c does not change when current disposable income increases d perhaps changes

C does not change when current disposable income

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c. does not change when current disposable income increases. d. perhaps changes when disposable income changes, but whether it increases or decreases is ran-dom. Answer: d When disposable income increases, a. the consumption function shifts upward. b. the economy moves upward along the consumption function but the consumption function does not shift. c. there is no change to the consumption function. d. the consumption function shifts downward. Answer: b Induced expenditures are defined as that part of a. aggregate expenditure that responds to changes in real GDP. b. real GDP that does not respond to changes in aggregate expenditure. c. aggregate expenditure that does not respond to changes in real GDP. d. autonomous expenditure. Answer: a Autonomous expenditure includes a. investment, government purchases of goods and services, and imports. b. consumption expenditures, investment, and exports. c. consumption expenditures, investment, and imports. d. investment, government purchases of goods and services, and exports. Answer: d
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If aggregate planned expenditure equals GDP, then a. there must be no change in firms’ inventories. b. the change in firms’ inventories must be positive. c. the change in firms’ inventories must be equal to the planned change. d. the change in firms’ inventories must be negative. Answer: c The fraction of a change in disposable income that is spent on consumption is the a. marginal propensity to consume. b. marginal buying power of money. c. expected future disposable income. d. None of the above answers are correct. Answer: a The MPC is equal to the a. change in consumption expenditure divided by the change in disposable income that brought it about. b. change in consumption expenditure divided by the total disposable income that brought it about. c. level of consumption expenditure divided by the level of total disposable income that brought it about. d. level of consumption divided by the change in disposable income that brought it about. Answer: a What is the value of the MPC if $66 out of every $100 increase in disposable income is consumed? a. 0.66 b. $166 c. 0.34 d. $34 Answer: a Jack Nelson, a supervisor in the hardware department at Sears, received a $3,000 increase in his annual disposable income. Suppose his marginal propensity to consume is 0.80. How much of the $3,000 increase will Jack spend on consumption? a. $2,750 b. $2,500 c. $2,400 d. $2,200 In Germany, expected future income increased during 2001. This increase lead to a(n) a. movement upward along the consumption function.
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