Question 1

Liquidity constraints prevent people from engaging in consumption smoothing.

Accepted Answer

A) True 
 B)False

Question 2

An increase in the marginal propensity to consume leads to an increase in the Keynesian multiplier.

Accepted Answer

A) True 
 B)False

Question 3

The forward-looking consumption model assumes that people make consumption decisions based on

Accepted Answer

A)  their mood. 
B)  their current income. 
C)  their anticipation of their future income. 
D)  their income taxes in the current year. 
E)  their perceptions of other people's behavior. 
A)  their mood. 
B)  their current income. 
C)  their anticipation of their future income. 
D)  their income taxes in the current year. 
E)  their perceptions of other people's behavior.

Question 4

Evidence from the effect of the 2008 Stimulus Act on consumption supports the permanent income hypothesis.

Accepted Answer

A) True 
 B)False

Question 5

The Keynesian multiplier measures

Accepted Answer

A)  both the short-run and long-run impacts of an initial change in spending on real GDP. 
B)  the long-run impact of an initial change in spending on real GDP. 
C)  the short-run impact of an initial change in spending on real GDP. 
D)  the long-run impact of a change in real GDP on consumption. 
E)  the short-run impact of a change in real GDP on total spending. 
A)  both the short-run and long-run impacts of an initial change in spending on real GDP. 
B)  the long-run impact of an initial change in spending on real GDP. 
C)  the short-run impact of an initial change in spending on real GDP. 
D)  the long-run impact of a change in real GDP on consumption. 
E)  the short-run impact of a change in real GDP on total spending.

Question 6

Suppose that MPC = 0.7 and MPI = 0.2. According to the Keynesian multiplier, a decrease of $20 million in government purchases will

Accepted Answer

A)  increase real GDP by $40 million. 
B)  decrease real GDP by $40 million. 
C)  increase real GDP by $100 million. 
D)  decrease real GDP by $100 million. 
E)  have no impact on real GDP. 
A)  increase real GDP by $40 million. 
B)  decrease real GDP by $40 million. 
C)  increase real GDP by $100 million. 
D)  decrease real GDP by $100 million. 
E)  have no impact on real GDP.

Question 7

The Keynesian multiplier is the ratio of the change in spending to a given change in real GDP.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is true about the marginal propensity to consume and the marginal propensity to import?

Accepted Answer

A)  The marginal propensity to import is typically smaller than the marginal propensity to consume because when income rises, not all goods we consume are imported. 
B)  The marginal propensity to import is always larger than the marginal propensity to consume because when income rises, not all goods we consume are imported. 
C)  The marginal propensity to import is always the same as the marginal propensity to consume because when income rises, not all goods we import are consumed. 
D)  The sum of the marginal propensity to import and the marginal propensity to consume is always equal to one because when income rises, we either consume or import. 
E)  The marginal propensity to import is sometimes larger and sometimes smaller than the marginal propensity to consume because when income rises, all goods we consume are imported. 
A)  The marginal propensity to import is typically smaller than the marginal propensity to consume because when income rises, not all goods we consume are imported. 
B)  The marginal propensity to import is always larger than the marginal propensity to consume because when income rises, not all goods we consume are imported. 
C)  The marginal propensity to import is always the same as the marginal propensity to consume because when income rises, not all goods we import are consumed. 
D)  The sum of the marginal propensity to import and the marginal propensity to consume is always equal to one because when income rises, we either consume or import. 
E)  The marginal propensity to import is sometimes larger and sometimes smaller than the marginal propensity to consume because when income rises, all goods we consume are imported.

Liquidity constraints prevent people from engaging in consumption smoothing.

An increase in the marginal propensity to consume leads to an increase in the Keynesian multiplier.

The forward-looking consumption model assumes that people make consumption decisions based on

Evidence from the effect of the 2008 Stimulus Act on consumption supports the permanent income hypothesis.

The Keynesian multiplier measures

Suppose that MPC = 0.7 and MPI = 0.2. According to the Keynesian multiplier, a decrease of $20 million in government purchases will

The Keynesian multiplier is the ratio of the change in spending to a given change in real GDP.

Which of the following is true about the marginal propensity to consume and the marginal propensity to import?

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

Subtleties of the Supply and Demand Model: Price Floors, Price Ceilings, and Elasticity

Macroeconomics: the Big Picture

Measuring the Production, Income, and Spending of Nations

The Spending Allocation Model

Unemployment and Employment

Productivity and Economic Growth

Money and Inflation

The Nature and Causes of Economic Fluctuations

The Economic Fluctuations Model

Using the Economic Fluctuations Model

Fiscal Policy

Monetary Policy

Capital and Financial Markets

Economic Growth and Globalization

International Trade

International Finance

Reading, Understanding, and Creating Graphs

the Miracle of Compound Growth

Present Discounted Value

Deriving the Growth Accounting Formula

Filters

Exam 22: Deriving the Formula for the Keynesian Multiplier and the Forward-Looking Consumption Model

Liquidity constraints prevent people from engaging in consumption smoothing.

An increase in the marginal propensity to consume leads to an increase in the Keynesian multiplier.

The forward-looking consumption model assumes that people make consumption decisions based on

Evidence from the effect of the 2008 Stimulus Act on consumption supports the permanent income hypothesis.

The Keynesian multiplier measures

Suppose that MPC = 0.7 and MPI = 0.2. According to the Keynesian multiplier, a decrease of $20 million in government purchases will

The Keynesian multiplier is the ratio of the change in spending to a given change in real GDP.

Which of the following is true about the marginal propensity to consume and the marginal propensity to import?

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

Subtleties of the Supply and Demand Model: Price Floors, Price Ceilings, and Elasticity

Macroeconomics: the Big Picture

Measuring the Production, Income, and Spending of Nations

The Spending Allocation Model

Unemployment and Employment

Productivity and Economic Growth

Money and Inflation

The Nature and Causes of Economic Fluctuations

The Economic Fluctuations Model

Using the Economic Fluctuations Model

Fiscal Policy

Monetary Policy

Capital and Financial Markets

Economic Growth and Globalization

International Trade

International Finance

Reading, Understanding, and Creating Graphs

the Miracle of Compound Growth

Present Discounted Value

Deriving the Growth Accounting Formula

Filters