Question 1

The slope of the saving schedule measures the size of the multiplier.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is likely to be an effect of an increase in planned inventory 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 3

The consumption schedule is such that:

Accepted Answer

A) both the APC and the MPC increase as income rises. 
B) the APC is constant and the MPC declines as income rises. 
C) the MPC is constant and the APC declines as income rises. 
D) the MPC and APC must be equal at all levels of income. 
A) both the APC and the MPC increase as income rises. 
B) the APC is constant and the MPC declines as income rises. 
C) the MPC is constant and the APC declines as income rises. 
D) the MPC and APC must be equal at all levels of income.

Question 4

Assume the saving schedule for a private closed economy is S = -20 + 0.2Y, where S is saving and Y is gross domestic product.The multiplier for this economy:

Accepted Answer

A) is 3. 
B) is 4. 
C) is 5. 
D) cannot be determined from the information given. 
A) is 3. 
B) is 4. 
C) is 5. 
D) cannot be determined from the information given.

Question 5

Refer to the above diagram.The marginal propensity to save is equal to:

Accepted Answer

A) CD/0D. 
B) 0B/0A. 
C) 0D/0D. 
D) CD/BD. 
A) CD/0D. 
B) 0B/0A. 
C) 0D/0D. 
D) CD/BD.

Question 6

If the MPC is.6, the simple multiplier will be:

Accepted Answer

A) 4.0. 
B) 6.0. 
C) 2.5. 
D) 1.67. 
A) 4.0. 
B) 6.0. 
C) 2.5. 
D) 1.67.

Question 7

The practical significance of the multiplier is that it:

Accepted Answer

A) brings about an equality of planned investment and saving. 
B) magnifies relatively small initial changes in spending into larger changes in GDP. 
C) keeps inflation within tolerable limits. 
D) helps to stabilize the economy. 
A) brings about an equality of planned investment and saving. 
B) magnifies relatively small initial changes in spending into larger changes in GDP. 
C) keeps inflation within tolerable limits. 
D) helps to stabilize the economy.

Question 8

1 + MPS = MPC.

Accepted Answer

A) True 
 B)False

Question 9

The MPC can be defined as the fraction of a:

Accepted Answer

A) change in income which is not spent. 
B) change in income which is spent. 
C) given total income which is not consumed. 
D) given total income which is consumed. 
A) change in income which is not spent. 
B) change in income which is spent. 
C) given total income which is not consumed. 
D) given total income which is consumed.

Question 10

If a consumption schedule shifts upward, this means that the:

Accepted Answer

A) MPC has increased. 
B) MPS has decreased. 
C) APC is now higher at each level of disposable income. 
D) APC is now lower at each level of disposable income. 
A) MPC has increased. 
B) MPS has decreased. 
C) APC is now higher at each level of disposable income. 
D) APC is now lower at each level of disposable income.

Question 11

The above table reflects a(n):

Accepted Answer

A) interest rate schedule. 
B) demand-for-money schedule. 
C) investment-demand schedule. 
D) profit schedule. 
A) interest rate schedule. 
B) demand-for-money schedule. 
C) investment-demand schedule. 
D) profit schedule.

Question 12

The following table illustrates the multiplier process in a private closed economy:   Refer to the above table.The multiplier in this economy is:

Accepted Answer

A) 2 
B) 4 
C) 5 
D) 10 
A) 2 
B) 4 
C) 5 
D) 10

Question 13

Refer to the above data.The slope of the saving schedule is:

Accepted Answer

A) .80. 
B) .10. 
C) .20. 
D) .15. 
A) .80. 
B) .10. 
C) .20. 
D) .15.

Question 14

The numerical value of the multiplier will be smaller the:

Accepted Answer

A) larger the average propensity to consume. 
B) larger the slope of the saving schedule. 
C) larger the slope of the consumption schedule. 
D) smaller the slope of the saving schedule. 
A) larger the average propensity to consume. 
B) larger the slope of the saving schedule. 
C) larger the slope of the consumption schedule. 
D) smaller the slope of the saving schedule.

Question 15

Assume that for the entire business sector of a private closed economy there is $0 worth of investment projects which will yield an expected rate of return of 25 percent or more.But there are $15 worth of investments which will yield an expected rate of return of 20-25 percent; another $15 with an expected rate of return of 15-20 percent; and similarly an additional $15 of investment projects in each successive rate of return range down to and including the 0-5 percent range.   Which of the lines on the above diagram represents these data?

Accepted Answer

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

Question 16

Assume there are no prospective investment projects (I) which will yield an expected rate of return (r) of 25 percent or more, but that there are $5 billion of investment opportunities with an expected rate of return between 20 and 25 percent, an additional $5 billion between 15 and 20 percent, and so on.The investment-demand curve for this economy is:

Accepted Answer

A) Column A 
B) Column B 
C) Column C 
D) Column D 
A) Column A 
B) Column B 
C) Column C 
D) Column D

Question 17

Suppose a family's consumption exceeds its disposable income.This means that its:

Accepted Answer

A) MPC is greater than 1. 
B) MPS is negative. 
C) APC is greater than 1. 
D) APS is positive. 
A) MPC is greater than 1. 
B) MPS is negative. 
C) APC is greater than 1. 
D) APS is positive.

Question 18

If the consumption schedule shifts upward and the shift was not caused by a tax change, the saving schedule:

Accepted Answer

A) will not shift. 
B) may shift either upward or downward. 
C) will shift downward. 
D) will also shift upward. 
A) will not shift. 
B) may shift either upward or downward. 
C) will shift downward. 
D) will also shift upward.

Question 19

As aggregate income decreases, 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 20

The 45-degree line on a chart relating consumption and income shows:

Accepted Answer

A) all points where the MPC is constant. 
B) all points at which saving and income are equal. 
C) all the points at which consumption and income are equal. 
D) the amounts households will plan to save at each possible level of income. 
A) all points where the MPC is constant. 
B) all points at which saving and income are equal. 
C) all the points at which consumption and income are equal. 
D) the amounts households will plan to save at each possible level of income.

Exam 10: B: Basic Macroeconomic Relationships

The slope of the saving schedule measures the size of the multiplier.

Which of the following is likely to be an effect of an increase in planned inventory on the investment demand curve of an economy?

The consumption schedule is such that:

Assume the saving schedule for a private closed economy is S = -20 + 0.2Y, where S is saving and Y is gross domestic product.The multiplier for this economy:

Refer to the above diagram.The marginal propensity to save is equal to:

If the MPC is.6, the simple multiplier will be:

The practical significance of the multiplier is that it:

1 + MPS = MPC.

The MPC can be defined as the fraction of a:

If a consumption schedule shifts upward, this means that the:

The above table reflects a(n):

The following table illustrates the multiplier process in a private closed economy: Refer to the above table.The multiplier in this economy is:

Refer to the above data.The slope of the saving schedule is:

The numerical value of the multiplier will be smaller the:

Suppose a family's consumption exceeds its disposable income.This means that its:

If the consumption schedule shifts upward and the shift was not caused by a tax change, the saving schedule:

As aggregate income decreases, the APC:

The 45-degree line on a chart relating consumption and income shows:

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

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