Question 1

If consumption is $340 and saving is $20,then disposable income

Accepted Answer

A) Is $340. 
B) Is $360. 
C) Is $320. 
D) Cannot be determined from the information given. 
A) Is $340. 
B) Is $360. 
C) Is $320. 
D) Cannot be determined from the information given.

Question 2

Table 9.1 $$\begin{array} { | l | c | } 
\hline \begin{array} { c } 
\text { Disposable Income } \
\text { (Billions of dollars per year) }
\end{array} & \begin{array} { c } 
\text { Total Consumption } \
\text { (Billions of dollars per year) }
\end{array} \
\hline \text { \$0 } & \$ 50 \
\hline 200 & 210 \
\hline
\end{array}$$ Which of the following represents the consumption function consistent with the data in Table 9.1?

Accepted Answer

A) C = $160 billion + 0.91YD. 
B) C = $160 billion + 0.80YD. 
C) C = $50 billion + 0.76YD. 
D) C = $50 billion + 0.80YD. 
A) C = $160 billion + 0.91YD. 
B) C = $160 billion + 0.80YD. 
C) C = $50 billion + 0.76YD. 
D) C = $50 billion + 0.80YD.

Question 3

The MPC in the economy depicted in Figure 9.3

Accepted Answer

A) Is constant. 
B) Increases steadily as disposable income increases. 
C) Decreases steadily as disposable income increases. 
D) Equals 1.0. 
A) Is constant. 
B) Increases steadily as disposable income increases. 
C) Decreases steadily as disposable income increases. 
D) Equals 1.0.

Question 4

Which government sector has the ability to respond countercyclically to the economy?

Accepted Answer

A) State only. 
B) Federal only. 
C) Local only. 
D) Federal,state,and local. 
A) State only. 
B) Federal only. 
C) Local only. 
D) Federal,state,and local.

Question 5

In Figure 9.8,if full-employment income is produced at $400 billion,which of the following can alleviate a recession?

Accepted Answer

A) An increase in government spending. 
B) An increase in taxes. 
C) An increase in interest rates. 
D) An increase in saving. 
A) An increase in government spending. 
B) An increase in taxes. 
C) An increase in interest rates. 
D) An increase in saving.

Question 6

Which of the following is eliminated when output equals full-employment GDP?

Accepted Answer

A) Cyclical unemployment. 
B) Demand-pull inflation. 
C) The need for autonomous consumption. 
D) Net exports. 
A) Cyclical unemployment. 
B) Demand-pull inflation. 
C) The need for autonomous consumption. 
D) Net exports.

Question 7

Unlike the classical economists,Keynes believed that the economy would automatically adjust to full employment.

Accepted Answer

A) True 
 B)False

Question 8

Gross exports for the United States depend most directly on the

Accepted Answer

A) Level of U.S.GDP. 
B) Spending behavior of U.S.consumers. 
C) Spending behavior of U.S.government agencies. 
D) Spending behavior of foreign consumers and businesses. 
A) Level of U.S.GDP. 
B) Spending behavior of U.S.consumers. 
C) Spending behavior of U.S.government agencies. 
D) Spending behavior of foreign consumers and businesses.

Question 9

How can autonomous consumption be greater than zero when income is zero?

Accepted Answer

Autonomous consumption is the level of c

Question 10

Which of the following most likely occurs when an inflationary gap exists?

Accepted Answer

A) Producers will use overtime shifts and strain capacity. 
B) More layoffs. 
C) Rising inventories. 
D) Excessive saving. 
A) Producers will use overtime shifts and strain capacity. 
B) More layoffs. 
C) Rising inventories. 
D) Excessive saving.

Question 11

Under what conditions would the APC equal the MPC at all levels of disposable income?

Accepted Answer

A) When autonomous consumption equals 0. 
B) When there is saving at very high levels of disposable income. 
C) When disposable income is greater than consumption. 
D) When the aggregate expenditure line is horizontal. 
A) When autonomous consumption equals 0. 
B) When there is saving at very high levels of disposable income. 
C) When disposable income is greater than consumption. 
D) When the aggregate expenditure line is horizontal.

Question 12

Which of the following statements is not true about the consumption function?

Accepted Answer

A) The equation is written as C = a + bYD. 
B) It indicates the rate of consumer spending that will take place at various disposable income levels. 
C) It indicates that consumption is inversely related to disposable income. 
D) It shows how consumption is influenced by disposable income. 
A) The equation is written as C = a + bYD. 
B) It indicates the rate of consumer spending that will take place at various disposable income levels. 
C) It indicates that consumption is inversely related to disposable income. 
D) It shows how consumption is influenced by disposable income.

