Real consumption is a function of real disposable income, but the simple Keynesian model uses real GDP instead of real disposable income. This is appropriate since
A) we cannot measure either exactly and the purpose of the exercise is theoretical only.
B) real disposable income tends to move proportionately with real GDP.
C) real disposable income is a fixed percentage of real GDP.
D) real GDP is a fixed percentage of real disposable income.
B
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The five most important variables that determine the level of consumption are
A) disposable income, wealth, expected future income, price level, and interest rate. B) wealth, savings account balances, checking account balances, stock portfolio balances, and bond portfolio balances. C) government purchases, saving account balances, wealth, interest rates, portfolio balances. D) government purchases, interest rates, income, taxes, and transfers.
All of the following took place during the economic crisis that began in 2007 EXCEPT:
A) the financial system was disrupted B) large portions of the U.S. economy were cut off from the funds they needed to thrive C) there was a devastating decline in the production of goods and services throughout the economy D) unlike households, most businesses still had easy access to funds
In the new Keynesian view, the larger the proportion of firms in the economy with sticky prices,
A) the steeper the SRAS curve will be. B) the flatter the SRAS curve will be. C) the greater the increase in the price level for a given shift in the AD curve. D) the less effective is fiscal policy in increasing output.
Under a progressive income tax system, the marginal income tax rate paid by taxpayers
A) declines as their incomes increase. B) rises as their incomes increase. C) is unchanged as their incomes increase. D) is unrelated to their incomes.