Question 1

If households decrease the amount of bank account withdrawals,the consumption function may shift upward.

Accepted Answer

A) True 
 B)False

Question 2

Consumer spending is an injection in the circular flow of income and spending.

Accepted Answer

A) True 
 B)False

Question 3

What is disposable income? How is it calculated?

Accepted Answer

Disposable income (DI)is the sum of the

Question 4

The circular flow diagram is best described as a(n)

Accepted Answer

A)  abstraction of little value in macroeconomics. 
B)  exact representation of the cause and effect relationship between spending and employment. 
C)  model that clarifies the relationship between spending and income. 
D)  model to explain the relationship between the federal deficit and tax revenues. 
A)  abstraction of little value in macroeconomics. 
B)  exact representation of the cause and effect relationship between spending and employment. 
C)  model that clarifies the relationship between spending and income. 
D)  model to explain the relationship between the federal deficit and tax revenues.

Question 5

The "investment" component of aggregate demand will include all of the following except

Accepted Answer

A)  expenditures of business firms on new plants. 
B)  expenditures of business firms on new equipment. 
C)  resales of existing physical assets. 
D)  household spending on new homes. 
A)  expenditures of business firms on new plants. 
B)  expenditures of business firms on new equipment. 
C)  resales of existing physical assets. 
D)  household spending on new homes.

Question 6

To predict the effects of a tax cut on consumption spending,economists must have some estimate of the

Accepted Answer

A)  income effect. 
B)  substitution effect. 
C)  relative price effect. 
D)  marginal propensity to consume. 
A)  income effect. 
B)  substitution effect. 
C)  relative price effect. 
D)  marginal propensity to consume.

Question 7

National income minus personal taxes net of transfer payments equals disposable income.

Accepted Answer

A) True 
 B)False

Question 8

The purchase of a new house is included in government spending.

Accepted Answer

A) True 
 B)False

Question 9

Government purchases are included in national product.

Accepted Answer

A) True 
 B)False

Question 10

The largest component of aggregate demand is

Accepted Answer

A)  investment spending. 
B)  consumer spending. 
C)  government spending. 
D)  total imports. 
A)  investment spending. 
B)  consumer spending. 
C)  government spending. 
D)  total imports.

Question 11

The nation's disposable income increases by $400 billion and,as a result,consumer spending increases by $320 billion.Therefore,the MPC equals

Accepted Answer

A)  0.16. 
B)  0.20. 
C)  0.60. 
D)  0.80. 
E)  0.96. 
A)  0.16. 
B)  0.20. 
C)  0.60. 
D)  0.80. 
E)  0.96.

Question 12

The marginal propensity to consume is

Accepted Answer

A)  disposable income divided by consumption. 
B)  the change in consumption divided by the change in disposable income. 
C)  consumption divided by disposable income. 
D)  the change in disposable income divided by the change in consumption. 
A)  disposable income divided by consumption. 
B)  the change in consumption divided by the change in disposable income. 
C)  consumption divided by disposable income. 
D)  the change in disposable income divided by the change in consumption.

Question 13

GDP can be calculated as the final demand for goods and services by consumers,businesses,

Accepted Answer

A)  and governments. 
B)  and foreigners. 
C)  governments,and foreigners. 
D)  governments,and financial institutions. 
A)  and governments. 
B)  and foreigners. 
C)  governments,and foreigners. 
D)  governments,and financial institutions.

Question 14

If real interest rates decrease,we generally expect

Accepted Answer

A)  saving to increase. 
B)  saving to decrease. 
C)  consumption spending to decrease. 
D)  no significant change in saving. 
A)  saving to increase. 
B)  saving to decrease. 
C)  consumption spending to decrease. 
D)  no significant change in saving.

Question 15

If the consumption function shifts downward,which of the following is the most likely cause?

Accepted Answer

A)  Consumers become more optimistic. 
B)  The price level increased. 
C)  Consumers' incomes increase. 
D)  Real interest rates decrease. 
A)  Consumers become more optimistic. 
B)  The price level increased. 
C)  Consumers' incomes increase. 
D)  Real interest rates decrease.

Question 16

Both President Bush and President Obama wanted tax cuts to stimulate consumer spending during the 2007-2009 recession.

Accepted Answer

A) True 
 B)False

Question 17

If U.S.consumers become more optimistic about their future income and wealth,the consumption function will shift upward.

Accepted Answer

A) True 
 B)False

Question 18

Adding depreciation to net national product yields

Accepted Answer

A)  disposable income (DI). 
B)  personal income (PI). 
C)  net national product (NNP). 
D)  gross domestic product (GDP). 
A)  disposable income (DI). 
B)  personal income (PI). 
C)  net national product (NNP). 
D)  gross domestic product (GDP).

