Question 1

If the marginal propensity to consume is 0.85, the value of the spending multiplier will be:

Accepted Answer

A)  0.15. 
B)  1.17. 
C)  5.1. 
D)  6.67. 
A)  0.15. 
B)  1.17. 
C)  5.1. 
D)  6.67.

Question 2

The marginal propensity to consume is equal to the change in consumption divided by the change in income.

Accepted Answer

A) True 
 B)False

Question 3

Investment levels depend mainly on:

Accepted Answer

A)  high levels of consumption in the economy. 
B)  strong government demand. 
C)  the rate of return on capital. 
D)  tax incentives. 
A)  high levels of consumption in the economy. 
B)  strong government demand. 
C)  the rate of return on capital. 
D)  tax incentives.

Question 4

The 45-degree line represents the set of points where aggregate expenditures is equal to disposable income.

Accepted Answer

A) True 
 B)False

Question 5

When the foreign sector, government spending, and taxes are added to the simple Keynesian model, at equilibrium, all injections must equal all withdrawals, as stated by the equation I + G + X = S + T + M.

Accepted Answer

A) True 
 B)False

Question 6

Activities that remove spending from the economy are called:

Accepted Answer

A)  negative spending. 
B)  withdrawals. 
C)  injections. 
D)  reverse spending. 
A)  negative spending. 
B)  withdrawals. 
C)  injections. 
D)  reverse spending.

Question 7

In Keynesian macroeconomic equilibrium, pressures on the economy to move to a different income exist.

Accepted Answer

A) True 
 B)False

Question 8

If income rises from $10,000 to $20,000 and savings increases from $9,000 to $16,000, then the marginal propensity to save is:

Accepted Answer

A)  0.10. 
B)  0.30. 
C)  0.70. 
D)  0.80. 
A)  0.10. 
B)  0.30. 
C)  0.70. 
D)  0.80.

Question 9

When the economy is in equilibrium in the simple Keynesian model:

Accepted Answer

A)  saving is greater than investment. 
B)  investment is greater than saving. 
C)  saving is equal to investment. 
D)  investment is equal to consumption. 
A)  saving is greater than investment. 
B)  investment is greater than saving. 
C)  saving is equal to investment. 
D)  investment is equal to consumption.

Question 10

If the stock market collapses, consumption will:

Accepted Answer

A)  not be affected. 
B)  increase because stocks can now be purchased cheaply. 
C)  decrease because people feel less wealthy. 
D)  increase by a small amount. 
A)  not be affected. 
B)  increase because stocks can now be purchased cheaply. 
C)  decrease because people feel less wealthy. 
D)  increase by a small amount.

Question 11

If aggregate expenditures equals $7,600 and aggregate income equals $8,000, businesses will produce:

Accepted Answer

A)  more, raising both employment and income. 
B)  less, lowering both employment and income. 
C)  more, raising employment and lowering income. 
D)  less, lowering employment and raising income. 
A)  more, raising both employment and income. 
B)  less, lowering both employment and income. 
C)  more, raising employment and lowering income. 
D)  less, lowering employment and raising income.

Question 12

Income rises when desired investment is:

Accepted Answer

A)  greater than desired savings. 
B)  less than desired savings. 
C)  equal to desired savings. 
D)  less than required investment. 
A)  greater than desired savings. 
B)  less than desired savings. 
C)  equal to desired savings. 
D)  less than required investment.

Question 13

Personal consumption expenditures:

Accepted Answer

A)  constitute 30% of GDP. 
B)  can be found by subtracting saving from disposable income. 
C)  primarily depend on interest rates, according to Keynes. 
D)  are very unstable as a percentage of GDP over time. 
A)  constitute 30% of GDP. 
B)  can be found by subtracting saving from disposable income. 
C)  primarily depend on interest rates, according to Keynes. 
D)  are very unstable as a percentage of GDP over time.

