Question 1

Consider a simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption. If the consumption function is
C = $500 + 0.8Y, planned investment = $200, government purchases = $300,
Net exports = $100, and real GDP = $1,000, what is the amount of autonomous expenditures?

Accepted Answer

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Question 2

In the simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption, the size of the multiplier depends on the

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Question 3

In the simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption, if the slope of the aggregate expenditures curve increases, the multiplier

Accepted Answer

If the slope of the aggregate expenditures curve increases, it means that a change in autonomous expenditure (other than consumption) will cause a larger change in aggregate expenditure. This will result in a higher multiplier effect on any changes in autonomous expenditure, as more spending will be generated for each dollar of initial autonomous expenditure. Therefore, the multiplier will increase.

Question 4

In the simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption, what is the value of the multiplier if the slope of the aggregate expenditures curve is 0.8?

Accepted Answer

In this scenario, the multiplier equals 1/(1-MPC), where MPC is the marginal propensity to consume. Since only consumption is not autonomous, we know that MPC=0.8. Therefore, the multiplier equals 1/(1-0.8) = 5.

Question 5

Consider a simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption. Which of the following events causes the aggregate expenditures curve to shift downwards?

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Question 6

Consider a simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption. If government purchases increases by $200 billion, the aggregate expenditures curve will shift up by

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Question 7

Consider a simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption. If the consumption function is
C = $500 + 0.8Y, planned investment = $200, government purchases = $300,
Net exports = $100, and real GDP = $1,000, what is the amount of aggregate expenditures?

Accepted Answer

The answer of Consider a simple aggregate expenditure model where...

Question 8

Consider a simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption. The marginal propensity to consume is 0.8. Suppose the equilibrium level of real GDP at the prevailing price is $500 billion below potential real GDP. All else constant, by how much should autonomous aggregate expenditures be increased to reach potential output?

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Question 9

Consider a simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption. The marginal propensity to consume is 0.75. Suppose the equilibrium level of real GDP at the prevailing price is $600 billion below potential real GDP. All else constant, by how much should autonomous aggregate expenditures be increased to reach potential output?

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Question 10

In the simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption, if the slope of the aggregate expenditures curve decreases, the multiplier

Accepted Answer

The multiplier and the slope of the aggregate expenditures curve are inversely related. As the slope of the curve decreases, the multiplier decreases because a given change in autonomous spending will result in a smaller change in equilibrium output. Therefore, the correct answer is B.

Question 11

Consider a simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption. Which of the following events causes the aggregate expenditures curve to shift upwards?

Accepted Answer

If households decrease the autonomous component of saving and increase consumption, then the aggregate expenditure curve will shift upwards. The other options involve decreases in one or more components of aggregate expenditure, which would cause the curve to shift downwards.

Question 12

Table 13-3
All figures in billions of base-year dollars
 
-Refer to Table 13-3. What is the value of the multiplier?

Accepted Answer

The answer of Table 13-3
All figures in billions of base-year...

Question 13

In the simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption, suppose when autonomous aggregate expenditures rise by $1,000 billion, equilibrium real GDP increases by $2,500 billion. Which of the following statements is true?

Accepted Answer

The multiplier is equal to the change in equilibrium real GDP divided by the initial change in autonomous aggregate expenditure. Therefore, the multiplier in this case would be 2.5 ($2,500 billion increase in equilibrium real GDP divided by $1,000 billion increase in autonomous aggregate expenditures). The MPC cannot be determined with the information given.

Question 14

Table 13-3
All figures in billions of base-year dollars
 
-Refer to Table 13-3. What is the value of the marginal propensity to consume?

Accepted Answer

The answer of Table 13-3
All figures in billions of base-year...

Question 15

Consider a simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption. Which of the following causes the aggregate expenditures curve to shift upwards?

Accepted Answer

Since all components of aggregate expenditure are autonomous except consumption, the only factor that can cause a shift in the aggregate expenditures curve is a change in one of the autonomous components. An increase in exports results in an increase in the autonomous component of net exports, causing the aggregate expenditures curve to shift upwards. The other factors listed have no direct effect on the autonomous components of aggregate expenditure.

Question 16

In the simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption, what is the value of the multiplier if the marginal propensity to consume is 0.75?

Accepted Answer

The answer of In the simple aggregate expenditure model where...

Question 17

Consider a simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption. If the consumption function is
C = $500 + 0.8Y, planned investment = $200, government purchases = $300,
Net exports = $100, and real GDP = $1,000, what is the amount of induced expenditures?

Accepted Answer

Induced expenditures are the part of aggregate expenditure that vary with real GDP. In this case, all components of aggregate expenditure except consumption are autonomous, meaning they do not vary with real GDP. Therefore, induced expenditures would be equal to the change in consumption resulting from the change in real GDP.

Using the given consumption function, we can calculate induced expenditures as follows:

C = $500 + 0.8Y
C = $500 + 0.8($1,000)
C = $500 + $800
C = $1,300

Induced expenditures are equal to the change in consumption, which is $1,300 minus the autonomous consumption of $500, or $800. Therefore, the answer is B.

Question 18

In the simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption, what is the value of the multiplier if the marginal propensity to save is 0.1?

Accepted Answer

The answer of In the simple aggregate expenditure model where...

Question 19

Consider a simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption. Which of the following causes the aggregate expenditures curve to shift downwards?

Accepted Answer

An increase in imports will lower the aggregate expenditures curve because it means that more money is leaving the economy to purchase goods and services from other countries, thus reducing domestic consumption and investment.

Question 20

In the simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption, suppose when autonomous aggregate expenditures rise by $500 billion, equilibrium real GDP increases by $2,500 billion. Which of the following statements is true?

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The answer of In the simple aggregate expenditure model where...

Quiz 13: Consumption and the Aggregate Expenditures Model

In the simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption, the size of the multiplier depends on the

In the simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption, if the slope of the aggregate expenditures curve increases, the multiplier

In the simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption, what is the value of the multiplier if the slope of the aggregate expenditures curve is 0.8?

Consider a simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption. Which of the following events causes the aggregate expenditures curve to shift downwards?

Consider a simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption. If government purchases increases by $200 billion, the aggregate expenditures curve will shift up by

In the simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption, if the slope of the aggregate expenditures curve decreases, the multiplier

Consider a simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption. Which of the following events causes the aggregate expenditures curve to shift upwards?

Table 13-3 All figures in billions of base-year dollars -Refer to Table 13-3. What is the value of the multiplier?

In the simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption, suppose when autonomous aggregate expenditures rise by $1,000 billion, equilibrium real GDP increases by $2,500 billion. Which of the following statements is true?

Table 13-3 All figures in billions of base-year dollars -Refer to Table 13-3. What is the value of the marginal propensity to consume?

Consider a simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption. Which of the following causes the aggregate expenditures curve to shift upwards?

In the simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption, what is the value of the multiplier if the marginal propensity to consume is 0.75?

In the simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption, what is the value of the multiplier if the marginal propensity to save is 0.1?

Consider a simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption. Which of the following causes the aggregate expenditures curve to shift downwards?

In the simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption, suppose when autonomous aggregate expenditures rise by $500 billion, equilibrium real GDP increases by $2,500 billion. Which of the following statements is true?