Download AP Macro Economics - Spring Branch ISD

AP Macro Economics
Unit Review
The Aggregate Expenditures Model
1. What is the most important determinant of consumer spending?
__________________________________________________________________
2. What happens to APC as disposable income goes up?
__________________________________________________________________
3. The consumption schedule relates consumption to;
__________________________________________________________________
4. The consumption schedule shows a direct relationship between;
__________________________________________________________________
5. APC is defined as; __________________________________________________
6. What happens is disposable income increases?
__________________________________________________________________
7. The slope of the consumption schedule or line represents; ___________________
8. The above diagram shows consumption schedules for economies A and B. Which
curve has a greater MPC? ____________.
9. Holly's break-even level of income is $10,000 and her MPC is 0.75. If her actual
disposable income is $16,000, her level of consumption spending will be;
_________________
10. If Mr. Walton spends eight-tenths of any increase in his disposable income, then
is MPC is equal to; _____________
11. When we dissave that means our APC is; ______________________________
12. Which of the following is correct?
A) MPC + MPS = APC + APS
B) APC + MPS = APS + MPC
C) APC + MPC = APS + MPS
D) APC - APS = MPC – MPS
13. Which of the following relations is not correct?
A)
B)
C)
D)
1 - MPC = MPS
APS + APC = 1
MPS = MPC + 1
MPC + MPS = 1
13. What happens to APC and APS if aggregate income decreases?
__________________________________________________________________
14. Which one of the following will cause a movement up along an economy's saving
schedule?
A) an increase in household debt outstanding C) an increase in stock prices
B) an increase in disposable income
D) an increase in interest rates
14. In the late 1990s the U. S. stock market boomed, causing U.S. consumption to
rise. Economists refer to this outcome as the; ____________________________
15. Assume the economy's consumption and saving schedules simultaneously shift
downward. This must be the result of; ___________________________________
16. The above figure suggests that:
A)
B)
C)
D)
consumption would be $60 billion even if GDP were zero.
saving is zero at the $120 billion GDP.
as GDP increases, consumption decreases as a percentage of GDP.
as GDP increases, consumption decreases absolutely.
17. Refer to the above figure. If the relevant saving schedule were constructed, one
would find that:
A)
B)
C)
D)
saving would be minus $20 billion at the zero level of GDP.
aggregate saving would be $60 at the $60 billion level of income.
its slope would be 1/2.
it would slope downward and to the right
18. Refer to the above diagram. The marginal propensity to save is equal to:
A) CD/0D.
B) 0B/0A.
C) 0D/0D.
D) CD/BD.
19. Refer to the above diagram. At disposable income level D, the average propensity
to save is equal to:
A) CD/BD.
B) CD/D.
C) D/CD.
D) A/B.
20. Refer to the above diagram. At disposable income level D, consumption is:
A)
B)
C)
D)
equal to CD.
equal to D minus CD.
equal to CD/D.
equal to CD plus BD.
21. Refer to the above diagram. Consumption equals disposable income when:
A)
B)
C)
D)
disposable income is B.
disposable income is D.
CD equals A.
B equals CD.
(1)
DI
$ 0
10
20
30
40
50
(2)
C
$ 4
11
18
25
32
39
DI
$ 0
80
160
240
320
400
C
$ 65
125
185
245
305
365
(3)
DI
C
$ 0 $ 2
20
20
40
38
60
56
80
74
100
92
22. Refer to the above data. The marginal propensity to consume in economy (1) is;
___________
23. Refer to the above diagram. The break-even level of GDP (= income) is: _______
24. Refer to the above diagram. The average propensity to consume is:
A) greater than 1 at all levels of GDP above $150. C)
B) greater than 1 at all levels of GDP below $150. D)
zero.
.6.
25. Assume there are no prospective investment projects (I) that will yield an
expected rate of return (r) of 25 percent or more, but that there are $5 billion of
investment opportunities with an expected rate of return between 20 and 25
percent, an additional $5 billion between 15 and 20 percent, and so on. The
investment-demand curve for this economy is: _______________
(a)
r
I
25%
$10
20
15
15
20
10
25
5
30
0
35
(b)
r
I
25%
$ 0
20
5
15
10
10
15
5
20
0
25
(c)
r
I
20% $10
15
20
10
30
5
40
0
50
(d)
r
25%
20
15
10
5
0
I
$ 5
10
15
20
25
30
26. In a private closed economy, when aggregate expenditures exceed GDP:
A) GDP will decline.
B) business inventories will rise.
C) saving will decline.
D) business inventories will fall.
27. The equilibrium level of GDP is associated with:
A)
B)
C)
D)
an excess of planned investment over saving.
no unintended changes in inventories.
an unintended decrease in business inventories.
an unintended increase in business inventories.
C+Ig
$200
Private spending (billions)
180
C
160
140
120
100
80
60
40
20
0
45
$20 40 60 80 100 120 140 160 180 200
GDP (billions)
28. Refer to the above diagram for a private closed economy. The equilibrium GDP
in this economy is; _______________________________
29. Refer to the above diagram for a private closed economy. In this economy
investment is; _________________________________________________
30. The formula for the expenditure multiplier is; ___________________________
31. If 100 percent of any change in income is spent, the multiplier will be:
________________________________________________________________
32. The practical significance of the multiplier is that it:
A) brings about an equality of planned investment and saving.
B) magnifies relatively small initial changes in spending into larger changes in
GDP.
C) keeps inflation within tolerable limits.
D) helps to stabilize the economy.
33. If the MPC is .6, the multiplier will be: ______________________
34. If a $200 billion increase in investment spending creates $200 billion of new
income in the first round of the multiplier process and $160 billion in the second
round, the multiplier in the economy is; ________________________________
35. Suppose that the level of GDP increased by $100 billion in an economy where the
marginal propensity to consume is 0.5. Aggregate expenditures must have
increased by; ____________________________________________________