Deck 6: Aggregate Expenditures

Question 1

How is savings defined?

A)S = Y + C
B)S = C - Y
C)S = Y/C
D)S = Y - C

Answer 1

S = Y - C

Question 2

What is meant by dis-savings?

A)The level of savings when income is zero.
B)Negative savings.
C)The level of savings where it is equal to consumption.
D)The level of savings where it is equal to income.

Answer 2

Negative savings.

Question 3

What is induced spending?

A)The portion of total spending that is dependent of the level of income.
B)The portion of total spending that is independent of the level of income.
C)The level of spending which varies with the level of prices.
D)The portion of income that is dependent on the level of spending.

Answer 3

The portion of total spending that is dependent of the level of income.

Question 4

Which of the following is true of induced spending?

A)It rises as income increases.
B)It is a function of income.
C)It is zero when income is zero.
D)It rises as income increase,it is a function of income,and it is zero when income is zero.

Question 5

Refer to the graph above to answer this question.What is the value of the MPC?

A)0.25.
B)0.4.
C)0.6.
D)0.8
E)100.

Question 6

How is the MPC defined?

A)It is the fraction of a change in income which is not spent.
B)It is the fraction of a change in consumption that results from a change in income.
C)It is the fraction of total income which is not consumed.
D)It is the fraction of total income which is consumed.
E)It is the fraction of a change in the level of income that results from a change in consumption.

Question 7

What is meant by the term induced consumption?

A)It is the portion of consumer spending that is unrelated to income levels.
B)It is the necessary amount of spending that consumers must undertake.
C)It is the portion of income which is not saved.
D)It is the portion of consumer spending which is dependent on the level of income.

Question 8

What is the marginal propensity to import?

A)It is the change in incomes resulting from a change in imports.
B)It is the effect on net exports resulting from a change in imports.
C)It is the effect on imports of a change in the exchange rate.
D)It is the change in imports that results from a change in income.

Question 9

What is autonomous spending?

A)The portion of total spending that is dependent of the level of income.
B)The portion of total spending that is independent of the level of income.
C)The level of spending which never varies.
D)The portion of income that is dependent on the level of spending.

Question 10

What is meant by the term the marginal leakage rate?

A)Total leakages as a fraction of aggregate expenditures.
B)Total leakages as a fraction of the level of income.
C)The ratio of change in income that results from a change in leakages.
D)The ratio of change in leakages that results from a change in income.

Question 11

What is meant by the term the marginal propensity to expend?

A)Aggregate expenditures as a fraction of income.
B)Autonomous expenditures as a fraction of income.
C)The ratio of change in aggregate expenditures that results from a change in income.
D)The ratio of change in autonomous expenditures that results from a change in income.

Question 12

What is true of the size of the MPC?

A)It is less than zero.
B)It is greater than one.
C)It is greater than zero,but less than one.
D)It is equal to one.

Question 13

On what does the level of consumption in an economy depend most?

A)The needs of households.
B)The income level of households.
C)The level of savings.
D)The wants of households.

Question 14

What is the formula for the marginal propensity to expend?

A)∆ autonomous expenditures/∆ national income
B)∆ national income/∆ induced expenditures
C)∆ consumption/∆ national income
D)∆ aggregate expenditures/∆ national income

Question 15

Which of the following is true regarding autonomous spending?

A)It depends on the level of income.
B)It is the level of spending when income is zero.
C)It falls as income rises.
D)It can be negative.

Question 16

What is the formula for the marginal leakage rate?

A)∆ aggregate expenditures/∆ national income
B)(1 + MPE)
C)∆ leakages/∆ aggregate expenditures
D)(MPE - 1)
E)(1 - MPE)

Question 17

What is meant by the marginal propensity to save?

A)The ratio of change in savings to the corresponding change in income.
B)The ratio of change in income to the corresponding change in savings.
C)The ratio of change in savings to the corresponding change in consumption.
D)The portion of savings that is independent of the level of income.

Question 18

What does autonomous consumption refer to?

A)The level of consumption spending at break-even income.
B)The level of consumption spending which is independent of the income level.
C)The level of consumption spending which is independent of the rate of interest.
D)The amount of consumption spending when saving is zero.
E)The poverty-line level of consumption.

Question 19

Refer to the graph above to answer this question.What is the value of the MPS?

A)0.2.
B)0.25.
C)0.4.
D)0.5.
E)-100.

Question 20

What is meant by expenditure equilibrium?

