chpt8 - Student: Instructor: Sandra Hadler Assignment: MEL...

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Unformatted text preview: Student: Instructor: Sandra Hadler Assignment: MEL Quiz-Set 4 Chapter 8 Date: Colu'se: EconlOl Spring 3010 Time: Book: Case-"Fair: Principles of 1\-Iacroec«.nnnnics 9e 1_ Which of the following best describes the relationship between aggregate expenditure and real GDP? [:JA. If aggregate expenditure falls short of real GDP, inventories will decrease and real GDP and aggregate income will increase in future [:1 B. If aggregate expenditure falls short of real GDP, inventories will decrease and real GDP and aggregate income will fall in future [:1 C. If aggregate expenditure falls short of real GDP, inventories will accumulate and real GDP and aggregate income will fall in future [:1 D. If aggregate expenditure falls short of real GDP, inventories will accumulate and real GDP and aggregate income will increase in fiJture Answer: C 2_ When interest rate increases: [:JA. only the dollar amount ofcredit card purchases increases [:1 B. the consumption function shifts down since individuals face larger debt [:1 C. cost of borrowing increases and the consumption fiJnction shifts up [:1 D. cost of borrowing increases and the consumption function shifts down Answer: D 3. Assume there are no taxes. The equation for the consumption function is given to be: C = 100 + ORGY, where Y represents aggregate income. Determine the equation for the saving function: 3 = D + jv Answers — IOO 0.30 4_ The equation for a consumption function in a simple economy, where there are no taxes, is given by C = 240 + 0.?2Y, where Y denotes aggregate income. Autonomous consumption, or the vertical intercept of the consumption function, is , and MPC is Answers 240 0 . 72 Page 1 Student: Instructor: Sandra Hadler Assignment: MEL Quiz-Set 4 Chapter 8 Date: Course: EconlOl Spring 3010 Time: Book: Case-"Fair: Principles of 1\-Iacroeconolnics 9e LII Textbook Problem #6a You are given the following data concerning Freedonia, a legendary country: Consumption Function: C = 200 + 0.90Y Investment Function: I = 300 Aggregate Expenditure Function: AB = C + I Equilibrium: AE = Y Calculate the following: MPC = . (Enter your response rounded to two decimal places). MPS = (Enter your response rounded to two decimal places). The Level of Equilibrium Income, Y = $ The value ofthe Investment Multiplier = (Enter your response rounded to two decimal places). The change in the level of equilibrium income if investment increases by $5. AY = $|:|. Answers 0.90 0.10 5000 10.00 50.00 Page 3 Student: Instructor: Sandra Hadler Assignment: MEL Quiz-Set 4 Chapter 8 Date: Colu'se: Ec011301 Spring 3010 Time: Book: Case.-"Fair: Principles of Macroeconomics 9e 6_ Textbook Problem #6b You are given the Tncome Determination Plan:th Aggregate Expcttdintrc following data concerning Freedonia, a legendary country: Consumption Function: C = 250 +0.75Y Investment Function: l = 150 Aggregate Expenditure Function: AB = C + I Equilibrium: AE = Y Draw the following: 1) Use the line drawing tool to draw the Consumption Function. Label this line 'C'. 2) Use the line drawing tool to draw the Aggregate Expenditure Function. Label this line 'AE'. . . . _ 3.606 't .5'00' '16:}: 3) Use the pomt drawmg tool to identify the Aggregate Output equilibrium level of income. Note: t'fyou are not promptedfbr tine label's. you have used the wrong drawing tool. Income Determination Planned Aggregate Expenditure 1,600 3.606 3.50 '2.o'oo Answer: Aggregate Output Page 3 Student: Instructor: Sandra Hadler Assignment: MEL Quiz-Set 4 Chapter 8 Date: Colu'se: EconlOl Spring 2010 Time: Book: Case-"Fair: Principles of 1\-Iacroeconomics 9e I Textbook Problem #4 Consider the following information on the levels of income, consumption and planned investment for a country: Aggregate Consumption Planned IncomefOutput Expenditure Investment $3,200 $2,900 $500 3,400 3,050 500 3,600 3,200 500 3,800 3,350 500 4,000 3,500 500 4,200 3,650 500 4,400 3,800 500 4,600 3,950 500 a. When income is $4,400, [HJA Saving is $100 and unplanned investment (inventory change) is $500. [:1 B. Saving is - $600 and unplanned investment (inventory change) is $500. [:1 C. Saving is $600 and unplanned investment (inventory change) is $100. C1D. Saving is 40 and unplanned investment (inventory change) is $100. The equilibrium level of outputs“ income is = $l:|. b. Based on the above information calculate MPC and MP8. Also calculate the Multiplier. MPC = (E m‘er your response rounded to two decima! places). MPS = C . (Enter your response rounded to two decimal places). The Multiplier = c. Suppose there is no change in the level of MPC and the MP8, and planned investmentjumps by $400, calculate the change in the equilibrium value of incomex’output. The change in equilibrium incomefoutput = $D. Answers C 4,000 0.75 0.25 4 1,600 Page 4 Student: Instructor: Sandra Hadler Assignment: MEL Quiz-Set 4 Chapter 8 Date: Colu'se: Ec011301 Spring 3010 Time: Book: Case.-"Fai1': Principles of Macroecononncs 9e 8_ Textbook Problem #7 Consider the following model of a very simple economy: Household saving and investment behavior depend in part on wealth (accumulated savings and inheritance). In the late 1990's many were concemed with very large increases in stock values (a form of wealth) and its possible effect on saving and investment. The following Consumption Function incorporates wealth (W) as a determinant ofconsumption. We have the following information on Consumption (C) and Investment (I): (1 =15 + 0.60Y + 0.05w I: 200 w = 1,000, We are ignoring thefiict that saving adds to the Stock ofweaith. Calculate the values of equilibrium Y, C and S. Suppose that wealth increases by 50%. Calculate the values of equilibrium Y, C and S. NewY=$_; NewC=$ ; New S =$ As a result of the wealth accumulation, GDP . Answers 663 463 200 725 525 200 increases Page 5 Student: Instructor: Sandra Hadler Assignment: MEL Quiz-Set 4 Chapter 8 Date: Colu'se: EconlOl Spring 3010 Time: Book: Case-"Fair: Principles of 1\-Iacr«.1economics 9e 9_ The following Consumption Function incorporates wealth (W) as a determinant of consumption. We have the following information on Consumption (C) and Investment (I): C =10 + 0.75Y + 0.04W l = 100 A Y Calculate the value of the Wealth Multiplier, Aw _. and the increase (or change) in Y (AY) if wealth increases by 500. A_Y _ D. AW ’ A Y = Answers 0.16 80 1()_ If Logan received a $2,500 bonus and his MP5 is 0.20, his consumption rises by $ and his saving rises by $ [:JA. 2,000; 500 [:1 B. 2,500; 200 [:1 C. 500; 100 [:1 D. 2,500; 20 Answer: A 1 1_ Consumption is L1A. positively related to household income and wealth, interest rates, and households‘ expectations about the future. [:1 B. negatively related to household income and wealth, interest rates, and households' expectations about the future. [:1 C. determined only by income. [:1 D. positively related to household income and wealth and households' expectations about the future, but negatively related to interest rates. Answer: D Page 6 Student: Instructor: Sandra Hadlel' Assignment: MEL Quiz-Set 4 Chapter 8 Date: Coln'se: Ec011301 Spring 3010 Time: Book: Case.-"Fai1': Principles of 1\*IacroecononIics 9e 12_ Refer to the information provided in thefigure a! right to answer the question thcztfolt'ows. Positive saving occurs along the line segment 0 Jerrj F" . DC. . ___.I A L1 5 C {'13 B. BA. ‘3 E - E E QC. AC. 5 f A BC :3 E L) D. .. .5"- : E1 :2. D 3’1 3’2 Jerry's Income. 