Daytona State College - PB ECO2013 Chapter 8 Question1)Which of the following equations is correct? Question 1 options: a)  AE = C – I + G – (X + M) b)  AE = C + I + G + (X – M) c)  AE = C – I + G + (X + M) d)  AE = C + I – G + (X – M)   Question 2    The 45-degree line in the Keynesian model represents a set of points where _____ equals _____

a) 

AE = C – I + G – (X + M)

b) 

AE = C + I + G + (X – M)

c) 

AE = C – I + G + (X + M)

d) 

AE = C + I – G + (X – M)

a) 

saving; consumption

b) 

disposable income; saving

c) 

disposable income; consumption

d) 

saving; investment

a) 

there is no excess plant capacity.

b) 

all resources are being used efficiently.

c) 

there is an increase in aggregate price levels.

d) 

unemployment is high.

a) 

the total of consumption plus investment plus government expenditures plus exports minus imports.

b) 

consumption alone in a simplified Keynesian model.

c) 

the total of consumption plus investment plus government expenditures plus imports minus exports.

d) 

the total of consumption plus investment plus government expenditures.

a) 

spending by individuals and households on only nondurable goods, since they are used up quickly.

b) 

spending by individuals and households on both durable and nondurable goods.

c) 

spending on goods and services by heads of households.

d) 

spending by households, businesses, and government on all goods used up within one year.

a) 

The average propensity to

b) 

The average propensity to consume

c) 

The marginal propensity to

d) 

The marginal propensity to consume

a) 

disposable income minus consumption.

b) 

government taxes minus investment.

c) 

investment minus government taxes.

d) 

consumption minus disposable income.

a) 

increases at a slower rate

b) 

decreases faster

c) 

increases faster

d) 

decreases at a slower rate

a) 

is always a negative number.

b) 

equals zero.

c) 

equals 0.75.

d) 

equals 1.

a) 

mildly increase.

b) 

decrease because people feel less wealthy.

c) 

not be affected.

d) 

increase because stocks can now be purchased cheaply.

a) 

is limited to the stock and bond markets.

b) 

tends to be volatile.

c) 

is not sensitive to interest rates.

d) 

is the largest component of total spending.

a) 

property rights

b) 

the interest rate

c) 

aggregate spending

d) 

investment

a) 

consumption equals investment.

b) 

quantity supplied equals quantity demanded.

c) 

price accepted by demanders equals price offered by suppliers.

d) 

investment spending equals saving.

a) 

saving is equal to investment.

b) 

saving is greater than investment.

c) 

investment is greater than saving.

d) 

investment is equal to consumption.

a) 

MPC + MPS.

b) 

1/(1 – MPC).

c) 

1/MPC.

d) 

1/(MPC + MPS).

a) 

both consumption spending and saving grow.

b) 

saving falls.

c) 

consumption spending alone grows.

d) 

saving alone grows.

a) 

rises; rises by the marginal propensity to consume

b) 

rises; falls by the marginal propensity to consume

c) 

falls; falls by the marginal propensity to consume

d) 

falls; rises by the marginal propensity to consume

a) 

recessionary gap.

b) 

inflationary gap.

c) 

GDP gap.

d) 

gap analysis.

a) 

full-employment level of income.

b) 

equilibrium level of injections and withdrawals.

c) 

inflationary or recessionary gap.

d) 

optimal level of government spending.

a) 

stayed the same; stayed the same

b) 

stayed the same; declined

c) 

declined; stayed the same

d) 

declined; declined