EC140 - Midterm 1 (CHAPTER 21] questions with accurate answers [verified]
In each of the four expenditure categories, national income accounts measure ________ expenditures,
while the theoretical model of the economy deals with ________ expenditures.
A. actual; desired
B. desired; actual
C. induced; exogenous
D. endogenous; exogenous
E. actual; autonomous -Answer- A. actual; desired
In a simple model of the economy, without government or taxes, a shock that causes an upward shift of
the aggregate consumption function also causes ________ shift of the saving function.
A. a less−than−equal upward
B. a less−than−equal downward
C. no
D. an equal downward
E. an equal upward -Answer- D. an equal downward
Suppose there is an increase in the marginal propensity to spend out of national income. The result will
be -Answer- an increase in the slope of the AE curve
If national income is Y3 and the aggregate expenditure function is
AE1 -Answer- there is unintended inventory accumulation and income will fall
In a simple macro model with the price level assumed to be constant, a change in firms' level of desired
investment is predicted to influence equilibrium national income by
A. shifting the 45−degree line.
B. causing movement along the investment function.
C. shifting the aggregate expenditure function.
1
, EC140 - Midterm 1 (CHAPTER 21] questions with accurate answers [verified]
D. shifting the consumption function.
E. shifting the saving function. -Answer- shifting the aggregate expenditure function.
A shift in the aggregate expenditure function from AE0 to
AE1 could be caused by (parallel up) -Answer- an increase in desired investment expenditures
Suppose aggregate output is demand−determined.
If the simple multiplier is 4 and there is a $10 billion increase in planned investment spending, then
equilibrium income will ________ and the marginal propensity to spend must equal ________ -Answer-
increase by $40 billion; 0.75
In a simple macro model, an increase in households' wealth is generally assumed to -Answer- cause an
upward shift in the aggregate consumption function
The consumption function is based on the assumption that as real disposable income rises, aggregate
desired consumption -Answer- and desired saving will both rise
Consider the following aggregate expenditure function: AE = $300 billion + (0.87)Y. Assuming that we
have no government, no international trade and desired investment is autonomous and is equal to $56
billion, then which of the following is the correct statement of the consumption function? -Answer- C =
$244 billion + (0.87)Y
Consider the following information for an economy with
demand−determined output and a constant price level. There is no government or foreign trade.
1. Y = C + I
2. C = 100 + 0.8Y
3. I = 200 -Answer- 1500
2
In each of the four expenditure categories, national income accounts measure ________ expenditures,
while the theoretical model of the economy deals with ________ expenditures.
A. actual; desired
B. desired; actual
C. induced; exogenous
D. endogenous; exogenous
E. actual; autonomous -Answer- A. actual; desired
In a simple model of the economy, without government or taxes, a shock that causes an upward shift of
the aggregate consumption function also causes ________ shift of the saving function.
A. a less−than−equal upward
B. a less−than−equal downward
C. no
D. an equal downward
E. an equal upward -Answer- D. an equal downward
Suppose there is an increase in the marginal propensity to spend out of national income. The result will
be -Answer- an increase in the slope of the AE curve
If national income is Y3 and the aggregate expenditure function is
AE1 -Answer- there is unintended inventory accumulation and income will fall
In a simple macro model with the price level assumed to be constant, a change in firms' level of desired
investment is predicted to influence equilibrium national income by
A. shifting the 45−degree line.
B. causing movement along the investment function.
C. shifting the aggregate expenditure function.
1
, EC140 - Midterm 1 (CHAPTER 21] questions with accurate answers [verified]
D. shifting the consumption function.
E. shifting the saving function. -Answer- shifting the aggregate expenditure function.
A shift in the aggregate expenditure function from AE0 to
AE1 could be caused by (parallel up) -Answer- an increase in desired investment expenditures
Suppose aggregate output is demand−determined.
If the simple multiplier is 4 and there is a $10 billion increase in planned investment spending, then
equilibrium income will ________ and the marginal propensity to spend must equal ________ -Answer-
increase by $40 billion; 0.75
In a simple macro model, an increase in households' wealth is generally assumed to -Answer- cause an
upward shift in the aggregate consumption function
The consumption function is based on the assumption that as real disposable income rises, aggregate
desired consumption -Answer- and desired saving will both rise
Consider the following aggregate expenditure function: AE = $300 billion + (0.87)Y. Assuming that we
have no government, no international trade and desired investment is autonomous and is equal to $56
billion, then which of the following is the correct statement of the consumption function? -Answer- C =
$244 billion + (0.87)Y
Consider the following information for an economy with
demand−determined output and a constant price level. There is no government or foreign trade.
1. Y = C + I
2. C = 100 + 0.8Y
3. I = 200 -Answer- 1500
2
