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Consider a simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption.Which of the following causes the aggregate expenditures curve to shift upwards?


A) an increase in taxes
B) an increase in exports
C) a decrease in the national debt
D) a decrease in interest rate

E) B) and D)
F) All of the above

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Which of the following is true? I.1 − MPS = MPC where MPS = marginal propensity to save and MPC = marginal propensity to consume. II.personal saving + consumption = gross income III.∆disposable income = ∆saving + ∆consumption where ∆ = change in


A) I, II, and III
B) I and II only
C) I and III only
D) II and III only

E) None of the above
F) B) and D)

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If C = $500 billion + .6Y, then, if Y = $1,000 billion, induced consumption will be equal to $1,100 billion.

A) True
B) False

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Use the following to answer questions Exhibit: Income and Consumption Use the following to answer questions Exhibit: Income and Consumption -(Exhibit: Income and Consumption) When disposable personal income is $300, what is the amount of personal saving? A) −$40 B) −$20 C) $0 D) $20 -(Exhibit: Income and Consumption) When disposable personal income is $300, what is the amount of personal saving?


A) −$40
B) −$20
C) $0
D) $20

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

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The consumption function shows the negative relationship between consumption and disposable personal income.

A) True
B) False

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Use the following to answer questions Exhibit: Aggregate Expenditures Curve Figure 13-6 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<sub>P</sub> = Planned Investment, G = Government Purchases.Further, I<sub>P</sub> and G are autonomous.What is the equation of the aggregate expenditures curve? All figures in billions of dollars. A) AE = G + I<sub>P</sub> B) AE = 800 + G + I<sub>P</sub> C) AE = 800 + G + I<sub>P </sub>+ 0.5Y D) AE = 800 + 0.5Y -(Exhibit: Aggregate Expenditures Curve) Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, IP = Planned Investment, G = Government Purchases.Further, IP and G are autonomous.What is the equation of the aggregate expenditures curve? All figures in billions of dollars.


A) AE = G + IP
B) AE = 800 + G + IP
C) AE = 800 + G + IP + 0.5Y
D) AE = 800 + 0.5Y

E) None of the above
F) All of the above

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Use the following to answer questions Exhibit: Consumption Functions Figure 13-3 Use the following to answer questions Exhibit: Consumption Functions Figure 13-3 -(Exhibit: Consumption Functions) Suppose the consumption function is given by curve C<sub>1</sub>.Which of the following will cause an upward shift to curve C<sub>2</sub>? A) a decrease in wealth B) an increase in price level C) an increase in interest rates D) an increase in consumer confidence -(Exhibit: Consumption Functions) Suppose the consumption function is given by curve C1.Which of the following will cause an upward shift to curve C2?


A) a decrease in wealth
B) an increase in price level
C) an increase in interest rates
D) an increase in consumer confidence

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

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Use the following to answer questions Exhibit: Aggregate Expenditures and Real GDP 1 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<sub>P</sub> = Planned Investment.Suppose AE = C + I<sub>P</sub>.I<sub>P</sub> 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? A) C = $3,000 billion, I<sub>P</sub> = $3,000 billion B) C = $4,000 billion, I<sub>P</sub> = $2,000 billion C) C = $5,000 billion, I<sub>P</sub> = $1,000 billion D) C = $6,000 billion, I<sub>P</sub> = zero -(Exhibit: Aggregate Expenditures and Real GDP 1) 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 Y= $6,000 billion, what is the value of consumption and planned investment?


A) C = $3,000 billion, IP = $3,000 billion
B) C = $4,000 billion, IP = $2,000 billion
C) C = $5,000 billion, IP = $1,000 billion
D) C = $6,000 billion, IP = zero

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

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Use the following to answer questions Exhibit: Income and Consumption Use the following to answer questions Exhibit: Income and Consumption -Suppose the consumption function is C = $500 + 0.8Y.If Y = $1,000, then induced consumption is A) $500. B) $800. C) $1,000. D) $1,300. -Suppose the consumption function is C = $500 + 0.8Y.If Y = $1,000, then induced consumption is


A) $500.
B) $800.
C) $1,000.
D) $1,300.