A)The income at which savings equals consumption.
B)The level of aggregate expenditures at which savings equals consumption.
C)The income at which the value of production and aggregate expenditures are equal.
D)The income at which the level of aggregate expenditures is zero.
E)Where income is equal to the value of production.

Question 21

The following partial data relates to a national economy (all figures in $billions):

Refer to the above table to answer this question.What is the value of the marginal leakage rate?

A)0
B)0.4
C)0.6
D)1.67
E)2.5

Question 22

The following data relates to a national economy (all figures in $billions):

Refer to the table above to answer this question.What is the level of aggregate expenditures when income equals $2,000?

A)$1,800
B)$2,000
C)$2,200
D)$2,400
E)Cannot be determined from the information.

Question 23

Refer to the data above to answer this question.What is the equation for the aggregate expenditures function?

A)AE = 1,200.
B)AE = 2,500Y.
C)AE = 1,200 + 0.7Y.
D)AE = 1,200 + 0.8Y
E)AE = 1,400 + 0.8Y

Question 24

If X is an autonomous $150 and the MPM is 0.1,what is the value of X_N at an income of $1,000?

A)+$50.
B)+$100.
C)+$150.
D)-$100.

Question 25

The following partial data relates to a national economy (all figures in $billions):

Refer to the above table to answer this question.What is the value of the marginal propensity to expend?

A)0
B)0.4
C)0.6
D)1.67
E)2.5

Question 26

Refer to the data above to answer this question.What is the equation for the consumption function?

A)C = 200Y.
B)C = 200 + Y.
C)C = 200 + 0.6Y.
D)C = 0.8Y.
E)C = 200 + 0.8Y.

Question 27

Refer to the data above to answer this question.What is the value of expenditures equilibrium?

A)1,000.
B)1,200.
C)2,500.
D)3,000.
E)4,000.

Question 28

The following data relates to a national economy (all figures in $billions):

Refer to the table above to answer this question.If planned investment increased by $200,what would be the new value of equilibrium income?

A)$2,200
B)$2,400
C)$2,600
D)$2,800
E)Cannot be determined from the information.

Question 29

Refer to the data above to answer this question.What is the value of autonomous aggregate expenditures?

A)0.
B)200.
C)1,200.
D)2,500.
E)4,000.

Question 30

All of the following,except one,are true statements about expenditure equilibrium.Which is the exception?

A)It is the national income at which the value of production and aggregate expenditures are equal.
B)It is the national income level at which there is neither a surplus nor a shortage of production.
C)It is the national income level at which planned investment is equal to zero.
D)It is the national income level at which total injections equal total leakages.

Question 31

What happens if aggregate expenditures exceeds the level of production?

A)National income exceeds the level of production and inventories will accumulate.
B)The level of production exceeds national income and inventories will accumulate
C)National income exceeds the level of production and inventories will be reduced.
D)The level of production exceeds national income and inventories will be reduced
E)National income is less than total spending and inventories will be reduced.

Question 32

Refer to the graph above to answer this question.What is the equation for the consumption function?

A)C = 100 + 0.2Y.
B)C = 100 + 0.4Y.
C)C = 100 + 0.6Y.
D)C = 100 + 0.8Y.
E)C = -100 + 0.8Y.

Question 33

What is true of unplanned investment?

A)It is equal to the difference between national income and the level of production.
B)It is the amount of intended investment by firms.
C)It is the amount of investment that results from an unexpected decrease in interest rates.
D)It is equal to the difference between the level of production and aggregate expenditures.

Question 34

What happens to the value of net exports as national income increases?

A)It increases because the level of imports increases.
B)It decreases because the level of imports decreases.
C)It increases because the level of imports decreases.
D)It decreases because the level of imports increases.
E)It is not affected by the level of national income.

Question 35

Refer to the data above to answer this question.What is the equation for the net export function?

A)X_N = 300.
B)X_N = 400 - 300Y.
C)X_N = 300 - 50Y.
D)X_N = 300 + 0.1Y.
E)X_N = 300 - 0.1Y.

Question 36

The following data relates to a national economy (all figures in $billions):

Refer to the above graph to answer this question.What is the value of the MPE?

A)0.5.
B)1.
C)2.
D)$300.

Question 37

Refer to the graph above to answer this question.What is the equation for the saving function?

A)S = -200 + 0.2Y.
B)S = 200 - 0.2Y.
C)S = 200 + 0.4Y.
D)S = -200 + 0.6Y.
E)S = -200 + 0.8Y.

Question 38

Refer to the data above to answer this question.What is the equation for the saving function?

