ECO 2013: Macroeconomics Valencia Community College

Size: px
Start display at page:

Download "ECO 2013: Macroeconomics Valencia Community College"

Transcription

1 ECO 2013: Macroeconomics Valencia Community College Exam 3 Fall The most important determinant of consumer spending is: A. the level of household debt. B. consumer expectations. C. the stock of wealth. D. the level of income. 2. As disposable income goes up the: A. APC falls. B. APS falls. C. volume of consumption declines absolutely. D. volume of investment diminishes. 3. The consumption schedule shows: A. a direct relationship between aggregate consumption and accumulated wealth. B. a direct relationship between aggregate consumption and aggregate income. C. an inverse relationship between aggregate consumption and accumulated financial wealth. D. an inverse relationship between aggregate consumption and aggregate income. 4. For all levels of income to the left of the intersection of the 45-degree line and the consumption schedule, the APC is: A. greater than 100 percent. B. less than the APS. C. equal to the MPC. D. equal to 100 percent. 5. The consumption and saving schedules reveal that the: A. MPC is greater than zero, but less than one. B. MPC and APC are equal at the point where the consumption schedule intersects the 45-degree line. C. APS is positive at all income levels. D. MPC is equal to or greater than one at all income levels. Answer the next question(s) on the basis of the following consumption schedule: C = Y, where C is consumption and Y is disposable income. 6. Refer to the above data. The MPC is: A..45. B..20. C..50. D

2 7. Refer to the above data. At an $800 level of disposable income, the level of saving is: A. $180. B. $740. C. $60. D. $ At the point where the consumption schedule intersects the 45-degree line: A. the MPC is B. the APC is C. saving is equal to consumption. D. the economy is in equilibrium. 9. If the equation C = Y, where C is consumption and Y is disposable income, were graphed: A. the vertical intercept would be +.6 and the slope would be +20. B. it would reveal an inverse relationship between consumption and disposable income. C. the vertical intercept would be negative, but consumption would increase as disposable income rises. D. the vertical intercept would be +20 and the slope would be Which of the following is correct? A. MPC + MPS = APC + APS B. APC + MPS = APS + MPC C. APC + MPC = APS + MPS D. APC APS = MPC MPS Answer the next question(s) on the basis of the following consumption schedules. DI signifies disposable income and C represents consumption expenditures. All figures are in billions of dollars. 11. Refer to the above data. The marginal propensity to consume in economy (1) is: A..5. B..3. C..8. D Refer to the above data. The marginal propensity to consume: A. is highest in economy (1). B. is highest in economy (2). C. is highest in economy (3). D. cannot be calculated from the data given. 2

3 13. Refer to the above data. The marginal propensity to save: A. is highest in economy (1). B. is highest in economy (2). C. is highest in economy (3). D. cannot be determined from the data given. 14. Refer to the above data. At an income level of $40 billion, the average propensity to consume: A. is highest in economy (1). B. is highest in economy (2). C. is highest in economy (3). D. cannot be determined from the data given. 15. Refer to the above data. At an income level of $400 billion, the average propensity to save in economy (2) is: A B C D A decline in the real interest rate will: A. increase the amount of investment spending. B. shift the investment schedule downward. C. shift the investment demand curve to the right. D. shift the investment demand curve to the left. 17. A rightward shift of the investment demand curve might be caused by: A. an increase in the price level. B. a decline in the real interest rate. C. an increase in the expected rate of return on investment. D. an increase in business taxes. 18. The multiplier is: A. 1/MPC. B. 1/(1 + MPC). C. 1/MPS. D. 1/(1 MPS). 3

4 19. The above figure shows the saving schedules for economies 1, 2, 3, and 4. Which economy has the highest marginal propensity to consume? A. 1 B. 2 C. 3 D The above figure shows the saving schedules for economies 1, 2, 3, and 4. Which economy has the largest multiplier? A. 1 B. 2 C. 3 D Assume that in a private closed economy consumption is $240 billion and investment is $50 billion, both at the $280 billion level of domestic output. Thus: A. saving is $10 billion. B. unplanned decreases in inventories of $10 billion will occur. C. the MPC is.80. D. unplanned increases in inventories of $10 billion will occur. 22. Refer to the above diagram for a private closed economy. The equilibrium GDP is: A. $60 billion. B. $180 billion. C. between $60 and $180 billion. D. $60 billion at all levels of GDP. 4

5 23. Refer to the above diagram for a private closed economy. In this economy investment: A. decreases as GDP increases. B. increases as GDP increases. C. is $40 billion at all levels of GDP. D. is $60 billion at all levels of GDP. 24. Refer to the above diagram for a private closed economy. In this economy aggregate expenditures: A. do not change as GDP increases. B. increase by $2 for every $5 increase in GDP. C. increase by $2 for every $4 increase in GDP. D. increase by $2 for every $3 increase in GDP. 25. Refer to the above diagram for a private closed economy. Aggregate saving in this economy will be zero when: A. C + I g cuts the 45-degree line. B. GDP is $180 billion. C. GDP is $60 billion. D. GDP is also zero. 26. In the aggregate expenditures model, equilibrium GDP in a private closed economy is indicated by: A. the equality of saving and planned investment. B. the intersection of aggregate expenditures and the 45-degree line. C. the absence of unplanned changes in inventories. D. all of these. 27. Suppose that the level of GDP increased by $100 billion in a private closed economy where the marginal propensity to consume is 0.5. Aggregate expenditures must have increased by: A. $100 billion. B. $50 billion. C. $500 billion. D. $5 billion. Complete the following table and answer the next question(s) on the basis of the resulting data. All figures are in billions of dollars. 5

