model with a constant price level and demand-determined output. Suppose the level of actual national income is less than desired aggregate expenditure. In this case,

Accepted Answer

A)   inventories will build up, causing national income to rise.
B)   national income will fall, because desired expenditures are less than actual expenditures.
C)   shortages of goods and reductions in inventories will cause producers to increase output and national income to rise.
D)   national income may increase or decrease, depending on the relative sizes of the average propensity to consume and the average propensity to save.
E)   there will be no change in national income because only actual expenditure is relevant.F) A) and B)
G) None of the above

Question 4

Consider a simple macro model with a constant price level and demand-determined output. If national income is above its equilibrium level, it is likely that inventories are , and so national income tends to
)

Accepted Answer

A)   accumulating; rise
B)   accumulating; fall
C)   being depleted; rise
D)   being depleted; fall
E)   constant; fallF) A) and E)
G) All of the above

Question 5

Consider the following aggregate expenditure function: AE = $300 billion + 0.87) Y. Assuming that we have no government, no international trade and desired investment is autonomous and is equal to $56 billion, then which of the following is the correct statement of the consumption function?

Accepted Answer

A)   C = $356 billion + 0.87) Y
B)   C = $356 billion + 0.13) Y
C)   C = $244 billion + 0.87) Y
D)   C = $244 billion + 0.13) Y
E)   C = $300 billion + 0.13) YF) B) and C)
G) D) and E)

Question 6

Consider the following information for an economy with demand-determined output and a constant price level. There is no government or foreign trade.
1. Y = C + I
2. C = 100 + 0.8Y
3. I = 200
TABLE 21-8
-Refer to Table 21-8. This economyʹs equilibrium level of national income is

Accepted Answer

A)   500.
B)   600.
C)   750.
D)   1000.
E)   1500.F) C) and D)
G) A) and B)

Question 7

Suppose the price level is constant, output is demand-determined, and the economy is closed with no government. If the saving function is S = -100 + 0.2) Y, the simple multiplier is

Accepted Answer

A)   0.2.
B)   1.
C)   2.5.
D)   5.
E)   Insufficient information to know.F) A) and D)
G) All of the above

Question 8

FIGURE 21-2
-Refer to Figure 21-2. The amount of desired consumption expenditure that is unrelated to the level of disposable income is

Accepted Answer

A)   $0.
B)   $500.
C)   $1000.
D)   $1500.
E)   $2000.F) B) and C)
G) C) and D)

Question 9

Consider the following information describing an economy with demand -determined output. There is no government or foreign trade. All dollar figures are in billions.
1. equilibrium condition is Y = C + I
2. marginal propensity to save = 0.20
3. the autonomous part of C is $50
4. investment is autonomous and equals $25
TABLE 21-5
-Refer to Table 21-5. At the equilibrium level of national income, the level of desired saving will be

Accepted Answer

A)   equal to consumption expenditures.
B)   $375.
C)   $50.
D)   $25.
E)   $0F) A) and B)
G) C) and D)

Question 10

Consider a simple macro model with a constant price level and demand-determined output. If the marginal propensity to spend in such a model is 0.8, the simple multiplier is

Accepted Answer

A)   0.
B)   0.8.
C)   1.25.
D)   5.0.
E)   8.0.F) A) and E)
G) C) and D)

Question 11

In a simple model of the economy, without government or taxes, a shock that causes an upward shift of the aggregate consumption function also causes shift of the saving function.

Accepted Answer

A)   an equal upward
B)   a less-than-equal upward
C)   an equal downward
D)   a less-than-equal downward
E)   noF) C) and E)
G) None of the above

Question 12

FIGURE 21-2
-Refer to Figure 21-2. The slope of the consumption function in the figure is equal to

Accepted Answer

A)   the marginal propensity to consume.
B)   the average propensity to consume.
C)   the marginal propensity to save.
D)   the average propensity to save.
E)   the slope of the 45-degree line.F) A) and B)
G) A) and E)

Question 13

FIGURE 21-1
-Refer to Figure 21-1. The marginal propensity to consume is equal to

Accepted Answer

A)   EF/Y2Y3.
B)   EF/DF.
C)   ED/CF.
D)   DF/Y2Y3.
E)   ED/Y2Y3.F) A) and C)
G) A) and B)

Question 14

Consider the equation: AE = C + I + G + X - IM) . Which of the following statements correctly describes this sum?

