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Exam 28: Consumption and the Aggregate Expenditures Model

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Question 71

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Figure 13-4 -Refer to Figure 13-4.Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, I_P = Planned Investment.Suppose AE = C + I_P, and I_P is autonomous.If the level of real GDP equals $7,000 billion, and if there are no changes in the consumption function or in planned investment, then we expect that, in the next period, real GDP will

A) rise.
B) remain unchanged.
C) fall.
D) fall, but only if there is an offsetting change in autonomous consumption.

E) A) and C)
F) A) and B)

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Question 72

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Figure 13-6 -Refer to Figure 13-6.Suppose government purchases rise by $100.In the aggregate demand/aggregate supply model,

A) the aggregate demand curve shifts to the right by $100 at any given price level.
B) the aggregate demand curve shifts to the right by ($100 *the multiplier) at any given price level.
C) there is a downward movement along the aggregate demand curve such that real GDP demanded increases by $100.
D) there is a downward movement along the aggregate demand curve such that real GDP demanded increases by ($100 * the multiplier) .

E) A) and B)
F) C) and D)

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Question 73

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Figure 13-5 -Refer to Figure 13-5.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.What is the value of planned investment when real GDP is $6,000 billion?

Figure 13-6 -Refer to Figure 13-6.Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, I_P = Planned Investment, G = Government Purchases.Further, I_P and G are autonomous.What is the equation of the aggregate expenditures curve? All figures in billions of dollars.

If the economy spends 80% of any increase in real GDP, then an increase in autonomous investment of $1 billion would result ultimately in an increase in equilibrium real GDP of

Figure 13-2 -Refer to Figure 13-2.If real GDP were $12 trillion, consumption equals

Which of the following statements is false?

Consider a simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption.Which of the following events causes the aggregate expenditures curve to shift upwards? If government purchases increases by $200 billion, the aggregate expenditures curve will shift up by

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

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?

Figure 13-5 -Refer to Figure 13-5.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.What is the value of the multiplier?

Figure 13-4 -Refer to Figure 13-4.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.If Y= $6,000 billion, what is the value of consumption and planned investment?

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.

In the aggregate expenditures model, if a $40 billion increase in autonomous investment leads to an increase in equilibrium real GDP of $100 billion at the initial price level, then the multiplier is 2.5.

Unplanned investment is

Personal saving is disposable personal income not spent on consumption.

Consider a simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption.The marginal propensity to consume is 0.8.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?

Figure 13-6 -Refer to Figure 13-6.Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, I_P = Planned Investment, G = Government Purchases.Further, I_P and G are autonomous.What is the level of autonomous aggregate expenditures?

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

If consumption is given by C = $10 billion + 0.5Y, and autonomous planned investment, government purchases, and net exports amount to $5 billion, then aggregate expenditures are $20 billion if Y = $10 billion.