Question 1

What are the factors that determine consumption expenditure, and which of these factors is the most important?
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Accepted Answer

The answer of What are the factors that determine consumption...

Question 2

Explain the relationship between the marginal propensity to consume (MPC)and the aggregate expenditure line.
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Accepted Answer

The answer of Explain the relationship between the marginal propensity...

Question 3

Real investment tends to follow a smooth upward path over time; however, consumption spending tends to fluctuate significantly according to consumer income levels and spending patterns.

Accepted Answer

Real investment can also experience fluctuations due to changes in business conditions and economic factors. While consumption spending can be influenced by consumer income levels and spending patterns, there are also other factors such as consumer confidence and market conditions that can impact spending behavior.

Question 4

Given the following table, fill in the values of the marginal propensity to save (MPS)and the marginal propensity to consume (MPC). Show that the MPC + MPS = 1. The numbers in the table are in billions of dollars.
  
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Accepted Answer

The answer of Given the following table, fill in the...

Question 5

You review a salesman's income over a five-year period. You note it fluctuates significantly from year-to-year. Yet his consumption of goods and services remains consistently at the same level, year after year. Does this mean that income is not a determinant of consumption, or could something else explain his behaviour?
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Accepted Answer

The answer of You review a salesman's income over a...

Question 6

How will the following affect Australian net exports?
a.Australia experiences a long period of inflation relative to other countries.
b.Australia experiences a recession.
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Accepted Answer

The answer of How will the following affect Australian net...

Question 7

Which of the following leads to a decrease in real GDP?

Accepted Answer

An increase in interest rates leads to a decrease in consumption and investment spending, which decreases aggregate demand and ultimately decreases real GDP. Options A and D lead to an increase in aggregate demand and may increase real GDP. Option B may have some negative impact on net exports, but it is not significant enough to decrease real GDP.

Question 8

What happened to government purchases between 1960 and 2016?

Accepted Answer

Government purchases generally grew between 1960 and 2016.

Question 9

Throughout most of the 2000s, including 2016, net exports in Australia:

Accepted Answer

Throughout most of the 2000s, including 2016, net exports in Australia were mostly negative, indicating that the country was importing more goods than it was exporting.

Question 10

An increase in the price level in Australia, ceteris paribus, will reduce imports and increase exports.

Accepted Answer

An increase in the price level in Australia, ceteris paribus, makes Australian goods more expensive relative to foreign goods. This would likely reduce exports because Australian goods become less competitive abroad, and increase imports as consumers and businesses look for cheaper alternatives from other countries.

Question 11

Given the following table, fill in the values for savings. The numbers in the table are in billions of dollars. Assume there are no taxes.
  
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Accepted Answer

The answer of Given the following table, fill in the...

Question 12

Australian net export spending falls when the:

Accepted Answer

The answer of Australian net export spending falls when the:
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Question 13

Net exports usually ________ when the Australian economy is in a recession and ________ when the Australian economy is expanding.

Accepted Answer

During a recession, domestic demand for imports typically falls, and exports may become more competitive due to a weaker currency, leading to an increase in net exports. Conversely, during economic expansion, increased domestic demand can lead to higher imports, potentially decreasing net exports.

Question 14

What is the 'marginal propensity to consume'?
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Accepted Answer

The answer of What is the 'marginal propensity to consume'?
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Question 15

Explain how a stock market crash has the potential to lead to a recession in an economy.
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Accepted Answer

The answer of Explain how a stock market crash has...

Question 16

The marginal propensity to consume is the ratio of consumption to disposable income.

Accepted Answer

The marginal propensity to consume (MPC) is the proportion of an additional amount of disposable income that is spent on consumption. It is not the ratio of total consumption to total disposable income, but rather the ratio of the change in consumption to the change in disposable income.

Question 17

Which of the following leads to an increase in real GDP?

Accepted Answer

An increase in the inflation rate in other countries relative to Australia's inflation rate would lead to an increase in exports and hence an increase in real GDP.

Note: The other choices would lead to a decrease in real GDP - a decrease in government spending (A) would decrease aggregate demand, an increase in interest rates (C) would decrease investment and consumption spending, and households having increasingly pessimistic expectations about future income (D) would decrease consumption spending.

Question 18

On the 45° line diagram, the 45° line shows points such that:

Accepted Answer

The 45° line on the diagram represents the points where real aggregate expenditure (which is the sum of consumption, investment, government spending, and net exports adjusted for inflation) equals real GDP (which is the total value of goods and services produced in an economy adjusted for inflation). Therefore, choice (C) is the correct answer.

