Question Bank: Determination Of Income And Employment

In a two-sector model, aggregate demand (AD) is defined as the sum of which two components?

What does the variable 'Y' represent in the equation Y = C + I + cY?

In the two-sector model, the term 'A' in the equation Y = A + cY represents what?

If actual output (Y) exceeds planned aggregate demand (C + I), what happens in the economy?

The Marginal Propensity to Consume (c) reflects which of the following?

If investment (I) is considered autonomous in a two-sector model, it means that it is:

In the equation Y = C + I + cY, which term represents planned consumption?

Planned inventory investment occurs when:

What could happen if planned (Y) is less than actual output?

In absence of a government in the two-sector model, which of the following is correct?

In equilibrium output, planned income equals which of the following?

Which of the following statements is true about equilibrium in the two-sector model?

Unplanned inventory investment arises mainly due to:

The impact of an increase in autonomous investment on equilibrium Y is:

What does the consumption function describe?

What is meant by autonomous consumption?

How is the marginal propensity to consume (MPC) defined?

If the MPC is 0.75, what does it signify?

Which component is NOT part of aggregate demand?

What effect does an increase in consumer confidence typically have on aggregate demand?

Which component of aggregate demand is considered most volatile?

What happens to aggregate demand when the economy experiences a recession?

Which of the following best describes planned investment?

In the aggregate demand formula, which variable cannot be zero for economic activity to occur?

Which component is most directly influenced by fiscal policy?

What does an increase in taxes do to aggregate demand?

When does an economy experience a zero marginal propensity to consume (MPC)?

What is an example of ex ante measures in the context of aggregate demand?

How does an increase in interest rates typically affect investment?

When ceteris paribus is applied in economic modeling, what does it mean?

What is the primary reason for taking the price level as fixed in short-run income determination?

What does the marginal propensity to consume (MPC) represent?

In the consumption function, what does the term 'c' represent?

Which of the following best describes 'full employment'?

What equation represents the equilibrium condition in a simple two-sector economy?

What can cause a 'paradox of thrift' in the economy?

Which of the following best describes planned inventory investment?

In the 'effective demand principle', what primarily determines the level of output in the economy?

What happens to the equilibrium income if autonomous spending increases?

What is the result of an increase in autonomous investment on aggregate output?

What does the investment function represent in the context of equilibrium income?

What happens when the equilibrium output is less than the full employment level?

Why is the government sector often ignored in basic income determination models?

If the marginal propensity to consume (MPC) increases, what effect does this have on the aggregate demand curve?

If the consumption function is represented as C = a + cY, what does 'a' represent?

How is ex ante consumption defined?

How does negative inventory investment affect aggregate output adjustments?

Which formula represents the aggregate demand in a simple economy?

Which graphical representation is used to show the relationship between income and consumption in macroeconomic equilibrium?

Which term describes the tendency for an increased level of savings to lead to a decrease in aggregate demand?

What occurs to equilibrium income during a recession if autonomous consumption remains the same?

When prices are sticky, what is likely to happen to production levels if aggregate demand decreases?

What is the expected outcome if both consumption and investment increase concurrently?

What is ex post investment?

In a closed economy, what are the primary components affecting equilibrium income determination?

If the slope of the AD line decreases, what would most likely happen to aggregate demand?

What effect does an increase in taxes have on equilibrium income, assuming government spending remains unchanged?

Which of the following conditions describes the situation where aggregate demand exceeds aggregate supply?

What does a high marginal propensity to save (MPS) indicate about consumer behavior?