ECON - CHAPTER 11

when disposable income increases from 6 trillion to 6.5 trillion, consumption expenditure increase from 5.5 trillion to 5.9 trillion. The MPC equals

0.8

the slope of the consumption function is

less than 1

in the keynesian model of aggregate expenditure, real GDP is determined by the

level of aggregate demand

at equilibrium expenditure

aggregate planned expenditure equals real GDP

the Keynesian model of aggregate expenditure assumes that

both individual firms' prices are the price level are fixed

the marginal propensity to save equals the

change in savings resulting from a one dollar change in disposable income

disposable income is divided into

consumption and saving

the aggregate expenditure curve shows

how planned aggregate expenditure and real GDP are related

in the very short run, the components of aggregate planned expenditure that depend on the level of real GDP are

planned consumption expenditure and planned imports

the slope of the aggregate expenditure curve equals the change in

planned expenditure divided by the change in real GDP

in the very short term, in the Keynesian model, which of the following is fixed and does not change when GDP changes

planned investment

a consumption function shows a

positive (direct) relationship between consumption expenditure and disposable income

when disposable income is 0, consumption is $2000. Then

saving = -$2000

equilibrium expenditure occurs when

the aggregate expenditure curve crosses the 45-degree line

What is the marginal propensity to consume

the change in the consumption expenditure divided by the change in disposable income

1 - MPC equals

the marginal propensity to save

the sum of the components of aggregate expenditure that vary with real GDP is called

induced expenditures

which of the following is true

MPS + MPC = 1

when disposable income increases form 7 trillion to 7.5 trillion, consumption expenditure increase from 6.5 trillion to 6.9 trillion. The MPS is equal to

0.2

if the marginal propensity to save is 0.6, then the marginal propensity to consume is

0.4

the expenditure multiplier equals

1/(1 - slope of AE curve)

if the MPC is .9 and there are no income taxes or imports, the multiplier for a change in autonomous expenditure equals

10

if there are no taxes or imports and MPC = 0.67, the multiplier is

3

the MPC is equal to

C / YD

autonomous consumption is that portion of consumption expenditure that is not influenced by

income

disposable income is

income minus taxes plus transfer payments

if the slope of the AE curve increases, the multiplier

increases