Aggregate demand is the total quantity of output:
A. Demanded if the economy is in equilibrium.
B. Demanded at alternative price levels in a given time period.
C. Producers are willing and able to supply at alternative price levels.
D. Consumers actually
B
The combination of price level and real output that is compatible with both aggregate demand and aggregate supply is the definition of:
A. Full-employment GDP.
B.Disposable income.
C.Equilibrium.
D.Real expenditures.
C
Consumption expenditures:
A. Account for over two-thirds of total spending.
Include purchases of new and used goods by consumers.
Are equal to disposable personal income plus personal savings.
Are equal to consumer spending plus transfer payments.
A
Which of the following forces did Keynes assert had the strongest influence on consumption decisions?
A.Prices
B.Wealth
C.Interest rates
D.Disposable income
D
If the MPC is 0.60 and disposable income increases from $20,000 billion to $22,000 billion, then consumption will increase by:
A.$2,000 billion.
B.$800 billion.
C.$1,200 billion.
D.$600 billion.
C Consumption spending will rise by the change in disposable income multiplied by the MPC. (2000 � 0.60 = $1200)
The MPC indicates the portion of:
A.An additional dollar of income that will be saved.
B.An additional dollar of income that will be spent.
C.Total income that will be saved.
D.Total income that will be spent.
B
The consumption function implies that:
A.Disposable income inversely influences consumption.
B.Consumption directly influences disposable income.
C.Autonomous consumption changes when people have low incomes.
D.Consumption increases as disposable income i
D
If autonomous consumption decreases, then:
A.The AD curve will shift to the right.
B.The AD curve will shift to the left.
C.There will be a movement to the left along the AD curve.
D.The AD curve will not be affected.
B
With respect to the aggregate demand curve, improved consumer confidence would:
A.Shift the curve rightward.
B.Shift the curve leftward.
C.Move the economy down along the curve.
D.Move the economy up along the curve.
A
If the availability of credit increases, then:
A.There will be a movement to the left along the AD curve.
B.There will be a movement to the right along the AD curve.
C.The AD curve will shift to the left.
D.The AD curve will shift to the right.
D
If tax policies become less favorable, then:
A.The AD curve will not be affected.
B.There will be a movement to the right along the AD curve.
C.The AD curve will shift to the left.
D.The AD curve will shift to the right.
C
Investment spending includes expenditures on all of the following except:
A.Stocks and bonds.
B.Equipment.
C.Inventory.
D.Plant or office building.
A
Which of the following causes a movement along the investment demand curve?
A.A change in expenditures
B.A change in technology
C.A change in the rate of interest
D.The current level of income
C
If the investment demand curve shifts to the left, then:
A.The AD curve will shift to the left.
B.The AD curve will shift to the right.
C.The AD curve will not be affected.
D.There will be a rightward movement along the AD curve.
A
Which of the following lists all the components that are included in aggregate demand?
A.Consumption, government spending, net exports, and investment
B.Government spending, saving, consumption, and investment
C.Investment, imports, exports, consumption,
A
Which of the following is not a component of aggregate demand?
A.Consumption
B.Investment
C.Productivity
D.Net exports
C
Which of the following occurs when the spending on final goods and services exceeds full-employment GDP?
A.Inventory accumulation
B.Unemployment
C.Inflationary gap
D.Recessionary gap
C
Which of the following most likely occurs when an inflationary gap exists?
A.A bidding war for available goods and services
B.More layoffs
C.Rising inventories
D.Excessive saving
A
Demand-pull inflation is caused by:
A.An increase in aggregate supply.
B.An increase in resource costs as an economy's production capacity is approached.
C.An increase in inventories.
D.Excessive aggregate demand in relation to an economy's production cap
D
Using Figure 9.1, the amount of autonomous consumption is:
A.$500 billion.
B.$750 billion.
C.Different at every income level.
D.Equal to disposable income when the consumption line crosses the 45-degree line.
A
Using Figure 9.5, a movement from Point A to Point C would result from:
A.An improvement in technology.
B.An improvement in expectations for future sales.
C.A decrease in the interest rates.
D.An increase in disposable income.
C
A movement from Point A to Point B in Figure 9.5 would result in:
A.A decrease in aggregate demand.
B.A decrease in both aggregate demand and aggregate supply.
C.An increase in aggregate demand.
D.An increase in both aggregate demand and aggregate supply.
C