Question 1

The difference between national income and disposable income is

Accepted Answer

A)  residential investment. 
B)  federal deficits. 
C)  net exports. 
D)  financial investment. 
E)  the amount of taxes collected. 
A)  residential investment. 
B)  federal deficits. 
C)  net exports. 
D)  financial investment. 
E)  the amount of taxes collected.

Question 2

In 1975,Congress passed a tax rebate to spur consumer spending.Consumers:

Accepted Answer

A)  spent the entire amount of the tax savings,boosting the economy,as planned 
B)  did not spend any of the amount of the tax savings 
C)  saved a substantial share of the tax savings and spent the rest 
D)  saved a small portion of the tax savings,and spent the rest 
A)  spent the entire amount of the tax savings,boosting the economy,as planned 
B)  did not spend any of the amount of the tax savings 
C)  saved a substantial share of the tax savings and spent the rest 
D)  saved a small portion of the tax savings,and spent the rest

Question 3

Consumer spending represents about what fraction of total spending in the economy?

Accepted Answer

A)  one-fifth 
B)  two-thirds 
C)  one-third 
D)  two-fifths 
E)  three-fourths 
A)  one-fifth 
B)  two-thirds 
C)  one-third 
D)  two-fifths 
E)  three-fourths

Question 4

The marginal propensity to consume is calculated by dividing the change in consumer spending by the change in disposable income.

Accepted Answer

A) True 
 B)False

Question 5

Lower real interest rates

Accepted Answer

A)  tend to shift the consumption function upward. 
B)  have no significant effect on consumption. 
C)  tend to shift the consumption function downward. 
D)  tend to move the consumer upward along the consumption function. 
A)  tend to shift the consumption function upward. 
B)  have no significant effect on consumption. 
C)  tend to shift the consumption function downward. 
D)  tend to move the consumer upward along the consumption function.

Question 6

Explain why it makes a difference if consumers consider a tax cut temporary rather than permanent.What does this explanation tell us about the importance of government credibility? Put this in the context of the 2008 and 2009 tax cuts favored by President Bush and President Obama.

Accepted Answer

Consumers tend to base their spending de

Question 7

Historical data depicted on a scatter diagram show that consumer spending and disposable income

Accepted Answer

A)  converge as income grows. 
B)  generally move together. 
C)  diverge as income grows. 
D)  show no clear relationship. 
A)  converge as income grows. 
B)  generally move together. 
C)  diverge as income grows. 
D)  show no clear relationship.

Question 8

A decrease in disposable income will

Accepted Answer

A)  lead to an upward movement along the consumption function. 
B)  lead to a downward movement along the consumption function. 
C)  shift the consumption function upward. 
D)  shift the consumption function downward. 
A)  lead to an upward movement along the consumption function. 
B)  lead to a downward movement along the consumption function. 
C)  shift the consumption function upward. 
D)  shift the consumption function downward.

Question 9

Which of the following is the injection into the circular flow model?

Accepted Answer

A)  Money deposited in a savings account. 
B)  Income earned through exports. 
C)  Goods imported from abroad. 
D)  Taxes paid by the individuals. 
A)  Money deposited in a savings account. 
B)  Income earned through exports. 
C)  Goods imported from abroad. 
D)  Taxes paid by the individuals.

Question 10

According to the data in Table 8-1,the value of GDP is

Accepted Answer

A)  800. 
B)  805. 
C)  955. 
D)  1055. 
A)  800. 
B)  805. 
C)  955. 
D)  1055.

Question 11

Financial investments,such as mutual fund purchases,are included in the national income component.

Accepted Answer

A) True 
 B)False

Question 12

If disposable income increases by $400 billion and consumption increases by $300 billion,the MPC equals

Accepted Answer

A)  0.75 
B)  0.60 
C)  0.80 
D)  0.68 
A)  0.75 
B)  0.60 
C)  0.80 
D)  0.68

Question 13

According to the data in Table 8-1,the value of GNP is

Accepted Answer

A)  900. 
B)  950. 
C)  955. 
D)  960. 
A)  900. 
B)  950. 
C)  955. 
D)  960.

Question 14

The difference between disposable income and consumption spending is

Accepted Answer

A)  transfer payments. 
B)  personal taxes. 
C)  net exports. 
D)  personal investment. 
E)  personal saving. 
A)  transfer payments. 
B)  personal taxes. 
C)  net exports. 
D)  personal investment. 
E)  personal saving.

Question 15

Tax reductions should also reduce the amount of consumer expenditures.

