Tutorial 10
UBEA 1013: ECONOMICS
TUTORIAL 10:
AGGREGATE EXPENDITURE & EQUILIBRIUM OUTPUT
Objective Questions:
1.
MPC is
a. the change in consumption divided by the change in income
b. consumption divided by income
c. the change in consumption divided by the change in saving
d. the change in saving divided by the change in income
2.
Savings equal
a. Y– C
b. Y – actual I
c. Y – planned I
d. Inventory changes
3.
Consumption is
a. positively related to household income and wealth and household’s
expectations about the future
b. negatively related to household income and wealth
c. determined only by income
d. none of the above
4. In a closed economy, with no government, aggregate expenditure is
a. consumption plus investment
b. consumption plus MPC
c. saving plus investment
d. MPC + MPS
5.
If Sara’s total consumption is $1500 a month, the fraction of her income that she
consumes is 60% and her income is $2000, the amount of money she consumes
when her income is zero is
a. 300
b. 500
c. 200
d. 1200
6.
If consumption is $25,000 when income is $26,000 and consumption increases
to $25,900 when income increases to $28,000, the MPC is
a. 0.59
b. 0.65
c. 0.55
d. 0.45
Elise/hwm
1
Tutorial 10
7.
Suppose that planned investment is $ 50 billion but actual investment is $ 30
billion. Unplanned inventory investment is
a. – $10 billion
b. $80 billion
c. – $20 billion
d. $20 billion
8.
If real GDP in a 3-sector economy is $ 5 billion it implies that
a. total spending by consumers and business is $ 5 billion
b. total income received is $ 5 billion
c. total output produced is $ 5 billion
d. B and C are correct
9.
Higher interest rates are likely to
a. have no effect on consumer spending and saving
b. decreases consumer spending and increases savings
c. increases consumer spending and decreases savings
d. none of the above
10. If Jack received $ 1000 bonus and his MPS is 0.15, his consumption rises by
a. 150
b. 850
c. 500
d. 1000
Structure Questions:
Answer the question based on the following information:
C = 100 + 0.60Y
I = 200
G = 200
T = 100
1. Derive the saving function if we assume neither government spending nor taxes.
2. What is the marginal propensity to consume (MPC) and marginal propensity to
save (MPS) if we assume neither government spending nor taxes?
3. Derive the saving function if we take into consideration the government spending
and taxes as given by the above given information.
4. What is the marginal propensity to consume (MPC) and marginal propensity to
save (MPS) if we take into consideration the government spending and taxes as
given by the above given information?
5. From your answer to question 2 and question 4, what can you tell regarding MPC
and MPS?
6. What is the equilibrium output taking all the above given information into
consideration?
Elise/hwm
2