A $500 billion increase in investment spending causes the equilibrium income in the country of Oncy to rise by $5,000billion.
What is the marginal propensity to consume in this economy?
A. 0.9
B. 0.6
C. 0.8
D. 0.5
Which of the following correctly describes the composition of the $5,000 billion rises in aggregate demand that occurs in Oncy?
A. Consumption spending increases by $3,000 billion; investment spending increases by $1,000 billion; saving increases by $1,000billion
B. Government spending increases by $3,000 billion; investment spending increases by $500 billion; net exports decrease by $2,000billion; consumption spending increases by $3,500 billion
C. Government spending increases by $2,500 billion; investment spending increases by $500 billion; net exports increase by $2,000billion
D. Consumption spending increases by $4,500 billion; investment spending increases by $500 billion
A $500 billion increase in investment spending causes the equilibrium income in the country of Oncy to rise by $5,000billion.
If Oncy was at full employment before the increase in investment spending, what is the situation in Oncy after the $500 billion increase in investment spending?
A. Full employment
B. An inflationary gap
C. A recessionary gap with cyclical unemployment
A $500 billion increase in investment spending causes the equilibrium income in the country of Oncy to rise by $5,000billion.
What is the marginal propensity to consume in this economy?
A. 0.9
B. 0.6
C. 0.8
D. 0.5
Which of the following correctly describes the composition of the $5,000 billion rises in aggregate demand that occurs in Oncy?
A. Consumption spending increases by $3,000 billion; investment spending increases by $1,000 billion; saving increases by $1,000billion
B. Government spending increases by $3,000 billion; investment spending increases by $500 billion; net exports decrease by $2,000billion; consumption spending increases by $3,500 billion
C. Government spending increases by $2,500 billion; investment spending increases by $500 billion; net exports increase by $2,000billion
D. Consumption spending increases by $4,500 billion; investment spending increases by $500 billion
A $500 billion increase in investment spending causes the equilibrium income in the country of Oncy to rise by $5,000billion.
If Oncy was at full employment before the increase in investment spending, what is the situation in Oncy after the $500 billion increase in investment spending?
A. Full employment
B. An inflationary gap
C. A recessionary gap with cyclical unemployment
Related textbook solutions
Related questions
Question 1
Which of the following describes the relationship between the change in inventories and aggregate expenditure?
| A. | Aggregate expenditure equals the change in inventories minus GDP. |
| B. | The change in inventories equals GDP divided by aggregate expenditures. |
| C. | Aggregate expenditures equals GDP divided by the change in inventories. |
| D. | Aggregate expenditures equals GDP minus the change in inventories. |
| E. | The change in inventories equals GDP multiplied by aggregate expenditure. |
1 points
Question 2
Suppose the marginal propensity to consume is 0.80 and taxes decrease by $10 billion. Which of the following is true?
| A. | Disposable income and consumption fall by $10 billion |
| B. | Disposable income and consumption rise by $10 billion |
| C. | Disposable income rises by $10 billion and consumption rises by $8 billion |
| D. | Disposable income falls by $10 billion and consumption falls by $8 billion |
| E. | Disposable income rises by $10 billion and consumption falls by $8 billion |
1 points
Question 3
If aggregate expenditure at a particular level of income is less than output,
| A. | output will increase |
| B. | output will decrease |
| C. | output will remain the same |
| D. | output will rise slightly and then level off |
| E. | we cannot determine what will happen to output |
1 points
Question 4
The consumption function
| A. | illustrates the relationship between real disposable income and real consumption spending |
| B. | illustrates the relationship between the price level and real consumption spending |
| C. | is the relationship between productivity and real consumption spending |
| D. | shows how real consumption increases when real disposable income decreases |
| E. | illustrates the relationship between real consumption spending and employment |
1 points
Question 5
The focus of the short-run macro model is on the role of
| A. | spending in explaining economic fluctuations |
| B. | labor in explaining economic fluctuations |
| C. | financial markets in explaining economic fluctuations |
| D. | output in explaining economic fluctuations |
| E. | resources in explaining economic fluctuations. |
1 points
Question 6
If the output level is such that the aggregate expenditure line lies below the 45-degree line, which of the following is true?
| A. | Aggregate expenditure is greater than output, so inventories will increase and output will be raised. |
| B. | Aggregate expenditure is greater than output, so inventories will decrease and output will be increased. |
| C. | Aggregate expenditure is less than output, so inventories will decrease and output will be raised. |
| D. | Aggregate expenditure is less than output, so inventories will increase and output will be lowered. |
| E. | Aggregate expenditure is greater than output, so inventories will increase and output will be lowered. |
1 points
Question 7
If the marginal propensity to consume is 0.7, the expenditure multiplier is
| A. | 7.0 |
| B. | 0.7 |
| C. | 3.0 |
| D. | 3.3 |
| E. | not determinable without additional information. |
1 points
Question 8
Aggregate expenditure is the sum of
| A. | all types of spending by households and firms |
| B. | spending and savings by households |
| C. | spending by households and governments on final goods and services |
| D. | spending by households, government, firms, and foreigners on final goods and services |
| E. | all spending and saving by households, firms, and governments |
1 points
Question 9
If the marginal propensity to consume is 0.5 and disposable income increases by $10,000, by how much will consumption spending increase?
| A. | $10,000 |
| B. | $500 |
| C. | $50 |
| D. | $5,000 |
| E. | $9,524 |
1 points
Question 10
When real consumption expenditure is plotted against real disposable income the resulting relationship is
| A. | very weak. |
| B. | virtually flat . |
| C. | positive and very close to linear. |
| D. | negative and very close to linear. |
Multiple Choice (2 points each)
Identify the choice that best completes the statement or answers the question.
____ 16. Government purchases, under the expenditure approach to GDP accounting, do not include:
|
a. |
state government purchases of plumbing services. |
|
b. |
Social Security benefit payments to retirees. |
|
c. |
the salaries of military officers. |
|
d. |
federal government purchases of computers. |
____ 17. GDP equals $8 trillion. If consumption equals $5.5 trillion, investment equals $500 billion, and government spending equals $1.5 trillion, then:
|
a. |
exports exceed imports by $500 billion. |
|
b. |
imports exceed exports by $500 billion. |
|
c. |
net exports equal zero. |
|
d. |
exports exceed imports by $1 trillion. |
|
e. |
imports exceed exports by $1 trillion. |
____ 18. If some non-price level determinant causes total spending to increase, then the effect on aggregate demand will be a:
|
a. |
movement upward along the curve. |
|
b. |
movement downward along the curve. |
|
c. |
shift to the left. |
|
d. |
shift to the right. |
____ 19. An increase in the U.S. price level will:
|
a. |
increase U.S. exports. |
|
b. |
increase U.S. imports. |
|
c. |
increase RGDP demanded in the United States. |
|
d. |
both a. and c. |
|
e. |
both b. and c. |