Accepted Answer

A) True 
 B)False

Question 16

For each $1 of a tax cut,economists expect consumption to

Accepted Answer

A)  decrease by $1. 
B)  decrease by less than $1. 
C)  increase by less than $1. 
D)  increase by $1. 
A)  decrease by $1. 
B)  decrease by less than $1. 
C)  increase by less than $1. 
D)  increase by $1.

Question 17

A once-and-for-all jump in the price level would initially cause a(n)

Accepted Answer

A)  upward shift in the consumption function. 
B)  upward movement along the consumption function. 
C)  downward shift in the consumption function. 
D)  downward movement along the consumption function. 
A)  upward shift in the consumption function. 
B)  upward movement along the consumption function. 
C)  downward shift in the consumption function. 
D)  downward movement along the consumption function.

Question 18

Based on the relative size of factor payments,the most important resource in the U.S.economy is

Accepted Answer

A)  capital. 
B)  land. 
C)  labor. 
D)  natural resources. 
A)  capital. 
B)  land. 
C)  labor. 
D)  natural resources.

Question 19

Goods produced that go into inventories are

Accepted Answer

A)  not counted in GDP. 
B)  only counted in GDP when they are ultimately sold. 
C)  counted in GDP even though they are not sold. 
D)  counted if they completely depreciate within the calendar year. 
A)  not counted in GDP. 
B)  only counted in GDP when they are ultimately sold. 
C)  counted in GDP even though they are not sold. 
D)  counted if they completely depreciate within the calendar year.

Question 20

Which of the following is an example of wealth?

Accepted Answer

A)  a yearly salary of $40,000 
B)  a mutual fund balance of $1,000 
C)  rental payments of $3,000 per month 
D)  stock dividends of $500 per quarter 
A)  a yearly salary of $40,000 
B)  a mutual fund balance of $1,000 
C)  rental payments of $3,000 per month 
D)  stock dividends of $500 per quarter

The difference between national income and disposable income is

In 1975,Congress passed a tax rebate to spur consumer spending.Consumers:

Consumer spending represents about what fraction of total spending in the economy?

The marginal propensity to consume is calculated by dividing the change in consumer spending by the change in disposable income.

Lower real interest rates

Explain why it makes a difference if consumers consider a tax cut temporary rather than permanent.What does this explanation tell us about the importance of government credibility? Put this in the context of the 2008 and 2009 tax cuts favored by President Bush and President Obama.

Historical data depicted on a scatter diagram show that consumer spending and disposable income

A decrease in disposable income will

Which of the following is the injection into the circular flow model?

According to the data in Table 8-1,the value of GDP is

Financial investments,such as mutual fund purchases,are included in the national income component.

If disposable income increases by $400 billion and consumption increases by $300 billion,the MPC equals

According to the data in Table 8-1,the value of GNP is

The difference between disposable income and consumption spending is

Tax reductions should also reduce the amount of consumer expenditures.

For each $1 of a tax cut,economists expect consumption to

A once-and-for-all jump in the price level would initially cause a(n)

Based on the relative size of factor payments,the most important resource in the U.S.economy is

Goods produced that go into inventories are

Which of the following is an example of wealth?

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

Exam 8: Aggregate Demand and The Powerful Consumer

The difference between national income and disposable income is

In 1975,Congress passed a tax rebate to spur consumer spending.Consumers:

Consumer spending represents about what fraction of total spending in the economy?

The marginal propensity to consume is calculated by dividing the change in consumer spending by the change in disposable income.

Lower real interest rates

Explain why it makes a difference if consumers consider a tax cut temporary rather than permanent.What does this explanation tell us about the importance of government credibility? Put this in the context of the 2008 and 2009 tax cuts favored by President Bush and President Obama.

Historical data depicted on a scatter diagram show that consumer spending and disposable income

A decrease in disposable income will

Which of the following is the injection into the circular flow model?

According to the data in Table 8-1,the value of GDP is

Financial investments,such as mutual fund purchases,are included in the national income component.

If disposable income increases by $400 billion and consumption increases by $300 billion,the MPC equals

According to the data in Table 8-1,the value of GNP is

The difference between disposable income and consumption spending is

Tax reductions should also reduce the amount of consumer expenditures.

For each $1 of a tax cut,economists expect consumption to

A once-and-for-all jump in the price level would initially cause a(n)

Based on the relative size of factor payments,the most important resource in the U.S.economy is

Goods produced that go into inventories are

Which of the following is an example of wealth?

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