Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

Figure 13-1 
-Refer to Figure 13-1. When disposable personal income goes up by $400 billion, personal saving increases by

Accepted Answer

A)   $0.
B)   $100 billion.
C)   $200 billion.
D)   $400 billion.E) None of the above
F) A) and D)

Question 3

A decrease in the price level, all other things unchanged, shifts the aggregate expenditures
curve upwards.

Accepted Answer

A) True 
 B)False

Question 4

According to the permanent income hypothesis,

Accepted Answer

A)   consumption in any period depends on the stable annual income that people expect to earn in their jobs.
B)   the amount of income that people require depends on the amount of consumption they need and want to undertake.
C)   consumption in any period depends on the average annual income people expect to receive for the rest of their lives.
D)   the amount of personal saving depends on the amount of consumption people plan to undertake when they retire.E) B) and D)
F) C) and D)

Question 5

Consumption spending in any one period that is determined by income in that period is explained by the

Accepted Answer

A)   current income hypothesis.
B)   disposable personal income theory of consumption.
C)   transitory income theory of consumption.
D)   permanent income hypothesis.E) B) and D)
F) All of the above

Question 6

Table 13-1
 
-Refer to Table 13-1. Negative personal saving occurs when disposable personal income is

Accepted Answer

A)   equal to $300.
B)   greater than $300.
C)   less than $300.
D)   between $300 and $400.E) A) and D)
F) B) and D)

Question 7

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

Accepted Answer

A)   increases.
B)   decreases.
C)   remains constant.
D)   is undefined.E) A) and B)
F) None of the above

Question 8

The income households receive less the personal income taxes they pay is

Accepted Answer

A)   net savings.
B)   disposable personal income.
C)   gross private domestic investment.
D)   gersonal consumption.E) A) and D)
F) None of the above

Question 9

In general, we expect that a reduction in the income tax rate will make the aggregate expenditures curve

Accepted Answer

A)   steeper and the multiplier larger.
B)   steeper and the multiplier smaller.
C)   flatter and the multiplier larger.
D)   flatter and the multiplier smaller.E) C) and D)
F) A) and B)

Question 10

Difficulty: Medium Figure 13-4 P = Planned Investment. Suppose AE = C + IP. IP is autonomous and the consumption function is C = $1,000 billion + 0.5Y. If IP = $2,000 billion, what is the equilibrium level of real GDP? A)  $4,500 billion B)  $6,000 billion C)  $7,500 billion D)  $9,000 billion " class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 13-4. Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption,
IP = Planned Investment. Suppose AE = C + IP. IP is autonomous and the consumption function is C = $1,000 billion + 0.5Y. If IP = $2,000 billion, what is the equilibrium level of real GDP?

Accepted Answer

A)   $4,500 billion
B)   $6,000 billion
C)   $7,500 billion
D)   $9,000 billionE) All of the above
F) A) and D)

Question 11

The relationship between aggregate expenditures and real GDP is shown by the

Accepted Answer

A)   aggregate expenditures curve.
B)   consumption function.
C)   aggregate demand curve.
D)   autonomous expenditures curve.E) B) and D)
F) B) and C)

Question 12

An increase in aggregate demand causes an increase in

Accepted Answer

A)   income, which in turn induces an increase in consumption.
B)   investment, which in turn induces an increase in consumption.
C)   government, which in turn induces an increase in net exports.
D)   consumption, which in turn induces an increase in price.E) B) and C)
F) None of the above

Question 13

Suppose when disposable personal income increases from $10,000 to $15,000, consumption increases from $9,000 to $13,000. What is the marginal propensity to save?

Accepted Answer

A)   0.2
B)   0.4
C)   0.6
D)   0.8E) A) and B)
F) A) and C)

Question 14

In a graph with real GDP on the horizontal axis and aggregate expenditures on the vertical axis, autonomous aggregate expenditures are represented by

Accepted Answer

A)   a ray from the origin.
B)   an upward sloping line with a positive vertical intercept.
C)   a 45-degree line.
D)   a horizontal line.E) B) and D)
F) A) and B)

Question 15

Figure 13-3 0  to C1 to C2 demonstrate A)  an increase in the marginal propensity to save. B)  increases in the amount of consumption for a given level of disposable income. C)  increases in the amount of disposable income available for consumption. D)  an increase in the marginal propensity to save " class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 13-3. Upward shifts of the consumption function, for example from C0  to C1 to C2 demonstrate

Accepted Answer

A)   an increase in the marginal propensity to save.
B)   increases in the amount of consumption for a given level of disposable income.
C)   increases in the amount of disposable income available for consumption.
D)   an increase in the marginal propensity to saveE) All of the above
F) A) and B)

Question 16

Table 13-1
 
-Refer to Table 13-1. When disposable personal income is $400, what is the amount of personal saving?

Accepted Answer

A)   −$40
B)   −$20
C)   $0
D)   $20E) None of the above
F) A) and C)

Question 17

Table 13-3
All figures in billions of base-year dollars
 
-Refer to Table 13-3. What is the equilibrium level of GDP?

Accepted Answer

A)   $6,000 billion
B)   $6,500 billion
C)   $7,000 billion
D)   $7,500 billionE) A) and C)
F) A) and B)

Question 18

Table 13-3
All figures in billions of base-year dollars
 
-Refer to Table 13-3. Suppose the equilibrium level of real GDP at the prevailing price is $500 billion below potential real GDP. All else constant, by how much should autonomous aggregate expenditures be increased to reach potential output?

