Learning Curve chapter 11

_____ is an equation showing how an individual household's consumer spending varies with the household's current disposable income.

consumption function

The marginal propensity to save ( MPS ) is the increase in ______ when disposable income rises by $1

Household savings

If the marginal propensity to consume (MPC) is 0.8 and planned investment expenditures increase by $60 million, then real GDP will _____ million.

Increase by $300

According to the accelerator principle, a higher expected future growth rate in GDP leads to a higher growth rate in _____ spending.

Investment

Which statement is true regarding income and expenditure?

Investment spending during the Great Depression of the 1930s fell by more than 80% in the United States

Holding everything else constant, when interest rates rise, this:

Leads to a lower level of planned investment spending

The _____ hypothesis of consumer spending suggests that consumers plan their spending over a life time, not just in response to current disposable income.

Life- cycle

The _____ hypothesis of consumer spending suggests that consumers plan their spending based on long-term income rather than on current income.

Permanent income

The marginal propensity to consume ( MPC ) is:

The increase in consumer spending when disposable income rises by $1

As _____ becomes larger, the multiplier becomes _____.

The marginal propensity to consume ( MPC ); larger

Autonomous consumer spending is the amount that a household would spend if it had _____ disposable income

$0

In a closed economy with no taxes, if the marginal propensity to save is 0.25, then the multiplier is:

4

If a company produces 8,000 computers this month and sells 7,500 of them, then unplanned inventory investment is _____ computers.

500

______ spending is the sum of planned investment spending and unplanned inventory investment

Actual investment

In a closed economy with no government, planned aggregate spending is the sum of:

Consumption and planned investment

If the Federal Reserve decides to increase interest rates, investment spending will:

Decrease