3; Answer: C 13_ If Zander‘s saving function is of the form S = - 150 + 0.5 Y, his consumption equals his income at an income level of Cm. 225. {:13 B. 300. (3 c. 150. (:3 D. 1.500. Answer: B 14_ Refer to the information provided in the table at right to answer the question thatfbil'ows. Aggregate Income (35 Aggregate Consumption ( billion) billion) The equation for the aggregate consumption 0 30 function is 50 125 100 170 {:3A. C : — 80 + 0.45 Y. 150 215 {33. C = 80 + 0.9 Y. 200 260 O c. C = so —- 0.?5 Y. (:3 D. C = 80 -- 0.95 Y. Answer: B Page 7 - Student: Instructor: Sandra Hadler Assignment: MEL Quiz-Set 4 Chapter 8 Date: Colu'se: Ec011301 Spring 3010 Time: Book: Case.-"Fai1': Principles of 1\-Iacroeconomics 9e 15_ In 2006 Happyland's planned investment was $90 billion and its actual investment was $140 billion. In 2006 Happyland's unplanned inventory change was CIA. - $1 15 billion. (:3 B. - $50 billion. (:31 C. $230 billion. {:3 D. $50 billion. Answer: D 16_ If unplanned inventory investment is positive, then (IDA. planned aggregate spending must equal aggregate output. C} B. planned investment must be zero. {:3 C. planned aggregate spending must be greater than aggregate output. (:3 D. planned aggregate spending must be less than aggregate output. Answer: D 11 Refer to the information provided in the tabie at right to answer the question thotjoi’to ws. All Figures in Billions of Dollars Aggregate Aggregate Planned At an aggregate output level oti$200 billion, the Output Consumption Investment unplanned inventory change is 200 300 100 400 450 100 — $200 billlOI‘l. 600 600 100 c: B. — $150 billion. 800 750 100 _ ‘ I 1.000 900 100 L} C. $ l 00 billion. {:3 D. - $50 billion. Answer: A 1 8_ Refer to the information provided in the tabie at right to answer the question thotfoito ws. The equilibrium level of aggregate output equals CIA. $800 billion. C: B. $1.000 billion. C10. $600 billion. CID. $400 billion. Answer: B Page 8 All Figures in Billions of Dollars Aggregate Output 200 400 600 800 1.000 Aggregate Consumption 300 450 600 750 900 Planned Investment IOO 100 100 100 IOO Student: Instructor: Sandra Hadlel' Assignment: MEL Quiz-Set 4 Chapter 8 Date: Colu'se: Ec011301 Spring 3010 Time: Book: Case-Fair: Principles of h-Iacroecononlics 9e 19_ Refer to the information provided in the table at right to answer the question tkrztfolt'ows. All Figures in Billions of Dollars Aggregate Aggregate Planned Which of the following statements is FALSE? Output Consumption Investment 200 300 100 [EA The MPC for this economy is 0.?5. 400 450 '00 {:3 B. At output levels greater than $800 billion, 600 600 100 there is a positive unplanned inventory 800 750 100 change. 1,000 900 100 L} C. At an output level of $400 billion, there is a $150 billion unplanned inventory decrease. if 2' D. If aggregate output equals $1,000 billion, then aggregate saving equals $100. Answer: B 2()_ Refer to the information provided in thefigure at right to answer the question that‘fotlows. At aggregate output level $100 million, there is a ti 13A. $75 million unplanned decrease in inventories. t jB. $100 million decrease in inventories. L} C. $l00 million increase in inventories. tij. $75 million unplanned increase in inventories. gregate expenditures (S millions) u D A 45 i100 i200 i300 Aggregate output (3 millions} Answer: A Page 9 ...
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This note was uploaded on 02/02/2012 for the course ECON 201 taught by Professor Shea during the Spring '08 term at Maryland.

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chpt8 - Student: Instructor: Sandra Hadler Assignment: MEL...

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