Deck 9: Aggregate Demand

Question 1

If a household's income falls from $26,000 to $24,000 and its saving falls from $1,000 to $500,then its _____.

A)marginal propensity to consume is 0.98
B)marginal propensity to consume is 1.33
C)marginal propensity to consume is 0.25
D)marginal propensity to save is 0.02
E)marginal propensity to save is 0.25

Answer 1

marginal propensity to save is 0.25

Question 2

As disposable income increases,_____.

A)consumption and saving both increase
B)consumption increases and saving decreases
C)consumption and saving both decrease
D)consumption decreases but saving increases
E)saving increases,but we cannot predict what happens to consumption

Answer 2

consumption and saving both increase

Question 3

The difference between consumption spending and disposable income _____.

A)decreases as income increases
B)stays proportionally the same as income increases
C)decreases if the interest rate increases
D)equals the amount of taxes paid
E)equals saving

Answer 3

equals saving

Question 4

The sum of the marginal propensity to consume (MPC)and the marginal propensity to save (MPS)equals:

A)0.5.
B)the multiplier.
C)the slope of the consumption function.
D)1.0.
E)the slope of the saving function.

Question 5

The consumption function relates consumption spending to _____.

A)the price level
B)interest rates
C)disposable income
D)expectations about the price level
E)household wealth

Question 6

If a household's income rises from $46,000 to $46,700 and its consumption spending rises from $35,800 to $36,400,then its:

A)marginal propensity to consume is 0.86.
B)marginal propensity to consume is 0.99.
C)marginal propensity to consume is 0.98.
D)marginal propensity to save is 0.01.
E)marginal propensity to save is 0.86.

Question 7

The table given below shows the disposable income and consumption of a household.In the table below,saving:
Table 9.1
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$\begin{array}{cc}\text { Disposable }\\\text { Income }(\$) & \text { Consumption }(\$) \\\hline 1,000 & 800 \\1,100 & 880 \\1,200 & 960 \\1,300 & 1,040 \\1,400 & 1,120\end{array}$

A)decreases as disposable income increases.
B)decreases as disposable income decreases.
C)remains constant as disposable income increases.
D)is negative at a disposable income of $1,000.
E)is negative at a disposable income of $1,400.

Question 8

The marginal propensity to consume is:

A)the relationship between a change in consumption and a change in income.
B)the relationship between a change in consumption and a change in saving.
C)the relationship between changes in consumption and changes in net wealth.
D)the ratio of income to consumption at any given level of income.
E)the ratio of total consumption to total saving.

Question 9

Historically,consumption spending in the United States has _____.

A)fluctuated greatly with changes in the level of income
B)remained approximately constant as a percentage of income
C)decreased as a percentage of income
D)varied inversely with the inflation rate
E)varied inversely with the interest rate

Question 10

If a household's income falls from $20,000 to $17,000 and its consumption spending falls from $18,000 to $15,000,then its:

A)marginal propensity to consume is −0.67.
B)marginal propensity to consume is 0.88.
C)marginal propensity to consume is 0.20.
D)marginal propensity to save is 0.
E)marginal propensity to save is 0.12.

Question 11

If the marginal propensity to consume,MPC,is less than 1 and a household's disposable income increases by $2,000,the household's consumption will _____.

A)increase by less than $2,000
B)increase by $2,000
C)decrease if the total income of the household is above $100,000
D)remain the same unless the change in income significantly affects the household's wealth
E)increase by more than $2,000

Question 12

The table given below shows the disposable income and consumption of a household.In the table below,the level of saving at a disposable income of $1,200 is:
Table 9.1
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?
$\begin{array}{cc}\text { Disposable }\\\text { Income }(\$) & \text { Consumption }(\$) \\\hline 1,000 & 800 \\1,100 & 880 \\1,200 & 960 \\1,300 & 1,040 \\1,400 & 1,120\end{array}$

A)$80
B)$240
C)$950
D)$1,200
E)$1,300

Question 13

Suppose an increase in disposable income from $3 trillion to $3.2 trillion increases consumption from $2.5 trillion to $2.6 trillion.The marginal propensity to consume is _____.

