The average propensity to consume (APC) equals
the change in real disposable income divided by the change in consumption expenditures.
the change in consumption expenditures divided by the change in real disposable income.
real disposable income divided by consumption expenditures.
consumption expenditures divided by real disposable income.
The consumption function shows how much
households plan to consume per year at each level of real disposable income.
households plan to consume per year at each level of savings.
households plan to consume per year at each possible interest rate.
real disposable income people will earn at each income tax bracket.
Saving is
the accumulation of past periods of savings while savings is the amount of disposable income that is not consumed in a given period of time.
the amount one does not consume in a given period of time while savings is the accumulation of past periods of saving.
the difference between disposable income and spending on goods and services while savings is the difference between real GDP and disposable income.
the difference between real GDP and disposable income while savings is the difference between disposable income and consumption spending.
Thinking as an economist would, which is true of investment?
Investment represents spending on capital goods.
Investment is a stock concept.
Investment is putting money into stocks and bonds.
It is the portion of disposable income that is not used for consumption or saving.
An appreciation of the U.S. dollar ________ the price of U.S. imports, and ________ the price of U.S. exports.
lowers, lowers
increases, increases
increases, lowers
lowers, increases
QUESTION 33
Other things being equal, if input prices rise in a country, then there would be
cost-push inflation.
demand-pull inflation.
cost-push deflation.
more production and a lower price level.
The average propensity to consume (APC) equals
| the change in real disposable income divided by the change in consumption expenditures. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| the change in consumption expenditures divided by the change in real disposable income. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| real disposable income divided by consumption expenditures. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| consumption expenditures divided by real disposable income. The consumption function shows how much
|
Related textbook solutions
Related questions
Question 1
Which of the following describes the relationship between the change in inventories and aggregate expenditure?
| A. | Aggregate expenditure equals the change in inventories minus GDP. |
| B. | The change in inventories equals GDP divided by aggregate expenditures. |
| C. | Aggregate expenditures equals GDP divided by the change in inventories. |
| D. | Aggregate expenditures equals GDP minus the change in inventories. |
| E. | The change in inventories equals GDP multiplied by aggregate expenditure. |
1 points
Question 2
Suppose the marginal propensity to consume is 0.80 and taxes decrease by $10 billion. Which of the following is true?
| A. | Disposable income and consumption fall by $10 billion |
| B. | Disposable income and consumption rise by $10 billion |
| C. | Disposable income rises by $10 billion and consumption rises by $8 billion |
| D. | Disposable income falls by $10 billion and consumption falls by $8 billion |
| E. | Disposable income rises by $10 billion and consumption falls by $8 billion |
1 points
Question 3
If aggregate expenditure at a particular level of income is less than output,
| A. | output will increase |
| B. | output will decrease |
| C. | output will remain the same |
| D. | output will rise slightly and then level off |
| E. | we cannot determine what will happen to output |
1 points
Question 4
The consumption function
| A. | illustrates the relationship between real disposable income and real consumption spending |
| B. | illustrates the relationship between the price level and real consumption spending |
| C. | is the relationship between productivity and real consumption spending |
| D. | shows how real consumption increases when real disposable income decreases |
| E. | illustrates the relationship between real consumption spending and employment |
1 points
Question 5
The focus of the short-run macro model is on the role of
| A. | spending in explaining economic fluctuations |
| B. | labor in explaining economic fluctuations |
| C. | financial markets in explaining economic fluctuations |
| D. | output in explaining economic fluctuations |
| E. | resources in explaining economic fluctuations. |
1 points
Question 6
If the output level is such that the aggregate expenditure line lies below the 45-degree line, which of the following is true?
| A. | Aggregate expenditure is greater than output, so inventories will increase and output will be raised. |
| B. | Aggregate expenditure is greater than output, so inventories will decrease and output will be increased. |
| C. | Aggregate expenditure is less than output, so inventories will decrease and output will be raised. |
| D. | Aggregate expenditure is less than output, so inventories will increase and output will be lowered. |
| E. | Aggregate expenditure is greater than output, so inventories will increase and output will be lowered. |
1 points
Question 7
If the marginal propensity to consume is 0.7, the expenditure multiplier is
| A. | 7.0 |
| B. | 0.7 |
| C. | 3.0 |
| D. | 3.3 |
| E. | not determinable without additional information. |
1 points
Question 8
Aggregate expenditure is the sum of
| A. | all types of spending by households and firms |
| B. | spending and savings by households |
| C. | spending by households and governments on final goods and services |
| D. | spending by households, government, firms, and foreigners on final goods and services |
| E. | all spending and saving by households, firms, and governments |
1 points
Question 9
If the marginal propensity to consume is 0.5 and disposable income increases by $10,000, by how much will consumption spending increase?
| A. | $10,000 |
| B. | $500 |
| C. | $50 |
| D. | $5,000 |
| E. | $9,524 |
1 points
Question 10
When real consumption expenditure is plotted against real disposable income the resulting relationship is
| A. | very weak. |
| B. | virtually flat . |
| C. | positive and very close to linear. |
| D. | negative and very close to linear. |
The following table is a consumption schedule. Assume taxes and transfer payments are zero and that all saving is personal saving.
|
(GDP = DI) |
C |
S |
APC |
APS |
|
$1,500 |
$1,540 |
$_____ |
1.027 |
ā0.027 |
|
$1,600 |
$1,620 |
_____ |
1.013 |
ā0.013 |
|
$1,700 |
$1,700 |
_____ |
_____ |
_____ |
|
$1,800 |
$1,780 |
_____ |
0.989 |
0.011 |
|
$1,900 |
$1,860 |
_____ |
0.979 |
0.021 |
|
$2,000 |
$1,940 |
_____ |
_____ |
_____ |
|
$2,100 |
$2,020 |
_____ |
0.962 |
0.038 |
|
$2,200 |
$2,100 |
_____ |
_____ |
_____ |
Compute saving at each of the eight levels of disposable income and the missing average propensities to consume and to save.
1. The break-even level of disposable income is $________.
2. As disposable income rises, the marginal propensity to consume remains constant. Between each two GDPs the MPC can be found by dividing $________ by $________, and is equal to _______.
3. The marginal propensity to save also remains constant when the GDP rises. Between each two GDPs the MPS is equal to $________ divided by $________, or to _______.
