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 1) Total aggregate demand includes ________. A) planned investment spending B) consumption expenditures C) net exports D) all of the above E) none of the above 2) The consumption function shows how ________. A) the marginal propensity to consume varies with disposable income B) income varies as a result of changes in consumption C) consumption depends on the decision to save D) all of the above E) none of the above 3) Consumption expenditures decrease when ________. A) the real interest rate falls B) disposable income increases C) autonomous consumption increases D) all of the above E) none of the above 4) If disposable income falls, consumption expenditure falls ________. A) by an amount that depends on the real interest rate B) so that planned expenditure remains constant C) by an amount smaller than the decrease in disposable income D) all of the above E) none of the above 5) Total planned expenditure (equals total output) is 14,000 when autonomous consumption expenditure is 450. When autonomous consumption expenditure falls to 400, total planned expenditure (equals total output) is 13,800. The marginal propensity to consume is ________. A) 0.89 B) 0.75 C) 0.99 D) 0.44 E) 0.03 6) Total planned expenditure (equals income) is 13,500, autonomous consumption expenditure is 600, the marginal propensity to consume is 0.8, government purchases are 2,700, taxes are 2,500 and planned investment spending is 2,900. Net exports is ________. A) 3,840 B) negative 1,500 C) negative 1,380 D) negative 1,340 E) 2,100 7) Consumption expenditure is 15,000, government purchases are 5,000, planned investment spending is 4,000 and net exports are 1,500. If total output is 25,000, then unplanned inventory investment is ________. A) negative 500 B) 2,500 C) 3,500 D) 4,000 E) negative 450 8) An increase in the real interest rate will cause an increase in ________. A) saving B) planned investment C) net exports D) all of the above E) none of the above 9) An decrease in the real interest rate will cause an increase in ________. A) consumption B) planned investment C) net exports D) all of the above E) none of the above 10) When firms spend more on additional holdings of raw materials, parts and finished goods ________. A) they are increasing their fixed investment B) they are increasing their inventory investment C) they are increasing their private consumption D) all of the above E) none of the above 1

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