macroeconomics exam 2
autonomous consumption is dependent on what
Income
In general, the steeper the aggregate expenditure curve, the
larger the multiplier
In general, a decrease in autonomous expenditure that is NOT caused by a price change results in a
leftward shift on the AD curve
the multiplier is larger if
marginal propensity to consume is larger
The sum of planned consumption expenditure, planned investment, planned government purchases, andplanned net exports is
aggregate planned expenditure
The graph of the aggregate expenditure curve has ________ on the y-axis and ________ on the x-axis
aggregate planned expenditure, real GDP
an increase in U.S. exports because of increasing foreign incomes is ________ in the United State
an increase in autonomous expenditure
all of the following statements about equilibrium expenditure are true EXCEPT ________. A)aggregate planned expenditure equals real GDP B)actual investment is less than planned investment C)aggregate planned expenditure equals actual aggregate expenditure D)unplanned inventory investment is zero
b - actual investment is less than planned investment
A change in imports caused by rising U.S. incomes is
change in induced expenditure
the consumer price index
compares the cost in the current period to the cost in the reference year base period of a basket of goods typically consumed in the base period
In the short run, with fixed prices and no imports and no income taxes, a decrease in investment A)decreases real GDP by the same amount. B)decreases real GDP by a smaller amount. C)decreases real GDP by a larger amount. D)increases real GDP because of the increase in induced expenditures
decrease real GDP by a larger amount
The presence of income taxes and imports cause the multiplier to
fall in value but remain positive
true or false autonomous expenditures change when GDP changes.
false
the presence of income taxes and imports cause the slope of the aggregate expenditure curve to be
flatter than it would be without income taxes exports
The marginal propensity to import is the ________ that is spent on imports
fraction of an increase in real GDP
the multiplier is greater than 1 because the change in autonomous expenditure leads to
more induced expenditure
The slope of the aggregate expenditure curve equals the change in
planned expenditure divided by the change in real GDP
decrease in autonomous consumption will
shift the aggregate expenditure downwards
if this years price level exceeds last years price level then
the inflation rate between these 2 years in positive
The consumption function relates the consumption expenditure decisions of households to
the level of disposable income
marginal propensity to import, marginal propensity to consume, and marginal income tax rate all affect the size of what
the multiplier
Any expenditure component that depends on the level of real GDP is called
induced expenditure
what is the marginal propensity to consume
the ratio of the change in consumption expenditure to the change in disposable income
true or false aggregate planned expenditure is the sum of planned consumption expenditure, investment, government purchases, and net exports
true
when an economy experiences inflation
- price level rises persistently -
marginal propensity to consume is between what two numbers
0 and 1
Which of the following events will make the consumption function steeper? A)an increase in disposable income B)an increase in real GDP C)an increase in the marginal propensity to consume D)an increase in unplanned inventory investment
C - an increase in the marginal propensity to consume