# Macro 11 Final

## 30 terms · Final

### The marginal propensity to consume is:

the change in consumer spending divided by the change in aggregate disposable income.

10.

### Suppose that the marginal propensity to consume is 0.8, and investment spending increases by \$100 billion. The increase in aggregate demand is:

\$500 billion, composed of \$100 billion in investment spending and \$400 billion in consumption.

1/[1-MPC].

0.8.

0.6.

### (Figure: Consumption and Real GDP) The slope of the consumption function is called the:

marginal propensity to consume.

\$3

\$5; \$3

### The _______ the _______ , the _______ the multiplier.

greater; MPC; greater

0.4; \$9,000

### The most important factor affecting a household's consumer spending is:

its current disposable income.

\$30,000.

### For the economy as a whole it holds true that:

C = A + (MPC × YD).

### Use the following to answer question 15: Figure: Consumption Functions (Figure: Consumption Functions) Curve C' compared with curve C, would most likely result from a(n):

increase in wealth.

### If the stock market crashes:

the aggregate consumption function will shift down.

100.

.60.

\$100 billion.

### Planned investment spending depends on all of the following, EXCEPT:

the current level of real GDP.

### Which one of the following accurately describes actual investment spending?

Actual Investment = Planned Investment + Unplanned Investment

### Inventory investment is:

a part of the unplanned investment spending and may either be positive or negative.

### The Federal Reserve, the central bank of the U.S., has been cutting the interest rate in order to stimulate the recessionary economy. Fed's interest cuts are supposed to:

increase the investment spending and thus increase GDP via the multiplier.

### Planned investment spending is:

investment spending that businesses plan to undertake during a period.

### Most recessions originate from:

a decrease in aggregate demand.

### Investment spending:

fluctuates more than consumption.

### The current level of productive capacity ________________ investment spending.

is negatively related to

### The higher the current production capacity of the economy:

the lower is investment spending.

### Use the following to answer questions 29-30: Table: The Economy of Albernia (Table: The Economy of Albernia) What is the consumption function for Albernia?

C = 400 + 0.6 × YD

\$2,500 billion