Deck 25: The Algebra of Income and Expenditure

Question 1

If C = a + bY,which of the following is true?

A) If a increases,autonomous saving will increase.
B) If a increases,the multiplier will increase.
C) If a increases,the multiplier will decrease.
D) If b increases,the multiplier will increase.
E) If b increases,the multiplier will decrease.

Answer 1

If b increases,the multiplier will increase.

Question 2

If C = $3,000 + 0.9Y,which of the following will not be true?

A) If income is less than $30,000,saving must be negative.
B) If income is $30,000,then consumers are not saving.
C) If income equals $40,000,saving must be $0.
D) The marginal propensity to consume is 0.9.
E) Autonomous consumption is $3,000.

Answer 2

If income equals $40,000,saving must be $0.

Question 3

If the net export function is 500 - 0.15Y,then exports are represented by -0.15Y.

Answer 3

False

Question 4

In the consumption function: C = a + b(Y - NT),the term b represents the

A) intercept of the consumption function
B) level of taxation
C) level of net taxation
D) level of income
E) marginal propensity to consume

Question 5

Increases in consumption that result from increases in investment are called induced consumption.

Question 6

Investment is the only autonomous spending component in aggregate expenditure.

Question 7

If the net export function is 500 - 0.15Y,then an increase in income of $1,000 will decrease net exports by $150.

Question 8

Equilibrium output can be found by solving for the value of Y in the expression a + b(Y - NT)+ I + G + X - M(Y - NT).

Question 9

Equilibrium output equals autonomous spending multiplied by the spending multiplier.

Question 10

If C = 10 + 0.8Y,a $100 increase in Y would increase consumption by

A) $10
B) $20
C) $50
D) $80
E) $100

Question 11

The nation of Omega has an MPC of 0.70 and an MPM of 0.15.Therefore,Omega's spending multiplier is

A) 1.18
B) 2.22
C) 3.33
D) 1.43
E) This question cannot be answered without knowing the MPS

Question 12

If Y = C + I + G + (X - M)(where C = $100,I = $50,G = $50,and X - M = -$10)the equilibrium level of Y equals

A) $150
B) $180
C) $190
D) $200
E) $210

Question 13

Consumption that is independent of the level of income is called autonomous consumption.

Question 14

If C = $3,000 + 0.9Y and income is $20,000,

A) consumption is $20,000
B) consumption is $18,000
C) saving is $0
D) saving is -$1,000
E) income will increase to $200,000

Question 15

If Y = C + I + G + (X - M)and Y = $190,C = $100,I = $50 and G = $50 then,in equilibrium,X - M must equal

A) -$20
B) -$10
C) $10
D) $20
E) $50

Question 16

If the marginal propensity to import increases,the spending multiplier increases.