A)S = -200Y.
B)C = -200 + Y.
C)C = -200 + 0.2Y.
D)C = -200 + 0.8Y.
E)C = 200 + 0.8Y.

Question 39

The following partial data relates to a national economy (all figures in $billions):

Refer to the above table to answer this question.What is the value of equilibrium income?

A)0.
B)$400.
C)$666.
D)$1,000.
E)$2,000.

Question 40

The following data relates to a national economy (all figures in $billions):

Refer to the table above to answer this question.What is the value of equilibrium income?

A)$1,800
B)$2,000
C)$2,200
D)$2,400
E)Cannot be determined from the information.

Question 41

The following data relates to a national economy (all figures in $billions):

Refer to the above graph to answer this question.What is the value of the multiplier?

A)0.5.
B)1.
C)2.
D)$600.

Question 42

Refer to the graph above to answer this question.Suppose that G equals $650,I equals $380 and X equals $170.If income equals $1,200,which of the following statements is correct?

A)There is a shortage of goods and services of $100.
B)There is a surplus of goods and services of $100.
C)There is a shortage of goods and services of $300.
D)There is a surplus of goods and services of $300.
E)The economy is in expenditures equilibrium.

Question 43

The following data relates to a national economy (all figures in $billions):

Refer to the above graph to answer this question.What is the value of equilibrium income?

A)0.
B)$300.
C)$600.
D)Cannot be determined.

Question 44

This data represents a hypothetical economy (all figures are in $billions):

Refer to the information above to answer this question.What is the value of the MPC?

A)0.4.
B)0.6.
C)0.75.
D)0.8.
E)1

Question 45

Refer to the above graph to answer this question.What is the value of total leakages at equilibrium?

A)$200.
B)$300.
C)$600.
D)Cannot be determined.

Question 46

Refer to the above graph to answer this question.What is the value of autonomous expenditures?

A)$100.
B)$200.
C)$300.
D)Cannot be determined.

Question 47

Refer to the above graph to answer this question.What is the value of autonomous aggregate expenditures?

A)0.
B)100.
C)200.
D)800.
E)1,000.

Question 48

Refer to the information above to answer this question.What is the value of equilibrium income?

A)600.
B)800.
C)1,000.
D)1,500.
E)2,000.

Question 49

Refer to the above graph to answer this question.What is the value of the marginal leakage rate?

A)0.2.
B)0.5.
C)2.
D)2.5.

Question 50

Refer to the information above to answer this question.What is the equation for aggregate expenditures?

A)AE = 600.
B)AE = 2000.
C)AE = 600 + 0.6Y.
D)AE = 600 + 0.8Y.
E)AE = 600 - 0.8Y

Question 51

Refer to the above graph to answer this question.What is the value of aggregate expenditures at an income level of 1,000?

A)800.
B)1,000.
C)1,100.
D)1,200.
E)1,500.

Question 52

Refer to the information above to answer this question.What is the value of equilibrium income?

A)2,700.
B)3,500
C)4,500.
D)7,500.
E)11,250.

Question 53

Refer to the above graph to answer this question.What is the value of the MPE?

A)0.2
B)0.4
C)0.5
D)0.6
E)1

Question 54

Refer to the information above to answer this question.What is the equation for aggregate expenditures?

A)AE = 4,500.
B)AE = 3,500.
C)AE = 4,500 + Y.
D)AE = 4,500 + 0.6Y.
E)AE = 11,250 + 0.6Y.

Question 55

Refer to the above graph to answer this question.What is the value of the MPM?

A)0.
B)0.1
C)0.2
D)0.6
E)1

Question 56

Refer to the above graph to answer this question.What is the value of the multiplier?

A)2.
B)2.5.
C)5.
D)10.

Question 57

Refer to the above graph to answer this question.What is the value of the MPC?

A)0
B)0.4
C)0.6
D)1
E)2.5

Question 58

Refer to the graph above to answer this question.Suppose that G equals $650,I equals $380 and X equals $170.What is the value of equilibrium income?

A)0.
B)$500.
C)$1,200
D)$1,400.
E)$1,600.

Question 59

Refer to the above graph to answer this question.What is the value of the multiplier?

A)0.5
B)1
C)1.5
D)2
E)2.5

Question 60

Refer to the above graph to answer this question.If autonomous taxes were to increase,what would be the result?

