Question 1

The equation C = 35 + .75Y, where C is consumption and Y is disposable income, tells us that:

Accepted Answer

A) households will consume three-fourths of whatever level of disposable income they receive. 
B) households will consume $35 if their disposable income is zero and will consume three-fourths of any increase in disposable income they receive. 
C) there is an inverse relationship between disposable income and consumption. 
D) households will save $35 if their disposable income is zero and will consume three-fourths of any increase in disposable income they receive. 
A) households will consume three-fourths of whatever level of disposable income they receive. 
B) households will consume $35 if their disposable income is zero and will consume three-fourths of any increase in disposable income they receive. 
C) there is an inverse relationship between disposable income and consumption. 
D) households will save $35 if their disposable income is zero and will consume three-fourths of any increase in disposable income they receive.

Question 2

If the nominal interest rate is 18 percent and the real interest rate is 6 percent, the inflation rate is:

Accepted Answer

A) 18 percent. 
B) 24 percent. 
C) 12 percent. 
D) 6 percent. 
A) 18 percent. 
B) 24 percent. 
C) 12 percent. 
D) 6 percent.

Question 3

Economists disagree on the actual size of the multiplier.

Accepted Answer

A) True 
 B)False

Question 4

The simple multiplier is:

Accepted Answer

A) 1/MPC. 
B) 1/(1 + MP
C) . 
C) 1/MPS. 
D) 1/(1 - MPS). 
A) 1/MPC. 
B) 1/(1 + MP
C) . 
C) 1/MPS. 
D) 1/(1 - MPS).

Question 5

If the saving schedule is a straight line, the:

Accepted Answer

A) MPS must be constant. 
B) APS must be constant. 
C) APC must be constant. 
D) MPC must be rising. 
A) MPS must be constant. 
B) APS must be constant. 
C) APC must be constant. 
D) MPC must be rising.

Question 6

The consumption schedule relates:

Accepted Answer

A) consumption to the level of disposable income. 
B) saving to the level of disposable income. 
C) disposable income to domestic income. 
D) consumption to saving. 
A) consumption to the level of disposable income. 
B) saving to the level of disposable income. 
C) disposable income to domestic income. 
D) consumption to saving.

Question 7

The multiplier:

Accepted Answer

A) varies directly with the slope of the investment-demand schedule. 
B) is unrelated to the slope of the saving schedule. 
C) will be greater, the smaller the slope of the saving schedule. 
D) will be greater, the steeper the slope of the saving schedule. 
A) varies directly with the slope of the investment-demand schedule. 
B) is unrelated to the slope of the saving schedule. 
C) will be greater, the smaller the slope of the saving schedule. 
D) will be greater, the steeper the slope of the saving schedule.

Question 8

Suppose that the level of GDP increased by $100 billion in an economy where the marginal propensity to consume is 0.5.The initial change in spending must have been:

Accepted Answer

A) $100 billion. 
B) $50 billion. 
C) $500 billion. 
D) $5 billion. 
A) $100 billion. 
B) $50 billion. 
C) $500 billion. 
D) $5 billion.

Question 9

With an MPS of .4, the MPC will be:

Accepted Answer

A) 1.0 minus .4. 
B) .4 minus 1.0. 
C) the reciprocal of the MPS. 
D) .4. 
A) 1.0 minus .4. 
B) .4 minus 1.0. 
C) the reciprocal of the MPS. 
D) .4.

Question 10

Refer to the above diagram.The MPC and APC are both constant as income increases for:

Accepted Answer

A) none of the consumption schedules shown. 
B) C3 only. 
C) C3 and C4 only. 
D) C1 and C2 only. 
A) none of the consumption schedules shown. 
B) C3 only. 
C) C3 and C4 only. 
D) C1 and C2 only.

Question 11

The simple multiplier may be calculated as:

Accepted Answer

A) 1/(MPS + MP
C) . 
B) 1/(1 - MP
C) . 
C) MPC/MPS. 
D) 1 - MPC = MPS. 
A) 1/(MPS + MP
C) . 
B) 1/(1 - MP
C) . 
C) MPC/MPS. 
D) 1 - MPC = MPS.

