MACRO Ch 11
Larger the multiplier
In general, the steeper the aggregate expenditure curve, the
Decreases real GDP by a larger amount
In the short run, with fixed prices and no imports and no income taxes, a decrease in investment
Induced consumption expenditure minus imports
Induced expenditure includes ______
Aggregate planned expenditure
The sum of planned consumption expenditure, planned investment, planned government purchases, and planned net exports is _____
I is false and II is true
Read the two statements below and indicate if they are true or false. I. Autonomous expenditures change when GDP changes. II. Aggregate planned expenditure is the sum of planned consumption expenditure, investment, government purchases, and net exports.
Flatter than it would be without income taxes and exports
The presence of income taxes and imports cause the slope of the aggregate expenditure curve to be
Planned expenditure divided by the change in real GDP
The slope of the aggregate expenditure curve equals the change in
Increases; decreases
The slope of the aggregate expenditure curve increases when the marginal propensity to consume _____ or the marginal propensity to import _____
Greater than 0 and less than 1
The slope of the aggregate expenditure curve is
Less than the slope of the 45-degree line but not equal to zero
The slope of the consumption is _____
A change in induced expenditure
A change in imports caused by rising U.S. income is
Shift the aggregate expenditure function downward
A decrease in autonomous consumption will
Actual investment is less than planned investment
All of the following statements about equilibrium expenditure are true EXCEPT
An increase in autonomous expenditure
An increase in U.S. exports because of increasing foreign incomes is _______ in the United States
The price level; downward; autonomous expenditure; rightward
An increase in _____ shifts the AE curve _____ and an increase in _____ shifts the aggregate demand curve _____
Shift in the AE curve and a movement along the AD curve
Any change in the price level will result in a
Induced expenditure
Any expenditure component that depends on the level of real GDP is called
Imports increase
As a nation's GDP increases, that nation's
Is independent of income
Autonomous consumption
Imports
Decrease the size of the multiplier because spending on imports does not increase real GDP in the domestic nation
The level of disposable income
The consumption function relates the consumption expenditure decision of households to _____
Aggregate planned expenditure; real GDP
The graph of the aggregate expenditure curve has _____ on the y-axis and _____ on the x-axis
Disposable income on the horizontal axis
The graph of the consumption function has consumption expenditure on the vertical axis and _____
Is between 0 and 1
The marginal propensity to consume
Fraction of a change in disposable income that is consumed
The marginal propensity to consume is the ____
Fraction of an increase in real GDP
The marginal propensity to import is the _______ that is spent on imports
More induced expenditure
The multiplier is greater than 1 because the change in autonomous expenditure leas to _____
Marginal propensity to consume is larger
The multiplier is larger if the
Fall in value but remain positive
The presence of income taxes and imports cause the multiplier to
The ratio of the change in consumption expenditure to the change in disposable income
What is the marginal propensity to consume
Greater than one
When prices are fixed and there are no imports or income taxes, the value of the multiplier is
An increase in the marginal propensity to consume
Which of the following events will make the consumption function steeper
I, II, and III
Which of the following will affect he size of the multiplier? I. marginal propensity to import II. marginal propensity to consume III. marginal income tax rate
Leftward shift of the AD curve
in general, a decrease in autonomous expenditure that is NOT caused by a price change results in a