Question 13

Full-employment income is the same as the potential GDP of the economy.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following causes a movement along the investment demand curve?

Accepted Answer

A) A change in expenditures. 
B) A change in technology. 
C) A change in the rate of interest. 
D) The current level of income. 
A) A change in expenditures. 
B) A change in technology. 
C) A change in the rate of interest. 
D) The current level of income.

Question 15

The slope of a graph of the consumption function equals the marginal propensity to consume.

Accepted Answer

A) True 
 B)False

Question 16

If disposable income increases from $9,000 billion to $11,000 billion,and consumption increases from $9,500 billion to $11,000 billion,the MPC must be

Accepted Answer

A) 0.75. 
B) 1.00. 
C) 0.90. 
D) 0.25. 
A) 0.75. 
B) 1.00. 
C) 0.90. 
D) 0.25.

Question 17

Demand-pull inflation is caused by

Accepted Answer

A) An increase in aggregate supply. 
B) An increase in resource costs as an economy's production capacity is approached. 
C) An increase in inventories. 
D) Excessive aggregate demand in relation to an economy's production capacity. 
A) An increase in aggregate supply. 
B) An increase in resource costs as an economy's production capacity is approached. 
C) An increase in inventories. 
D) Excessive aggregate demand in relation to an economy's production capacity.

Question 18

Assuming that investment,government expenditures,and net exports are all autonomous,the marginal propensity to consume for the economy represented in Figure 9.9 is

Accepted Answer

A) 1.0 since aggregate expenditure is a straight line. 
B) 0.5. 
C) 0.25. 
D) Indeterminate since there is no consumption function. 
A) 1.0 since aggregate expenditure is a straight line. 
B) 0.5. 
C) 0.25. 
D) Indeterminate since there is no consumption function.

Question 19

In Figure 9.6,if full employment occurs at QC,then aggregate demand is

Accepted Answer

A) Too great,causing cyclical unemployment. 
B) Too small,causing demand-pull inflation. 
C) Too small,causing cyclical unemployment. 
D) Just right. 
A) Too great,causing cyclical unemployment. 
B) Too small,causing demand-pull inflation. 
C) Too small,causing cyclical unemployment. 
D) Just right.

Question 20

With respect to the aggregate demand curve,improved consumer confidence would

Accepted Answer

A) Shift the curve rightward. 
B) Shift the curve leftward. 
C) Move the economy down along the curve. 
D) Move the economy up along the curve. 
A) Shift the curve rightward. 
B) Shift the curve leftward. 
C) Move the economy down along the curve. 
D) Move the economy up along the curve.

Exam 9: Aggregate Demand

If consumption is $340 and saving is $20,then disposable income

Table 9.1 Disposable Income (Billions of dollars per year) Total Consumption (Billions of dollars per year) \0 \ 50 200 210 Which of the following represents the consumption function consistent with the data in Table 9.1?

The MPC in the economy depicted in Figure 9.3

Which government sector has the ability to respond countercyclically to the economy?

In Figure 9.8,if full-employment income is produced at $400 billion,which of the following can alleviate a recession?

Which of the following is eliminated when output equals full-employment GDP?

Unlike the classical economists,Keynes believed that the economy would automatically adjust to full employment.

Gross exports for the United States depend most directly on the

How can autonomous consumption be greater than zero when income is zero?

Which of the following most likely occurs when an inflationary gap exists?

Under what conditions would the APC equal the MPC at all levels of disposable income?

Which of the following statements is not true about the consumption function?

Full-employment income is the same as the potential GDP of the economy.

Which of the following causes a movement along the investment demand curve?

The slope of a graph of the consumption function equals the marginal propensity to consume.

If disposable income increases from $9,000 billion to $11,000 billion,and consumption increases from $9,500 billion to $11,000 billion,the MPC must be

Demand-pull inflation is caused by

Assuming that investment,government expenditures,and net exports are all autonomous,the marginal propensity to consume for the economy represented in Figure 9.9 is

In Figure 9.6,if full employment occurs at QC,then aggregate demand is

With respect to the aggregate demand curve,improved consumer confidence would

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

In Figure 9.6,if full employment occurs at Q_C,then aggregate demand is