6 28. If the above economy was closed to international trade, the equilibrium GDP and the multiplier would be: A. $300 and 5. B. $350 and 4. C. $400 and 4. D. $350 and Refer to the above table. For the open economy the equilibrium GDP and the multiplier are: A. $300 and 2.5. B. $450 and 5. C. $400 and 4. D. $400 and If the multiplier in an economy is 5, a $20 billion increase in net exports will: A. increase GDP by $100 billion. B. reduce GDP by $20 billion. C. decrease GDP by $100 billion. D. increase GDP by $20 billion. 31. In the private closed economy, equilibrium GDP occurs where C + I g = GDP. 32. When C + I g = GDP in a private closed economy, S = I and there are no unplanned changes in inventories. 33. If the MPC is.8 in a private closed economy, a $30 billion increase in planned investment will increase equilibrium real GDP by $120 billion. 34. Equal increases in government expenditures and tax collections will leave the equilibrium GDP unchanged. 35. A $10 billion decrease in taxes will increase the equilibrium GDP by more than would a $10 billion increase in government expenditures. 36. If the MPC is.9, a $20 billion increase in a lump-sum tax will reduce GDP by $200 billion. 37. The aggregate expenditures schedule in the mixed open economy has a negative slope. 6

7 38. The interest-rate effect suggests that: A. a decrease in the supply of money will increase interest rates and reduce interest-sensitive consumption and investment spending. B. an increase in the price level will increase the demand for money, reduce interest rates, and decrease consumption and investment spending. C. an increase in the price level will increase the demand for money, increase interest rates, and decrease consumption and investment spending. D. an increase in the price level will decrease the demand for money, reduce interest rates, and increase consumption and investment spending. 39. The foreign purchases effect suggests that a decrease in the U.S. price level relative to other countries will: A. shift the aggregate demand curve leftward. B. shift the aggregate supply curve leftward. C. decrease U.S. exports and increase U.S. imports. D. increase U.S. exports and decrease U.S. imports. 40. The factors that affect the amounts that consumers, businesses, government, and foreigners wish to purchase at each price level are the: A. real-balances, interest-rate, and foreign purchases effects. B. determinants of aggregate supply. C. determinants of aggregate demand. D. sole determinants of the equilibrium price level and the equilibrium real output. 41. If investment increases by $10 billion and the economy's MPC is.8, the aggregate demand curve will shift: A. leftward by $50 billion at each price level. B. rightward by $10 billion at each price level. C. rightward by $50 billion at each price level. D. leftward by $40 billion at each price level. 42. If investment decreases by $20 billion and the economy's MPC is.5, the aggregate demand curve will shift: A. leftward by $40 billion at each price level. B. rightward by $20 billion at each price level. C. rightward by $40 billion at each price level. D. leftward by $20 billion at each price level. 7

8 43. In the above diagram, the economy's long-run aggregate supply curve is shown by line: A. 1. B. 2. C. 3. D In the above diagram, the economy's relevant aggregate demand and long-run aggregate supply curves, respectively, are lines: A. 4 and 2. B. 4 and 1. C. 2 and 4. D. 2 and In the above diagram, the economy's short-run AS curve is line and its long-run AS curve is line. A. 1; 3 B. 2; 4 C. 3; 4 D. 2; In the above diagram, the most favorable shift of the aggregate supply curve for the economy would be from: A. AS 1 to AS 2. B. AS 1 to AS 3. C. AS 2 to AS 3. D. AS 3 to AS 2. Suppose that real domestic output in an economy is 20 units, the quantity of inputs is 10, and the price of each input is $4. Answer the following question(s) on the basis of this information. 8

9 47. Refer to the above information. The level of productivity is: A. 20. B. 10. C. 5. D The per unit cost of production in the economy described above is: A. $.50. B. $1. C. $2. D. $5. Answer the next question(s) on the basis of the following table for a particular country in which C is consumption expenditures, I g is gross investment expenditures, G is government expenditures, X is exports, and M is imports. All figures are in billions of dollars. Each question is independent of the other questions. 49. Refer to the above table. If the equilibrium level of real GDP is $43 billion, its level of consumption will be: A. $20 billion. B. $22 billion. C. $24 billion. D. $26 billion. 50. An increase in net exports will shift the: A. aggregate expenditures curve upward and the aggregate demand curve rightward. B. aggregate expenditures curve upward and the aggregate demand curve leftward. C. aggregate expenditures curve downward and the aggregate demand curve rightward. D. aggregate expenditures curve downward and the aggregate demand curve leftward. 9

KING S UNIVERSITY COLLEGE. Economics 1022B (570 & 574) Review Questions for Chapter 27

KING S UNIVERSITY COLLEGE. Economics 1022B (570 & 574) Review Questions for Chapter 27 KING S UNIVERSITY COLLEGE Economics 1022B (570 & 574) G. Copplestone Review Questions for Chapter 27 Multiple Choice Questions: 1) If the marginal propensity to consume is 0.85, what change in consumption

More information

Principles of Macroeconomics Prof. Yamin Ahmad ECON 202 Spring 2007

Principles of Macroeconomics Prof. Yamin Ahmad ECON 202 Spring 2007 Principles of Macroeconomics Prof. Yamin Ahmad ECON 202 Spring 2007 Midterm Exam II Name Id # Instructions: There are two parts to this midterm. Part A consists of multiple choice questions. Please mark

More information

Assignment 2 (part 1) Deadline: September 30, 2004

Assignment 2 (part 1) Deadline: September 30, 2004 ECN 204 Introductory Macroeconomics Instructor: Sharif F. Khan Department of Economics Ryerson University Fall 2005 Assignment 2 (part 1) Deadline: September 30, 2004 Part A Multiple-Choice Questions [20

More information

Suggested Solutions to Assignment 3

Suggested Solutions to Assignment 3 ECON 1010C Principles of Macroeconomics Instructor: Sharif F. Khan Department of Economics Atkinson College York University Summer 2005 Suggested Solutions to Assignment 3 Part A Multiple-Choice Questions

More information

Questions and Answers

Questions and Answers Questions and Answers Chapter 1 Q1: MCQ Aggregate demand 1. The aggregate demand curve: A) is up-sloping because a higher price level is necessary to make production profitable as production costs rise.

