macro

In an economy with no international trade, no government expenditure, no transfers, and no taxes, planned aggregate spending equals _____ plus planned investment spending.

consumption

If the marginal propensity to consume is greater than zero but less than one, when disposable income rises by $1, consumption will:

rise by less than $1.

If the consumption function is plotted on the vertical axis of a graph with disposable income on the horizontal axis:

the slope of the line will be positive and determined by the marginal propensity to consume.

If real GDP is $1,000 billion and the aggregate expenditure is $850 billion, then the change in inventories will be:

$150 million.

.75

If the multiplier is 4, the marginal propensity to consume is:

Paul Samuelson

The Keynesian cross was developed by

accelerator principle

The belief that a higher rate of growth in real GDP will lead to higher planned investment spending is known as:

positive and negative multiplier effects.

The changes in the economy of Ft. Myers, Florida, between 2003 and 2010 provide an example of:

over their lifetime.

The life-cycle hypothesis of consumer spending says that consumers plan their spending:

plan spending over their lifetime.

The life-cycle hypothesis suggests that consumers:

false

The marginal propensity to consume is consumption divided by disposable income.

If expected GDP increases, then current planned investment will increase.

True

the current level of aggregate wealth

Which of the following is NOT one of the three principal factors upon which planned investment spending depends?

Suppose that the U.S. economy is in a severe recession. Most households are trying to save more of their income than before. This increase in private savings will lead to:

a fall in real GDP, as more savings means people will spend less.

If the multiplier is 4, the marginal propensity to save is:

.25

If the slope of the aggregate expenditures curve is 0.9, the multiplier is:

10.

Suppose investment spending increases by $50 billion and as a result the equilibrium income increases by $200 billion. The investment multiplier is:

4.

If the marginal propensity to save is 0.2, the multiplier is:

5

5

If the marginal propensity to consume is 0.8, the multiplier is:

false

If the marginal propensity to save is 0.25 in an economy with no taxes and no imports, the marginal propensity to consume is 1.25.

0.6

If your disposable income increases from $10,000 to $15,000 and your consumption increases from $9,000 to $12,000, your marginal propensity to consume is:

2.5

In an economy with no taxes and no imports, disposable income increases from $2,000 to $3,000. If consumption increases from $1,500 to $2,100, the multiplier is: Group of answer choices

AEPlanned = $1,050 + 0.75 × YD

In an economy without government purchases, government transfers, or taxes, aggregate autonomous consumer spending is $750 billion, planned investment spending is $300 billion, and the marginal propensity to consume is 0.75. What is the expression for planned aggregate spending?

If the marginal propensity to save is 0.25 in an economy with no taxes and no imports, the marginal propensity to consume is 0.75.

True

In an economy with no taxes and no imports, disposable income increases from $1,000 to $2,000. If consumption increases from $800 to $1,500, the multiplier is 3.33.

True

unplanned inventory investment.

When planned investment is less than actual investment, there must be:

real GDP equals planned aggregate spending.

When the economy is in income-expenditure equilibrium:

firms reduce production, reducing real GDP.

Whenever real GDP exceeds planned aggregate spending:

The most important determinant of consumer spending is:

disposable income.

The marginal propensity to consume plus the marginal propensity to save must:

equal 1

Suppose the marginal propensity to consume equals 0.9 and investment spending increases by $50 billion. Assuming no taxes and no trade, real GDP will _____ by _____.

increase; $500 billion

The most important factor affecting a household's consumer spending is:

its current disposable income.

The higher the production capacity of the economy:

the lower is planned investment spending.

If aggregate expenditures are higher than real GDP:

there are unplanned decreases in inventories.

If disposable income increases:

there will be a rightward movement along the consumption function

If aggregate expenditures are lower than real GDP:

there will be unplanned increases in inventories.

The permanent income hypothesis suggests that consumer:

spending depends on income people expect over the long term rather than on current income.

Suppose investment spending increases by $50 billion and as a result the equilibrium income increases by $200 billion. The value of the marginal propensity to consume is:

0.75.

indicates the opportunity cost of using retained earnings.

A firm has enough retained earnings to finance an investment project. For this firm, the market interest rate: Group of answer choices

true

Changes in unplanned inventory investment move the economy toward the income-expenditure equilibrium.

contract, reducing employment.

If real GDP exceeds aggregate expenditures, the economy will:

If real GDP is greater than planned expenditure, unplanned inventory investment is negative.

False

Income-expenditure equilibrium real GDP is the level of real GDP at which:

GDP equals planned aggregate spending.

positive; slowing

Rising inventories typically indicate _____ unplanned inventory investment and a _____ economy.

If real GDP is less than aggregate expenditure, then inventories will _____, and firms will _____.

fall; increase their future production

If the marginal propensity to consume decreases, the multiplier will increase.

false

In an economy with no taxes or imports, if disposable income decreases by $2,000 and consumption decreases by $1,400, the multiplier is 7.

false

The marginal propensity to consume is consumption divided by disposable income.

false

Investment spending:

fluctuates more than consumption.