ECON 110 FINAL EXAM QUESTIONS
WITH CORRECT ANSWERS 2026/2027
Disposable income - CORRECT ANSWER -income that is available to you for saving or spending
after taxes have been paid and transfers received
Consumption function - CORRECT ANSWER -the positive relationship between consumption
spending and real disposable income
Consumption - CORRECT ANSWER -the part of GDP purchased by households as final users
Marginal propensity to consume (MPC) - CORRECT ANSWER -the amount by which consumption
spending rises when disposable income rises by one dollar; the slope of the consumption
function
Autonomous consumption spending - CORRECT ANSWER -the part of consumption spending
that is independent of income; the vertical intercept of the consumption function
Consumption-income line - CORRECT ANSWER -a line showing aggregate consumption spending
at each level of income or GDP
Short-run macro model - CORRECT ANSWER -a macroeconomic model that explains how
changes in spending can affect real GDP in the short run
Short-run macroeconomic equilibrium - CORRECT ANSWER -a combination of price level and
GDP consistent with both the AD and AS curves
Aggregate expenditure (AE) - CORRECT ANSWER -the sum of spending by households, business
firms, the government, and foreigners of final goods and services produced in the United States
, Gross domestic product (GDP) - CORRECT ANSWER -the total value of all final goods and
services produced for the marketplace during a given year, within the nation's borders
Expenditure multiplier - CORRECT ANSWER -the amount by which equilibrium real GDP changes
as a result of a one-dollar change in autonomous consumption, investment spending,
government purchases or net exports
Unit of account - CORRECT ANSWER -provides buyers and sellers with a common reference
point for valuing goods and services
Means of payment - CORRECT ANSWER -anything acceptable as payment for goods and services
Fiat money - CORRECT ANSWER -something that serves as a means of payment by government
declaration
Store of value - CORRECT ANSWER -provides a form of transferring purchasing power from the
present to the future
Legal tender - CORRECT ANSWER -money that by law must be accepted for payment of public
and private debts
Commodity money - CORRECT ANSWER -a good used as money that also has value independent
of its use as money
Open market operations - CORRECT ANSWER -purchases or sales of government bonds by the
Federal Reserve System
WITH CORRECT ANSWERS 2026/2027
Disposable income - CORRECT ANSWER -income that is available to you for saving or spending
after taxes have been paid and transfers received
Consumption function - CORRECT ANSWER -the positive relationship between consumption
spending and real disposable income
Consumption - CORRECT ANSWER -the part of GDP purchased by households as final users
Marginal propensity to consume (MPC) - CORRECT ANSWER -the amount by which consumption
spending rises when disposable income rises by one dollar; the slope of the consumption
function
Autonomous consumption spending - CORRECT ANSWER -the part of consumption spending
that is independent of income; the vertical intercept of the consumption function
Consumption-income line - CORRECT ANSWER -a line showing aggregate consumption spending
at each level of income or GDP
Short-run macro model - CORRECT ANSWER -a macroeconomic model that explains how
changes in spending can affect real GDP in the short run
Short-run macroeconomic equilibrium - CORRECT ANSWER -a combination of price level and
GDP consistent with both the AD and AS curves
Aggregate expenditure (AE) - CORRECT ANSWER -the sum of spending by households, business
firms, the government, and foreigners of final goods and services produced in the United States
, Gross domestic product (GDP) - CORRECT ANSWER -the total value of all final goods and
services produced for the marketplace during a given year, within the nation's borders
Expenditure multiplier - CORRECT ANSWER -the amount by which equilibrium real GDP changes
as a result of a one-dollar change in autonomous consumption, investment spending,
government purchases or net exports
Unit of account - CORRECT ANSWER -provides buyers and sellers with a common reference
point for valuing goods and services
Means of payment - CORRECT ANSWER -anything acceptable as payment for goods and services
Fiat money - CORRECT ANSWER -something that serves as a means of payment by government
declaration
Store of value - CORRECT ANSWER -provides a form of transferring purchasing power from the
present to the future
Legal tender - CORRECT ANSWER -money that by law must be accepted for payment of public
and private debts
Commodity money - CORRECT ANSWER -a good used as money that also has value independent
of its use as money
Open market operations - CORRECT ANSWER -purchases or sales of government bonds by the
Federal Reserve System