More information

Part2 Multiple Choice Practice Qs

Part2 Multiple Choice Practice Qs Part2 Multiple Choice Practice Qs 1. The Keynesian cross shows: A) determination of equilibrium income and the interest rate in the short run. B) determination of equilibrium income and the interest rate

More information

AP Macroeconomics. Scoring Guidelines

AP Macroeconomics. Scoring Guidelines 2018 AP Macroeconomics Scoring Guidelines College Board, Advanced Placement Program, AP, AP Central, and the acorn logo are registered trademarks of the College Board. AP Central is the official online

More information

Practice Test 2: Multiple Choice

Practice Test 2: Multiple Choice Practice Test 2: Multiple Choice 1. The expenditure multiplier equals A. 1/(slope of APE curve). B. APC-APS where APC is the average propensity to consume and APS is the average propensity to save. C.

More information

Chapter 12 Consumption, Real GDP, and the Multiplier

Chapter 12 Consumption, Real GDP, and the Multiplier Chapter 12 Consumption, Real GDP, and the Multiplier Learning Objectives After you have studied this chapter, you should be able to 1. define saving, savings, consumption, dissaving, autonomous consumption,

More information

Econ 102 Exam 2 Name ID Section Number

Econ 102 Exam 2 Name ID Section Number Econ 102 Exam 2 Name ID Section Number 1. Suppose investment spending increases by $50 billion and as a result the equilibrium income increases by $200 billion. The investment multiplier is: A) 10. B)

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Problem Set Econ 2013: Chapter 10 :Basic Macroeconomic Relationships Name ID: MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The most important

More information

AP Econ Practice Test Unit 5

AP Econ Practice Test Unit 5 DO NOT WRITE ON THIS TEST! AP Econ Practice Test Unit 5 Multiple Choice Identify the choice that best completes the statement or answers the question. 1. The marginal propensity to consume is equal to:

More information

OVERVIEW. 1. This chapter presents a graphical approach to the determination of income. Two different graphical approaches are provided.

OVERVIEW. 1. This chapter presents a graphical approach to the determination of income. Two different graphical approaches are provided. 24 KEYNESIAN CROSS OVERVIEW 1. This chapter presents a graphical approach to the determination of income. Two different graphical approaches are provided. 2. Initially, both the consumption function and

More information

Dokuz Eylül University Faculty of Business Department of Economics

Dokuz Eylül University Faculty of Business Department of Economics Dokuz Eylül University Faculty of Business Department of Economics ECN 1002 PROBLEM SET III Q1) A link between the money market and the goods and services market exists through the impact of A) tax revenue

More information

EXPENDITURE MULTIPLIERS

EXPENDITURE MULTIPLIERS 27 EXPENDITURE MULTIPLIERS After studying this chapter, you will be able to: Explain how expenditure plans are determined Explain how real GDP is determined at a fixed price level Explain the expenditure

More information

Professor Christina Romer SUGGESTED ANSWERS TO PROBLEM SET 5

Professor Christina Romer SUGGESTED ANSWERS TO PROBLEM SET 5 Economics 2 Spring 2016 Professor Christina Romer Professor David Romer SUGGESTED ANSWERS TO PROBLEM SET 5 1. The left-hand diagram below shows the situation when there is a negotiated real wage,, that

More information

7. Refer to the above graph. It depicts an economy in the: A. Immediate short run B. Short run C. Immediate long run D. Long run

7. Refer to the above graph. It depicts an economy in the: A. Immediate short run B. Short run C. Immediate long run D. Long run CHAPTER 29 1. When the price level decreases: A. The demand for money falls and the interest rate falls B. Holders of financial assets with fixed money values decrease their spending C. Holders of financial

More information

Disposable income (in billions)

Disposable income (in billions) Section 4 version 2 Multiple Choice Identify the choice that best completes the statement or answers the question. 1. An increase in the MPC: A. increases the multiplier. B. shifts the autonomous investment

More information

Pre-Test Chapter 9 ed17

Pre-Test Chapter 9 ed17 Pre-Test Chapter 9 ed17 Multiple Choice Questions 1. Which of the following statements is incorrect? A. Given the economy's MPS, a $15 billion reduction in government spending will reduce the equilibrium

More information

Chapter 11 1/19/2018. Basic Keynesian Model Expenditure and Tax Multipliers

Chapter 11 1/19/2018. Basic Keynesian Model Expenditure and Tax Multipliers Chapter 11 Basic Keynesian Model Expenditure and Tax Multipliers This chapter presents the basic Keynesian model and explains: how aggregate expenditure (C,I,G,X and M) is determined when the price level

More information

Chapter 10 3/19/2018. AGGREGATE SUPPLY AND AGGREGATE DEMAND (Part 1) Objectives. Aggregate Supply

Chapter 10 3/19/2018. AGGREGATE SUPPLY AND AGGREGATE DEMAND (Part 1) Objectives. Aggregate Supply Chapter 10 AGGREGATE SUPPLY AND AGGREGATE DEMAND (Part 1) Objectives Explain what determines aggregate supply in the long run and in the short run Explain what determines aggregate demand Explain how real

More information

Questions and Answers

Questions and Answers Questions and Answers Ch 1 (continued) Q1: MCQ Aggregate Demand 1) The aggregate demand curve shows A) total expenditures at different levels of national income. B) the quantity of real GDP demanded at

