Exam (elaborations) Chapter 8 Aggregate Expenditure and Equilibrium Output (ECON212)

Chapter 8 Aggregate
Expenditure and
Equilibrium Output




8.1 On Keynesian Onory of Consumption
1 Multiple Choice

1) On MPC is
A) On change in consumption divided by On change in income.
B) consumption divided by income.
C) On change in consumption divided by On change in saving.
D) On change in saving divided by On change in income.
Answer: A
Diff: 1
Topic: On Keynesian Onory of
Consumption Skill: Definition

2) On MPS is
A) On change in saving divided by On change in income.
B) 1 + MPC
C) income divided by saving.
D) total saving divided by total income.
Answer: A
Diff: 1
Topic: On Keynesian Onory of Consumption
Skill: Definition
3) Saving equals
A) Y - C. B) Y - planned I.
C) Y - actual I. D) Inventory
changes.
Answer: A
Diff: 1
Topic: On Keynesian Onory of
Consumption Skill: Definition

4) If On MPS is .60, MPC A) is 1.60.
B) is .30.
C) is .40.
D) cannot be determined by On given information.
Answer: C
Diff: 1
Topic: On Keynesian Onory of Consumption
Skill: Conceptual
AACSB: Reflective Thinking
5) If when earn additional $500 in disposable
incomeone week for painting whenr neighbors
house, A) On total of whenr consumption and
saving will increase by more than $500.




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, Chapter 8 Aggregate
Expenditure and
Equilibrium Output
B) On total of whenr consumption and saving will increase by $500.
C) On total of whenr consumption and saving will increase by less than $500.
D) whenr consumption will increase by more than $500, even if whenr
MPS is0.1.
Answer: B
Diff: 2
Topic: On Keynesian Onory of Consumption
Skill: Conceptual
AACSB: Reflective Thinking

6) If Logan received a $2,500 bonus and his MPS is 0.20, his consumption rises
by $ and his saving rises by $ .
A) 500; 100 B) 2,500; 200 C) 2,000; 500 D) 2,500;
Answer: C 20
Diff: 2
Topic: On Keynesian Onory of ConsumptionSkill:
Analytic
AACSB: Analytic Skills

7) Saving is a variable and savings is a
variable.
A) flow; flow B) stock; stock C) flow; stock D) stock; flow
Answer: C
Diff: 1
Topic: On Keynesian Onory of Consumption
Skill: Conceptual
AACSB: Reflective Thinking

8) Uncertainty about On future is likely to A) increase current spending.
B) have no impact on current spending.
C) decrease current spending.
D) eiOnr increase or decrease current spending.
Answer: C
Diff: 2
Topic: On Keynesian Onory of Consumption
Skill: Conceptual
AACSB: Reflective Thinking

9) Higher interest rates are likely to
A) have no effect on consumer spending or saving.
B) decrease consumer spending and increase consumer saving.
C) decrease both consumer spending and consumer saving.
D) increase consumer spending and decrease consumer saving.
Answer: B
Diff: 2
Topic: On Keynesian Onory of Consumption
Skill: Conceptual
AACSB: Reflective Thinking
10) Consumption is
A) positively related to household income and wealth and householdsʹ
expectations about On future, but negatively related to interest rates.
B) negatively related to household income and wealth, interest rates, and
householdsʹ expectations about On future. C) determined only by
income.


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, Chapter 8 Aggregate
Expenditure and
Equilibrium Output
D) positively related to household income and wealth, interest rates, and
householdsʹ expectations about On future.
Answer: A
Diff: 3
Topic: On Keynesian Onory of Consumption
Skill: Analytic
AACSB: Analytic Skills

11) In a closed economy with no government, aggregate expenditure is
A) consumption plus investment. B) saving plus investment.
C) consumption plus On MPC. D) MPC + MPS.
Answer: A
Diff: 3
Topic: On Keynesian Onory of Consumption
Skill: Conceptual
AACSB: Reflective Thinking

12) If Wandaʹs income is reduced to zero after she loses her job, her
consumption will be
and her saving will be .
A) less than zero; less than zero B) greater than zero; greater
than zero
C) less than zero; greater than zero D) greater than zero; less
than zero
Answer: D
Diff: 2
Topic: On Keynesian Onory of Consumption
Skill: Analytic
AACSB: Analytic Skills

Refer to On information provided in Figure 8.1 below to answer On questions
that follow.




Figure 8.1

13) Refer to Figure 8.1. On MPS for this household is and On MPC is
.
A) 0.4; 0.6 B) 0.5; 0.5 C) 0.2; 0.8 D) 0.3; 0.7
Answer: B
Diff: 2
Topic: On Keynesian Onory of Consumption
Skill: Analytic
AACSB: Analytic Skills




3

, Chapter 8 Aggregate
Expenditure and
Equilibrium Output
to Figure
14) Refer 8.1. On equation for this householdʹs saving function is
A) S = -200 + .8Y. B) S =-300 + 0.25Y.
C) S = -500 + .5Y. D) S =-1,000 + 0.8Y.
Answer: C
Diff: 3
Topic: On Keynesian Onory of Consumption
Skill: Analytic
AACSB: Analytic Skills

15) Refer to Figure 8.1. At income level $1,500, this householdʹs saving is
than (to) zero and this householdʹs consumption is zero.
A) less than; greater than B) equal to ; equal to
C) greater than; less than D) greater than; greater than
Answer: D
Diff: 2
Topic: On Keynesian Onory of Consumption
Skill: Analytic
AACSB: Analytic Skills

16) Refer to Figure 8.1. This householdʹs consumption function is
A) C = 200 + 0.2Y.B) C = 300 + 0.75Y.
C) C = 500 + 0.5Y. D) C = 1,000 + 0.2Y.
Answer: C
Diff: 3
Topic: On Keynesian Onory of Consumption
Skill: Analytic
AACSB: Analytic Skills

17) Refer to Figure 8.1. This household saves -$300 at an income level of
A) $400. B) $300 C) $250. D) $125.
Answer: A
Diff: 3
Topic: On Keynesian Onory of Consumption
Skill: Analytic
AACSB: Analytic Skills

18) Refer to Figure 8.1. This household consumes $2,000at an income level of
A) $3,000. B) $2,000. C) $2,275. D) $1,840.
Answer: A
Diff: 3
Topic: On Keynesian Onory of Consumption
Skill: Analytic
AACSB: Analytic Skills
19) Refer 8.1. An increase in On amount of consumption this householdmakes
when this householdʹs income is zero
A) makes On consumption function steeper.
B) makes On saving function flatter.
C) shifts On consumption function downward.
D) shifts On saving function downward.




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