A)0.1
B)0.2
C)0.5
D)0.8
E)0.9

Question 14

Which of the following is true of the relationship between disposable income and consumption?

A)Disposable income and consumption are both dependent variables.
B)Disposable income and consumption are both independent variables.
C)Disposable income is the dependent variable and consumption is the independent variable.
D)Consumption is the dependent variable and disposable income is the independent variable.
E)Disposable income and consumption are negatively related to each other.

Question 15

The consumption function assumes that:

A)only disposable income affects consumption.
B)only the price level affects consumption.
C)many factors other than disposable income affect consumption,and each is allowed to vary along the consumption function.
D)factors other than disposable income affect consumption,but those are held constant along the consumption function.
E)only consumer expectations affect consumption.

Question 16

Which of the following is true of disposable income?

A)It excludes transfer payments.
B)It is the portion of income that is used solely for consumption.
C)It is that part of total earned income that is paid to the government in the form of taxes.
D)It is the difference between income and saving.
E)It equals consumption expenditures plus saving.

Question 17

The fraction of an increase in income that is saved is referred to as the _____.

A)marginal propensity to save
B)average propensity to save
C)marginal propensity to consume
D)average propensity to consume
E)saving-consumption ratio

Question 18

If the marginal propensity to consume is equal to 0.70 and income rises by $20 billion in an economy,then consumption spending will increase by:

A)$6 billion.
B)$14 billion.
C)$20 billion.
D)$28 billion.
E)$67 billion.

Question 19

The marginal propensity to consume:

A)is the proportion of disposable income that is consumed.
B)is the ratio of disposable income to consumption.
C)is the change in consumption relative to a change in disposable income.
D)minus the marginal propensity to save must equal 1.
E)is greater than 1 at all levels of income.

Question 20

The most important determinant of a household's consumption spending is:

A)its disposable income.
B)the in-kind transfers received by the household.
C)the level of education of the members of the household.
D)the interest rate.
E)the ratio of wage to non-wage income of the household.

Question 21

Which of the following will shift the consumption function upward?

A)A lower interest rate
B)An increase in the interest rate
C)An increase in disposable income
D)A decrease in disposable income
E)Expectations of lower prices in the future

Question 22

If income increases by $100 and saving increases by $25,the slope of the consumption function equals _____.

A)1/4
B)1/5
C)1/2
D)3/4
E)3/5

Question 23

A decrease in disposable income will:

A)shift the consumption function upward.
B)shift the consumption function downward.
C)cause an upward movement along the consumption function.
D)cause a downward movement along the consumption function.
E)make the consumption function flatter.

Question 24

An upward shift of the consumption function might be caused by:

A)an increase in disposable income.
B)a decrease in disposable income.
C)a decrease in the price level.
D)a decrease in household wealth.
E)an increase in the interest rate.

Question 25

The slope of the consumption function shows how:

A)consumption changes over time.
B)consumption changes as household size changes.
C)consumption changes as the price level changes.
D)income changes as the level of consumption changes.
E)consumption changes as the level of income changes.

Question 26

Expectations that disposable income will increase in the future will _____.

A)shift the current consumption function upward
B)shift the current consumption function downward
C)result in an upward movement along the current consumption function
D)make the current consumption function flatter
E)make the current consumption function steeper

Question 27

Which of the following is least likely to cause a shift of the consumption function?

A)A change in the level of saving
B)A change in consumer expectations about future prices
C)A change in household wealth
D)A change in investment spending
E)A change in the interest rate

Question 28

A decrease in net wealth will _____.

A)shift the consumption function downward
B)make the consumption function steeper
C)cause an upward movement along the consumption function
D)cause a downward movement along the consumption function
E)make the consumption function flatter

Question 29

A decrease in the price level will _____.

A)shift the consumption function upward
B)result in an upward movement along the consumption function
C)result in a downward movement along the consumption function
D)shift the consumption function downward

Question 30

Which of the following will shift the consumption function upward?

