Question 1

The marginal propensity to consume (MPC)is related to the marginal propensity to save (MPS)by the formula MPC = 1 - MPS.

Accepted Answer

A) True 
 B)False

Question 2

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 3

A decrease in U.S.exports to Japan can be represented by

Accepted Answer

A) The aggregate expenditure curve shifting upward. 
B) The aggregate expenditure curve shifting downward. 
C) A rightward movement along the aggregate expenditure curve. 
D) A leftward movement along the aggregate expenditure curve. 
A) The aggregate expenditure curve shifting upward. 
B) The aggregate expenditure curve shifting downward. 
C) A rightward movement along the aggregate expenditure curve. 
D) A leftward movement along the aggregate expenditure curve.

Question 4

Suppose the consumption function is C = $200 + 0.85YD.If disposable income is $400,consumption is

Accepted Answer

A) $200. 
B) $540. 
C) $340. 
D) $185. 
A) $200. 
B) $540. 
C) $340. 
D) $185.

Question 5

Suppose the MPC in an economy is 0.9.The APC is initially 0.95 and disposable income is $4 billion.If disposable income increases to $14 billion,what is the new level of consumption?

Accepted Answer

A) $13.3 billion. 
B) $12.8 billion. 
C) $9 billion. 
D) $12.6 billion. 
A) $13.3 billion. 
B) $12.8 billion. 
C) $9 billion. 
D) $12.6 billion.

Question 6

Use the following figure to answer the questions : Figure9.5:
  
-In Figure 9.5,a movement from Point A to Point C would result from

Accepted Answer

A) An improvement in technology. 
B) An improvement in expectations for future sales. 
C) A decrease in the interest rates. 
D) An decrease in disposable income. 
A) An improvement in technology. 
B) An improvement in expectations for future sales. 
C) A decrease in the interest rates. 
D) An decrease in disposable income.

Question 7

If autonomous consumption decreases,then

Accepted Answer

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

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

According to an In the News article titled "Cuomo to Cut New York State Spending by $8.86 Billion,Fire 9,800 Workers," the governor did this because

Accepted Answer

A) Increased federal funding cannot keep up with decreased state gasoline taxes. 
B) New York State taxes cannot keep up with the loss of federal aid. 
C) State law requires the governor shrink the budget by 5 percent per year through 2015. 
D) None of the choices are correct. 
A) Increased federal funding cannot keep up with decreased state gasoline taxes. 
B) New York State taxes cannot keep up with the loss of federal aid. 
C) State law requires the governor shrink the budget by 5 percent per year through 2015. 
D) None of the choices are correct.

Question 10

Using the output at which the aggregate expenditure curve intersects the 45-degree line,we can identify

Accepted Answer

A) Equilibrium (macro)at the intersection point. 
B) Dissaving to the right of the intersection point. 
C) Full employment to the left of the intersection point if there is a recessionary gap. 
D) A consumption shortfall at the intersection point. 
A) Equilibrium (macro)at the intersection point. 
B) Dissaving to the right of the intersection point. 
C) Full employment to the left of the intersection point if there is a recessionary gap. 
D) A consumption shortfall at the intersection point.

Question 11

When aggregate expenditures fall below the full-employment level of output,which of the following types of unemployment is most likely to increase?

Accepted Answer

A) Cyclical. 
B) Seasonal. 
C) Frictional. 
D) Structural. 
A) Cyclical. 
B) Seasonal. 
C) Frictional. 
D) Structural.

Question 12

Keynes was concerned that at macroeconomic equilibrium in a laissez faire free market economy,full employment

Accepted Answer

A) And price stability might not continue simultaneously. 
B) Would continue but price stability might not. 
C) Might not continue but price stability would. 
D) None of the choices are correct. 
A) And price stability might not continue simultaneously. 
B) Would continue but price stability might not. 
C) Might not continue but price stability would. 
D) None of the choices are correct.

Question 13

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.

Question 14

The MPC indicates the portion of

Accepted Answer

A) An additional dollar of disposable income that will be saved. 
B) An additional dollar of disposable income that will be spent. 
C) Total income that will be saved. 
D) Total income that will be spent. 
A) An additional dollar of disposable income that will be saved. 
B) An additional dollar of disposable income that will be spent. 
C) Total income that will be saved. 
D) Total income that will be spent.

Question 15

Federal government spending has a countercyclical impact that helps to stabilize the economy.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

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

Question 17

Use the following figure to answer the questions : Figure9.1:
 
-According to Figure 9.1,saving equals zero at an income level of

Accepted Answer

A) $0. 
B) $1,000 billion. 
C) $2,000 billion. 
D) $500 billion. 
A) $0. 
B) $1,000 billion. 
C) $2,000 billion. 
D) $500 billion.

Question 18

The economy will not reach and maintain its goals of full employment and price stability unless the economy is

Accepted Answer

A) At full employment and the price level is stable. 
B) Above full employment and the price level is stable. 
C) Below full employment and the price level is stable. 
D) None of the choices are correct. 
A) At full employment and the price level is stable. 
B) Above full employment and the price level is stable. 
C) Below full employment and the price level is stable. 
D) None of the choices are correct.

Question 19

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.

Question 20

Use the following figure to  answer the questions : Figure9.8
 
-In Figure 9.8,if full-employment income is produced at $400 billion,the government can reduce a recessionary gap by

Accepted Answer

A) Decreasing government spending. 
B) Decreasing investment spending. 
C) Decreasing income taxes on consumers. 
D) Increasing taxes. 
A) Decreasing government spending. 
B) Decreasing investment spending. 
C) Decreasing income taxes on consumers. 
D) Increasing taxes.

Exam 9: Aggregate Demand Appendix: the Keynesian Cross

The marginal propensity to consume (MPC)is related to the marginal propensity to save (MPS)by the formula MPC = 1 - MPS.

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

A decrease in U.S.exports to Japan can be represented by

Suppose the consumption function is C = $200 + 0.85YD.If disposable income is $400,consumption is

Suppose the MPC in an economy is 0.9.The APC is initially 0.95 and disposable income is $4 billion.If disposable income increases to $14 billion,what is the new level of consumption?

Use the following figure to answer the questions : Figure9.5: -In Figure 9.5,a movement from Point A to Point C would result from

If autonomous consumption decreases,then

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

According to an In the News article titled "Cuomo to Cut New York State Spending by $8.86 Billion,Fire 9,800 Workers," the governor did this because

Using the output at which the aggregate expenditure curve intersects the 45-degree line,we can identify

When aggregate expenditures fall below the full-employment level of output,which of the following types of unemployment is most likely to increase?

Keynes was concerned that at macroeconomic equilibrium in a laissez faire free market economy,full employment

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

The MPC indicates the portion of

Federal government spending has a countercyclical impact that helps to stabilize the economy.

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

Use the following figure to answer the questions : Figure9.1: -According to Figure 9.1,saving equals zero at an income level of

The economy will not reach and maintain its goals of full employment and price stability unless the economy is

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

Use the following figure to answer the questions : Figure9.8 -In Figure 9.8,if full-employment income is produced at $400 billion,the government can reduce a recessionary gap by

Economics: the Core Issues Appendix: Using Graphs

The Us Economy: 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 Appendix: Indifference Curves

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 Glossary Index Reference Tables

Filters

Suppose the consumption function is C = $200 + 0.85Y_D.If disposable income is $400,consumption is