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Unformatted text preview: CHAPTER 9 Building the Aggregate Expenditures Model Topic Question numbers ___________________________________________________________________________________________________ 1. Consumption function/APC/MPC 1-42 2. Saving function/APS/MPS 43-56 3. Shifts in consumption and saving functions 57-72 4 Graphs/tables: mixed consumption and saving 73-109 5. Investment demand 110-141 6. Investment schedule 142-153 7. Equilibrium GDP in private closed economy 154-225 Last Word 226-230 True-False 231-242 ___________________________________________________________________________________________________ Multiple Choice Questions Consumption function/APC/MPC 1. The most important determinant of consumer spending is: A) the level of household debt. B) consumer expectations. C) the stock of wealth. D) the level of income. 2. In the aggregate expenditures model, the most important determinant of consumption and saving is the: A) level of bank credit. B) level of income. C) interest rate. D) price level. 3. If Smith's disposable income increases from $1,200 to $1,700 and her level of saving increases from minus $100 to a plus $100, her marginal propensity to: A) save is three-fifths. B) consume is one-half. C) consume is three-fifths. D) consume is one-sixth. 4. With an MPS of .4, the MPC will be: A) 1.0 minus .4. Page 1 B) .4 minus 1.0. C) the reciprocal of the MPS. D) .4. 5. The MPC can be defined as that fraction of a: A) change in income that is not spent. B) change in income that is spent. C) given total income that is not consumed. D) given total income that is consumed. 6. The 45-degree line on a chart relating consumption and income shows: A) all points where the MPC is constant. B) all points at which saving and income are equal. C) all the points at which consumption and income are equal. D) the amounts households will plan to save at each possible level of income. 7. As disposable income goes up the: A) APC falls. B) APS falls. C) volume of consumption declines absolutely. D) volume of investment diminishes. 8. The consumption schedule shows: A) that the MPC increases in proportion to GDP. B) that households consume more when interest rates are low. C) that consumption depends primarily on the level of business investment. D) the amounts households plan or intend to consume at various possible levels of aggregate income. 9. The consumption schedule relates: A) consumption to the level of disposable income. B) saving to the level of disposable income. C) disposable income to domestic income. D) consumption to saving. 10. A decline in disposable income: A) increases consumption by moving upward along a specific consumption schedule. B) decreases consumption because it shifts the consumption schedule downward....
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- Spring '08