Recent Lessons

Show all results for ""

Feature Overview

Ace your exams with our all-in-one platform for creating and sharing quizzes and tests.

Quizzes

Create quizzes and tests automatically from your content using AI.

Flashcards

Automatically turn your notes into digital flashcards.

Share, Export & Embed

Share with classmates or export to Excel and your learning management system.

Stats & Reporting

Auto-grading quizzes and tests with detailed stats and reports.

Mobile Apps

The smarter way to study – wherever you are.

Pricing

Search...

Aggregate Demand and Government Stabilization

12 Questions

1 Views

Aggregate Demand and Government Stabilization

Choose a study mode

Play Quiz

Study Flashcards

Spaced Repetition

Chat to lesson

Podcast

Play an AI-generated podcast conversation about this lesson

Questions and Answers

What are the two components of aggregate consumption?

Autonomous consumption and consumption dependent on income (correct)

Dependent consumption and savings

Autonomous consumption and investment

Marginal propensity to consume and savings

How is the marginal propensity to consume related to income?

It remains constant regardless of income levels

It increases as income increases

It varies across individuals based on their income levels (correct)

What is the role of expectations about future income in autonomous consumption?

Expectations are reflected in investment, not consumption

Expectations only affect dependent consumption

Expectations significantly affect autonomous consumption (correct)

Expectations have no impact on autonomous consumption

How does the slope of the consumption function relate to the marginal propensity to consume?

The slope is equal to the marginal propensity to consume Signup and view all the answers

Why might poor households have a higher marginal propensity to consume than wealthy households?

Poor households have credit constraints Signup and view all the answers

How do wealthy households typically react to variations in current income?

They maintain stable consumption regardless of income changes Signup and view all the answers

What is the main reason why the slope of the Aggregate Demand (AD) line is below 45°?

The marginal propensity to consume (MPC) is less than 1. Signup and view all the answers

In the multiplier model, what are considered as leakages from the circular flow of income?

Government spending, taxation, and imports. Signup and view all the answers

How does a fall in investment affect the economy in terms of Aggregate Demand (AD) and output (Y)?

Fall in investment leads to a fall in AD, which causes lower output and income. Signup and view all the answers

What signifies a decrease in consumption leading to precautionary savings?

A fall in expected earnings. Signup and view all the answers

During economic fluctuations, how does a higher tax rate impact the multiplier effect?

Higher tax rate lowers the multiplier effect. Signup and view all the answers

What determines the amount of imports in the context of Aggregate Demand (AD)?

Domestic income and marginal propensity to import. Signup and view all the answers