More information

ECO 2013: Macroeconomics Valencia Community College

ECO 2013: Macroeconomics Valencia Community College ECO 2013: Macroeconomics Valencia Community College Final Exam Fall 2008 1. Fiscal policy is carried out primarily by: A. the Federal government. B. state and local governments working together. C. state

More information

Archimedean Upper Conservatory Economics, October 2016

Archimedean Upper Conservatory Economics, October 2016 Multiple Choice Identify the choice that best completes the statement or answers the question. 1. The marginal propensity to consume is equal to: A. the proportion of consumer spending as a function of

More information

Introduction. Learning Objectives. Learning Objectives. Economics Today Twelfth Edition. Chapter 12 Consumption, Income, and the Multiplier

Introduction. Learning Objectives. Learning Objectives. Economics Today Twelfth Edition. Chapter 12 Consumption, Income, and the Multiplier Roger LeRoy Miller Economics Today Twelfth Edition Chapter 12 Consumption, Income, and the Multiplier Introduction Consumption spending by households is the largest component of U.S. GDP. To the extent

More information

Aggregate Supply and Aggregate Demand

Aggregate Supply and Aggregate Demand Aggregate Supply and Aggregate Demand ECO 301: Money and Banking 1 1.1 Goals Goals Specific Goals Be able to explain GDP fluctuations when the price level is also flexible. Explain how real GDP and the

More information

Introduction. Learning Objectives. Learning Objectives. Chapter 12. Consumption, Real GDP, and the Multiplier

Introduction. Learning Objectives. Learning Objectives. Chapter 12. Consumption, Real GDP, and the Multiplier Chapter 12 Consumption, Real GDP, and the Multiplier Introduction Investment spending by businesses is a key component of economic growth. Expenditures on information technology were once expected to provide

More information

3 Macroeconomics SAMPLE QUESTIONS

3 Macroeconomics SAMPLE QUESTIONS MULTIPLE-CHOICE UNIT E07 Unit Summative Assessment Sample Multiple-Choice Questions Circle the letter of each correct answer. 1. Which of the following best describes aggregate supply? (A) The amount buyers

More information

Basic Macroeconomics Relationships. Business, Computers, & Information Technology

Basic Macroeconomics Relationships. Business, Computers, & Information Technology Basic Macroeconomics Relationships Business, Computers, & Information Technology Unit 3 Chapter 27 1 Remember Growth, Business Cycle, Recession, and Inflation? Macroeconomic Relationships help us explain

More information

Introduction to Economics. MACROECONOMICS Chapter 2 Aggregate Demand and Aggregate Supply

Introduction to Economics. MACROECONOMICS Chapter 2 Aggregate Demand and Aggregate Supply Introduction to Economics MACROECONOMICS Chapter 2 Aggregate Demand and Aggregate Supply contents 2.1 2.2 2.3 2.4 2.5 2.6 Equilibrium of a National Economy Aggregate Demand and Consumption Expenditure

More information

Basic Macroeconomic Relationships

Basic Macroeconomic Relationships 8 Basic Macroeconomic Relationships 8-1 Chapter Objectives How Changes in Income Affect Consumption (and Saving). About Factors Other Than Income That Can Affect Consumption. How Changes in Real Interest

More information

KOÇ UNIVERSITY ECON 202 Macroeconomics Fall Problem Set VI C = (Y T) I = 380 G = 400 T = 0.20Y Y = C + I + G.

KOÇ UNIVERSITY ECON 202 Macroeconomics Fall Problem Set VI C = (Y T) I = 380 G = 400 T = 0.20Y Y = C + I + G. KOÇ UNIVERSITY ECON 202 Macroeconomics Fall 2007 Problem Set VI 1. Consider the following model of an economy: C = 20 + 0.75(Y T) I = 380 G = 400 T = 0.20Y Y = C + I + G. (a) What is the value of the MPC

More information

Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a

Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a 10 1 Aggregate Expenditure & Income A dollar spent (expenditure) Translates directly into a dollar earned (income) Aggregate expenditure components Consumption, C - varies with income Investment, I - autonomous

More information

3) If the Canadian dollar exchange rate increases, the 3) A) internal value of the dollar falls.

3) If the Canadian dollar exchange rate increases, the 3) A) internal value of the dollar falls. Forty questions were automatically and randomly chosen by the computer from Chapters 19 through 2 6 of the Textʹs test bank - the instructor has not seen the questions chosen. Name: Random Q. Practice

More information

AGGREGATE EXPENDITURE AND EQUILIBRIUM OUTPUT. Chapter 20

AGGREGATE EXPENDITURE AND EQUILIBRIUM OUTPUT. Chapter 20 1 AGGREGATE EXPENDITURE AND EQUILIBRIUM OUTPUT Chapter 20 AGGREGATE EXPENDITURE AND EQUILIBRIUM OUTPUT The level of GDP, the overall price level, and the level of employment three chief concerns of macroeconomists

More information

Practice Test 1: Multiple Choice

Practice Test 1: Multiple Choice Practice Test 1: Multiple Choice 1. If aggregate planned expenditure exceeds real GDP A. actual inventories decrease below their target. B. firms are not maximizing their profits. C. planned consumption

More information

SOLUTION ECO 202Y - L5101 MACROECONOMIC THEORY. Term Test #1 LAST NAME FIRST NAME STUDENT NUMBER. University of Toronto June 18, 2002 INSTRUCTIONS:

SOLUTION ECO 202Y - L5101 MACROECONOMIC THEORY. Term Test #1 LAST NAME FIRST NAME STUDENT NUMBER. University of Toronto June 18, 2002 INSTRUCTIONS: Department of Economics Prof. Gustavo Indart University of Toronto June 18, 2002 SOLUTION ECO 202Y - L5101 MACROECONOMIC THEORY Term Test #1 LAST NAME FIRST NAME STUDENT NUMBER INSTRUCTIONS: 1. The total

