Question 1

The equation for the above saving schedule is:

Accepted Answer

A) Yd = -20 + .8S. 
B) Yd = 20 + .2S. 
C) S = 20 + .8Yd. 
D) S = -20 + .2Yd. 
A) Yd = -20 + .8S. 
B) Yd = 20 + .2S. 
C) S = 20 + .8Yd. 
D) S = -20 + .2Yd.

Question 2

Given the consumption schedule, it is possible to graph the relevant saving schedule by:

Accepted Answer

A) subtracting the MPC from "one" at each level of income. 
B) subtracting investment from consumption at each level of GDP. 
C) plotting the horizontal differences between the consumption schedule and the 45-degree line. 
D) plotting the vertical differences between the consumption schedule and the 45-degree line. 
A) subtracting the MPC from "one" at each level of income. 
B) subtracting investment from consumption at each level of GDP. 
C) plotting the horizontal differences between the consumption schedule and the 45-degree line. 
D) plotting the vertical differences between the consumption schedule and the 45-degree line.

Question 3

One can determine the amount of consumption at any level of total income by:

Accepted Answer

A) multiplying total income by the slope of the consumption schedule. 
B) multiplying total income by the APC. 
C) subtracting the MPS from total income. 
D) multiplying total income by the MPC. 
A) multiplying total income by the slope of the consumption schedule. 
B) multiplying total income by the APC. 
C) subtracting the MPS from total income. 
D) multiplying total income by the MPC.

Question 4

If the real interest rate in the economy is i and the expected rate of return from additional investment is r, then more investment will be forthcoming when:

Accepted Answer

A) r is greater than i. 
B) i is greater than r. 
C) r falls. 
D) i rises. 
A) r is greater than i. 
B) i is greater than r. 
C) r falls. 
D) i rises.

Question 5

Suppose the economy's saving schedule shifts from S1to S2as shown in the below diagram.We can say that its:

Accepted Answer

A) MPC has increased. 
B) MPS has increased. 
C) APS has increased at all levels of disposable income. 
D) APS has decreased at all levels of disposable income. 
A) MPC has increased. 
B) MPS has increased. 
C) APS has increased at all levels of disposable income. 
D) APS has decreased at all levels of disposable income.

Question 6

The MPC for an economy is:

Accepted Answer

A) the slope of the consumption schedule or line. 
B) the slope of the savings schedule or line. 
C) 1 divided by the slope of the consumption schedule or line. 
D) 1 divided by the slope of the savings schedule or line. 
A) the slope of the consumption schedule or line. 
B) the slope of the savings schedule or line. 
C) 1 divided by the slope of the consumption schedule or line. 
D) 1 divided by the slope of the savings schedule or line.

Question 7

A rightward shift of the investment-demand curve might be caused by:

Accepted Answer

A) an increase in the price level. 
B) a decline in the real interest rate. 
C) a decline in the acquisition, maintenance and operating costs. 
D) an increase in business taxes. 
A) an increase in the price level. 
B) a decline in the real interest rate. 
C) a decline in the acquisition, maintenance and operating costs. 
D) an increase in business taxes.

Question 8

The consumption schedule shows:

Accepted Answer

A) that the MPC increases in proportion to GDP. 
B) that households consume more when interest rates are low. 
C) that consumption depends primarily upon the level of business investment. 
D) the amounts households plan or intend to consume at various possible levels of aggregate income. 
A) that the MPC increases in proportion to GDP. 
B) that households consume more when interest rates are low. 
C) that consumption depends primarily upon the level of business investment. 
D) the amounts households plan or intend to consume at various possible levels of aggregate income.

Question 9

If the inflation rate is 10 percent and the real interest rate is 12 percent, the nominal interest rate is:

Accepted Answer

A) 2 percent. 
B) zero percent. 
C) 10 percent. 
D) 22 percent. 
A) 2 percent. 
B) zero percent. 
C) 10 percent. 
D) 22 percent.

Question 10

The following table illustrates the multiplier process in a private closed economy:   Refer to the above table.The change in income in round two will be:

Accepted Answer

A) $4 
B) $16 
C) $20 
D) $24 
A) $4 
B) $16 
C) $20 
D) $24

Question 11

As aggregate income increases, the APC:

Accepted Answer

A) and APS will both increase. 
B) will decrease, but the APS will increase. 
C) will increase, but the APS will decrease. 
D) and APS will both decrease. 
A) and APS will both increase. 
B) will decrease, but the APS will increase. 
C) will increase, but the APS will decrease. 
D) and APS will both decrease.

Question 12

Assume that a machine, which has a useful life of only one year, costs $2,000.Also, assume that the difference between the estimated operating costs, which includes power and taxes, and the additional revenue from the output of this machine is expected to be $2,300.If the firm finds that it can borrow funds at an interest rate of 10 percent per annum, the firm should:

Accepted Answer

A) not purchase the machine because the expected rate of return exceeds the cost of borrowing. 
B) purchase the machine because the expected rate of return exceeds the cost of borrowing. 
C) not purchase the machine because the cost of borrowing exceeds the expected rate of return. 
D) purchase the machine because the cost of borrowing exceeds the expected rate of return. 
A) not purchase the machine because the expected rate of return exceeds the cost of borrowing. 
B) purchase the machine because the expected rate of return exceeds the cost of borrowing. 
C) not purchase the machine because the cost of borrowing exceeds the expected rate of return. 
D) purchase the machine because the cost of borrowing exceeds the expected rate of return.

Question 13

Which of the following is the primary explanation for most of the fluctuations in output and employment over the course of the business cycle?

