Chap 3 _Part 1

In the Keynesian income–expenditure model, equilibrium national income is achieved when

• Aggregate supply exceeds aggregate demand

• Aggregate demand exceeds aggregate supply

• Aggregate demand equals aggregate supply

• Saving equals consumption

Disposable income can be written as

• C + I G+ T

• C= S+ I

• C + S = I

• Y-T

Autonomous consumption refers to

• Consumption that varies with income

• Consumption at zero income

• Consumption financed only by borrowing

• Consumption equal to income

Leakages in circular flow of income refer to

• exports saving and taxes

• savings taxes and imports

• government spending exports and imports

• investment government spending and exports.

Which of the following is an injection in a four-sector economy?

• Saving

• Taxes

• Imports

• Exports

In a four-sector economy, aggregate demand includes

• C + I + G

• C + I + (X-M)

• C + I + G + (X-M)

• C + G + (X-M)

The 45-degree line in the income–expenditure diagram represents

• Consumption function

• Investment function

• Aggregate demand

• Points where income equals expenditure

Which of the following best describes equilibrium income

• Income at which savings are maximum

• Income at which production is minimum

• Income at which planned expenditure equals output

• Income at which taxes equals government spending

If the marginal propensity to consume (MPC) is 0.7, the marginal propensity to save (MPS) is

• 0.7

• 0.3

• 1.4

• 0

Break-even income is the level of income where

• consumption is zero

• saving is negative

• saving is maximum

• saving is zero