macroeconomics
Read the two statements below and indicate if they are true or false. I. Autonomous expenditures change when GDP changes. II. Aggregate planned expenditure is the sum of planned consumption expenditure, investment, government purchases, and net exports.
I is false and II is true.
Which of the following will affect the size of the multiplier? I. marginal propensity to import II. marginal propensity to consume III. marginal income tax rate
I, II, and III
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 of the AD curve.
The multiplier is larger if the
marginal propensity to consume is larger
In the above figure, the economy is initially at point B. If the government decreases transfer payments, there is
a shift to AD2
All of the following statements about equilibrium expenditure are true EXCEPT_____.
actual investment is less than planned investment
People expect their incomes will decrease next year. As a result, the_____will shift_____.
aggregate demand curve; leftward
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 States.
an increase in autonomous expenditure
Which of the following events will make the consumption function steeper?
an increase in the marginal propensity to consume
Which of the following does NOT shift the aggregate demand curve
an increase in the price level
Moving along the aggregate demand curve, a decrease in the quantity of real GDP demanded is a result of
an increase in the price level.
Using the data in above table, the marginal propensity to consume is
constant at 0.75
higher taxes
decrease aggregate demand.
imports
decrease the size of the multiplier because spending on imports does not increase real GDP in the domestic nation.
A rise in the foreign exchange rate of the dollar
decreases aggregate demand
A decrease in government transfer payments
decreases aggregate demand.
A decrease in the quantity of money
decreases aggregate demand.
A fall in the expected future inflation rate
decreases aggregate demand.
In the above figure, if the economy is at point a, an increase in_____will move the economy to_____.
expected future income; point b
The presence of income taxes and imports cause the multiplier to
fall in value but remain positive.
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 and exports.
The marginal propensity to consume is the_____.
fraction of a change in disposable income that is consumed.
The marginal propensity to import is the_____that is spent on imports.
fraction of an increase in real GDP
The slope of the aggregate expenditure curve equals the change in
planned expenditure divided by the change in real GDP.
Any change in the price level will result in a
shift in the AE curve and a movement along the AD curve.
A decrease in autonomous consumption will
shift the aggregate expenditure function downward
If the multiplier is 4.0 and, owing to a decrease in expected future profit, investment decreases by $2.5 billion, the AD curve
shifts leftward by $10 billion.
If an increase in a household's disposable income from $10,000 to $12,000 boosts its consumption expenditure from $8,000 to $9,000, the
slope of the consumption function is 0.5
In the above figure, the line AB is called
the 45- degree line
If investment increases by $150 and, in response, equilibrium expenditure rises by $600,
the multiplier is 4.0
Which of the following changes while moving along the aggregate demand curve?
the price level
An increase in_____shifts the AE curve_____and an increase in_____shifts the aggregate demand curve_____.
the price level; downward; autonomous expenditure; rightward
The slope of the aggregate expenditure curve increases when the marginal propensity to consume_____or the marginal propensity to import______
increases; decreases
Disposable income_____when_____.
increases; taxes decrease
Autonomous consumption
independent of income
Any expenditure component that depends on the level of real GDP is called
induced expenditure
The marginal propensity to consume
is between 0 and 1
A change in_____creates a movement along the aggregate demand curve, while a change in_____shifts the aggregate demand curve.
the price level; government purchases
An example of monetary policy is an increase in_____by the_____, which_____aggregate demand.
the quantity of money; Federal Reserve; increases
When the price level increases,_____
the quantity of real GDP demanded decreases
What is the marginal propensity to consume?
the ratio of the change in consumption expenditure to the change in disposable income
START OF:
MOD 5
The figure above illustrates an economy's consumption function. What is autonomous consumption in this economy?
$2 million
In the above figure, the economy is initially at point B. If the slope of the aggregate expenditure function is 0.75. To shift the aggregate demand to AD1 the government needs to increase its autonomous expenditure by
0.1
The data in the above table indicate that autonomous expenditure is
0.3 trillion
The figure above illustrates an economy's consumption function. What is the marginal propensity to consume in this economy?
0.33
In the above table, C is consumption expenditure, I is investment, G is government purchases, and NX is net exports. All entries are in dollars. The slope of the aggregate expenditure function is
0.60
If consumption expenditures for a household increase from $1000 to $1800 when disposable income rises from$1000 to $2000, the marginal propensity to consume is
0.8
In the above figure, equilibrium expenditure along AE2 is
8 trillion
In the above figure, autonomous expenditure along AE2 equals
4 trillion
In the above figure, equilibrium expenditure is
10 trillion
In the above figure, at the equilibrium, induced expenditure is
100 billion
If investment increases by $300 and, in response, equilibrium aggregate expenditure increases by $600, the multiplier is
2
In the above figure, autonomous expenditure along AE1 equals
2 trillion
In the above figure, the multiplier is
2.0
In the above figure, autonomous expenditure is
200 billion
In the above table, C is consumption expenditure, I is investment, G is government purchases, and NX is net exports. All entries are in dollars. The equilibrium level of real GDP is
2400
A change in imports caused by rising U.S. incomes is
a change in induced expenditure.
Other things equal, along the aggregate demand curve, a higher price level is associated with
a decrease in the quantity of real GDP demanded
In the above figure, consumption and disposable income are equal at
a disposable income level of $200 billion
In the above figure, the economy is initially at point B. If the Fed increases the quantity of money, there is
a shift to AD1
In the above figure, the economy is initially at point B. If taxes increase, there is
a shift to AD2
In the above figure, the economy is initially at point B. If the Fed decreases the quantity of money, there is
a shift to AD2
Suppose the value of the U.S. dollar decreases from $1.60 Canadian to $1.50 Canadian. U.S. exports will_____, U.S. imports will_____, and U.S. aggregate demand will_____.
increase; decrease; increase
An increase in expected future incomes
increases aggregate demand
An increase in foreign incomes
increases aggregate demand in the United States.
A fall in the foreign exchange rate of the dollar
increases aggregate demand.
An increase in government purchases of goods and services
increases aggregate demand.
Aggregate demand will increase if the quantity of money_____.
increases or tax rates decrease