Macroeconomics quiz 3

A downward shift in the consumption function can be caused by:

a decline in consumer wealth.

The marginal propensity to consume is:

the change in consumer spending divided by the change in aggregate disposable income.

If the multiplier is 4 and autonomous government spending decreases by $100 billion, real GDP will:

decrease by $400 billion.

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

one.

The marginal propensity to consume equals the:

ratio of the change in consumer spending to the change in aggregate disposable income.

Scenario: Aggregate Consumption Equation Suppose that the aggregate consumption function is given by the equation C = 200 + 0.8YD, where C represents consumption and YD represents disposable income. (Scenario: Aggregate Consumption Equation) Look at the scenario Aggregate Consumption Equation. If disposable income increases from $500 to $800, autonomous consumption is:

$200

Scenario: Aggregate Consumption Equation Suppose that the aggregate consumption function is given by the equation C = 200 + 0.8YD, where C represents consumption and YD represents disposable income. (Scenario: Aggregate Consumption Equation) Look at the scenario Aggregate Consumption Equation. If disposable income is $500, autonomous consumption is:

$200

Scenario: Aggregate Consumption Equation Suppose that the aggregate consumption function is given by the equation C = 200 + 0.8YD, where C represents consumption and YD represents disposable income. (Scenario: Aggregate Consumption Equation) Look at the scenario Aggregate Consumption Equation. If disposable income increases from $500 to $800, aggregate consumption will increase by:

$240

Suppose that the marginal propensity to consume is 0.8 and investment spending increases by $100 billion. The increase in real GDP is:

$500 billion, composed of $100 billion in investment spending and $400 billion in consumption.

Scenario: Aggregate Consumption Equation Suppose that the aggregate consumption function is given by the equation C = 200 + 0.8YD, where C represents consumption and YD represents disposable income. (Scenario: Aggregate Consumption Equation) Look at the scenario Aggregate Consumption Equation. If disposable income is $500, aggregate consumption is:

$600

You and a coworker have been trying to develop a linear equation that describes the local household consumption function. Your coworker has sent you a very short email that simply says he has finished the project and the consumption function is C = 100 + 0.75(YD). Your job is to explain this result to your supervisor. According to this consumption function, how much consumption spending would occur if a household had disposable income of $1,000?

$850

If the marginal propensity to save is 0.3, the size of the multiplier is:

3.3.

In an economy with no taxes and no imports, disposable income decreases from $6,000 to $4,000. If consumption decreases from $4,500 to $3,000, the multiplier is:

4

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

5.

In a simple economy with no taxes, government spending, exports, or imports, if disposable income increases by $100 and $70 is consumed, _____ is saved.

$30

In an economy with no taxes and no imports, disposable income decreases from $6,000 to $4,000. If consumption decreases from $4,500 to $3,000, the marginal propensity to save is:

0.25

If the multiplier equals 4, then the marginal propensity to save must be equal to:

0.25.

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:

0.6.

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

If disposable income increases by $5 billion and consumer spending increases by $4 billion, the marginal propensity to consume equals:

0.8.

The multiplier is:

1 / (1 - MPC).

Which of the following most accurately depicts the formula for the expenditure multiplier?

1/MPS and 1/1-MPC

If the MPS = 0.1, then the multiplier equals:

10

Scenario: Aggregate Consumption Equation Suppose that the aggregate consumption function is given by the equation C = 200 + 0.8YD, where C represents consumption and YD represents disposable income. (Scenario: Aggregate Consumption Equation) Look at the scenario Aggregate Consumption Equation. If disposable income increases from $500 to $800, aggregate consumption is:

$840

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

4

Scenario: Aggregate Consumption Equation Suppose that the aggregate consumption function is given by the equation C = 200 + 0.8YD, where C represents consumption and YD represents disposable income. (Scenario: Aggregate Consumption Equation) Look at the scenario Aggregate Consumption Equation. If all employers announce in September that they guarantee to give all employees a large bonus in December, which of the following equations could represent the new aggregate consumption function?

B) C = 250 + 0.8YD

"Macroeconomics is nothing but a simple aggregation of all the microeconomic parts." Do you agree or disagree with this statement?

Don't agree; there is a lot more to the study of macroeconomics than the sum of its microeconomic parts.

Suppose the government increases spending by $100 billion as a stimulus package. If the marginal propensity to consume is 0.6, then real GDP will:

increase by $250 billion.