Which of the following does the aggregate expenditure model fail to account for?
Answer
Correct Answer:
Inflation
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What happens to the aggregate demand curve when aggregate expenditure decreases?
Answer
Correct Answer:
It shifts left.
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What happens to the level of aggregate expenditure as the price level decreases?
Answer
Correct Answer:
It increases.
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The expenditure multiplier equals 1 ______ the marginal propensity to save.
Answer
Correct Answer:
Divided by
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The idea of the expenditure multiplier is that ______ increases in spending in one part of the economy lead to increased spending by others in the economy as well.
Answer
Correct Answer:
Permanent
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Which of the following explains why an increase in business investment of a given amount can create an increase in output equal to many times the investment increase?
Answer
Correct Answer:
Expenditure multiplier
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Which of the following responds most dramatically to perceptions of future changes in economic activity?
Answer
Correct Answer:
Planned investment
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Which of the following is considered an autonomous expenditure that may be added to the consumption function?
Answer
Correct Answer:
Investment
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Which variable in the following equation refers to the money allocated in the federal budget?
Answer
Correct Answer:
G
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Which of the following refers to the point at which aggregate expenditure equals output?
Answer
Correct Answer:
Equilibrium
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Which of the following is TRUE of the sum of marginal propensity to consume and marginal propensity to spend?
Answer
Correct Answer:
It always equals 1.
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The additional saving that results from an additional dollar of income is known as marginal propensity to ______.
Answer
Correct Answer:
Save
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Which of the following is an autonomous factor that, when decreased, causes consumer spending to rise?
Answer
Correct Answer:
The interest rate
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What type of expenditures are the largest single component of demand for final goods?
Answer
Correct Answer:
Household
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Which economist created the aggregate expenditure model?
Answer
Correct Answer:
John Maynard Keynes
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Unplanned inventory investment changes in inventories that firms did not anticipate.
Answer
Correct Answer:
True
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Marginal propensity to save is the ____ saving that results from an additional dollar of income
Answer
Correct Answer:
Additional
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Marginal propensity to consume is additional consumption that results from an additional dollar of income
Answer
Correct Answer:
True
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The multiplier that only considers the impact of consumption changes on aggregate expenditures is known as expenditure multiplier
Answer
Correct Answer:
True
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Autonomous determinants of consumption expenditures not dependent on the level of current disposable income that can result from factors such as real wealth, the Interest rate, household debt, expectations, and tastes and preferences
Answer
Correct Answer:
True
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