fall2007.econ1012.midterm3

# fall2007.econ1012.midterm3 - Economics 1012A Introduction...

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Page 1 Economics 1012A: Introduction to Macroeconomics FALL 2007 Dr. R. E. Mueller Third Midterm Examination November 15, 2007 Answer all of the following questions by selecting the most appropriate answer on your bubble sheet. Be sure to read each question carefully. Each question is worth 2 points (100 points total) and will count as 20 per cent of your final course grade. 1. The marginal propensity to consume ( mpc ) tells us A) the fraction of income consumed. B) the percentage of income consumed. C) the level of induced expenditures. D) the fraction of an additional dollar of income that is spent. 2. If the marginal propensity to consume is 0.9 and a decline in household wealth reduces autonomous expenditures by \$75 billion, equilibrium real GDP will 3. The multiplier equation can be used to determine how changes in 4. The multiplier equation shows the relationship between Use the following to answer question 5: Income Expenditures \$ 0 \$ 500 1,000 1,167 1,500 1,500 2,000 1,833 2,500 2,167

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Page 2 5. In the table above, the marginal propensity to consume is A) \$500. B) \$1,500. C) 0.167. D) 0.667. 6. Say foreign income increases and this pushes U.S. exports up. The U.S. AE curve will likely 7. If saving increases at a particular income level, it follows that 8. In the aggregate expenditure model, if the mpc is 0.75, then the multiplier is 9. According to the multiplier equation, an increase in the marginal propensity to consume A) raises output because it leads to an increase in autonomous expenditure. B) reduces aggregate expenditure because it reduces the multiplier. C) increases output because it increases the multiplier. D) increases aggregate expenditure because it increases autonomous expenditure.
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• Spring '09
• jim
• Macroeconomics, AD curve, C B C D C B D C, D D B C C D C