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ECON-1012-B-Introduction to Macroeconomics

ECON-1012-B-Introduction to Macroeconomics

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Which of the following actions is an example of a discretionary fiscal policy designed to counter a recessionary gap?

an increase in transfer payments

a decrease in government expenditure on goods and services

a decrease in transfer payments

an increase in debt interest payments

an increase in taxes

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Which of the following policies shifts the AD curve the farthest leftward?

an increase in government expenditure of $10 billion

a decrease in government expenditure of $10 billion

a decrease in taxes of $10 billion

a simultaneous increase in government expenditure of $10 billion and taxes of $10 billion

an increase in taxes of $10 billion

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Table 11.1.2

Disposable Income (dollars)	Consumption Expenditure (dollars)
325	325
400	375
475	425
550	475
625	525

Refer to Table 11.1.2, which shows the relationship between disposable income and consumption expenditure for an economy. When saving is zero, what is the level of disposable income?

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When firms plan to increase inventories, how do equilibrium expenditure and real GDP change?

Equilibrium expenditure ________ and real GDP ________.

decreases; does not change

increases; increases

decreases; decreases

decreases; increases

increases; decreases

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Everything else remaining the same, how does autonomous consumption change when disposable income changes?

It decreases as disposable income decreases.

It increases as disposable income increases.

It is usually assumed to be zero.

It increases as disposable income decreases.

It does not change as disposable income changes.

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How does a decrease in autonomous expenditure impact the economy's AE curve?

The new AE curve is parallel and below the original AE curve.

The new AE curve is steeper than the original AE curve.

The new AE curve is more downward sloping than the original AE curve.

The new AE curve is flatter than the original AE curve.

The new AE curve is parallel and above the original AE curve.

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Short Description: A line graph shows the relationship between consumption expenditure and disposable income for an economy. Long Description: The vertical axis is labelled, consumption expenditure (billions of 20 12 dollars per year) and ranges from 0 to 800. The horizontal axis is labelled, disposable income (billions of 20 12 dollars per year) and ranges from 0 to 800. The 45 degree line slopes upward from the origin and passes through the points B (200, 200), D (260, 260), and (500, 500). The line for consumption function slopes upward from (0, 100) and passes through the point (200, 260). The line intersects the 45 degree line at (500, 500).

Refer to Figure 11.1.1, which shows an economy's consumption function. When disposable income is equal to $200 billion, what is saving?

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In an economy with a fixed price level, autonomous spending is $20 trillion and the slope of the AE curve is 0.8. What is the equation of the AE curve?

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If a household's disposable income increases from $12,000 to $22,000 and at the same time its consumption expenditure increases from $4,000 to $9,000, which of the following statements is correct?

The slope of the consumption function is 0.6.

The slope of the consumption function is 0.5.

The household is dissaving.

The marginal propensity to consume over this range is negative.

The marginal propensity to save over this range is negative.

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Short Description: A line graph of aggregate planned expenditure versus real G D P. Long Description: The vertical axis is labelled, aggregate planned expenditure (billions of 20 12 dollars) and ranges from 0 to 400 in increments of 100. The horizontal axis is labelled, real G D P (billions of 20 12 dollars) and ranges from 0 to 400 in increments of 100. The 45 degree line slopes upward from the origin passing through the points (100, 100), (200, 200), and (300, 300). The line for C slopes upward from the point (0, 25) on the vertical axis intersecting the 45 degree line at (100, 100). The line for C + I slopes upward from the point (0, 50) on the vertical axis passing through the points (100, 125), (200, 200), and (300, 275).

Refer to Figure 11.3.1, which shows an economy's consumption expenditure (C) and investment (I). If the economy does not engage in international trade and has no government. If investment increases by $25 billion, by how much will real GDP increase?

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