macroeconomics exam 2

autonomous consumption is dependent on what

Income

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 on the AD curve

the multiplier is larger if

marginal propensity to consume is larger

The sum of planned consumption expenditure, planned investment, planned government purchases, andplanned net exports is

aggregate planned expenditure

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 State

an increase in autonomous expenditure

all of the following statements about equilibrium expenditure are true EXCEPT ________. A)aggregate planned expenditure equals real GDP B)actual investment is less than planned investment C)aggregate planned expenditure equals actual aggregate expenditure D)unplanned inventory investment is zero

b - actual investment is less than planned investment

A change in imports caused by rising U.S. incomes is

change in induced expenditure

the consumer price index

compares the cost in the current period to the cost in the reference year base period of a basket of goods typically consumed in the base period

In the short run, with fixed prices and no imports and no income taxes, a decrease in investment A)decreases real GDP by the same amount. B)decreases real GDP by a smaller amount. C)decreases real GDP by a larger amount. D)increases real GDP because of the increase in induced expenditures

decrease real GDP by a larger amount

The presence of income taxes and imports cause the multiplier to

fall in value but remain positive

true or false autonomous expenditures change when GDP changes.

false

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 exports

The marginal propensity to import is the ________ that is spent on imports

fraction of an increase in real GDP

the multiplier is greater than 1 because the change in autonomous expenditure leads to

more induced expenditure

The slope of the aggregate expenditure curve equals the change in

planned expenditure divided by the change in real GDP

decrease in autonomous consumption will

shift the aggregate expenditure downwards

if this years price level exceeds last years price level then

the inflation rate between these 2 years in positive

The consumption function relates the consumption expenditure decisions of households to

the level of disposable income

marginal propensity to import, marginal propensity to consume, and marginal income tax rate all affect the size of what

the multiplier

Any expenditure component that depends on the level of real GDP is called

induced expenditure

what is the marginal propensity to consume

the ratio of the change in consumption expenditure to the change in disposable income

true or false aggregate planned expenditure is the sum of planned consumption expenditure, investment, government purchases, and net exports

true

when an economy experiences inflation

- price level rises persistently -

marginal propensity to consume is between what two numbers

0 and 1

Which of the following events will make the consumption function steeper? A)an increase in disposable income B)an increase in real GDP C)an increase in the marginal propensity to consume D)an increase in unplanned inventory investment

C - an increase in the marginal propensity to consume