Question 1

The aggregate expenditure curve tells how much market participants desire to spend at different income levels.

Accepted Answer

A) True 
 B)False

Question 2

The four components of aggregate demand include all of the following except

Accepted Answer

A) Consumption. 
B) Saving. 
C) Investment. 
D) Net exports. 
A) Consumption. 
B) Saving. 
C) Investment. 
D) Net exports.

Question 3

If there is an inflationary gap,then a 45-degree line exceeds the aggregate expenditure curve at the full-employment level of income.

Accepted Answer

A) True 
 B)False

Question 4

Which diagram in Figure 9.4 shows what is likely to happen to investment as a new telecommunications technology suddenly is discovered that greatly facilitates the use of computers,cable TV,and other information services?

Accepted Answer

A) A. 
B) B. 
C) C. 
D) D. 
A) A. 
B) B. 
C) C. 
D) D.

Question 5

Which of the following is not true about the marginal propensity to consume?

Accepted Answer

A) It is equal to the change in consumption divided by the change in disposable income. 
B) It is equal to the slope of the consumption function. 
C) It is equal to 1 - MPS. 
D) It is always equal to or greater than 1. 
A) It is equal to the change in consumption divided by the change in disposable income. 
B) It is equal to the slope of the consumption function. 
C) It is equal to 1 - MPS. 
D) It is always equal to or greater than 1.

Question 6

Using Figure 9.1,dissaving occurs at all income levels

Accepted Answer

A) Above $2,000 billion. 
B) Above $3,000 billion. 
C) Below $2,000 billion. 
D) Below $3,000 billion. 
A) Above $2,000 billion. 
B) Above $3,000 billion. 
C) Below $2,000 billion. 
D) Below $3,000 billion.

Question 7

Given a consumption function of C = $25 + 0.75YD,the average propensity to consume equals 1 when disposable income equals

Accepted Answer

A) $25. 
B) $75. 
C) $100. 
D) -$300. 
A) $25. 
B) $75. 
C) $100. 
D) -$300.

Question 8

Given that autonomous consumption equals $1,000,disposable income equals $20,000,and the MPC equals 0.80,the level of

Accepted Answer

A) Saving equals $4,000. 
B) Saving equals $19,000. 
C) Consumption equals $17,000. 
D) Consumption equals $16,000. 
A) Saving equals $4,000. 
B) Saving equals $19,000. 
C) Consumption equals $17,000. 
D) Consumption equals $16,000.

Question 9

Suppose the consumption function is C = $100 + 0.85YD.If disposable income is $400,saving is

Accepted Answer

A) -$40.00. 
B) $40.00. 
C) -$15.00. 
D) $15.00. 
A) -$40.00. 
B) $40.00. 
C) -$15.00. 
D) $15.00.

Question 10

If the MPC is 0.8 and the APC is 0.9,the MPS equals

Accepted Answer

A) 0.1. 
B) 0.2. 
C) 0.8. 
D) 1.7. 
A) 0.1. 
B) 0.2. 
C) 0.8. 
D) 1.7.

Question 11

Table 9.1 $$\begin{array} { | l | c | } 
\hline \begin{array} { c } 
\text { Disposable Income } \
\text { (Billions of dollars per year) }
\end{array} & \begin{array} { c } 
\text { Total Consumption } \
\text { (Billions of dollars per year) }
\end{array} \
\hline \text { \$0 } & \$ 50 \
\hline 200 & 210 \
\hline
\end{array}$$ What is the rate of saving when income equals $1,000 billion in Table 9.1?

Accepted Answer

A) $100 billion. 
B) $150 billion. 
C) $250 billion. 
D) Zero. 
A) $100 billion. 
B) $150 billion. 
C) $250 billion. 
D) Zero.

Question 12

The marginal propensity to consume can be found by dividing

Accepted Answer

A) Total consumption by total saving. 
B) Total consumption by the number of people consuming. 
C) The change in total consumption by the change in disposable income. 
D) Disposable income by total consumption. 
A) Total consumption by total saving. 
B) Total consumption by the number of people consuming. 
C) The change in total consumption by the change in disposable income. 
D) Disposable income by total consumption.

Question 13

Which of the following is not considered to be an important determinant of investment?

Accepted Answer

A) Current disposable income. 
B) Expectations. 
C) Interest rates. 
D) Technological change. 
A) Current disposable income. 
B) Expectations. 
C) Interest rates. 
D) Technological change.

Question 14

If wealth rises,

Accepted Answer

A) There will be a movement to the left along the AD curve. 
B) There will be a movement to the right along the AD curve. 
C) The AD curve will shift to the left. 
D) The AD curve will shift to the right. 
A) There will be a movement to the left along the AD curve. 
B) There will be a movement to the right along the AD curve. 
C) The AD curve will shift to the left. 
D) The AD curve will shift to the right.

