econ sample test 4 (11)

With consumption expenditure on the vertical axis and disposable income on the horizontal axis, the consumption function intersects the 45-degree line at $8 trillion. This result indicates that

consumption spending is $8 trillion when disposable income is $8 trillion.

In the above figure, if the marginal propensity to consume increases, the slope of the AE curve would

increase

In the above figure, if the level of real GDP is $17 trillion

inventories are above the levels planned by firms

When aggregate planned expenditure is less than real GDP, unplanned

investment occurs

If aggregate planned expenditure is less than real GDP then

irms' inventories will increase and real GDP will decrease as production falls

When there is unplanned inventory investment, aggregate planned expenditure is ________ real GDP and actual investment is ________ planned investment.

less than, greater than

As disposable income increases, there is a ________ the saving function.

movement along

At equilibrium expenditure, unplanned changes in inventory

must be zero

The marginal propensity to consume is

never greater than 1.

The MPS equals the ratio of

none

The Keynesian model of aggregate expenditure describes the economy in

the short run

In the above figure, equilibrium real GDP is equal to

$16 trillion

In the above table, C is consumption expenditure, I is investment, G is government expenditure, X is exports, and M is imports. All entries are in dollars. What is the level of aggregate planned expenditure when real GDP is equal to $900 billion?

$796

n the above figure, at a disposable income level of $2 trillion, saving equals

consumption expenditures

In the above figure, if real GDP is greater than $15 trillion, inventories will be

above target levels so firms will decrease production.

If planned expenditures equal $16 trillion when real GDP is $16.5 trillion, then

actual investment will exceed planned investment.

There is a movement along the consumption function if there is ________.

an increase in disposable income

Suppose the equilibrium level of expenditure is $13 trillion. If real GDP is $14 trillion, then planned expenditures

are less than real GDP, and real GDP will decrease.

Between 2013 and 2014 the government estimates that disposable income in the United States decreased. Consequently, as a result of this change, consumption expenditure

decreased

Expenditure that does NOT depend on real GDP is called

equilibrium expenditure

If the MPC equals 0.75, then

for every $100 increase in disposable income, saving increases by $25.

Dissaving

occurs when consumption is greater than disposable income.

An increase in disposable income shifts

the consumption function upward and leads to a movement along the savings function.

The marginal propensity to consume measures

the fraction of a change in disposable income that is spent on consumption expenditure.

A movement along the consumption function to higher levels of consumption expenditure arises because

the level of disposable income increases.