Question 19

The main reason that the 1975,2008,and 2009 tax cuts did not have a large effect on GDP is that they were

Accepted Answer

A)  temporary surcharges rather than permanent surcharges. 
B)  permanent surcharges rather than temporary surcharges. 
C)  temporary tax cuts rather than a permanent tax cuts. 
D)  permanent tax cuts rather than a temporary tax cuts. 
A)  temporary surcharges rather than permanent surcharges. 
B)  permanent surcharges rather than temporary surcharges. 
C)  temporary tax cuts rather than a permanent tax cuts. 
D)  permanent tax cuts rather than a temporary tax cuts.

Question 20

Why is investment spending a highly volatile component?

Accepted Answer

Several factors influence how much busin

If households decrease the amount of bank account withdrawals,the consumption function may shift upward.

Consumer spending is an injection in the circular flow of income and spending.

What is disposable income? How is it calculated?

The circular flow diagram is best described as a(n)

The "investment" component of aggregate demand will include all of the following except

To predict the effects of a tax cut on consumption spending,economists must have some estimate of the

National income minus personal taxes net of transfer payments equals disposable income.

The purchase of a new house is included in government spending.

Government purchases are included in national product.

The largest component of aggregate demand is

The nation's disposable income increases by $400 billion and,as a result,consumer spending increases by $320 billion.Therefore,the MPC equals

The marginal propensity to consume is

GDP can be calculated as the final demand for goods and services by consumers,businesses,

If real interest rates decrease,we generally expect

If the consumption function shifts downward,which of the following is the most likely cause?

Both President Bush and President Obama wanted tax cuts to stimulate consumer spending during the 2007-2009 recession.

If U.S.consumers become more optimistic about their future income and wealth,the consumption function will shift upward.

Adding depreciation to net national product yields

The main reason that the 1975,2008,and 2009 tax cuts did not have a large effect on GDP is that they were

Why is investment spending a highly volatile component?

What Is Economics

The Economy Myth and Reality

The Fundamental Economic Problem Scarcity and Choice

Supply and Demand An Initial Look

An Introduction To Macroeconomics

The Goals Of Macroeconomic Policy

Economic Growth Theory And Policy

Demand Side Equilibrium Unemployment Or Inflation

Bringing In The Supply Side Unemployment and Inflation

Managing Aggregate Demand Fiscal Policy

Money and The Banking System

Monetary Policy Conventional and Unconventional

The Financial Crisis and The Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits In The Short and Long Run

The Trade Off Between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System Order Or Disorder

Exchange Rates and The Macroeconomy

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Exam 8: Aggregate Demand and The Powerful Consumer

If households decrease the amount of bank account withdrawals,the consumption function may shift upward.

Consumer spending is an injection in the circular flow of income and spending.

What is disposable income? How is it calculated?

The circular flow diagram is best described as a(n)

The "investment" component of aggregate demand will include all of the following except

To predict the effects of a tax cut on consumption spending,economists must have some estimate of the

National income minus personal taxes net of transfer payments equals disposable income.

The purchase of a new house is included in government spending.

Government purchases are included in national product.

The largest component of aggregate demand is

The nation's disposable income increases by $400 billion and,as a result,consumer spending increases by $320 billion.Therefore,the MPC equals

The marginal propensity to consume is

GDP can be calculated as the final demand for goods and services by consumers,businesses,

If real interest rates decrease,we generally expect

If the consumption function shifts downward,which of the following is the most likely cause?

Both President Bush and President Obama wanted tax cuts to stimulate consumer spending during the 2007-2009 recession.

If U.S.consumers become more optimistic about their future income and wealth,the consumption function will shift upward.

Adding depreciation to net national product yields

The main reason that the 1975,2008,and 2009 tax cuts did not have a large effect on GDP is that they were

Why is investment spending a highly volatile component?

What Is Economics

The Economy Myth and Reality

The Fundamental Economic Problem Scarcity and Choice

Supply and Demand An Initial Look

An Introduction To Macroeconomics

The Goals Of Macroeconomic Policy

Economic Growth Theory And Policy

Demand Side Equilibrium Unemployment Or Inflation

Bringing In The Supply Side Unemployment and Inflation

Managing Aggregate Demand Fiscal Policy

Money and The Banking System

Monetary Policy Conventional and Unconventional

The Financial Crisis and The Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits In The Short and Long Run

The Trade Off Between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System Order Or Disorder

Exchange Rates and The Macroeconomy

Filters