Question 1

Refer to the data below.When plotted on a graph, the vertical intercept of the consumption schedule in this economy is _____ and the slope is _____.

Accepted Answer

A) -2; 1 
B) $2; .18 
C) $100; .5 
D) $2; .9 
A) -2; 1 
B) $2; .18 
C) $100; .5 
D) $2; .9

Question 2

The use of 1/MPS formula as the size of the multiplier in the economy, overstates the actual size of it because:

Accepted Answer

A) saving is not the only fraction of the domestic income which is not spent. 
B) saving is the only fraction of the domestic income which is not spent. 
C) imports and taxes create new income in the economy. 
D) imports and not taxes creates new income in the economy. 
A) saving is not the only fraction of the domestic income which is not spent. 
B) saving is the only fraction of the domestic income which is not spent. 
C) imports and taxes create new income in the economy. 
D) imports and not taxes creates new income in the economy.

Question 3

The consumption schedule in the diagram below indicates that:

Accepted Answer

A) consumers will maximize their satisfaction where the consumption schedule and 45$\degree$line intersect. 
B) up to a point consumption exceeds income, but then falls below income. 
C) the MPC falls as income increases. 
D) households consume as much as they earn. 
A) consumers will maximize their satisfaction where the consumption schedule and 45$\degree$line intersect. 
B) up to a point consumption exceeds income, but then falls below income. 
C) the MPC falls as income increases. 
D) households consume as much as they earn.

Question 4

Assume the consumption schedule for a private closed economy is C = 40 + 0.75Y, where C is consumption 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 consume is:

Accepted Answer

A) .2. 
B) .8. 
C) .4. 
D) .3. 
A) .2. 
B) .8. 
C) .4. 
D) .3.

Question 6

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

Accepted Answer

A) CD/EF. 
B) CB/CF. 
C) CB/AF. 
D) EF/CB. 
A) CD/EF. 
B) CB/CF. 
C) CB/AF. 
D) EF/CB.

Question 7

The immediate determinants of investment spending are the:

Accepted Answer

A) expected rate of return on capital goods and the real interest rate. 
B) level of saving and the real interest rate. 
C) marginal propensity to consume and the real interest rate. 
D) interest rate and the expected price level. 
A) expected rate of return on capital goods and the real interest rate. 
B) level of saving and the real interest rate. 
C) marginal propensity to consume and the real interest rate. 
D) interest rate and the expected price level.

Question 8

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 in economy (1):

Accepted Answer

A) is .5. 
B) is .3. 
C) is .8. 
D) is .7. 
A) is .5. 
B) is .3. 
C) is .8. 
D) is .7.

Question 9

If the consumption schedule is linear, then the:

Accepted Answer

A) saving schedule will also be linear. 
B) MPS will decline as income rises. 
C) MPC will decline as income rises. 
D) APC will be constant at all levels of income. 
A) saving schedule will also be linear. 
B) MPS will decline as income rises. 
C) MPC will decline as income rises. 
D) APC will be constant at all levels of income.

Question 10

In view of your answer to the previous question, if the real interest rate is 15 percent in this economy, the aggregate amount of investment will be:

Accepted Answer

A) $25 
B) $20 
C) $15 
D) $10 
A) $25 
B) $20 
C) $15 
D) $10

Question 11

The following table illustrates the multiplier process in a private closed economy:   Refer to the above table.The total change in income resulting from the initial change in investment will be:

Accepted Answer

A) $100 
B) $20 
C) $80 
D) $200 
A) $100 
B) $20 
C) $80 
D) $200

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

The multiplier is useful in determining the:

Accepted Answer

A) full-employment unemployment rate. 
B) level of unintended investment or disinvestment. 
C) rate of inflation. 
D) change in equilibrium GDP resulting from a change in spending. 
A) full-employment unemployment rate. 
B) level of unintended investment or disinvestment. 
C) rate of inflation. 
D) change in equilibrium GDP resulting from a change in spending.

Question 14

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 5 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 15

Other things equal, the real interest rate and the level of investment are:

Accepted Answer

A) related only when saving equals planned investment. 
B) unrelated. 
C) inversely related. 
D) directly related. 
A) related only when saving equals planned investment. 
B) unrelated. 
C) inversely related. 
D) directly related.

Question 16

Which of the following countries had the highest percentage of gross investment expenditure relative to GDP in 2014, as per Image 10.2 Global Perspective?

Accepted Answer

A) China 
B) Korea 
C) Canada 
D) United States 
A) China 
B) Korea 
C) Canada 
D) United States

Question 17

The reverse wealth effect will cause the consumption schedule to:

Accepted Answer

A) shift upward. 
B) shift downward. 
C) not change at all. 
D) shift in the same direction as would occur with the wealth effect. 
A) shift upward. 
B) shift downward. 
C) not change at all. 
D) shift in the same direction as would occur with the wealth effect.

Question 18

A decline in disposable income:

Accepted Answer

A) increases consumption by moving upward along a specific consumption schedule. 
B) decreases consumption because it shifts the consumption schedule downward. 
C) decreases consumption by moving downward along a specific consumption schedule. 
D) increases consumption because it shifts the consumption schedule upward. 
A) increases consumption by moving upward along a specific consumption schedule. 
B) decreases consumption because it shifts the consumption schedule downward. 
C) decreases consumption by moving downward along a specific consumption schedule. 
D) increases consumption because it shifts the consumption schedule upward.

Question 19

The consumption schedule is drawn on the assumption that as disposable income increases consumption will:

Accepted Answer

A) be unaffected. 
B) increase absolutely, but remain constant as a percentage of income. 
C) increase absolutely, but decline as a percentage of income. 
D) increase absolutely and as a percentage of income. 
A) be unaffected. 
B) increase absolutely, but remain constant as a percentage of income. 
C) increase absolutely, but decline as a percentage of income. 
D) increase absolutely and as a percentage of income.

Question 20

When we draw an investment demand curve we hold constant all of the following except:

Accepted Answer

A) the expected rate of return from the investment. 
B) the interest rate. 
C) business taxes. 
D) the present stock of capital goods. 
A) the expected rate of return from the investment. 
B) the interest rate. 
C) business taxes. 
D) the present stock of capital goods.

Exam 10: B: Basic Macroeconomic Relationships

Refer to the data below.When plotted on a graph, the vertical intercept of the consumption schedule in this economy is _____ and the slope is _____.

The use of 1/MPS formula as the size of the multiplier in the economy, overstates the actual size of it because:

The consumption schedule in the diagram below indicates that:

Assume the consumption schedule for a private closed economy is C = 40 + 0.75Y, where C is consumption and Y is gross domestic product.The multiplier for this economy:

Refer to the above diagram.The marginal propensity to consume is:

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

The immediate determinants of investment spending are the:

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 in economy (1):

If the consumption schedule is linear, then the:

In view of your answer to the previous question, if the real interest rate is 15 percent in this economy, the aggregate amount of investment will be:

The following table illustrates the multiplier process in a private closed economy: Refer to the above table.The total change in income resulting from the initial change in investment will be:

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

The multiplier is useful in determining the:

Other things equal, the real interest rate and the level of investment are:

Which of the following countries had the highest percentage of gross investment expenditure relative to GDP in 2014, as per Image 10.2 Global Perspective?

The reverse wealth effect will cause the consumption schedule to:

A decline in disposable income:

The consumption schedule is drawn on the assumption that as disposable income increases consumption will:

When we draw an investment demand curve we hold constant all of the following except:

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

Refer to the data below.When plotted on a graph, the vertical intercept of the consumption schedule in this economy is _ and the slope is _.