A)A decrease in stock prices
B)An increase in stock prices
C)A higher price level
D)A lower disposable income
E)A higher disposable income

Question 31

Which of the following will not shift the consumption function?

A)A change in household wealth
B)A change in the price level
C)A change in household disposable income
D)A change in the level of unemployment
E)A change in the rate of interest

Question 32

An increase in the price level will:

A)make the consumption function flatter.
B)make the consumption function steeper.
C)increase consumption because wages will increase.
D)decrease consumption because falling interest rates make it cheaper to borrow.
E)decrease consumption because the value of net wealth will decrease.

Question 33

Which of the following will shift the consumption function upward?

A)A decrease in disposable income
B)An increase in disposable income
C)An increase in the interest rate
D)Expectations of lower future prices
E)An increase in net wealth

Question 34

Expectations that the price level will increase in the future will:

A)shift the current consumption function upward.
B)make the current consumption function steeper.
C)make the current consumption function flatter.
D)result in a downward movement along the current consumption function.
E)shift the current consumption function downward.

Question 35

_____ is the reward savers earn for deferring consumption.

A)Dividend
B)Wage
C)Rent
D)Profit
E)Interest

Question 36

An increase in net wealth will:

A)increase consumption and saving at each level of income.
B)increase saving and decrease consumption at each level of income.
C)decrease consumption and saving at each level of income.
D)increase consumption and decrease saving at each level of income.
E)have no effect on consumption because consumption is a function of income.

Question 37

Along the consumption function,an increase in disposable income will:

A)cause autonomous consumption to rise.
B)shift the consumption function upward.
C)cause a corresponding downward shift of the saving function.
D)cause a movement along the given consumption function.
E)shift the consumption function downward.

Question 38

A higher interest rate will:

A)shift the consumption function upward.
B)shift the consumption function downward.
C)make the consumption function steeper.
D)make the consumption function flatter.
E)cause an upward movement along the consumption function.

Question 39

A decrease in stock prices will _____ the net wealth of households and _____ consumption.

A)reduce;increase
B)reduce;decrease
C)reduce;not change
D)increase;increase
E)increase;decrease

Question 40

Expectations that the price level will decrease in the future will _____.

A)make the current consumption function flatter
B)shift the current consumption function downward
C)result in an upward movement along the current consumption function
D)result in a downward movement along the current consumption function
E)make the current consumption function steeper

Question 41

The market interest rate is important to the investment decision of firms:

A)only when funds are borrowed from financial intermediaries.
B)only when firms have the money to invest in capital.
C)regardless of whether funds must be borrowed or firms have the funds on hand.
D)only when firms have funds on hand and are ready to lend them.
E)only when firms purchase new equipment rather than a new building.

Question 42

Data on annual percentage changes in real GDP,consumption,and investment in the United States shows that fluctuations in investment _____.

A)are noticeably smaller during expansions than during recessions
B)are roughly similar to fluctuations in consumption
C)are roughly similar to fluctuations in GDP
D)are closely followed by economic forecasters because those fluctuations often signal that a recession will occur
E)account for most of the variability in GDP

Question 43

Which of the following is not an example of a government purchase?

A)Salaries of teachers in public schools
B)Chinese toys to be sold in stores
C)Purchase of military aircrafts
D)Construction of an interstate highway
E)Building a public school

Question 44

Which of the following is true of net taxes?

A)The level of net taxes varies directly with the level of transfer payments.
B)The level of net taxes varies inversely with the level of transfer payments.
C)Net taxes must always be less than zero.
D)Net taxes increase when income tax rates are reduced.
E)Net taxes increase when income decreases.

Question 45

An increase in real disposable income will:

A)increase the value of net exports of a country.
B)decrease the value of net exports of a country.
C)increase government purchases.
D)decrease government purchases.
E)increase net taxes.

Question 46

Government outlays equal:

A)the difference between government expenditures and government revenues.
B)the sum of government expenditures and government revenues.
C)the sum of government purchases and transfer payments.
D)the difference between government purchases and transfer payments.
E)the ratio of government purchases to transfer payments.

