Suppose that the consumption function isC= $500 + 0.8*YD, whereYDis disposable income. If disposable income is $1,000, savings is:

Select one:

a.-$500.

b.-$300.

c.$1,300.

d.$300.

Payments to Social Security recipients are indexed to the rate of inflation, as measured by the consumer price index. This means that, when the rate of inflation increases, the _____ Social Security recipients _____.

Select one:

a.market basket for; increases

b.payments to; decrease

c.payments to; increase

d.market basket for; decreases

If aggregate expenditures exceed real GDP, the economy will:

Select one:

a.neither expand nor contract, holding employment the same.

b.expand, increasing employment.

c.contract, decreasing employment.

d.expand, reducing prices.

A country is closed. It has no government sector, and its aggregate price levels and interest rates are fixed. Furthermore, the marginal propensity to consume is constant and the country's consumption function is as follows:C= 200 + 0.75YD, whereYDis disposable income andCis consumption. Assume that planned investment equals 75. When real GDP equals $900:

Select one:

a.unplanned inventory investment is negative.

b.autonomous consumption equals $900.

c.the economy is in income-expenditure equilibrium.

d.planned investment equals $900.

Firms demand resources in the factor markets.

Select one:

a.True

b.False