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ECON 2301 Chapter 9

Given that autonomous consumption equals $1,000, income equals $20,000, and the MPC equals 0.80, the level of
17,000
C=A+(B*Yd)
C=current consumption; a = autonomous consumption; b=marginal propensity to consume; Yd = Disposable Income
C=1000+(.80*20000)
C=1000+(16000)
C=17000
Demand-pull inflation is caused by:
Excessive aggregate demand in relation to an economy’s production capacity
A recessionary gap
Is the amount by which the rate of actual spending falls short of full-employment GDP
Consumption and investment spending account for approximately _______ percent of total output.
80
The combination of price level and real output that is compatible with both aggregate demand and aggregate supply is the definition of:
Equilibrium
If tax policies become less favorable, then
The AD curve will shift to the left
The MPC + MPS must always equal
1
The MPC indicates the portion of
An additional dollar of income that will be spent
The components of aggregate demand are:
Consumption, government spending, net exports, and investment
If consumption is $340 and saving is $20, then disposable income is:
$360
One In the News article says “Personal consumption expenditures (PCE) increased $51.9 billion, or 0.5 percent.” An increase in spending is likely the result of:
An increase in income.
If disposable income increases from $9,000 billion to $11,000 billion, and consumption increases from $9,500 billion to $11,000 billion, the MPC must be:
0.75
If the MPC is 0.8 and the APC is 0.9, then the MPS equals:
.2
A decrease in U.S. exports to Japan can be represented by:
The aggregate expenditure curve shifting downward.
A sudden increase in confidence by the business community could best be represented by:
An aggregate expenditure curve shifting upward
Which of the following is not a component of aggregate demand?
Productivity
Suppose the MPC in an economy is 0.9. The APC is initially 0.95 and disposable income is $4 billion. If disposable income increases to $14 billion, what is the new level of consumption?
$12.8 billion
Given that C = $1,000 + 0.60YD, if the level of disposable income is $1,000, the level of saving is
-$600.

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