If the stock market collapses consumption will quizlet

Log in Sign up. How can we help? What is your email? Upgrade to remove ads. When aggregate demand decreases rapidly, the economy is likely to experience. Governments can affect the level of aggregate demand in a direct way by changing. The total amount spent on final goods and services in the U. This total spending is referred to as. Consumer spending represents about what fraction of total spending in the economy? In which of the following years was a tax cut ineffective in stimulating aggregate demand?

Aggregate demand is the total demand for. Melissa purchases shares in a government bond mutual fund. Is this included in the aggregate demand component "Investment"? The "investment" component of aggregate demand will include all of the following except a. Which of the following is considered to be an investment in economists' point of view? Serena buys bonds issued by Citibank. John purchases a new house. Venus invests hundred thousand dollars in Bear Stearns stock. Allen sells the old truck he used for transporting goods.

The net export component of aggregate demand is defined as U. Which of the following should be subtracted while calculating aggregate demand of the U. Pakistan's purchase of Fs from the U.

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Computers imported by China from the U. Memorabilia purchases in the U. Aggregate demand is the sum of. The difference between national income and disposable income is. Aggregate demand is defined as the total spending a. Which of the following would be counted as investment in the national income accounts? The largest component of aggregate demand is.

Which of the following would be added to U. Saving is a leakage in the sense that. In economic analysis, which of the following is considered an injection? Government spending is an injection in the sense that it. Which of the following is the injection into the circular flow model? Money deposited in a savings account. Income earned through exports. Goods imported from abroad. Taxes paid by the individuals. Why is it true that domestic product and national income must be equal?

Disposable income can be defined as national product. In the circular flow model, which of the following is considered a leakage? Which of the following is a transfer payment? Work-study students receive wages transferred from the university budget. A company pays the moving expenses for a transferred employee. A student transfers to another college and receives a tuition rebate.

A student receives a tuition grant from the federal government.

When saving leaks out of the circular flow of income and spending, total income necessarily falls. In the circular flow model, which of the following is an injection? To get a complete measure of the total spending on U. Imports are a leakage in the sense that the international financial system is unstable. The relationship between consumption and disposable income is such that as consumption rises, disposable income falls.

Historical data representing consumption and disposable income reveals that during the s, U. If you produce a graph with consumption spending on the vertical axis and disposable income on the horizontal axis, the relation between consumption and income will be inverse. On a graph with consumption on the vertical axis and disposable income on the horizontal axis, the slope of the line is. The difference between disposable income and consumption spending is. The federal government's principal tool in altering consumer spending is changing.

Historical data depicted on a scatter diagram show that consumer spending and disposable income. If an economist wants to make a prediction about the effects of a change in disposable income on the change in consumption spending based on historical data, she must assume that the future will closely resemble the past. The slope of the scatter diagram representing the relationship between consumption and disposable income in the United States is approximately.

Economists expect the relationship between consumption and disposable income to be. The Marginal Propensity to Consume MPC is defined as the change in. Therefore, the MPC equals. The marginal propensity to consume MPC is calculated by which formula? The marginal propensity to consume is.

Given the scatter diagram in Figure , what is the MPC your best estimate? Given the scatter diagram in Figure , how much will consumption decrease if the price level rises by 5 percent? If you fit a line through a scatter diagram of points that represent coordinates of consumer spending and disposable income, the slope of this line will equal the. In , government economists assumed that the MPC for the United States was approximately 0.

If the MPC is 0. If the MPC increases in value, what will happen to the slope of the consumption function? Do economists know the value of the MPC for most economies? Yes, with a high level of precision. Yes, with a certainty level of four decimal places.

No, it is impossible to determine a national MPC. Yes, but with some level of uncertainty. If the MPC is.

In Macronesia, the MPC is approximately. If income in Austria decreases by 30 million euros and consumption decreases by 24 euros, then the MPC equals. To predict the effects of a tax cut on consumption spending, economists must have some estimate of the. According to the relationship represented by the consumption function, governments can indirectly decrease consumption spending by. A decrease in disposable income will lead to an upward movement along the consumption function.

A movement from one point to an another point on the same consumption function could be caused due to. One of the effects of a change in disposable income could not be a n movement up along the consumption function. Because of recent corporate downsizing, Chuck loses his job. The most likely effect on his consumption function is a n movement downward along the function.

In Figure , which of the following moves can be explained by a decrease in disposable income? In Figure , which of the following moves can be explained by a decrease in the price level? In Figure , which of the following moves can be explained by a decrease in the prices of stock on the NASDAQ? A to C price level shifts the graph, not movement along. In Figure , which of the following moves can be explained by a tax cut? A to E tax cut mean more spending, which moves ALONG graph.

In Figure , which of the following moves can be explained by an increase in government transfer payments? A to E gov. What is the most likely effect of this prize on your consumption function? It will shift downward temporarily. It will shift upward temporarily. It will shift downward permanently.

It will shift upward permanently. Which of the following is an example of wealth? Which of the following would be most likely to shift the consumption function downward? Price level changes have their greatest effect on consumers'. If the price level increases, we would expect consumers to raise their consumption functions.

Consumption functions would shift downward if disposable incomes fall. Pat Robertson, a TV evangelist and former Republican Party candidate for president, once said that "debt is an affront to God," so good Christians should not spend beyond their incomes. Indeed, Robertson wants Christians to save more.

If more Americans, Christians as well as others, took his message seriously, how would we represent the result using a Keynesian macroeconomic model? Which of the following would lead you to predict an upward shift in the consumption function?

If the stock market falls by 25 percent next year and remains down, what is most likely to happen to the consumption function? It will shift upward. It will shift downward. It will not shift, but people will move downward along the consumption function. It will not shift, but people will move upward along the consumption function. Which of the following will most likely have the greatest effect on an individual's consumption function?

Which of the following will most likely cause movement along the consumption function? Which of the following will most likely cause a shift in the consumption function? A decrease in the price level will most likely have what effect on the consumption function?

A once-and-for-all jump in the price level would initially cause a n. A sudden decrease in consumers' wealth-resulting, for example, from a stock market crash-would initially cause a n. Suppose the stock market rises, causing a rapid increase in consumers' wealth.

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This would lead to. Most older persons regularly spend more than their current disposable income. How is this possible? They receive government transfer payments. They work to supplement their retirement income.

They borrow and increase their debt levels. They withdraw funds from accumulated wealth. Why does an increase in the price level tend to cause the consumption function to shift downward?