Accepted Answer

A)   $150 billion
B)   $200 billion
C)   $400 billion
D)   $500 billionE) C) and D)
F) All of the above

Question 19

Table 13-2
 
-Refer to Table 13-2. Consider a simple economy that is made up of only two sectors, households and firms, and that investment is autonomous. Further, disposable personal income = real GDP. Suppose that actual real GDP in this economy is $500 billion in a particular period. We would expect to see

Accepted Answer

A)   unintended reductions in inventory, planned investment will exceed actual investment.
B)   unintended reductions in inventory, planned investment will be less than actual investment.
C)   unintended increases in inventory, planned investment will exceed actual investment.
D)   unintended increases in inventory, planned investment will be less than actual investment.E) C) and D)
F) A) and C)

Question 20

What is the international trade effect?

Accepted Answer

A)   It is the tendency for exports to fall and imports to rise when the domestic price level falls relative to the foreign price level.
B)   It is the tendency for exports to rise and imports to fall when the domestic price level falls relative to the foreign price level.
C)   It is the tendency for domestic investments to fall when foreign interest rates rise relative to domestic interest rates.
D)   It is the tendency for exchange rates to fall when foreign interest rates rise relative to domestic interest rates.E) C) and D)
F) B) and D)

Exam 28: Monetary Policy and Bank Regulation

Table 13-3 All figures in billions of base-year dollars -Refer to Table 13-3. What is the equilibrium level of GDP?

Correct Answer
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A decrease in the price level, all other things unchanged, shifts the aggregate expenditures curve upwards.

Correct Answer
verified

The income households receive less the personal income taxes they pay is

Correct Answer
verified

In general, we expect that a reduction in the income tax rate will make the aggregate expenditures curve

Correct Answer
verified

In a graph with real GDP on the horizontal axis and aggregate expenditures on the vertical axis, autonomous aggregate expenditures are represented by

Correct Answer
verified

Table 13-1 -Refer to Table 13-1. When disposable personal income is $400, what is the amount of personal saving?

Correct Answer
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Suppose when disposable personal income increases from $10,000 to $15,000, consumption increases from $9,000 to $13,000. What is the marginal propensity to save?

Correct Answer
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An increase in aggregate demand causes an increase in

Correct Answer
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Correct Answer
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Figure 13-3 -Refer to Figure 13-3. Upward shifts of the consumption function, for example from C₀ to C₁ to C₂demonstrate

Correct Answer
verified

The relationship between aggregate expenditures and real GDP is shown by the

Correct Answer
verified

Consumption spending in any one period that is determined by income in that period is explained by the

Correct Answer
verified

According to the permanent income hypothesis,

Correct Answer
verified

Table 13-1 -Refer to Table 13-1. Negative personal saving occurs when disposable personal income is

Correct Answer
verified

What is the international trade effect?

Correct Answer
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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

Correct Answer
verified

Table 13-3 All figures in billions of base-year dollars -Refer to Table 13-3. Suppose the equilibrium level of real GDP at the prevailing price is $500 billion below potential real GDP. All else constant, by how much should autonomous aggregate expenditures be increased to reach potential output?

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

Figure 13-1 -Refer to Figure 13-1. When disposable personal income goes up by $400 billion, personal saving increases by

Correct Answer
verified

Exam 28: Monetary Policy and Bank Regulation

Table 13-3 All figures in billions of base-year dollars -Refer to Table 13-3. What is the equilibrium level of GDP?

Correct AnswerverifiedShow Answer

A decrease in the price level, all other things unchanged, shifts the aggregate expenditures curve upwards.

Correct AnswerverifiedShow Answer

The income households receive less the personal income taxes they pay is

Correct AnswerverifiedShow Answer

In general, we expect that a reduction in the income tax rate will make the aggregate expenditures curve

Correct AnswerverifiedShow Answer

In a graph with real GDP on the horizontal axis and aggregate expenditures on the vertical axis, autonomous aggregate expenditures are represented by

Correct AnswerverifiedShow Answer

Table 13-1 -Refer to Table 13-1. When disposable personal income is $400, what is the amount of personal saving?

Correct AnswerverifiedShow Answer

Suppose when disposable personal income increases from $10,000 to $15,000, consumption increases from $9,000 to $13,000. What is the marginal propensity to save?

Correct AnswerverifiedShow Answer

An increase in aggregate demand causes an increase in

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 13-3 -Refer to Figure 13-3. Upward shifts of the consumption function, for example from C0 to C1 to C2 demonstrate

Correct AnswerverifiedShow Answer

The relationship between aggregate expenditures and real GDP is shown by the

Correct AnswerverifiedShow Answer

Consumption spending in any one period that is determined by income in that period is explained by the

Correct AnswerverifiedShow Answer

According to the permanent income hypothesis,

Correct AnswerverifiedShow Answer

Table 13-1 -Refer to Table 13-1. Negative personal saving occurs when disposable personal income is

Correct AnswerverifiedShow Answer

What is the international trade effect?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Table 13-3 All figures in billions of base-year dollars -Refer to Table 13-3. Suppose the equilibrium level of real GDP at the prevailing price is $500 billion below potential real GDP. All else constant, by how much should autonomous aggregate expenditures be increased to reach potential output?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 13-1 -Refer to Figure 13-1. When disposable personal income goes up by $400 billion, personal saving increases by

Correct AnswerverifiedShow Answer

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Figure 13-3 -Refer to Figure 13-3. Upward shifts of the consumption function, for example from C₀ to C₁ to C₂demonstrate

Correct Answer
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