Question 15

An increase in the income-dependent portion of the consumption function would correspond to a

Accepted Answer

A) Shift of the consumption function upward. 
B) Shift of the consumption function downward. 
C) Movement along the consumption function to the right. 
D) Movement along the consumption function to the left. 
A) Shift of the consumption function upward. 
B) Shift of the consumption function downward. 
C) Movement along the consumption function to the right. 
D) Movement along the consumption function to the left.

Question 16

Which of the following is not a component of aggregate demand?

Accepted Answer

A) Consumption. 
B) Investment. 
C) Productivity. 
D) Net exports. 
A) Consumption. 
B) Investment. 
C) Productivity. 
D) Net exports.

Question 17

If the investment demand curve shifts to the left,then

Accepted Answer

A) The AD curve will shift to the left. 
B) The AD curve will shift to the right. 
C) The AD curve will not be affected. 
D) There will be upward movement along the AD curve. 
A) The AD curve will shift to the left. 
B) The AD curve will shift to the right. 
C) The AD curve will not be affected. 
D) There will be upward movement along the AD curve.

Question 18

The largest component of aggregate spending is government spending.

Accepted Answer

A) True 
 B)False

Question 19

Autonomous consumption depends on all of the following except

Accepted Answer

A) Innovation. 
B) Wealth. 
C) Credit. 
D) Expectations. 
A) Innovation. 
B) Wealth. 
C) Credit. 
D) Expectations.

Question 20

Which of the following will cause an increase in U.S.imports?

Accepted Answer

A) An increase in U.S.consumer confidence. 
B) An increase in foreign consumer income. 
C) An increase in foreign business investment. 
D) A decrease in U.S.wealth. 
A) An increase in U.S.consumer confidence. 
B) An increase in foreign consumer income. 
C) An increase in foreign business investment. 
D) A decrease in U.S.wealth.

Exam 9: Aggregate Demand

The aggregate expenditure curve tells how much market participants desire to spend at different income levels.

The four components of aggregate demand include all of the following except

If there is an inflationary gap,then a 45-degree line exceeds the aggregate expenditure curve at the full-employment level of income.

Which diagram in Figure 9.4 shows what is likely to happen to investment as a new telecommunications technology suddenly is discovered that greatly facilitates the use of computers,cable TV,and other information services?

Which of the following is not true about the marginal propensity to consume?

Using Figure 9.1,dissaving occurs at all income levels

Given a consumption function of C = $25 + 0.75YD,the average propensity to consume equals 1 when disposable income equals

Given that autonomous consumption equals $1,000,disposable income equals $20,000,and the MPC equals 0.80,the level of

Suppose the consumption function is C = $100 + 0.85YD.If disposable income is $400,saving is

If the MPC is 0.8 and the APC is 0.9,the MPS equals

Table 9.1 Disposable Income (Billions of dollars per year) Total Consumption (Billions of dollars per year) \0 \ 50 200 210 What is the rate of saving when income equals $1,000 billion in Table 9.1?

The marginal propensity to consume can be found by dividing

Which of the following is not considered to be an important determinant of investment?

If wealth rises,

An increase in the income-dependent portion of the consumption function would correspond to a

Which of the following is not a component of aggregate demand?

If the investment demand curve shifts to the left,then

The largest component of aggregate spending is government spending.

Autonomous consumption depends on all of the following except

Which of the following will cause an increase in U.S.imports?

Economics: the Core Issues

The Useconomy: a Global View

Supply and Demand

The Role of Government

National Income Accounting

Unemployment

Inflation

The Business Cycle

Self-Adjustment or Instability

Fiscal Policy

Deficits and Debt

Money and Banks

The Federal Reserve System

Monetary Policy

Supply-Side Policy: Short-Run Options

Growth and Productivity: Long-Run Possibilities

Theory Versus Reality

Consumer Choice

Elasticity

The Costs of Production

The Competitive Firm

Competitive Markets

Monopoly

Oligopoly

Monopolistic Competition

Natural Monopolies: Deregulation

Environmental Protection

The Farm Problem

The Labor Market

Labor Unions

Financial Markets

Taxes: Equity Versus Efficiency

Transfer Payments: Welfare and Social Security

International Trade

International Finance

Global Poverty

Filters

Given a consumption function of C = $25 + 0.75Y_D,the average propensity to consume equals 1 when disposable income equals

Suppose the consumption function is C = $100 + 0.85Y_D.If disposable income is $400,saving is