Macro Ch 11 Sapling

The slope of the consumption function is the

marginal propensity to consume

Suppose disposable income increases by $2000. As a result, consumption increases by $1500. The marginal propensity to save (MPS) is

.25

Suppose disposable income increases by $2000. As a result, consumption increases by $1500. The marginal propensity to consume is:

.75

Suppose that Kim K decides to spend $30,000 on an American made purse instead of donating it to Haitian earthquake relief. Assume the multiplier is 1.1. How much will GDP rise when Kim K buys her purse according to the multiplier effect?

$33000

Suppose disposable income increases by $2000. As a result, consumption increases by $1500. The increase in savings resulting directly from this change of income is:

$500

If MPC =.8 and disposable income increases by $1000, then consumption will increase by (assuming no multiplier effect)

$800

A family has a disposable income of $90,000 annually. Assume that their marginal propensity to consume is 0.8 (the family spends 80% of new disposable income on consumption) and that their autonomous consumption spending is equal to $10,000. What is the amount of the family's annual consumer spending?

$82000

Suppose the island of Cat experiences a recession. As a result, consumers reduce spending on Kitty Chow and planned aggregate expenditures fall short of real GDP. Thankfully the recession is very short and consumer spending on Kitty Chow increases to pre-recession levels. What is most likely to occur first at Kitty Chow firms during this period of recovery?

Firms will sell off excess inventories before returning to increased production levels

the consumption function shows the relationship between consumption spending and _______

Disposable income

the multiplier (expenditure multiplier) is the ratio between which of the following two measures?

Total change in real GDP due to an autonomous change in aggregate spending AND size of the autonomous change in aggregate spending

We can predict changes in consumption by multiplying the change in _____ by the _______

disposable income; marginal propensity to consume

Suppose the island of Cat experiences a recession. As a result, consumers reduce spending on Kitty Chow and planned aggregate expenditures fall short of real GDP. As a result, unplanned inventories at Kitty Chow firms will

increase

Suppose that Kim K decides to spend $30,000 on an American made purse instead of donating it to Haitian earthquake relief. Assume the multiplier is 1.1. would buying the purse increase america's GDP by more, less, or the same as donating the money to Haitian earthquake relief? Suppose she instead donated to tornado relied in Joplin, MO. Would buying the purse increase GDP by more, less, or the same amount on tornado relief?

more; same

What type of spending depends primarily on these 3 factos: the interest rate, the expected future of real GDP, and the curent level of production capacity?

planned investment spending