the economics of money, banking, and financial markets

671 #

© 2014 Pearson Canada Inc.#

22.2 The Components of Aggregate Demand

1 ) Keynes reasoned that consumer expenditure is most closely related to ____.
A) the level of interest rates
B) the price level
C) disposable income
D) the marginal tax rate
Answer: C
Diff: 2 Type: MC Page Ref: 542
Skill: Recall
Objective List: 22.1 Utilize the Keynesian cross model for the determination of aggregate output

2. 
   

   In the Keynesian model of income determination, consumer expenditure includes spending by
   ____.
   A) consumers on personal computers
   B) businesses on personal computers
   C) governments on personal computers
   D) foreigners on domestic personal computers
   Answer: A
   Diff: 2 Type: MC Page Ref: 542 - 543
   Skill: Recall
   Objective List: 22.1 Utilize the Keynesian cross model for the determination of aggregate output

   
   


3. 
   

   The marginal propensity to consume (mpc) can be defined as the fraction of ____.
   A) a change in income that is spent
   B) a change in income that is saved
   C) income that is spent
   D) income that is saved
   Answer: A
   Diff: 2 Type: MC Page Ref: 543
   Skill: Recall
   Objective List: 22.1 Utilize the Keynesian cross model for the determination of aggregate output

   
   


4. 
   

   If the consumption function is expressed as C = a + mpc × YD, then "mpc" represents
   ____.
   A) autonomous consumer expenditure
   B) the marginal propensity to consume
   C) the expenditure multiplier
   D) disposable income
   Answer: B
   Diff: 2 Type: MC Page Ref: 542
   Skill: Recall
   Objective List: 22.1 Utilize the Keynesian cross model for the determination of aggregate output