Question 19

If inflation in Australia is lower than inflation in other countries, what will be the effect on net exports for Australia, ceteris paribus?

Accepted Answer

When inflation in Australia is lower than inflation in other countries, it makes Australian goods relatively cheaper compared to other countries. This leads to an increase in demand for Australian exports, resulting in a rise in net exports. Therefore, the best choice is A.

Question 20

High interest rates cause spending by all households to fall, which reduces aggregate expenditure in the economy.

Accepted Answer

While high interest rates can reduce spending by making borrowing more expensive and saving more attractive, the impact on household spending can vary. Some households may reduce spending significantly, while others may not be as affected due to differences in borrowing needs, savings, or income levels. Therefore, it's not accurate to say that high interest rates cause spending by all households to fall.

Quiz 9: Aggregate Expenditure and Output in the Short Run

What are the factors that determine consumption expenditure, and which of these factors is the most important? _ _

Explain the relationship between the marginal propensity to consume (MPC)and the aggregate expenditure line. _ _

Real investment tends to follow a smooth upward path over time; however, consumption spending tends to fluctuate significantly according to consumer income levels and spending patterns.

Given the following table, fill in the values of the marginal propensity to save (MPS)and the marginal propensity to consume (MPC). Show that the MPC + MPS = 1. The numbers in the table are in billions of dollars. _ _

How will the following affect Australian net exports? a.Australia experiences a long period of inflation relative to other countries. b.Australia experiences a recession. _ _

Which of the following leads to a decrease in real GDP?

What happened to government purchases between 1960 and 2016?

Throughout most of the 2000s, including 2016, net exports in Australia:

An increase in the price level in Australia, ceteris paribus, will reduce imports and increase exports.

Given the following table, fill in the values for savings. The numbers in the table are in billions of dollars. Assume there are no taxes. _ _

Australian net export spending falls when the:

Net exports usually when the Australian economy is in a recession and when the Australian economy is expanding.

What is the 'marginal propensity to consume'? _ _

Explain how a stock market crash has the potential to lead to a recession in an economy. _ _

The marginal propensity to consume is the ratio of consumption to disposable income.

Which of the following leads to an increase in real GDP?

On the 45° line diagram, the 45° line shows points such that:

If inflation in Australia is lower than inflation in other countries, what will be the effect on net exports for Australia, ceteris paribus?

High interest rates cause spending by all households to fall, which reduces aggregate expenditure in the economy.

Quiz 9: Aggregate Expenditure and Output in the Short Run

What are the factors that determine consumption expenditure, and which of these factors is the most important? _____________________________________________________________________________________________ _____________________________________________________________________________________________

Explain the relationship between the marginal propensity to consume (MPC)and the aggregate expenditure line. _____________________________________________________________________________________________ _____________________________________________________________________________________________

Real investment tends to follow a smooth upward path over time; however, consumption spending tends to fluctuate significantly according to consumer income levels and spending patterns.

Which of the following leads to a decrease in real GDP?

What happened to government purchases between 1960 and 2016?

Throughout most of the 2000s, including 2016, net exports in Australia:

An increase in the price level in Australia, ceteris paribus, will reduce imports and increase exports.

Australian net export spending falls when the:

Net exports usually ________ when the Australian economy is in a recession and ________ when the Australian economy is expanding.

What is the 'marginal propensity to consume'? _____________________________________________________________________________________________ _____________________________________________________________________________________________

Explain how a stock market crash has the potential to lead to a recession in an economy. _____________________________________________________________________________________________ _____________________________________________________________________________________________

The marginal propensity to consume is the ratio of consumption to disposable income.

Which of the following leads to an increase in real GDP?

On the 45° line diagram, the 45° line shows points such that:

If inflation in Australia is lower than inflation in other countries, what will be the effect on net exports for Australia, ceteris paribus?

High interest rates cause spending by all households to fall, which reduces aggregate expenditure in the economy.

What are the factors that determine consumption expenditure, and which of these factors is the most important? _ _

Explain the relationship between the marginal propensity to consume (MPC)and the aggregate expenditure line. _ _

Net exports usually when the Australian economy is in a recession and when the Australian economy is expanding.

What is the 'marginal propensity to consume'? _ _

Explain how a stock market crash has the potential to lead to a recession in an economy. _ _