More information

1. The most basic premise of the aggregate expenditures model is that:

1. The most basic premise of the aggregate expenditures model is that: 1. The most basic premise of the aggregate expenditures model is that: A. The total output produced in the economy depends directly on the level of total spending B. The level of employment in the economy

More information

Aggregate Supply and Demand

Aggregate Supply and Demand Aggregate demand is the relationship between GDP and the price level. When only the price level changes, GDP changes and we move along the Aggregate Demand curve. The total amount of goods and services,

More information

ECON 3312 Macroeconomics Exam 2 Spring 2017 Prof. Crowder

ECON 3312 Macroeconomics Exam 2 Spring 2017 Prof. Crowder ECON 3312 Macroeconomics Exam 2 Spring 2017 Prof. Crowder Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Suppose the economy is currently

More information

3. Explain what the APS tells us about people s spending and saving habits.

3. Explain what the APS tells us about people s spending and saving habits. National Income and Price Determination Reading Guide Chapters 9, 10 and 11 Chapter 9: Building the Aggregate Expenditures Model Objective... 1. Explain how the consumption schedule helps us find equilibrium

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Econ 330 Spring 2017: FINAL EXAM Name ID Section Number MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Tobin's q theory suggests that monetary

More information

Econ 102 Exam 2 Name ID Section Number

Econ 102 Exam 2 Name ID Section Number Econ 102 Exam 2 Name ID Section Number 1. In a closed economy government spending was $30 billion, consumption was $70 billion, taxes were $20 billion, and GDP was $110 billion this year. Investment spending

More information

Objectives AGGREGATE DEMAND AND AGGREGATE SUPPLY

Objectives AGGREGATE DEMAND AND AGGREGATE SUPPLY AGGREGATE DEMAND 7 AND CHAPTER AGGREGATE SUPPLY Objectives After studying this chapter, you will able to Explain what determines aggregate supply Explain what determines aggregate demand Explain macroeconomic

More information

45 Line -The height of this measures disposable income

45 Line -The height of this measures disposable income Fixed Prices and Expenditure Plans -In the Keynesian model, all firms are like the grocery store: They set their prices and sell the quantities their customers are willing to buy -If they persistently

More information

Intermediate Macroeconomics: Economics 301 Exam 1. October 4, 2012 B. Daniel

Intermediate Macroeconomics: Economics 301 Exam 1. October 4, 2012 B. Daniel October 4, 2012 B. Daniel Intermediate Macroeconomics: Economics 301 Exam 1 Name Answer all of the following questions. Each is worth 25 points. Label all axes, initial values and all values after shocks.

More information

I. Learning Objectives II. The Income-Consumption and Income-Saving Relationships

I. Learning Objectives II. The Income-Consumption and Income-Saving Relationships I. Learning Objectives In this chapter students will learn: A. How changes in income affect consumption (and saving). B. About factors other than income that can affect consumption. C. How changes in real

More information

Professor Christina Romer SUGGESTED ANSWERS TO PROBLEM SET 5

Professor Christina Romer SUGGESTED ANSWERS TO PROBLEM SET 5 Economics 2 Spring 2017 Professor Christina Romer Professor David Romer SUGGESTED ANSWERS TO PROBLEM SET 5 1. The tool we use to analyze the determination of the normal real interest rate and normal investment

More information

Notes for Econ FALL 2010 Midterm 1 Exam

Notes for Econ FALL 2010 Midterm 1 Exam Notes for Econ 302-001 FALL 2010 Midterm 1 Exam The Fall 2010 Econ 302-001 course used Hall and Papell, Macroeconomics (Norton) as a textbook. The notation differs from Blanchard, Macroeconomics 5/2 (Pearson).

More information

MACROECONOMICS. Section I Time 70 minutes 60 Questions

MACROECONOMICS. Section I Time 70 minutes 60 Questions MACROECONOMICS Section I Time 70 minutes 60 Questions Directions: Each of the questions or incomplete statements below is followed by five suggested answers or completions. Select the one that is best

More information

Econ 100B: Macroeconomic Analysis Fall 2008

Econ 100B: Macroeconomic Analysis Fall 2008 Econ 100B: Macroeconomic Analysis Fall 2008 Problem Set #7 ANSWERS (Due September 24-25, 2008) A. Small Open Economy Saving-Investment Model: 1. Clearly and accurately draw and label a diagram of the Small

More information

Economics 102 Homework #7 Due: December 7 th at the beginning of class

Economics 102 Homework #7 Due: December 7 th at the beginning of class Economics 102 Homework #7 Due: December 7 th at the beginning of class Complete all of the problems. Please do not write your answers on this sheet. Show all of your work. 1. The economy starts in long

More information

Chapter 11 Aggregate Demand I: Building the IS -LM Model

Chapter 11 Aggregate Demand I: Building the IS -LM Model Chapter 11 Aggregate Demand I: Building the IS -LM Model Modified by Yun Wang Eco 3203 Intermediate Macroeconomics Florida International University Summer 2017 2016 Worth Publishers, all rights reserved

More information

INTI COLLEGE MALAYSIA UNIVERSITY FOUNDATION PROGRAMME ECO 183 : FOUNDATION ECONOMICS (MACROECONOMICS) RESIT EXAMINATION : AUGUST 2002 SESSION

INTI COLLEGE MALAYSIA UNIVERSITY FOUNDATION PROGRAMME ECO 183 : FOUNDATION ECONOMICS (MACROECONOMICS) RESIT EXAMINATION : AUGUST 2002 SESSION ECO 183 (R) / Page 1 of 9 INTI COLLEGE MALAYSIA UNIVERSITY FOUNDATION PROGRAMME ECO 183 : FOUNDATION ECONOMICS (MACROECONOMICS) RESIT EXAMINATION : AUGUST 2002 SESSION Section A : Answer ALL questions.