Question 47

An increase in the market interest rate,other things equal,will _____.

A)have no effect on investment
B)increase the amount invested since the rate of return will be lower
C)increase the amount invested because income will increase
D)reduce the amount invested because the opportunity costs of investing will be higher
E)increase the amount invested because the rate of return will be higher

Question 48

Fluctuations in investment:

A)account for almost all of the variability in gross domestic product (GDP)only during expansions.
B)account for little of the variability in gross domestic product (GDP).
C)account for almost all of the variability in gross domestic product (GDP)only during recessions.
D)are larger during expansions than during recessions.
E)account for more of the variability in gross domestic product (GDP)than consumption.

Question 49

Less of an economy's resources will be channeled into building new factories and equipment when:

A)interest rates are high.
B)households decide to save more of their income.
C)firms are optimistic about their future profits.
D)aggregate income increases.
E)an economy has a trade deficit.

Question 50

If the market interest rate decreases,then there will be _____.

A)an upward movement along the investment demand curve
B)a downward movement along the investment demand curve
C)a rightward shift of the investment demand curve
D)a leftward shift of the investment demand curve
E)no movement along or shift of the investment demand curve

Question 51

A technological change that positively affects business expectations will:

A)cause a rightward shift of the investment demand curve.
B)cause a leftward shift of the investment demand curve.
C)cause an upward movement along the investment demand curve.
D)cause a downward movement along the investment demand curve.
E)make the investment demand curve upward sloping.

Question 52

Which of the following is true of government purchases?

A)They are positively related to current income.
B)They are negatively related to current income.
C)They are directly related to taxes.
D)They are decided by public officials.
E)They depend on the market rate of interest.

Question 53

A firm's level of investment depends on the market interest rate:

A)only when the firm has to borrow funds to invest in new equipment.
B)only when the firm has to borrow funds to buy stocks and bonds.
C)only when the firm already has sufficient funds and could lend them.
D)because the interest rate represents the opportunity cost of investing in capital.
E)because investments are always made with borrowed funds.

Question 54

On a graph showing investment along the vertical axis and income along the horizontal axis,_____.

A)the investment line will be downward sloping
B)the investment line will be upward sloping
C)the investment line will be horizontal
D)the investment line will be vertical
E)the investment line will be U-shaped

Question 55

If the market interest rate equals 8 percent,the opportunity cost of the last new investment project undertaken would approximately be equal to _____.

A)zero percent
B)4 percent
C)infinity
D)8 percent
E)16 percent

Question 56

Which of the following will shift the investment demand curve rightward?

A)Higher interest rates
B)Gloomy sales expectations
C)A cut in corporate taxes that raises after-tax profits
D)A decrease in the marginal propensity to consume
E)An increase in aggregate income

Question 57

Which of the following is most likely to cause a rightward shift of the investment demand curve?

A)An increase in income
B)A decrease in the market interest rate
C)An improvement in business expectations
D)An increase in the market rate of interest
E)A decrease in income

Question 58

Net taxes are:

A)taxes plus transfer payments.
B)taxes minus transfer payments.
C)an injection into the economic system.
D)consumption after taxes.
E)government spending minus taxes.

Question 59

Identify the correct statement.

A)During a recession,investment decreases while consumption increases.
B)During a recession,investment increases while consumption decreases.
C)During a recession,investment is constant while consumption increases.
D)Annual variations in investment are larger than annual variations in consumption.
E)Annual variations in investment are smaller than annual variations in consumption.

Question 60

A household that expects a decrease in disposable income in the future will _____.