Question 12

The investment-demand curve will shift to the right as the result of:

Accepted Answer

A) the availability of excess productive capacity. 
B) an increase in business taxes. 
C) businesses becoming more optimistic with respect to future business conditions. 
D) an increase in the real interest rate. 
A) the availability of excess productive capacity. 
B) an increase in business taxes. 
C) businesses becoming more optimistic with respect to future business conditions. 
D) an increase in the real interest rate.

Question 13

Assume that for the entire business sector of the 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.Refer to the above information.If the real interest rate is 15 percent, what amount of investment will be undertaken?

Accepted Answer

A) $15 
B) $30 
C) $45 
D) $60 
A) $15 
B) $30 
C) $45 
D) $60

Question 14

Refer to the above diagram.The equation for the saving schedule is:

Accepted Answer

A) S = .6Y. 
B) Y = 60 + .6S. 
C) S = 60 + .4Y. 
D) S = -60 + .4Y. 
A) S = .6Y. 
B) Y = 60 + .6S. 
C) S = 60 + .4Y. 
D) S = -60 + .4Y.

Question 15

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 consume:

Accepted Answer

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

Question 16

Which of the following is correct?

Accepted Answer

A) MPC + MPS = APC + APS 
B) APC + MPS = APS + MPC 
C) APC + MPC = APS + MPS 
D) APC - APS = MPC - MPS 
A) MPC + MPS = APC + APS 
B) APC + MPS = APS + MPC 
C) APC + MPC = APS + MPS 
D) APC - APS = MPC - MPS

Question 17

Other things equal, a 10 percent decrease in corporate income taxes will:

Accepted Answer

A) decrease the market price of real capital goods. 
B) have no effect on the location of the investment-demand curve. 
C) shift the investment-demand curve to the right. 
D) shift the investment-demand curve to the left. 
A) decrease the market price of real capital goods. 
B) have no effect on the location of the investment-demand curve. 
C) shift the investment-demand curve to the right. 
D) shift the investment-demand curve to the left.

Question 18

Which one of the following will cause a movement down along an economy's consumption schedule?

Accepted Answer

A) an increase in stock prices 
B) a decrease in stock prices 
C) an increase in consumer indebtedness 
D) a decrease in disposable income 
A) an increase in stock prices 
B) a decrease in stock prices 
C) an increase in consumer indebtedness 
D) a decrease in disposable income

Question 19

The wealth effect will tend to decrease consumption and increase saving.

Accepted Answer

A) True 
 B)False

Question 20

The investment-demand curve will shift to the left:

Accepted Answer

A) if firms plan to increase their inventories. 
B) if firms plan to decrease their inventories. 
C) if firms expect an increase in their sales. 
D) if firms expect no change in their sales. 
A) if firms plan to increase their inventories. 
B) if firms plan to decrease their inventories. 
C) if firms expect an increase in their sales. 
D) if firms expect no change in their sales.

Exam 10: B: Basic Macroeconomic Relationships

The equation C = 35 + .75Y, where C is consumption and Y is disposable income, tells us that:

If the nominal interest rate is 18 percent and the real interest rate is 6 percent, the inflation rate is:

Economists disagree on the actual size of the multiplier.

The simple multiplier is:

If the saving schedule is a straight line, the:

The consumption schedule relates:

The multiplier:

Suppose that the level of GDP increased by $100 billion in an economy where the marginal propensity to consume is 0.5.The initial change in spending must have been:

With an MPS of .4, the MPC will be:

Refer to the above diagram.The MPC and APC are both constant as income increases for:

The simple multiplier may be calculated as:

The investment-demand curve will shift to the right as the result of:

Refer to the above diagram.The equation for the saving schedule is:

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 consume:

Which of the following is correct?

Other things equal, a 10 percent decrease in corporate income taxes will:

Which one of the following will cause a movement down along an economy's consumption schedule?

The wealth effect will tend to decrease consumption and increase saving.

The investment-demand curve will shift to the left:

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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