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ECON-1012-B-Introduction to Macroeconomics

ECON-1012-B-Introduction to Macroeconomics

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Which of the following statements is about disposable income?

Aggregate income plus transfer payments.

Aggregate income minus taxes.

The income used for consumption expenditure only.

Aggregate income minus transfer payments.

Aggregate income minus taxes plus transfer payments.

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An economy has a consumption function of C = 10 + 0.8Y, investment equal to 6, government expenditure equal to 10, exports equal to 10, and an import function of M = 0.1Y.

Refer to Fact 11.5.1. If autonomous consumption increases by 10, what is the new equilibrium real GDP for this economy?

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When the price level is fixed, how does an increase in the marginal propensity to consume influence the slope of the AE curve and equilibrium expenditure?

The slope of the AE curve

decreases, which decreases equilibrium expenditure.

decreases, but equilibrium expenditure does not change.

increases, which increases equilibrium expenditure.

increases, which decreases equilibrium expenditure.

decreases, which increases equilibrium expenditure.

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As real GDP decreases, which of the following changes occurs?

Exports increase.

Planned investment increases.

Induced consumption decreases.

Induced consumption increases.

Imports increase.

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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 (20 12 dollars) and ranges from 0 to 800. The horizontal axis is labelled, disposable income (20 12 dollars) and ranges from 0 to 800. The 45 degree line slopes upward from the origin and passes through the point (800, 800). The line for consumption function slopes upward from (0, 200) and passes through the point (800, 800) intersecting the 45 degree line at this point. A dashed vertical line is drawn from this point to (800, 0) on the horizontal axis.

Refer to Figure 11.5.2, which shows an economy's consumption function. Which of the following equations is the economy's saving function?

S = 200 + 0.75YD

S = -200 + 0.25YD

S = -200 + 0.75YD

S = 200 + 0.8YD

S = -200 + 0.8YD

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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 the horizontal axis is labelled, real G D P (billions of 20 12 dollars). The 45 degree line slopes upward from the origin. The line for A E = C + I + G slopes upward from a point on the vertical axis intersecting the 45 degree line. The vertical dashed lines are drawn from the point of intersection of the two lines, a point below the point of intersection, and a point above the point of intersection to the points Y sub b, Y sub a, and Y sub c respectively on the horizontal axis.

Refer to Figure 11.2.2, which shows an economy's aggregate expenditure curve. If the economy has no exports or imports, which of the following situations occurs?

Equilibrium real GDP is decreasing.

Equilibrium real GDP is equal to Yb.

Equilibrium real GDP is equal to Ya.

Equilibrium real GDP is equal to Yc.

Equilibrium real GDP might be Ya, Yb, or Yc depending on what is happening to inventories.

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When the price level is fixed, how does an increase in the marginal propensity to import influence the slope of the AE curve and equilibrium expenditure?

The slope of the AE curve

decreases, which decreases equilibrium expenditure.

decreases, but equilibrium expenditure does not change.

increases, which decreases equilibrium expenditure.

decreases, which increases equilibrium expenditure.

increases, which increases equilibrium expenditure.

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Which of the following variables is the fraction of a change in disposable income that is saved?

the marginal propensity to save

the saving function

the marginal propensity to dispose

the marginal tax rate

the marginal propensity to consume

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If the marginal propensity to save in a country that has a fixed price level increases, how does the multiplier change?

It increases because MPC decreases.

It decreases because MPC decreases.

It does not change because disposable income does not change.

It increases because the slope of the AE curve increases.

It does not change because the multiplier equals 1/(1 - slope of the AE curve).

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An economy has a consumption function of C = 15 + 0.7Y, investment equal to 8, government expenditure equal to 12, exports equal to 20, and an import function of M = 0.2Y.

Refer to Fact 11.5.2. What is the multiplier for this economy?

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