Econ Exam 4

As interest rates increase, demand _____ and savings  ______ causing people to spend less and save more.

A) decreases, stay the same

B) decreases, increase

C) increases , decrease

D) stays the same, increase

• A

• B

• C

• D

If GDP = C + I and DI = C + S, then ...

a. C = S

b. C = I

c. I = S

d. GDP = C

• A

• B

• C

• D

What two characteristics of a line equation have to occur in order for the consumption function to be valid?

A. positive slope and positive intercept

B. positive slope and negative intercept

C. negative slope and negative intercept

D. negative slope and positive intercept

• A

• B

• C

• D

How can you use your income?

A. Spend it

B. Spend it or save it

C. Invest it and save it

D. Save it

• A

• B

• C

• D

What is not one of the four simplifying assumptions to study the Aggregate Expenditures Model

A. No Depreciation

B. No Government

C. All saving is done in households

D. Limited Grocery shopping

• A

• B

• C

• D

What is the aggregate expenditure? 

a. expected future income 

b. total spending in the economy

c. no international trades 

d. total take-home pay

• A

• B

• C

• D

How do you solve for APC (Average propensity to consume)?

A. APC=C/DI

B. APC=DI/C

C. APC=S/DI

D. APC=C*DI

• A

• B

• C

• D

what does APC + APS equal 

A. 2

B. 3

C. 1

D. 4

• A

• B

• C

• D

Which of the following is not an assumption of the aggregate expenditure model?

A. No international trade

B. No government

C. No savings are done by households

D. No depreciation  

• A

• B

• C

• D

How do you solve for GDP when using the assumptions discussed in class?

A. C + S = GDP

B. DI + S = GDP

C. C + I + G + NX = GDP

D. C + I = GDP

• A

• B

• C

• D