Accepted Answer

A)   This summation tells us total desired expenditures on domestically produced output.
B)   It is a summation of actual expenditures and is equivalent to GDP.
C)   This summation of planned expenditures is equal to actual nominal GDP.
D)   It is a summation of planned expenditures and is always equal to real GDP.
E)   It is a summation of the desired expenditures of domestic households, firms and government.F) C) and D)
G) A) and B)

Question 15

Consider the following information describing a closed economy with no government and where aggregate output is demand determined. All dollar figures are in billions.
1. the equilibrium condition is Y = C + I
2. the marginal propensity to consume is 0.90
3. the autonomous part of C is $300
4. investment is autonomous and is $100
TABLE 21-3
-Refer to Table 21-3. Suppose this economy is in equilibrium. There is then a significant decline in house prices across the country. The likely effect is

Accepted Answer

A)   autonomous consumption will rise above $300 billion and equilibrium national income will therefore rise.
B)   autonomous saving will fall and equilibrium national income will therefore fall.
C)   autonomous saving will rise and equilibrium national income will therefore rise.
D)   autonomous investment will rise and equilibrium national income will therefore rise.
E)   autonomous consumption will fall below $300 billion and equilibrium national income will therefore fall.F) None of the above
G) A) and C)

Question 16

Which of the following correctly describes the meaning of the aggregate expenditure AE)  function?

Accepted Answer

A)   The AE function relates the level of desired aggregate expenditure to the level of actual national income.
B)   The AE function relates the level of desired consumption expenditure to desired aggregate expenditure.
C)   The AE function relates the level of desired investment expenditure to desired aggregate expenditure.
D)   The AE function relates the level of nominal GDP to the level of real GDP.
E)   The AE function relates the level of aggregate demand to the price level.F) B) and C)
G) A) and E)

Question 17

If the Jones familyʹs disposable income increases from $1200 to $1700 and their desired saving increases from
-$100 to +$100, then the familyʹs

Accepted Answer

A)   average propensity to consume is 0.60.
B)   average propensity to consume is 0.40.
C)   marginal propensity to consume is 0.40.
D)   marginal propensity to consume is 0.60.
E)   marginal propensity to save is 1.F) A) and B)
G) None of the above

Question 18

Suppose the price level is constant, output is demand-determined, and the economy is closed with no government. If the saving function is S = -100 + 0.4) Y, the simple multiplier is

Accepted Answer

A)   0.2.
B)   1.
C)   2.5.
D)   5.
E)   Insufficient information to know.F) A) and B)
G) A) and C)

Question 19

If a familyʹs annual disposable income rose from $60 000 to $65 000 and their desired consumption expenditures rose from $50 000 to $54 000, it can be concluded that the familyʹs

Accepted Answer

A)   marginal propensity to consume is $800.
B)   average propensity to consume is 0.8.
C)   marginal propensity to consume is 0.8.
D)   average propensity to save is 0.8.
E)   marginal propensity to save is 0.8.F) C) and D)
G) None of the above

Question 20

On a graph of a consumption function, what is the significance of the 45 -degree line?

Accepted Answer

A)   It connects all points where desired consumption equals desired expenditure.
B)   It connects all points where desired consumption equals actual disposable income.
C)   It shows the slope of the average consumption function, against which we measure other consumption functions.
D)   It connects all points where desired consumption equals desired saving.
E)   Desired consumption is zero at all points along the 45-degree line.F) A) and B)
G) A) and C)

Exam 21: The Simplest Short-Run Macro Model

Consider the following information for an economy with demand-determined output and a constant price level. There is no government or foreign trade. 1. Y = C + I 2. C = 100 + 0.8Y 3. I = 200 TABLE 21-8 -Refer to Table 21-8. This economyʹs equilibrium level of national income is

Correct Answer
verified

FIGURE 21-2 -Refer to Figure 21-2. The amount of desired consumption expenditure that is unrelated to the level of disposable income is

Correct Answer
verified

Correct Answer
verified

FIGURE 21-2 -Refer to Figure 21-2. The slope of the consumption function in the figure is equal to

Correct Answer
verified

If a familyʹs annual disposable income rose from $60 000 to $65 000 and their desired consumption expenditures rose from $50 000 to $54 000, it can be concluded that the familyʹs

Correct Answer
verified

Consider the equation: AE = C + I + G + X - IM) . Which of the following statements correctly describes this sum?