A)The AE curve would shift up parallel and the equilibrium level of income would increase.
B)The AE curve would shift up parallel and the equilibrium level of income would decrease.
C)The AE curve would shift down parallel and the equilibrium level of income would increase.
D)The AE curve would shift down parallel and the equilibrium level of income would decrease.

Question 61

Which of the following equations is correct for an economy that does not have a government or a foreign sector?

A)MPC x MPS = 1
B)MPC/MPS = 1
C)MPC - MPS = 1
D)MPC + MPS = 1

Question 62

All of the following,except one,will cause an increase in autonomous consumption.Which is the exception?

A)A decrease in autonomous taxes.
B)Increased optimism in Canada's future economic prospects.
C)A sharp drop in the value of stock prices.
D)An increase in the average age of consumer durables.

Question 63

This data represents a hypothetical economy (all figures are in $billions):

Refer to the information above to answer this question.What is the value of the MPS?

A)0.15.
B)0.20.
C)0.25.
D)0.40.
E)0.60.

Question 64

What is the marginal tax rate?

A)Total taxes divided by total income.
B)Total income divided by total taxes.
C)The difference in incomes divided by the difference in total taxes.
D)The additional taxes paid divided by the original amount of taxes paid.
E)The proportion of additional income which is taxed.

Question 65

Refer to the information above to answer this question.What is the value of the MTR?

A)0.15
B)0.20
C)0.25
D)0.40
E)0.60

Question 66

Under what circumstance will the aggregate expenditure function shift upwards?

A)If the price level rises.
B)If the price level falls.
C)If consumer expectations turn pessimistic.
D)If the age of consumer durables is very low.
E)If income rises.

Question 67

Refer to the information above to answer this question.What is the value of autonomous consumption?

A)0
B)$40
C)$60
D)$80
E)$340

Question 68

Refer to the information above to answer this question.Which of the following is an expression for the consumption function (out of national income)?

A)C = 40 + 0.6Y
B)C = 80 + 0.6Y
C)C = 0.8Y
D)C = 40 + 0.8Y
E)C = 340 + 0.6Y

Question 69

If the MPS is 0.3,then what is the value of the MPC?

A)1 minus 0.3
B)0.3 minus 1
C)The reciprocal of the MPS.
D)0.3 x 0.7
E)0.3

Question 70

MPC = 0.63;MPM = 0.1
Refer to the above information to answer this question.What is the value of the MPE?

A)0.053
B)0.53
C)0.73
D)0.83

Question 71

What is not a determinant of the level of consumption?

A)The level of prices.
B)Consumer expectations.
C)The stock of wealth.
D)The age of capital goods.

Question 72

MPC = 0.9;MPM = 0.2
Refer to the above information to answer this question.What is the value of the MPE?

A)0.1.
B)0.3.
C)0.5
D)0.7.

Question 73

If the MPC is 0.8,then what is the value of the MPS?

A)0.8
B)0.2
C)0.25
D)1
E)4

Question 74

MTR = 0.2;MPS = 0.2
Refer to the above information to answer this question.What is the value of the MLR?

A)0.04
B)0.4
C)0.5
D)0.8

Question 75

Refer to the information above to answer this question.Which of the following is an expression for the tax function?

A)T = 175 + 0.25Y
B)T = 0.25Y
C)T = 175 - 0.25Y
D)T = 50 + 0.25Y
E)T = 175 + 0.75Y

Question 76

MPC = 0.9;MPM = 0.2
Refer to the above information to answer this question.What is the value of the MLR?

A)0.1.
B)0.3.
C)0.5
D)0.7.

Question 77

All of the following,except one,will cause a decrease in autonomous consumption.Which is the exception?

A)A sharp increase in stock prices.
B)Rising fears of political uncertainty concerning the possible break-up of the country.
C)A dramatic increase in the prices of most consumer goods.
D)An increase in income tax rates.

Question 78

Refer to the information above to answer this question.Which of the following is an expression for the savings function (out of national income)?

A)S = -90 + 0.2Y
B)S = -80 + 0.2Y
C)S = -90 + 0.15Y
D)S = -40 + 0.15Y
E)S = -15 + 0.15Y

Question 79

All of the following factors except one will cause the aggregate expenditure function to graphically shift upward.Which is the exception?

A)An increase in the age of the stock of consumer durable goods in the possession of consumers.
B)The expectation of a future decline in the consumer price index.
C)A big increase in the stock market index.
D)The expectation of an economic boom in the near future.

Question 80

Refer to the information above to answer this question.What is the value of the MPS?

A)0.15.
B)0.2.
C)0.25.
D)0.4.
E)0.6.