ECON 2213 FINAL EXAM QUESTIONS AND VERIFIED
ANSWERS
Income changes and consumption changes by less - Answers - What is the relationship
between consumption and income?
Marginal Propensity to Consume - Answers - What is MPC?
Change in consumption/Change in disposable income - Answers - How is MPC
Calculated?
Marginal Propensity to Save - Answers - What is MPS?
Change in savings/change in disposable income - Answers - How is MPS Calculated?
1 - Answers - What is MPC+MPS?
A curve that shows the quantity demanded of RGDP at various price levels, ceteris
paribus - Answers - What is Aggregate Demand?
Disposable Income
Interest Rate
Consumer Confidence
Income Taxes - Answers - What are the determinants of consumption?
Rate of return
Interest Rate
Future Expectations - Answers - What are the determinants of investment?
Government purchases
Transfer Payment - Answers - What are the determinants of government spending?
Foreign National Income
Domestic National Income
Exchange Rate - Answers - What are the determinants of exports and imports?
Downward Sloping - Answers - What is the shape of the AD curve?
Consumption
Investment
Government Purchases
Net Exports - Answers - What are factors that shift AD?
, 1/MPS
1/1-MPC - Answers - What is the simple spending multiplier?
Because of the circular flow of economy - Answers - Why do we have a multiplier
effect?
Multiplier x initial change in autonomous spending - Answers - How and how much will
AD change if there is an initial change in consumption/investment/government
spending?
A curve that shows the quantity supplied of RGDP at various price levels, ceteris
paribus - Answers - What is Aggregate Supply?
Upward Sloping - Answers - What is the shape of SRAS?
Vertical - Answers - What is the shape of LRAS?
Resources
Technology
Government Spending - Answers - What are factors that shift AS?
Negative Relationship - Answers - What is the relationship between RGDP and
unemployment?
Level of RGDP when quantity demanded = quantity supplied = potential output -
Answers - What is long run equilibrium?
Actual unemployment rate = natural unemployment rate - Answers - What is the
unemployment rate like during long run equilibrium?
Actual RGDP - Potential Output - Answers - What is output gap?
Actual RGDP < Potential output - Answers - What is contractionary (recessionary) gap?
Actual Unemployment Rate > Natural Unemployment Rate - Answers - What is the
unemployment rate like during contractionary (recessionary) gap?
Decreases - Answers - What happens to the price level during contractionary
(recessionary) gap?
Actual RGDP > Potential Output - Answers - What is an expansionary gap?
Actual Unemployment < Natural Unemployment - Answers - What is the unemployment
rate like during an expansionary gap?
Increases - Answers - What happens to the price level during an expansionary gap?
ANSWERS
Income changes and consumption changes by less - Answers - What is the relationship
between consumption and income?
Marginal Propensity to Consume - Answers - What is MPC?
Change in consumption/Change in disposable income - Answers - How is MPC
Calculated?
Marginal Propensity to Save - Answers - What is MPS?
Change in savings/change in disposable income - Answers - How is MPS Calculated?
1 - Answers - What is MPC+MPS?
A curve that shows the quantity demanded of RGDP at various price levels, ceteris
paribus - Answers - What is Aggregate Demand?
Disposable Income
Interest Rate
Consumer Confidence
Income Taxes - Answers - What are the determinants of consumption?
Rate of return
Interest Rate
Future Expectations - Answers - What are the determinants of investment?
Government purchases
Transfer Payment - Answers - What are the determinants of government spending?
Foreign National Income
Domestic National Income
Exchange Rate - Answers - What are the determinants of exports and imports?
Downward Sloping - Answers - What is the shape of the AD curve?
Consumption
Investment
Government Purchases
Net Exports - Answers - What are factors that shift AD?
, 1/MPS
1/1-MPC - Answers - What is the simple spending multiplier?
Because of the circular flow of economy - Answers - Why do we have a multiplier
effect?
Multiplier x initial change in autonomous spending - Answers - How and how much will
AD change if there is an initial change in consumption/investment/government
spending?
A curve that shows the quantity supplied of RGDP at various price levels, ceteris
paribus - Answers - What is Aggregate Supply?
Upward Sloping - Answers - What is the shape of SRAS?
Vertical - Answers - What is the shape of LRAS?
Resources
Technology
Government Spending - Answers - What are factors that shift AS?
Negative Relationship - Answers - What is the relationship between RGDP and
unemployment?
Level of RGDP when quantity demanded = quantity supplied = potential output -
Answers - What is long run equilibrium?
Actual unemployment rate = natural unemployment rate - Answers - What is the
unemployment rate like during long run equilibrium?
Actual RGDP - Potential Output - Answers - What is output gap?
Actual RGDP < Potential output - Answers - What is contractionary (recessionary) gap?
Actual Unemployment Rate > Natural Unemployment Rate - Answers - What is the
unemployment rate like during contractionary (recessionary) gap?
Decreases - Answers - What happens to the price level during contractionary
(recessionary) gap?
Actual RGDP > Potential Output - Answers - What is an expansionary gap?
Actual Unemployment < Natural Unemployment - Answers - What is the unemployment
rate like during an expansionary gap?
Increases - Answers - What happens to the price level during an expansionary gap?
