Modules 16-19 Review

Changes in which of the following leads to a shift of the aggregate consumption function?

I. expected future disposable income

II. aggregate wealth

III. current disposable income

• I only

• II only

• III only

• I and II only

• I, II, and III

The slope of a household's consumption function is equal to

• the real interest rate

• the inflation rate

• the marginal propensity to consume

• the rate of increase in household current disposable income

• the tax rate

The level of planned investment spending is negatively related to:

• the rate of return on investment

• the level of consumer spending

• the level of actual investment spending

• the interest rate

• all of the above

Actual investment spending in any period is equal to

• planned investment spending + unplanned inventory investment

• planned investment spending - unplanned inventory investment

• planned investment spending + inventory decreases

• unplanned inventory investment + inventory increases

• unplanned inventory investment - inventory increases

What is the spending multiplier if the marginal propensity to consume is 0.8?

• 4

• 5

• 3

• 2

• 8

Assume the MPC is 0.6, what is the potential change in Real GDP if there is a $100 billion increase in investment spending?

• $100 billion

• $200 billion

• $250 billion

• $400 billion

• $600 billion

Which of the following explains the slope of the aggregate demand curve?

I. the wealth effect of a change in the aggregate price level

II. the interest rate effect of a change in the aggregate price level

III. the product-substitution effect of a change in the aggregate price level

• I only

• II only

• III only

• I and II only

• I, II, and III

Which of the following will shift the aggregate demand curve to the right?

• a decrease in wealth

• pessimistic consumer expectations

• a decrease in the existing stock of capital

• contractionary fiscal policy

• a decrease in the quantity of money

Decrease in the stock market decrease aggregate demand by decreasing which of the following?

• consumer wealth

• the price level

• the stock of existing physical capital

• interest rates

• tax revenues

Which of the following government policies will shift the aggregate demand curve to the left?

• a decrease in the quantity of money

• an increase in government purchases of goods and services

• a decrease in taxes

• a decrease in interest rates

• an increase in government transfers