A)increase its current consumption spending
B)decrease its current consumption spending
C)maintain its current consumption spending
D)first increase its current consumption spending and then decrease spending when income falls
E)first decrease its current consumption spending and then increase spending when income falls

Question 61

The table given below shows the values of different components of aggregate expenditure of an economy.The marginal propensity to consume (MPC)equals:
?
Table 9.2
?
?
$\text { (Trillions of Dollars) }$
$\begin{array}{llccccccc}\text { Rea } & \text { Net } & \text { Disposab } & \text { Consumpti } & \text { Savin } & \text { Planned } & \text { Governme } & \text { Net } & \text { Planned } \\1 & \text { Taxe } & \text { le } & \text { on } & \text { g } & \text { Investme } & \text { nt } & \text { Export } & \text { Aggregate } \\\mathrm{GD} & \text { s } & \text { Income } & \text { (C) } & \text { (S) } & \text { nt } & \text { Purchases } & \text { s } & \text { Expenditures } \\\mathrm{P} & (\mathrm{NT}) & (\mathrm{Y}-\mathrm{NT}) & & & \text { (I) } & \text { (G) } & (\mathrm{X}- & \mathrm{C}+\mathrm{I}+\mathrm{G}+(\mathrm{X}- \\(\mathrm{Y}) & & & & & & & \text { M) } & \mathrm{M})\\\hline 5.0 & 1.0 & 4.0 & 3.9 & 0.1 & 1.0 & 1.0 & -0.7 & 5.2 \\5.5 & 1.0 & 4.5 & 4.3 & 0.2 & 1.0 & 1.0 & -0.7 & 5.6 \\6.0 & 1.0 & 5.0 & 4.7 & 0.3 & 1.0 & 1.0 & -0.7 & 6.0 \\6.5 & 1.0 & 5.5 & 5.1 & 0.4 & 1.0 & 1.0 & -0.7 & 6.4 \\7.0 & 1.0 & 6.0 & 5.5 & 0.5 & 1.0 & 1.0 & -0.7 & 6.8\end{array}$

A)0.20 or 1/5.
B)0.40 or 2/5.
C)0.80 or 4/5.
D)0.90 or 9/10.
E)0.60 or 3/5.

Question 62

The table given below shows the values of different components of aggregate expenditure of an economy.The marginal propensity to save (MPS)equals _____.
?
Table 9.2
?
?
$\text { (Trillions of Dollars) }$
$\begin{array}{llccccccc}\text { Rea } & \text { Net } & \text { Disposab } & \text { Consumpti } & \text { Savin } & \text { Planned } & \text { Governme } & \text { Net } & \text { Planned } \\1 & \text { Taxe } & \text { le } & \text { on } & \text { g } & \text { Investme } & \text { nt } & \text { Export } & \text { Aggregate } \\\mathrm{GD} & \text { s } & \text { Income } & \text { (C) } & \text { (S) } & \text { nt } & \text { Purchases } & \text { s } & \text { Expenditures } \\\mathrm{P} & (\mathrm{NT}) & (\mathrm{Y}-\mathrm{NT}) & & & \text { (I) } & \text { (G) } & (\mathrm{X}- & \mathrm{C}+\mathrm{I}+\mathrm{G}+(\mathrm{X}- \\(\mathrm{Y}) & & & & & & & \text { M) } & \mathrm{M})\\\hline 5.0 & 1.0 & 4.0 & 3.9 & 0.1 & 1.0 & 1.0 & -0.7 & 5.2 \\5.5 & 1.0 & 4.5 & 4.3 & 0.2 & 1.0 & 1.0 & -0.7 & 5.6 \\6.0 & 1.0 & 5.0 & 4.7 & 0.3 & 1.0 & 1.0 & -0.7 & 6.0 \\6.5 & 1.0 & 5.5 & 5.1 & 0.4 & 1.0 & 1.0 & -0.7 & 6.4 \\7.0 & 1.0 & 6.0 & 5.5 & 0.5 & 1.0 & 1.0 & -0.7 & 6.8\end{array}$

