Chap009 - Chapter 09 - Income and Spending Chapter 09...

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Chapter 09 - Income and Spending Chapter 09 Income and Spending Multiple Choice Questions 1. A consumption function of the form C = C o + cYD has a positive vertical intercept C o , which indicates that A . Some consumption is unaffected by changes in disposable income b. The multiplier is always positive c. The apc will always increase as disposable income increases d. Some consumption will occur no matter what the price level e. All of the above Difficulty: Easy 2. The marginal propensity to consume (mpc) a. Shows the fraction of total national income that is used for consumption b. Added to the marginal propensity to save (mps) always equals zero C . Is the relationship between a change in consumer purchases and the change in disposable income that allows consumption to change d. Declines as disposable income declines, eventually becoming zero as disposable income reaches zero e. Decreases as autonomous saving increases Difficulty: Easy 3. In a Keynesian model of income determination, when intended spending is greater than actual output, the adjustment to a new macro-economic equilibrium is based on changes in a. Autonomous consumption B . Unplanned inventories c. Government spending d. Net exports e. All of the above Difficulty: Easy 9-1
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Chapter 09 - Income and Spending 4. Total autonomous spending a. Is dependent on the level of output b. Is only determined by the equation for the consumption function c. Is not part of aggregate demand? D . Is independent of the level of income e. Increases when disposable income increases Difficulty: Easy 5. The expenditure multiplier is used to calculate the change in a. Spending caused by a change in income B . Income caused by a change in autonomous spending c. Intended spending caused by a change in consumption d. Disposable income caused by a change in saving e. Government expenditures caused by a change in income Difficulty: Easy 6. In a simple model with no government or foreign sector, the amount of involuntary inventory accumulation at equilibrium is a. Dependent upon the amount of consumption b. Equal to output minus consumption C . Zero d. Always positive e. Usually negative Difficulty: Easy 9-2
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Chapter 09 - Income and Spending 7. If there is no government or foreign sector and planned investment equals planned saving, then a. Actual output is equal to planned spending on consumption and investment b. Consumption plus investment equals income c. The quantity of output produced is equal to aggregate demand d. There are no unplanned inventory changes E . All of the above Difficulty: Easy 9-3
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Chapter 09 - Income and Spending 8. Assume a model with no government or foreign sector. If actual output is $13.1 trillion while aggregate demand is $13.2 trillion, we know that A . The magnitude of unintended inventory adjustments is - $100 billion b. The magnitude of unintended inventory adjustments is + $100 billion c. The magnitude of unintended inventory adjustments is + $10 billion d. The actual income level is above its equilibrium
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This note was uploaded on 12/05/2011 for the course ECON 201 taught by Professor Dr.matin during the Spring '09 term at Charleston.

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Chap009 - Chapter 09 - Income and Spending Chapter 09...

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