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

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In the aggregate expenditures model, if aggregate expenditures equal $800 billion and real GDP equals $600 billion,


A) unplanned inventory accumulation equals $200 billion.
B) unplanned inventory depletion equals $200 billion.
C) consumption plus investment equals $200 billion.
D) net investment equals $200 billion.

E) All of the above
F) A) and B)

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Disposable personal income is


A) the income households receive after paying personal taxes and personal debt.
B) the income households receive after paying personal taxes and saving.
C) the income households receive after paying personal taxes and purchasing necessities.
D) the income households receive that is available for consumption and saving.

E) B) and C)
F) None of the above

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Use the following to answer questions Exhibit: Aggregate Expenditures Curve Figure 13-6 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<sub>P</sub> = Planned Investment, G = Government Purchases.Further, I<sub>P</sub> and G are autonomous.The equilibrium level of real GDP is A) $800 billion. B) $1,000 billion. C) $1,600 billion. D) $3,200 billion. -(Exhibit: Aggregate Expenditures Curve) Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, IP = Planned Investment, G = Government Purchases.Further, IP and G are autonomous.The equilibrium level of real GDP is


A) $800 billion.
B) $1,000 billion.
C) $1,600 billion.
D) $3,200 billion.

E) A) and B)
F) All of the above

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Use the following to answer questions Exhibit: Consumption Functions Figure 13-3 Use the following to answer questions Exhibit: Consumption Functions Figure 13-3 -In the summer of 2001, tax rebate checks of $300 per single taxpayer and $600 for married couples were distributed to 92 million people in the U.S.Economic researchers found that over a nine-month period spending increased to about 40% of the rebate.These findings support A) the permanent income hypothesis. B) the current income hypothesis. C) the transitory income hypothesis. D) the consumption function. -In the summer of 2001, tax rebate checks of $300 per single taxpayer and $600 for married couples were distributed to 92 million people in the U.S.Economic researchers found that over a nine-month period spending increased to about 40% of the rebate.These findings support


A) the permanent income hypothesis.
B) the current income hypothesis.
C) the transitory income hypothesis.
D) the consumption function.

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

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Let AE = Aggregate Expenditures, C = Consumption, IP = Planned Investment, G =Government Purchases.Consider a simple aggregate expenditures model, where AE = C + IP + G and all components of aggregate expenditures except consumption are autonomous.All other things unchanged, an increase in the price level,


A) shifts the aggregate expenditures curve upwards and causes the aggregate demand curve to shift right.
B) shifts the aggregate expenditures curve downwards and causes the aggregate demand curve to shift left.
C) shifts the aggregate expenditures curve down and causes a movement up along a given aggregate demand curve.
D) shifts the aggregate expenditures curve upwards and causes a movement down along a given aggregate demand curve.

E) A) and B)
F) All of the above

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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 save?


A) 0.2
B) 0.4
C) 0.6
D) 0.8

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

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Personal saving is


A) total income not spent on consumption.
B) disposable personal income not spent on consumption.
C) found by subtracting consumption from disposable personal income.
D) disposable income spent on investment.

E) A) and C)
F) None of the above

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An increase in wealth is likely to shift the consumption function curve upward.

A) True
B) False

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Aggregate expenditures that vary with real GDP are called induced aggregate expenditures.

A) True
B) False

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Use the following to answer questions Exhibit: Aggregate Expenditures and Real GDP 1 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<sub>P</sub> = Planned Investment.Suppose AE = C + I<sub>P</sub>.I<sub>P</sub> is autonomous and the consumption function is C = $1,000 billion + 0.5Y.If I<sub>P</sub> = $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 -(Exhibit: Aggregate Expenditures and Real GDP 1) 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?


A) $4,500 billion
B) $6,000 billion
C) $7,500 billion
D) $9,000 billion

E) All of the above
F) B) and C)

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Holding all else constant, a change in autonomous aggregate expenditures will shift in aggregate demand by an amount equal to


A) the change in autonomous aggregate expenditures.
B) the multiplier times the change in autonomous aggregate expenditures.
C) the change in real GDP divided by the change in autonomous aggregate expenditures.
D) the multiplier.

E) All of the above
F) B) and C)

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