A)0.80 or 4/5
B)0.60 or 3/5
C)0.40 or 2/5
D)0.10 or 1/10
E)0.20 or 1/5

Question 63

The table given below shows the values of different components of aggregate expenditure of an economy.At the equilibrium level of gross domestic product (GDP),saving equals _____.
?
Table 9.2
?
?
$\text { (Trillions of Dollars) }$
$\begin{array}{llccccccc}\text { Rea } & \text { Net } & \text { Disposab } & \text { Consumpti } & \text { Savin } & \text { Planned } & \text { Governme } & \text { Net } & \text { Planned } \\1 & \text { Taxe } & \text { le } & \text { on } & \text { g } & \text { Investme } & \text { nt } & \text { Export } & \text { Aggregate } \\\mathrm{GD} & \text { s } & \text { Income } & \text { (C) } & \text { (S) } & \text { nt } & \text { Purchases } & \text { s } & \text { Expenditures } \\\mathrm{P} & (\mathrm{NT}) & (\mathrm{Y}-\mathrm{NT}) & & & \text { (I) } & \text { (G) } & (\mathrm{X}- & \mathrm{C}+\mathrm{I}+\mathrm{G}+(\mathrm{X}- \\(\mathrm{Y}) & & & & & & & \text { M) } & \mathrm{M})\\\hline 5.0 & 1.0 & 4.0 & 3.9 & 0.1 & 1.0 & 1.0 & -0.7 & 5.2 \\5.5 & 1.0 & 4.5 & 4.3 & 0.2 & 1.0 & 1.0 & -0.7 & 5.6 \\6.0 & 1.0 & 5.0 & 4.7 & 0.3 & 1.0 & 1.0 & -0.7 & 6.0 \\6.5 & 1.0 & 5.5 & 5.1 & 0.4 & 1.0 & 1.0 & -0.7 & 6.4 \\7.0 & 1.0 & 6.0 & 5.5 & 0.5 & 1.0 & 1.0 & -0.7 & 6.8\end{array}$

A)$0.4 trillion
B)$0.1 trillion
C)$0.5 trillion
D)$0.2 trillion
E)$0.3 trillion

Question 64

If planned spending exceeds planned output in an economy,the result is a(n)_____.

A)increase in inventories
B)decrease in gross domestic product
C)decrease in imports
D)increase in government purchases
E)unintended decrease in inventories

Question 65

The figure given below shows the income-expenditure model.Which of the following best describes the situation at point B?

A)Consumption expenditure exceeds disposable income
B)Real GDP exceeds aggregate expenditure
C)Aggregate expenditure is exactly equal to real GDP
D)Aggregate expenditure exceeds real GDP
E)Producers experience an unexpected accumulation of inventory

Question 66

The amount of U.S.exports to the rest of the world is primarily determined by _____.

A)the real disposable income in the United States
B)the real disposable income in other nations
C)the real interest rate in other nations
D)the real interest rate in the United States
E)the government budget deficits in other nations

Question 67

Identify the correct statement about net exports.

A)The value of net exports increases as real domestic income increases.
B)The value of net exports increases as real domestic income decreases.
C)The value of net exports is dependent on the amount of government purchases.
D)The value of net exports is always positive.
E)The value of net exports is always negative.

Question 68

The aggregate output demanded for a given price level occurs at the point where:

A)an economy reaches the full employment of labor.
B)aggregate expenditure equals real GDP.
C)actual aggregate expenditures exceeds real GDP.
D)inventories of goods and services are increasing.
E)inventories of goods and services are decreasing.

Question 69

In the simple aggregate expenditure model,the slope of the aggregate expenditure line depends on:

A)interest rates.
B)real gross domestic product.
C)the price level.
D)the marginal propensity to consume.
E)the marginal propensity to save.

Question 70

At the equilibrium level of real gross domestic product (GDP),unplanned inventory adjustment equals _____.

A)planned investment
B)saving
C)zero
D)actual investment
E)consumption

Question 71

Which of the following best describes aggregate expenditure?

A)C + I + G + (X − M)
B)C + S + G + (X − M)
C)C + I + G + (X + M)
D)C + I + T + (X − M)
E)C + I + T + (X + M)

Question 72

An increase in income in other countries,other things equal,would cause U.S._____.

A)exports to decrease and imports to increase
B)exports to increase and imports to increase
C)imports to decrease and exports to decrease
D)imports to increase and exports to remain unchanged
E)imports to remain unchanged and exports to increase

Question 73

Which of the following is illustrated by the distance between the aggregate expenditure line and the 45-degree line at each level of real GDP?