Accepted Answer

A) changes in net exports 
B) changes in the marginal propensity to consume 
C) abrupt changes in stock market prices 
D) changes in investment expenditures 
A) changes in net exports 
B) changes in the marginal propensity to consume 
C) abrupt changes in stock market prices 
D) changes in investment expenditures

Question 14

If the equation for the consumption schedule is C = 20 + 0.8Y, where C is consumption and Y is disposable income, then the average propensity to consume is 1 when disposable income is:

Accepted Answer

A) $80 
B) $100 
C) $120 
D) $160 
A) $80 
B) $100 
C) $120 
D) $160

Question 15

Refer to the above data.At the $100 level of income, the average propensity to save is:

Accepted Answer

A) .10. 
B) .20. 
C) .25. 
D) .90. 
A) .10. 
B) .20. 
C) .25. 
D) .90.

Question 16

For all levels of income to the left of the intersection of the 45-degree line and the consumption schedule, the APC is:

Accepted Answer

A) greater than 100 percent. 
B) less than the APS. 
C) equal to the MPC. 
D) equal to 100 percent. 
A) greater than 100 percent. 
B) less than the APS. 
C) equal to the MPC. 
D) equal to 100 percent.

Question 17

Which of the following is likely to be an effect of lower business taxes on the investment demand curve of an economy?

Accepted Answer

A) A leftward shift of the curve 
B) A rightward shift of the curve 
C) An upward movement along the curve 
D) A downward movement along the curve 
A) A leftward shift of the curve 
B) A rightward shift of the curve 
C) An upward movement along the curve 
D) A downward movement along the curve

Question 18

Following is consumption schedules for three private closed economies.DI signifies disposable income and C represents consumption expenditures.All figures are in billions of dollars.   Refer to the above data.The marginal propensity to save:

Accepted Answer

A) is highest in economy (1). 
B) is highest in economy (2). 
C) is highest in economy (3). 
D) cannot be determined from the data given. 
A) is highest in economy (1). 
B) is highest in economy (2). 
C) is highest in economy (3). 
D) cannot be determined from the data given.

Question 19

Refer to the above data.At the $200 level of disposable income:

Accepted Answer

A) the marginal propensity to save is 21/2 percent. 
B) dissaving is $5. 
C) the average propensity to save is .20. 
D) the average propensity to consume is .80. 
A) the marginal propensity to save is 21/2 percent. 
B) dissaving is $5. 
C) the average propensity to save is .20. 
D) the average propensity to consume is .80.

Question 20

The greater the MPC, the greater the multiplier.

Accepted Answer

A) True 
 B)False

Exam 10: B: Basic Macroeconomic Relationships

The equation for the above saving schedule is:

Given the consumption schedule, it is possible to graph the relevant saving schedule by:

One can determine the amount of consumption at any level of total income by:

If the real interest rate in the economy is i and the expected rate of return from additional investment is r, then more investment will be forthcoming when:

Suppose the economy's saving schedule shifts from S1to S2as shown in the below diagram.We can say that its:

The MPC for an economy is:

A rightward shift of the investment-demand curve might be caused by:

The consumption schedule shows:

If the inflation rate is 10 percent and the real interest rate is 12 percent, the nominal interest rate is:

The following table illustrates the multiplier process in a private closed economy: Refer to the above table.The change in income in round two will be:

As aggregate income increases, the APC:

Which of the following is the primary explanation for most of the fluctuations in output and employment over the course of the business cycle?

If the equation for the consumption schedule is C = 20 + 0.8Y, where C is consumption and Y is disposable income, then the average propensity to consume is 1 when disposable income is:

Refer to the above data.At the $100 level of income, the average propensity to save is:

For all levels of income to the left of the intersection of the 45-degree line and the consumption schedule, the APC is:

Which of the following is likely to be an effect of lower business taxes on the investment demand curve of an economy?

Following is consumption schedules for three private closed economies.DI signifies disposable income and C represents consumption expenditures.All figures are in billions of dollars. Refer to the above data.The marginal propensity to save:

Refer to the above data.At the $200 level of disposable income:

The greater the MPC, the greater the multiplier.

B: Limits, Alternatives, and Choices

A: - Limits, Alternatives, and Choices

B: The Market System and the Circular Flow

A: - The Market System and the Circular Flow

B: Demand, Supply, and Market Equilibrium

A: - Demand, Supply, and Market Equilibrium

B: Market Failures: Public Goods and Externalities

A: - Market Failures: Public Goods and Externalities

B: Governments Role and Government Failure

A: Governments Role and Government Failure

B: an Introduction to Macroeconomics

A: an Introduction to Macroeconomics

B: Measuring the Economys Output

A: Measuring the Economys Output

B: Economic Growth

A: Economic Growth

B: Business Cycles, Unemployment, and Inflation

A: Business Cycles, Unemployment, and Inflation

A: Basic Macroeconomic Relationships

B: The Aggregate Expenditures Model

A: The Aggregate Expenditures Model

B: Aggregate Demand and Aggregate Supply

A: Aggregate Demand and Aggregate Supply

B: Fiscal Policy, Deficits, Surpluses, and Debt

A: Fiscal Policy, Deficits, Surpluses, and Debt

B: Money, Banking, and Money Creation

A: Money, Banking, and Money Creation

B: Interest Rates and Monetary Policy

A: Interest Rates and Monetary Policy

C: Financial Economics

A: Long-Run Macroeconomic Adjustments

B: Long-Run Macroeconomic Adjustments

A: International Trade

B: International Trade

A: The Balance of Payments and Exchange Rates

B: The Balance of Payments and Exchange Rates

The Economics of Developing Countries

Filters

Suppose the economy's saving schedule shifts from S₁to S₂as shown in the below diagram.We can say that its: