Macroeconomics Quiz CH 5

What is the difference between b in the consumption function and b in the aggregate expenditure function?

• b in the consumption function represents the marginal propensity to consume, while b in the aggregate expenditure function represents the induced expenditures.

• b in the consumption function represents the induced expenditures, while b in the aggregate expenditure function represents the marginal propensity to consume.

• b in the consumption function represents the autonomous expenditures, while b in the aggregate expenditure function represents the induced expenditures.

• b in the consumption function represents the induced expenditures, while b in the aggregate expenditure function represents the autonomous expenditures.

When Y* = AE*, do savings have the same value as the investment? Prove it.

• Yes, because in equilibrium national income equals aggregate expenditures, so savings and investment are always equal.

• No, because in equilibrium national income equals aggregate expenditures, so savings and investment are only equal in certain cases.

• No, because in equilibrium national income equals aggregate expenditures, so savings and investment are not necessarily equal.

• Yes, because in equilibrium national income equals aggregate expenditures, so savings and investment are equal.

What happens with saving when autonomous expenditures increase by 100, based on the aggregate expenditures function (AE = 400 + 0.8Y)?

• Savings decrease by 80.

• Savings increase by 80.

• Savings decrease by 100.

• Savings increase by 100.

What is the multiplier in the given numerical example of the equilibrium of national income?

• 5

• 4

• 3

• 2

If autonomous expenditures increase by 2 percent, how much will equilibrium national income increase based on the multiplier?

• 2 percent

• 4 percent

• 5 percent

• 3 percent

What is the equation for aggregate expenditure in the given model of the economy?

• AE = a + I + Y

• AE = a + bY + I

• AE = a + I + bY

• AE = C + I

What is the essential condition for equilibrium national income?

• Y = AE

• Y + AE

• Y > AE

• Y < AE

What is the expression for aggregate expenditure in the given model of the economy?

• AE = a + bY

• AE = a + I + Y

• AE = C + I

• AE = a + I + bY

What is the sum of a and 퐼̅ called in the aggregate expenditure function?

• Induced expenditures

• Autonomous expenditures

• Aggregate expenditures

• National income

What does the 45-degree line represent in the graph of aggregate expenditure function and equilibrium national income?

• All points where Y plus AE

• All points where Y is less than AE

• All points where Y equals AE

• All points where Y is greater than AE