Question 1

Melissa purchases shares in a government bond mutual fund.Is this included in the aggregate demand component "Investment"?

Accepted Answer

A)  Yes,if it is a domestic mutual fund. 
B)  Yes,if the purchase is made out of current income. 
C)  No,unless the funds are deposited in a domestic financial institution. 
D)  No,it would never be included. 
A)  Yes,if it is a domestic mutual fund. 
B)  Yes,if the purchase is made out of current income. 
C)  No,unless the funds are deposited in a domestic financial institution. 
D)  No,it would never be included.

Question 2

Do economists know the value of the MPC for most economies?

Accepted Answer

A)  Yes,with a high level of precision. 
B)  Yes,with a certainty level of four decimal places. 
C)  No,it is impossible to determine a national MPC. 
D)  Yes,but with some level of uncertainty. 
A)  Yes,with a high level of precision. 
B)  Yes,with a certainty level of four decimal places. 
C)  No,it is impossible to determine a national MPC. 
D)  Yes,but with some level of uncertainty.

Question 3

An economic boom in one country usually causes a recession in other countries.

Accepted Answer

A) True 
 B)False

Question 4

According to the relationship represented by the consumption function,governments can indirectly decrease consumption spending by

Accepted Answer

A)  increasing taxes. 
B)  decreasing transfers. 
C)  decreasing taxes. 
D)  decreasing government spending. 
A)  increasing taxes. 
B)  decreasing transfers. 
C)  decreasing taxes. 
D)  decreasing government spending.

Question 5

If personal taxes are increased by $10 billion,we can expect that consumers will reduce

Accepted Answer

A)  spending by $10 billion. 
B)  spending by more than $10 billion. 
C)  spending by less than $10 billion. 
D)  saving by $10 billion. 
E)  saving by more than $10 billion. 
A)  spending by $10 billion. 
B)  spending by more than $10 billion. 
C)  spending by less than $10 billion. 
D)  saving by $10 billion. 
E)  saving by more than $10 billion.

Question 6

We should expect the consumption function to shift downward if

Accepted Answer

A)  real interest rates rise. 
B)  price levels fall. 
C)  consumers become more optimistic about future incomes. 
D)  consumers become more pessimistic about future incomes. 
A)  real interest rates rise. 
B)  price levels fall. 
C)  consumers become more optimistic about future incomes. 
D)  consumers become more pessimistic about future incomes.

Question 7

Which of the following is not a factor that influences investment spending?

Accepted Answer

A)  transfer payment policy 
B)  business confidence 
C)  business expectations 
D)  technical change 
A)  transfer payment policy 
B)  business confidence 
C)  business expectations 
D)  technical change

Question 8

Figure 8-1  
-Based on the scatter diagram in Figure 8-1,approximately how much will consumption increase after a permanent tax cut of $400 billion?

Accepted Answer

A)  $100 billion 
B)  $150 billion 
C)  $250 billion 
D)  $350 billion 
A)  $100 billion 
B)  $150 billion 
C)  $250 billion 
D)  $350 billion

Question 9

A decrease in the price level will most likely have what effect on the consumption function?

Accepted Answer

A)  It will shift upward. 
B)  It will shift downward. 
C)  It will cause movement downward along the function. 
D)  It will cause movement upward along the function. 
A)  It will shift upward. 
B)  It will shift downward. 
C)  It will cause movement downward along the function. 
D)  It will cause movement upward along the function.

Question 10

The most volatile component of aggregate demand is

Accepted Answer

A)  consumption spending. 
B)  government spending. 
C)  investment spending. 
D)  net exports. 
A)  consumption spending. 
B)  government spending. 
C)  investment spending. 
D)  net exports.

Question 11

To economists,investment means buying stocks and bonds.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following should be subtracted while calculating aggregate demand of the U.S.?

Accepted Answer

A)  Pakistan's purchase of F-16s from the U.S. 
B)  Computers imported by China from the U.S. 
C)  Memorabilia purchases in the U.S.by a foreign tourist. 
D)  A U.S.firm's purchase of German machinery. 
A)  Pakistan's purchase of F-16s from the U.S. 
B)  Computers imported by China from the U.S. 
C)  Memorabilia purchases in the U.S.by a foreign tourist. 
D)  A U.S.firm's purchase of German machinery.

Question 13

In the national income accounts,the symbol G represents the

Accepted Answer

A)  government production of goods and services. 
B)  volume of goods and services purchased by the federal government. 
C)  value of goods and services purchased by the federal government. 
D)  value of goods and services purchased by all levels of government. 
A)  government production of goods and services. 
B)  volume of goods and services purchased by the federal government. 
C)  value of goods and services purchased by the federal government. 
D)  value of goods and services purchased by all levels of government.

Question 14

Inventories are goods that can be considered as "purchased" by

Accepted Answer

A)  the firms that produce them. 
B)  the consumers that ultimately buy them. 
C)  the government since they are tax deductible. 
D)  no one since they are not counted as part of GDP. 
A)  the firms that produce them. 
B)  the consumers that ultimately buy them. 
C)  the government since they are tax deductible. 
D)  no one since they are not counted as part of GDP.