A)The level of saving in an economy
B)Unplanned inventory change
C)Planned investment undertaken in an economy
D)The marginal propensity to save
E)The marginal propensity to consume

Question 74

Suppose at a particular level of real gross domestic product (GDP),there are no unintended inventory adjustments.In this context,which of the following is true?

A)Real GDP is less than the equilibrium level of real GDP demanded.
B)Real GDP is greater than the equilibrium level of real GDP demanded.
C)Real GDP equals the equilibrium level of real GDP demanded.
D)At equilibrium real GDP,there is no inflation.
E)At equilibrium real GDP,there is no saving.

Question 75

The aggregate expenditure line is drawn on a graph that measures:

A)real GDP on the horizontal axis and aggregate expenditure on the vertical axis.
B)aggregate expenditure on the horizontal axis and real GDP on the vertical axis.
C)consumption on the horizontal axis and aggregate expenditure on the vertical axis.
D)aggregate expenditure on the horizontal axis and consumption on the vertical axis.
E)investment on the horizontal axis and aggregate expenditure on the vertical axis.

Question 76

The table given below shows the values of different components of aggregate expenditure of an economy.The equilibrium level of gross domestic product (GDP)is _____.
?
Table 9.2
?
?
$\text { (Trillions of Dollars) }$
$\begin{array}{llccccccc}\text { Rea } & \text { Net } & \text { Disposab } & \text { Consumpti } & \text { Savin } & \text { Planned } & \text { Governme } & \text { Net } & \text { Planned } \\1 & \text { Taxe } & \text { le } & \text { on } & \text { g } & \text { Investme } & \text { nt } & \text { Export } & \text { Aggregate } \\\mathrm{GD} & \text { s } & \text { Income } & \text { (C) } & \text { (S) } & \text { nt } & \text { Purchases } & \text { s } & \text { Expenditures } \\\mathrm{P} & (\mathrm{NT}) & (\mathrm{Y}-\mathrm{NT}) & & & \text { (I) } & \text { (G) } & (\mathrm{X}- & \mathrm{C}+\mathrm{I}+\mathrm{G}+(\mathrm{X}- \\(\mathrm{Y}) & & & & & & & \text { M) } & \mathrm{M})\\\hline 5.0 & 1.0 & 4.0 & 3.9 & 0.1 & 1.0 & 1.0 & -0.7 & 5.2 \\5.5 & 1.0 & 4.5 & 4.3 & 0.2 & 1.0 & 1.0 & -0.7 & 5.6 \\6.0 & 1.0 & 5.0 & 4.7 & 0.3 & 1.0 & 1.0 & -0.7 & 6.0 \\6.5 & 1.0 & 5.5 & 5.1 & 0.4 & 1.0 & 1.0 & -0.7 & 6.4 \\7.0 & 1.0 & 6.0 & 5.5 & 0.5 & 1.0 & 1.0 & -0.7 & 6.8\end{array}$

A)$5.0 trillion
B)$5.5 trillion
C)$6.0 trillion
D)$6.5 trillion
E)$7.0 trillion

Question 77

In an economy without a government and without international transactions,aggregate expenditure at each level of income is equal to:

A)consumption plus saving.
B)planned investment plus saving.
C)disposable income plus the price level.
D)consumption plus planned investment.
E)planned investment minus saving.

Question 78

If incomes in the United States increase,other things equal,then U.S._____.

A)imports increase and exports remain constant
B)exports increase and imports decrease
C)imports decrease and exports decrease
D)imports remain constant and exports increase
E)net exports remains constant

Question 79

The aggregate expenditure line shows total planned spending at each _____.

A)consumption level
B)investment level
C)income level,holding the price level constant
D)price level,holding the level of income constant
E)interest rate,holding the price level constant

Question 80

The figure given below shows the income-expenditure model.At point C,_____.

A)consumption expenditure exceeds disposable income
B)producers experience an unexpected loss of inventory
C)aggregate expenditure is exactly equal to real GDP
D)real GDP exceeds aggregate expenditure
E)producers experience an unexpected accumulation of inventory