the economics of money, banking, and financial markets

672 #

© 2014 Pearson Canada Inc.#

5. If the consumption function is expressed as C = a + mpc × YD, then "a" represents ____.

A) autonomous consumer expenditure
B) the marginal propensity to consume
C) the expenditure multiplier
D) disposable income
Answer: A
Diff: 2 Type: MC Page Ref: 542
Skill: Recall
Objective List: 22.1 Utilize the Keynesian cross model for the determination of aggregate output

6. If the consumption function is C = 20 + 0.5YD, then an increase in disposable income by

$100 will result in an increase in consumer expenditure by ____.
A) $25
B) $70
C) $50
D) $100
Answer: C
Diff: 2 Type: MC Page Ref: 542
Skill: Applied
Objective List: 22.1 Utilize the Keynesian cross model for the determination of aggregate output

7. If the consumption function is C = 20 + 0.8YD, then an increase in disposable income by

$100 will result in an increase in consumer expenditure by ____.
A) $58
B) $64
C) $80
D) $100
Answer: C
Diff: 2 Type: MC Page Ref: 542
Skill: Applied
Objective List: 22.1 Utilize the Keynesian cross model for the determination of aggregate output

8. Assume that autonomous consumption equals $200 and that the mpc equals 0.8. If disposable
   income equals $1000, then total consumption equals ____.
   A) $80
   B) $200
   C) $800
   D) $1000
   Answer: D
   Diff: 2 Type: MC Page Ref: 542
   Skill: Applied
   Objective List: 22.1 Utilize the Keynesian cross model for the determination of aggregate output