macro ch 12

given the consumption schedule in the table above, the marginal propensity to save as

A. 0.1 consumption (dollars) Disposable Income 1,200 3,000 2,100 4,000 3,000 5,000

if disposable income increases by $100 mil, and consumption increase by $90 mil, then the marginal propensity to consume is

A. 0.9

if inventories decline by more than analyst predict they will decline, this implies that

A. actual investment spending was less than planned investment spending

equilibrium GDP is equal to

autonomous expenditure times the multiplier

An unplanned decrease in inventories results in

A. actual investment that is GREATER than planned investment

the ratio of increase in __ to the increase in __ is called the multiplier

A. equilibrium real GDP; autonomous expenditure

in a small economy in 2013, aggregate expenditure was $800 mil while GDP that year was $850 mil. Which of the following can explain the difference between aggregate expenditure and GDP that year?

A. firm investment in inventories was greater than anticipated in 2013

how does a decrease in government spending affect the aggregate expenditure line

A. if shifts the aggregate expenditure line downward

when aggregate expenditure = GDP

A. macro equilibrium occurs

if planned aggregate expenditure is below potential GDP and planned aggregate expenditure equals GDP, then

A. the economy is in a recession

US net export spending falls when

A. the growth rate of US GDP is faster than the growth rate of GDP in other countries

consumption spending is 5 mil, planned investment spending is 8 mil, unplanned investment spending is 2 mil, government purchases are 10 mil, and net export spending is 2 mil. What is aggregate expenditure

B. 23 mil Cs + pi + gp

suppose that the government spending increases, shifting up aggregate expenditure line, GDP increases from GDP1 to GDP2, and this amount is 200 mil. if the MPC is 0.8, then what is the distance between N and L or by how much did government spending change

B. 40 bil *graph

if the consumption function is defined as C= 5,500 + 0.9y, what is the autonomous level of consumption expenditure

B. $5,500

given the quations for c,i,g, and NX, below is the equilibrium level of gdp c= 2,000 + 0.9y I= 2,500 G= 3,000 NX= 400

B. $79,000 E = C+I+G+NX E = Y Y = (2,000 + 0.9y) + 2500 + 3000 + 400 Y = 0.9y + 7900 Y-.09y = 0.9y-0.9y + 7900 0.1y = 7900 Y = 7900/0.1 Y = 79,000

a general formula for the multiplier

B. 1/(MPS)

A decrease in consumer confident can put your job at risk if

C. aggregate expenditures fall

if the economy is in equilibrium, it is at a level of aggregate expenditure given by point

B. K

which of the following leads to an increase in real GDP

B. a decrease in interest rates

the increase in consumer spending discussed in the article summary was due in part to an improving housing market. this reason for the increase in consumer spending is most closely related to which of the following variables that determine the level of consumption

B. household wealth *read paper*

disposable income is defined as

B. national income + transfers - taxes

if an increase in autonomous consumption spending of 25 mil results in 100 mil increase in equilibrium real GDP, then

B. the MPC is 0.75

__ consumption is consumption that does not depend upon the level of GDP

C. autonomous

suppose that investment spending decreases by 5 mil, decreasing aggregate expenditure and decreasing real GDP from GDP2 to GDP1. if the MPC is 0.8 the what is the change in GDP

C. -25 mil *graph

equations for c,i,g, and nx are given below. if the equilibrium level of GDP is , 21,500, what is the marginal propensity to consume c= 1,500 + (MPC) Y I= 1,000 G= 2,000 NX= -200

C. 0.8

the national restaurant association states that the restaurant industry has economic effect of more than 1.7 trill annually in the US, with every dollar spent in restaurants generating an estimated total of $2.05 in spending in the economy. this indicates that the spending multiplier for the restaurant industry is equal to

C. 2.05

National income =

C. Consumption + saving + taxes

on the 45 degree line diagram, for points that lie below the 45 degree line

C. planned aggregate expenditure is less than GDP

if an increase in investment spending of $20 million results in a 200 mil increase in equilibrium real GDP, then

C. the multiplier is 10

if an increase in investment spending if 50 mil result in a 400 mil increase in equilibrium real GDP, then

C. the multiplier is 8 400/8

all of the following are true statements about the multiplier EXCEPT

C. the multiplier is a value between zero and one

which of he following is a true statement about the multiplier

C. the multiplier rises as the MPC rises

john keynes argued that if many households decide at the same time to increase saving and reduce spending

C. they may make themselves worse off by cuasing aggregate expenditure to fall, thereby pushing the economy into recession

according to the figure above, at what point is aggregate expenditure greater than gdp

C.J *look at graph

consumption spending is $22 mil, planned investment spending is $7 mil, actual investment spending is $7 mil, government purchases are $9 mil, and net export spending is 3 mil. based on this info. which is TRUE

D aggregate expenditure is = to GDP

MPC + MPS =

D. 1 Marginal Propensity to Consume change in how much disposable income spent - Δ consumption - always less than one but more than zero - MPS + MPC = 1 - slope of consumption function (ΔConsumption) / (ΔDisposable Income)

if the consumption function is defines as c= 5,500 + 0.9y, what is the value of the multiplier

D. 10

suppose that investment spending increases by 10 mil, shifting up the aggregate expenditure line and gdp increases from gdp1 to gdp2. if the MPC is 0.9, then what is the change in GDP

D. 100 mil *graph

the key idea of the aggregate expenditure model is that any particular year, the level of __ is determined mainly by the level of aggregate expenditure

D. GDP

which of the following will decrease aggregate expenditure in the US

D. a decrease in government purchases

if firms sell EXACTLY what they expected to sell, all of the following will be true EXCEPT

D. aggregate expenditure will be GREATER than GDP

Firms in a small economy planned that inventories would grow over the past year by $300,00. over that year, inventories actually grew by $400,000. this implies that

D. aggregate expenditure will be LESS than GDP

in the aggregate expenditure model, __ has both an autonomous component and an induced component

D. consumption spending

consumer spending __ and investment spending __

D. follows a smooth trend; is more volatile and subject to fluntuations

if the US economy is currently at point N, which of the following could cause it to move to point K

D. households expect future income to decline *look at graphs

if the economy is at point J, what will happen

D. inventories have FALLEN BELOW their desired level, and firms INCREASE production

the increase in consumer spending discussed in the article summary was due in part to lower debt payments which have resulted in an increase in disposable income. the increase in consumption resulting from the increase in disposable income caused an __ the aggregate expenditure curve

D. movement up along

Actual investment spending does NOT include

D. spending on consumer durable goods

if the US economy is currently at point K, which of the following could cause it to move to point N

D. the price level in the US rises relative to the price level in other countries *look at graphs

the aggregate expenditure model focuses on the relationship between __ and __ to the short run, assuming __ is constant

D. total spending, real GDP, total income