More information

MACROECONOMICS - CLUTCH CH DERIVING THE AGGREGATE EXPENDITURES MODEL

MACROECONOMICS - CLUTCH CH DERIVING THE AGGREGATE EXPENDITURES MODEL !! www.clutchprep.com CONCEPT: AGGREGATE EXPENDITURES MODEL AND MACROECONOMIC EQUILIBRIUM Aggregate expenditures (AE) represent the total in an economy The aggregate expenditures model describes the relationship

More information

University of Toronto June 17, 2002 ECO 208Y - L5101 MACROECONOMIC THEORY. Term Test #1 LAST NAME FIRST NAME

University of Toronto June 17, 2002 ECO 208Y - L5101 MACROECONOMIC THEORY. Term Test #1 LAST NAME FIRST NAME Department of Economics Prof. Gustavo Indart University of Toronto June 17, 2002 SOLUTION ECO 208Y - L5101 MACROECONOMIC THEORY Term Test #1 LAST NAME FIRST NAME STUDENT NUMBER INSTRUCTIONS: 1. The total

More information

Table 9-2. Base Year (2006) 2013 Product Quantity Price Price Milk 50 $2 $3 Bread 100 $3 $3.50

Table 9-2. Base Year (2006) 2013 Product Quantity Price Price Milk 50 $2 $3 Bread 100 $3 $3.50 1) The advice to "keep searching, there are plenty of jobs around here for which you are qualified," would be most appropriate for which of the following types of unemployment? A) frictional unemployment

More information

Chapter 10 Aggregate Demand I

Chapter 10 Aggregate Demand I Chapter 10 In this chapter, We focus on the short run, and temporarily set aside the question of whether the economy has the resources to produce the output demanded. We examine the determination of r

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. ECON 3312 Mcroeconomics Exam 2 Fall 2016 Prof. Crowder Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) If output is currently 1000 below full

More information

Textbook Media Press. CH 27 Taylor: Principles of Economics 3e 1

Textbook Media Press. CH 27 Taylor: Principles of Economics 3e 1 CH 27 Taylor: Principles of Economics 3e 1 The Building Blocks of Keynesian Analysis Keynesian economics is based on two main ideas: a) aggregate demand is more likely than aggregate supply to be the primary

More information

Econ 3 Practice Final Exam

Econ 3 Practice Final Exam Econ 3 Winter 2010 Econ 3 Practice Final Exam No books or notes of any kind are allowed. On problems requiring calculations, you will only get credit if you show your work. Part I: Longer Answers. Please

More information

Macroeconomics CHAPTER 10. Aggregate Supply and Aggregate Demand

Macroeconomics CHAPTER 10. Aggregate Supply and Aggregate Demand Macroeconomics CHAPTER 10 Aggregate Supply and Aggregate Demand What you will learn in this chapter: How the aggregate supply curve illustrates the relationship between the aggregate price level and the

More information

Exam #2 7 or 9 November Instructor: Brian Young. Formulas and Definitions. 5 points each

Exam #2 7 or 9 November Instructor: Brian Young. Formulas and Definitions. 5 points each Economics 211 211 Macroeconomic Principles Exam 7 or 9 November 2011 Name: The value of this exam is 100 points. Instructor: Brian Young Please show your work where appropriate! Formulas and Definitions

More information

Lecture 6 and 7: The Aggregate Expenditures Model Reference - Chapter 7

Lecture 6 and 7: The Aggregate Expenditures Model Reference - Chapter 7 Lecture 6 and 7: The Aggregate Expenditures Model Reference - Chapter 7 LEARNING OBJECTIVES 7.1 The factors that determine consumption expenditure and saving. 7.2 The factors that determine investment

More information

The level of consumption and saving in the United States is higher today than a decade ago because real GDP and income are higher.

The level of consumption and saving in the United States is higher today than a decade ago because real GDP and income are higher. Chapter 27 Basic Macroeconomic Relationships QUESTIONS 1. What are the variables (the items measured on the axes) in a graph of the (a) consumption schedule and (b) saving schedule? Are the variables inversely

More information

Chapter 12 Appendix B

Chapter 12 Appendix B The Effects of Macroeconomic Shocks on Asset Prices Chapter Appendix B By explicitly including the MP and IS curves in the aggregate demand and supply analysis, we can analyze the response of asset prices,

More information

CHAPTER TWENTY-SEVEN BASIC MACROECONOMIC RELATIONSHIPS

CHAPTER TWENTY-SEVEN BASIC MACROECONOMIC RELATIONSHIPS CHAPTER TWENTY-SEVEN BASIC MACROECONOMIC RELATIONSHIPS CHAPTER OVERVIEW Previous chapters identified macroeconomic issues of growth, business cycles, recession, and inflation. In this chapter, the authors

More information

Business Fluctuations. Notes 05. Preface. IS Relation. LM Relation. The IS and the LM Together. Does the IS-LM Model Fit the Facts?

Business Fluctuations. Notes 05. Preface. IS Relation. LM Relation. The IS and the LM Together. Does the IS-LM Model Fit the Facts? ECON 421: Spring 2015 Tu 6:00PM 9:00PM Section 102 Created by Richard Schwinn Based on Macroeconomics, Blanchard and Johnson [2011] Before diving into this material, Take stock of the techniques and relationships

More information

Chapter 10 Aggregate Demand I CHAPTER 10 0

Chapter 10 Aggregate Demand I CHAPTER 10 0 Chapter 10 Aggregate Demand I CHAPTER 10 0 1 CHAPTER 10 1 2 Learning Objectives Chapter 9 introduced the model of aggregate demand and aggregate supply. Long run (Classical Theory) prices flexible output

More information

Econ 302 Fall Don t forget to download a copy of the Homework Cover Sheet. Mark the location where you handed in your work.

Econ 302 Fall Don t forget to download a copy of the Homework Cover Sheet. Mark the location where you handed in your work. Econ 302 Fall 2005 Don t forget to download a copy of the Homework Cover Sheet. Mark the location where you handed in your work. Homework #3; Chapter 9. This homework has three parts (A, B, C). Each part

More information

Unit 3 Exam Review. Formulas to Know: Output gap = YA YP/YP (x 100) MPC = Consumption/ Yd. MPS = Savings/ Yd

Unit 3 Exam Review. Formulas to Know: Output gap = YA YP/YP (x 100) MPC = Consumption/ Yd. MPS = Savings/ Yd Unit 3 Exam Review Income and Expenditure 1. Explain relationship between MPC and the multiplier. Direct relationship, the higher the MPC, the greater the multiplier. 2. Understand the concept of autonomous

More information

11 EXPENDITURE MULTIPLIERS* Chapt er. Key Concepts. Fixed Prices and Expenditure Plans1

11 EXPENDITURE MULTIPLIERS* Chapt er. Key Concepts. Fixed Prices and Expenditure Plans1 Chapt er EXPENDITURE MULTIPLIERS* Key Concepts Fixed Prices and Expenditure Plans In the very short run, firms do not change their prices and they sell the amount that is demanded. As a result: The price

More information

download instant at

download instant at Exam Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The aggregate supply curve 1) A) shows what each producer is willing and able to produce

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Econ 330 Spring 2015: FINAL EXAM Name ID Section Number MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Suppose a report was released today that

More information

ECO 209Y MACROECONOMIC THEORY AND POLICY LECTURE 3: AGGREGATE EXPENDITURE AND EQUILIBRIUM INCOME

ECO 209Y MACROECONOMIC THEORY AND POLICY LECTURE 3: AGGREGATE EXPENDITURE AND EQUILIBRIUM INCOME ECO 209Y MACROECONOMIC THEORY AND POLICY LECTURE 3: AGGREGATE EXPENDITURE AND EQUILIBRIUM INCOME Gustavo Indart Slide 1 ASSUMPTIONS We will assume that: There is no depreciation There are no indirect taxes

More information

Economics 102 Discussion Handout Week 13 Fall Introduction to Keynesian Model: Income and Expenditure. The Consumption Function

Economics 102 Discussion Handout Week 13 Fall Introduction to Keynesian Model: Income and Expenditure. The Consumption Function Economics 102 Discussion Handout Week 13 Fall 2017 Introduction to Keynesian Model: Income and Expenditure The Consumption Function The consumption function is an equation which describes how a household

More information

Aggregate Demand I, II March 22-31

Aggregate Demand I, II March 22-31 March 22-31 The Keynesian Cross Y=C(Y-T)+I+G with I, T, and G fixed Government-purchases multiplier Y/ G (if interest rate is fixed) Tax multiplier Y/ T (if interest rate is fixed) Marginal propensity

More information

Long Run vs. Short Run

Long Run vs. Short Run Long Run vs. Short Run Long Run: A period long enough for nominal wages and other input prices to change in response to a change in the nation s price level. The Basic Model of Economic Fluctuations Two

More information

IMPORTANT INFORMATION:

IMPORTANT INFORMATION: Economics 1B ECS1601 Semester 1 Department of Economics IMPORTANT INFORMATION: This tutorial letter contains solutions to assignment 03 BARCODE SOLUTIONS TO ASSIGNMENT 03 QUESTIONS SEMESTER 1, 2017 3.1

More information

Aggregate Expenditure and Equilibrium Output. The Core of Macroeconomic Theory. Aggregate Output and Aggregate Income (Y)

Aggregate Expenditure and Equilibrium Output. The Core of Macroeconomic Theory. Aggregate Output and Aggregate Income (Y) C H A P T E R 8 Aggregate Expenditure and Equilibrium Output Prepared by: Fernando Quijano and Yvonn Quijano The Core of Macroeconomic Theory 2of 31 Aggregate Output and Aggregate Income (Y) Aggregate

More information

E) price level and the total output that firms wish to produce and sell, as technology and input prices vary.

E) price level and the total output that firms wish to produce and sell, as technology and input prices vary. Exam Name 1) The economyʹs aggregate supply (AS) curve shows the relationship between the A) price level and the marginal propensity to consume (MPC). B) equilibrium real GDP and marginal cost. C) price

More information

Chapter 4. Determination of Income and Employment 4.1 AGGREGATE DEMAND AND ITS COMPONENTS

Chapter 4. Determination of Income and Employment 4.1 AGGREGATE DEMAND AND ITS COMPONENTS Determination of Income and Employment Chapter 4 We have so far talked about the national income, price level, rate of interest etc. in an ad hoc manner without investigating the forces that govern their

More information

EconS 102: Mid Term 3 Date: July 14th, Name: WSU ID:

EconS 102: Mid Term 3 Date: July 14th, Name: WSU ID: EconS 102: Mid Term 3 Date: July 14th, 2017 Instructions Write your name and WSU ID on the paper. All questions are worth 1 point. You have 40 minutes. This test is out of 15 points. There is a total of

More information

Principles of Macroeconomics December 17th, 2005 name: Final Exam (100 points)

Principles of Macroeconomics December 17th, 2005 name: Final Exam (100 points) EC132.02 Serge Kasyanenko Principles of Macroeconomics December 17th, 2005 name: Final Exam (100 points) This is a closed-book exam - you may not use your notes and textbooks. Calculators are not allowed.

