## Chapter Nine: Module Quiz -- The Income-Expenditure Model

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1. In the Income-Expenditure model, Aggregate Expenditures are composed of all of the following except

consumption spending.
investment spending.
saving.
net exports.
government expenditures.

2. Which of the following is not an assumption that we make in the income-expenditure model?

the price level can vary
the interest rate is fixed
consumption increases with the level of income
suppliers produce whatever level of output is demanded at the fixed price
all of the above are correct assumptions

3. Given a value of 0.75 for the MPC and autonomous consumption of 300, if disposable income were \$1,000, then consumption would be

\$0
\$750
\$1050
\$1400
None of the Above

4. Suppose the MPC is 0.8 and income increases by \$100. We know that

consumption increases by \$80
saving increases by \$20
consumption and saving both increase
all of the above

5. Given that MPC=0.8, Ca=400, and Ia=100, the level of Aggregate Expenditures

is \$500.
is \$2,000.
is \$2,500.
depends upon the level of income.

6. In equilibrium, we know that

Y=AE.
Y=C+I
AE=C+I
the AE line crosses the 45 degree line
all of the above

7. If MPC=0.8, Ca=600, Ia=200, then equilibrium income is \$_______ .

500
2,000
\$3,100
\$4,000
cannot tell from the information given

8. Suppose that autonomous consumption falls. This leads to

a shift upwards in the AE schedule.
a rise in consumption expenditures.
a drop in equilibrium income.
a decline in investment.
all of the above.

9. Investment never changes. It is always the same value year after year.

True
False

10. If the economy's level of income is at a point to the left of where the Aggregate Expenditure schedule crosses the 45 degree line, then income is less than Aggregate Expenditures and inventories unexpectedly decrease.

True
False