Correct Answer
verified

Consider a simple macro model with a constant price level and demand-determined output. If national income is above its equilibrium level, it is likely that inventories are , and so national income tends to )

Correct Answer
verified

Correct Answer
verified

Consider a simple macro model with a constant price level and demand-determined output. If the marginal propensity to spend in such a model is 0.8, the simple multiplier is

Correct Answer
verified

FIGURE 21-3 -Refer to Figure 21-3. If national income is Y1 and the aggregate expenditure function is AE1,

Correct Answer
verified

Suppose disposable income for an entire economy rises from $400 billion to $440 billion and desired consumption rises from $350 billion to $380 billion. We can conclude that the marginal propensity to consume for this economy is

Correct Answer
verified

Correct Answer
verified

Suppose the price level is constant, output is demand-determined, and the economy is closed with no government. If the saving function is S = -100 + 0.4) Y, the simple multiplier is

Correct Answer
verified

If the Jones familyʹs disposable income increases from $1200 to $1700 and their desired saving increases from -$100 to +$100, then the familyʹs

Correct Answer
verified

On a graph of a consumption function, what is the significance of the 45 -degree line?

Correct Answer
verified

Consider the following aggregate expenditure function: AE = $300 billion + 0.87) Y. Assuming that we have no government, no international trade and desired investment is autonomous and is equal to $56 billion, then which of the following is the correct statement of the consumption function?

Correct Answer
verified

Which of the following correctly describes the meaning of the aggregate expenditure AE) function?

Correct Answer
verified

FIGURE 21-1 -Refer to Figure 21-1. The marginal propensity to consume is equal to

Correct Answer
verified

In a simple model of the economy, without government or taxes, a shock that causes an upward shift of the aggregate consumption function also causes shift of the saving function.

Correct Answer
verified

Suppose the price level is constant, output is demand-determined, and the economy is closed with no government. If the saving function is S = -100 + 0.2) Y, the simple multiplier is

Correct Answer
verified

Exam 21: The Simplest Short-Run Macro Model

Consider the following information for an economy with demand-determined output and a constant price level. There is no government or foreign trade. 1. Y = C + I 2. C = 100 + 0.8Y 3. I = 200 TABLE 21-8 -Refer to Table 21-8. This economyʹs equilibrium level of national income is

Correct AnswerverifiedShow Answer

FIGURE 21-2 -Refer to Figure 21-2. The amount of desired consumption expenditure that is unrelated to the level of disposable income is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

FIGURE 21-2 -Refer to Figure 21-2. The slope of the consumption function in the figure is equal to

Correct AnswerverifiedShow Answer

If a familyʹs annual disposable income rose from $60 000 to $65 000 and their desired consumption expenditures rose from $50 000 to $54 000, it can be concluded that the familyʹs

Correct AnswerverifiedShow Answer

Consider the equation: AE = C + I + G + X - IM) . Which of the following statements correctly describes this sum?

Correct AnswerverifiedShow Answer

Consider a simple macro model with a constant price level and demand-determined output. If national income is above its equilibrium level, it is likely that inventories are , and so national income tends to )

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Consider a simple macro model with a constant price level and demand-determined output. If the marginal propensity to spend in such a model is 0.8, the simple multiplier is

Correct AnswerverifiedShow Answer

FIGURE 21-3 -Refer to Figure 21-3. If national income is Y1 and the aggregate expenditure function is AE1,

Correct AnswerverifiedShow Answer

Suppose disposable income for an entire economy rises from $400 billion to $440 billion and desired consumption rises from $350 billion to $380 billion. We can conclude that the marginal propensity to consume for this economy is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Suppose the price level is constant, output is demand-determined, and the economy is closed with no government. If the saving function is S = -100 + 0.4) Y, the simple multiplier is

Correct AnswerverifiedShow Answer

If the Jones familyʹs disposable income increases from $1200 to $1700 and their desired saving increases from -$100 to +$100, then the familyʹs

Correct AnswerverifiedShow Answer

On a graph of a consumption function, what is the significance of the 45 -degree line?

Correct AnswerverifiedShow Answer

Consider the following aggregate expenditure function: AE = $300 billion + 0.87) Y. Assuming that we have no government, no international trade and desired investment is autonomous and is equal to $56 billion, then which of the following is the correct statement of the consumption function?

Correct AnswerverifiedShow Answer

Which of the following correctly describes the meaning of the aggregate expenditure AE) function?

Correct AnswerverifiedShow Answer

FIGURE 21-1 -Refer to Figure 21-1. The marginal propensity to consume is equal to

Correct AnswerverifiedShow Answer

In a simple model of the economy, without government or taxes, a shock that causes an upward shift of the aggregate consumption function also causes shift of the saving function.

Correct AnswerverifiedShow Answer

Suppose the price level is constant, output is demand-determined, and the economy is closed with no government. If the saving function is S = -100 + 0.2) Y, the simple multiplier is

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified