ECONS 102 Exam 4 Questions and Correct Answers the Latest Update and Recommended Version
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Course
Econ 102
Institution
Econ 102
The _____ the MPC is, the _____ disposable income "leaks out" into savings at each round of
expansion.
→ higher; less
Real aggregate spending
→ GDP = Y = C + I
Disposable income
→ YD = Y = GDP
Aggregate consumption function
→ C = A + MPC x YD
Planned aggregate spending
→ the to...
ECONS 102 Exam 4 Questions and
Correct Answers the Latest Update and
Recommended Version
The _____ the MPC is, the _____ disposable income "leaks out" into savings at each round of
expansion.
→ higher; less
Real aggregate spending
→ GDP = Y = C + I
Disposable income
→ YD = Y = GDP
Aggregate consumption function
→ C = A + MPC x YD
Planned aggregate spending
→ the total amount of planned spending in the economy
Firms will reduce production due to an unintended _____ in inventories
→ rise
Firms will increase production due to an unintended _____ in inventories
(Figure: Income-Expenditure Equilibrium) According to the Figure: Income-Expenditure
Equilibrium, if planned investment spending increases by $100, income-expenditure
equilibrium occurs at GDP of:
→ $2250
If the slope of the aggregate expenditures curve = 0.9, the multiplier is equal to:
→ 10
A country is closed. It has no government sector, and its aggregate price levels and interest
rate levels are fixed. Furthermore, the marginal propensity to consume is constant and the
country's consumption function is as follows: C = 200 + 0.75YD, where YD is disposable
income and C is consumption. Assume that planned investment equals 75.
According to the Scenario: A Country's Consumption Function, holding everything else constant,
what will happen if aggregate wealth decreases by $100?
→ The AE curve will shift downward.
(T/F) Suppose we are in an economy with no taxes or imports. If the marginal propensity to
consume is 0.9 and investment spending increases by $50 billion, the change in real GDP will
be $5 billion.
→ False
(Figure: Aggregate Expenditures I) Refer to the Figure: Aggregate Expenditures I. When real
GDP is $700 billion, there will be a:
→ $125 million increase in unplanned inventory investment.
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