More information

EC202 Macroeconomics

EC202 Macroeconomics EC202 Macroeconomics Koç University, Summer 2014 by Arhan Ertan Study Questions - 3 1. Suppose a government is able to permanently reduce its budget deficit. Use the Solow growth model of Chapter 9 to

More information

2.2 Aggregate demand and aggregate supply

2.2 Aggregate demand and aggregate supply The business cycle Short-term fluctuations and long-term trend Explain, using a business cycle diagram, that economies typically tend to go through a cyclical pattern characterized by the phases of the

More information

SOLUTIONS ECO 202Y MACROECONOMIC THEORY. Midterm Test #3. University of Toronto March 19, 2003 LAST NAME FIRST NAME STUDENT NUMBER INSTRUCTIONS:

SOLUTIONS ECO 202Y MACROECONOMIC THEORY. Midterm Test #3. University of Toronto March 19, 2003 LAST NAME FIRST NAME STUDENT NUMBER INSTRUCTIONS: Department of Economics Prof. Gustavo Indart University of Toronto March 19, 2003 SOLUTIONS ECO 202Y MACROECONOMIC THEORY Midterm Test #3 LAST NAME FIRST NAME STUDENT NUMBER INSTRUCTIONS: 1. The total

More information

MACROECONOMICS. Aggregate Demand I: Building the IS-LM Model. N. Gregory Mankiw. PowerPoint Slides by Ron Cronovich

MACROECONOMICS. Aggregate Demand I: Building the IS-LM Model. N. Gregory Mankiw. PowerPoint Slides by Ron Cronovich 11 : Building the IS-LM Model MACROECONOMICS N. Gregory Mankiw PowerPoint Slides by Ron Cronovich 2013 Worth Publishers, all rights reserved IN THIS CHAPTER, YOU WILL LEARN: the IS curve and its relation

More information

Keynesian Theory (IS-LM Model): how GDP and interest rates are determined in Short Run with Sticky Prices.

Keynesian Theory (IS-LM Model): how GDP and interest rates are determined in Short Run with Sticky Prices. Keynesian Theory (IS-LM Model): how GDP and interest rates are determined in Short Run with Sticky Prices. Historical background: The Keynesian Theory was proposed to show what could be done to shorten

More information

13 EXPENDITURE MULTIPLIERS: THE KEYNESIAN MODEL* Chapter. Key Concepts

13 EXPENDITURE MULTIPLIERS: THE KEYNESIAN MODEL* Chapter. Key Concepts Chapter 3 EXPENDITURE MULTIPLIERS: THE KEYNESIAN MODEL* Key Concepts Fixed Prices and Expenditure Plans In the very short run, firms do not change their prices and they sell the amount that is demanded.

More information

THE AD (AGGREGATE DEMAND) / AS (AGGREGATE SUPPLY) MACRO MODEL

THE AD (AGGREGATE DEMAND) / AS (AGGREGATE SUPPLY) MACRO MODEL THE AD (AGGREGATE DEMAND) / AS (AGGREGATE SUPPLY) MACRO MODEL Again, we visit the supply and demand framework. However, when applied to Macroeconomics, we use the following terms in setting up our graph:

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Exam Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Suppose government has a budget deficit of $500 billion. If there is no Ricardo-Barro

More information

6. The Aggregate Demand and Supply Model

6. The Aggregate Demand and Supply Model 6. The Aggregate Demand and Supply Model 1 Aggregate Demand and Supply Curves The Aggregate Demand Curve It shows the relationship between the inflation rate and the level of aggregate output when the

More information

Aggregate Consumption, Aggregate Demand, GDP and the Keynesian Cross 1 Instructional Primer 2

Aggregate Consumption, Aggregate Demand, GDP and the Keynesian Cross 1 Instructional Primer 2 Consumption, Demand, GDP and the Keynesian Cross 1 Instructional Primer 2 To understand the relationship between consumption, savings, expenditures, and GDP think of consumption as a function of income

More information

14.02 Principles of Macroeconomics Problem Set # 2, Answers

14.02 Principles of Macroeconomics Problem Set # 2, Answers 14.0 Principles of Macroeconomics Problem Set #, Answers Part I 1. False. The multiplier is 1/ [1- c 1 (1- t)]. The effect of an increase in autonomous spending is dampened because taxes respond proportionally

More information

Aggregate Supply and Aggregate Demand

Aggregate Supply and Aggregate Demand Aggregate Supply and Aggregate Demand Econ 120: Global Macroeconomics 1 1.1 Goals Goals Specific Goals Define the expenditure multiplier and how to compute it. Explain how recessions and expansions can

More information

1. You are right. When a fall in the value of the dollar against other currencies makes U.S. final

1. You are right. When a fall in the value of the dollar against other currencies makes U.S. final AP Krugman Section 4 Problem Solutions 1. You are right. When a fall in the value of the dollar against other currencies makes U.S. final goods and services cheaper to foreigners, this represents a shift

More information

Macroeconomics 2016 Scoring Guidelines

Macroeconomics 2016 Scoring Guidelines AP Macroeconomics 2016 Scoring Guidelines College Board, Advanced Placement Program, AP, AP Central, and the acorn logo are registered trademarks of the College Board. AP Central is the official online

More information

Aggregate Demand. Sherif Khalifa. Sherif Khalifa () Aggregate Demand 1 / 36

Aggregate Demand. Sherif Khalifa. Sherif Khalifa () Aggregate Demand 1 / 36 Sherif Khalifa Sherif Khalifa () Aggregate Demand 1 / 36 The ISLM model allows us to build the Aggregate Demand curve. IS stands for investment and saving. The IS curve represents what is happening in

More information

Shanghai Livingston American School Quarterly / Trimester Plan 2

Shanghai Livingston American School Quarterly / Trimester Plan 2 Shanghai Livingston American School Quarterly / Trimester Plan 2 Concept / Topic To Teach: Specific Objectives: Week 1 Week 2 Week 3 Week 4 Unit 3 Module 16 INCOME AND EXPENDITURES Comprehend the nature

More information