ECON 102 Chapter : Textbook Terms & Defintions - Chp. 21

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22 Feb 2014

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The sum of desired or planned spending on domestic output by households, firms, governments, and foreigners. Elements of expenditure that do not change systematically with national income. Any component of expenditure that is systematically related to national income. An economy that has no foreign trade in goods, services, or assets. All disposable income that is not spent on consumption. The relationship between desired consumption expenditure and all the variables that determine it; in the simplest case, the relationship between desired consumption expenditure and disposable income. Desired consumption divided by the level of disposable income. The change in desired consumption divided by the change in disposable income that brought it about. The change in desired saving divided by the change in disposable income that brought it about. The function that relates desired aggregate expenditure to actual national income. The change in desired aggregate expenditure on domestic output divided by the change in national income that brought it about.

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.

indigognu668

Consider a small open economy in which aggregate expenditures, AE, is the sum of consumption spending by households, investment spending by firms, government expenditures and net exports. You may assume that net exports are independent of real GDP and taxes are lumpâsum. The numbers in the table below are in billions.

Real GDP	Consumption	Investment	Gov't Expend.	Net Exports	Taxes	Aggregate Expenditures
1000	1430	120	50	-100	160	A
2000	B	120	50	-100	160	2250
3000	2930	120	50	-100	160	3000
4000	3680	120	50	-100	160	3750
5000	4430	120	50	-100	160	4500

a. (4 pts) For the table below, calculate the missing values, A and B. b. (2 pts) From the table above, what kind of situation is the country in with regards to the trade balance (i.e. do we have a trade surplus or deficit)? What kind of situation is the country in with regards to the domestic balance (i.e. is the government running a deficit or surplus)? c. (4 pts) Use the table above to calculate the slope of the AE curve. [Hint: Recall that the slope of the AE curve is the additional increase in aggregate expenditures arising from an increase in GDP.] d. (4 pts) Recall that the Aggregate Expenditure function is written as: AE = AE0 + (slope of AE) *Y where AE0 is Autonomous Expenditures. Use the table in part (a) and your answer to part (c) above to calculate Autonomous Expenditure AE0. [Hint: Calculate induced expenditures for any given level of GDP, and use your answer to figure out AE0] e. (2 pts) In the table above, what is the value of real GDP in equilibrium? f. (4 pts) Suppose that the government decides to spend 500 billion more. By calculating the multiplier (or any other way), calculate the value of the new equilibrium value of real GDP!

True or False Questions:

1. Recessionary Expenditure Gap- Aggregate expenditures by which aggregate expenditures at the full employment GDP falls short of those required to achieve full employment GDP.

2. Private Closed Economy- An economy that includes consumer, business, and government segments of the economy.

3. Lump-sum taxes- A tax of a constant amount so the government obtains the same amount of tax at each level of GDP.

4. Aggregate Supply schedule- A relationship between a nation's price level and the amount of real domestic output that is produced.

5. Real Rate of Interest effect- The Nominal Rate of Interest earned on a project.

6. Savings- savings are planned investments by the consumer.

7. Wealth effect- The dollar amount of all the assets owned minus the dollar amount of all the liabilities or debt.

8. Savings Schedule - GDP less investment = savings

9. Aggregate Demand Schedule- a schedule that shows the amount of a nation's output (real GDP) that buyers desire to purchase at each price level.

10. Productivity- The measure of the level of the nation of real output and the amount of resources used to produce the output, less labor cost.

11. Multiplier effect- Measures the change in GDP to spending.

12. Injection- Investment by private business into the economy for capital goods is and injection into the economy.

13. Consumption schedule- The measurement of Disposable income less savings.

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ECON 102 Chapter : Textbook Terms & Defintions - Chp. 21

ECON 102 Full Course Notes

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