Question 15

A scatter diagram could help a policy maker decide on the size of a tax cut necessary to increase consumer expenditures by a certain amount.

Accepted Answer

A) True 
 B)False

Question 16

If income in Austria decreases by 30 million euros and consumption decreases by 24 euros,then the MPC equals

Accepted Answer

A)  0.90. 
B)  0.80. 
C)  0.60 
D)  −0.60. 
A)  0.90. 
B)  0.80. 
C)  0.60 
D)  −0.60.

Question 17

Which of the following would cause an upward shift in the consumption function?

Accepted Answer

A)  a stock market crash 
B)  an increase in the price level 
C)  a decrease in disposable income 
D)  a decrease in the price level 
A)  a stock market crash 
B)  an increase in the price level 
C)  a decrease in disposable income 
D)  a decrease in the price level

Question 18

When saving leaks out of the circular flow of income and spending,

Accepted Answer

A)  total income necessarily falls. 
B)  it leaks out of the financial system. 
C)  it flows to borrowers. 
D)  it increases the size of the spending flow. 
A)  total income necessarily falls. 
B)  it leaks out of the financial system. 
C)  it flows to borrowers. 
D)  it increases the size of the spending flow.

Question 19

If the MPC increases in value,what will happen to the slope of the consumption function?

Accepted Answer

A)  The slope will decrease and the consumption function will become flatter. 
B)  The slope will decrease and the consumption function will become steeper. 
C)  The slope will increase and the consumption function will become steeper. 
D)  The slope will increase and the consumption function will become flatter. 
A)  The slope will decrease and the consumption function will become flatter. 
B)  The slope will decrease and the consumption function will become steeper. 
C)  The slope will increase and the consumption function will become steeper. 
D)  The slope will increase and the consumption function will become flatter.

Question 20

In calculating the nation's total output,net exports

Accepted Answer

A)  represent exports of goods and services minus imports of goods and services. 
B)  have been a negative number in the last several years. 
C)  would include purchases of U.S.-made automobiles by foreigners minus purchase of foreign-made automobiles by U.S.residents. 
D)  All of the above are correct. 
A)  represent exports of goods and services minus imports of goods and services. 
B)  have been a negative number in the last several years. 
C)  would include purchases of U.S.-made automobiles by foreigners minus purchase of foreign-made automobiles by U.S.residents. 
D)  All of the above are correct.

Melissa purchases shares in a government bond mutual fund.Is this included in the aggregate demand component "Investment"?

Do economists know the value of the MPC for most economies?

An economic boom in one country usually causes a recession in other countries.

According to the relationship represented by the consumption function,governments can indirectly decrease consumption spending by

If personal taxes are increased by $10 billion,we can expect that consumers will reduce

We should expect the consumption function to shift downward if

Which of the following is not a factor that influences investment spending?

Figure 8-1 -Based on the scatter diagram in Figure 8-1,approximately how much will consumption increase after a permanent tax cut of $400 billion?

A decrease in the price level will most likely have what effect on the consumption function?

The most volatile component of aggregate demand is

To economists,investment means buying stocks and bonds.

Which of the following should be subtracted while calculating aggregate demand of the U.S.?

In the national income accounts,the symbol G represents the

Inventories are goods that can be considered as "purchased" by

A scatter diagram could help a policy maker decide on the size of a tax cut necessary to increase consumer expenditures by a certain amount.

If income in Austria decreases by 30 million euros and consumption decreases by 24 euros,then the MPC equals

Which of the following would cause an upward shift in the consumption function?

When saving leaks out of the circular flow of income and spending,

If the MPC increases in value,what will happen to the slope of the consumption function?

In calculating the nation's total output,net exports

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

Melissa purchases shares in a government bond mutual fund.Is this included in the aggregate demand component "Investment"?

Do economists know the value of the MPC for most economies?

An economic boom in one country usually causes a recession in other countries.

According to the relationship represented by the consumption function,governments can indirectly decrease consumption spending by

If personal taxes are increased by $10 billion,we can expect that consumers will reduce

We should expect the consumption function to shift downward if

Which of the following is not a factor that influences investment spending?

Figure 8-1 -Based on the scatter diagram in Figure 8-1,approximately how much will consumption increase after a permanent tax cut of $400 billion?

A decrease in the price level will most likely have what effect on the consumption function?

The most volatile component of aggregate demand is

To economists,investment means buying stocks and bonds.

Which of the following should be subtracted while calculating aggregate demand of the U.S.?

In the national income accounts,the symbol G represents the

Inventories are goods that can be considered as "purchased" by

A scatter diagram could help a policy maker decide on the size of a tax cut necessary to increase consumer expenditures by a certain amount.

If income in Austria decreases by 30 million euros and consumption decreases by 24 euros,then the MPC equals

Which of the following would cause an upward shift in the consumption function?

When saving leaks out of the circular flow of income and spending,

If the MPC increases in value,what will happen to the slope of the consumption function?

In calculating the nation's total output,net exports

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