Question 14

The factors that would shift the savings and consumption schedule include all of the following EXCEPT:

Accepted Answer

A)  household debt. 
B)  tastes and preferences from durable goods and nondurable goods. 
C)  wealth. 
D)  taxes. 
A)  household debt. 
B)  tastes and preferences from durable goods and nondurable goods. 
C)  wealth. 
D)  taxes.

Question 15

The paradox of thrift suggests that when households intend to save more, they will _____ consumption, which will ultimately lead to _____ actual aggregate saving.

Accepted Answer

A)  reduce; lower 
B)  reduce; higher 
C)  increase; lower 
D)  increase; higher 
A)  reduce; lower 
B)  reduce; higher 
C)  increase; lower 
D)  increase; higher

Question 16

Changes in spending modify income by an amount equal to the change in spending.

Accepted Answer

A) True 
 B)False

Question 17

In the Keynesian aggregate expenditure model, which variable is assumed to be fixed?

Accepted Answer

A)  GDP 
B)  consumption 
C)  unemployment 
D)  the price level 
A)  GDP 
B)  consumption 
C)  unemployment 
D)  the price level

Question 18

Which of the following would NOT shift the investment demand schedule?

Accepted Answer

A)  a change in interest rates 
B)  a change in operating costs 
C)  a change in technology 
D)  a change in expectations 
A)  a change in interest rates 
B)  a change in operating costs 
C)  a change in technology 
D)  a change in expectations

Question 19

The marginal propensity to consumer plus the marginal propensity to save:

Accepted Answer

A)  equals 1. 
B)  equals 0.75. 
C)  equals zero. 
D)  is always a negative number. 
A)  equals 1. 
B)  equals 0.75. 
C)  equals zero. 
D)  is always a negative number.

Question 20

Which two countries currently have the highest savings rates?

Accepted Answer

A)  China and India 
B)  China and Japan 
C)  China and the United States 
D)  Japan and the United States 
A)  China and India 
B)  China and Japan 
C)  China and the United States 
D)  Japan and the United States

If the marginal propensity to consume is 0.85, the value of the spending multiplier will be:

The marginal propensity to consume is equal to the change in consumption divided by the change in income.

Investment levels depend mainly on:

The 45-degree line represents the set of points where aggregate expenditures is equal to disposable income.

When the foreign sector, government spending, and taxes are added to the simple Keynesian model, at equilibrium, all injections must equal all withdrawals, as stated by the equation I + G + X = S + T + M.

Activities that remove spending from the economy are called:

In Keynesian macroeconomic equilibrium, pressures on the economy to move to a different income exist.

If income rises from $10,000 to $20,000 and savings increases from $9,000 to $16,000, then the marginal propensity to save is:

When the economy is in equilibrium in the simple Keynesian model:

If the stock market collapses, consumption will:

If aggregate expenditures equals $7,600 and aggregate income equals $8,000, businesses will produce:

Income rises when desired investment is:

Personal consumption expenditures:

The factors that would shift the savings and consumption schedule include all of the following EXCEPT:

The paradox of thrift suggests that when households intend to save more, they will _ consumption, which will ultimately lead to _ actual aggregate saving.

Changes in spending modify income by an amount equal to the change in spending.

In the Keynesian aggregate expenditure model, which variable is assumed to be fixed?

Which of the following would NOT shift the investment demand schedule?

The marginal propensity to consumer plus the marginal propensity to save:

Which two countries currently have the highest savings rates?

Exploring Economics

Production, Economic Growth, and Trade

Supply and Demand

Markets and Government

Introduction to Macroeconomics

Measuring Inflation and Unemployment

Economic Growth

Aggregate Demand and Supply

Fiscal Policy and Debt

Saving, Investment, and the Financial System

Money Creation and the Federal Reserve

Monetary Policy

Macroeconomic Policy: Challenges in a Global Economy

International Trade

Open Economy Macroeconomics

Filters

Exam 8: Aggregate Expenditures

If the marginal propensity to consume is 0.85, the value of the spending multiplier will be:

The marginal propensity to consume is equal to the change in consumption divided by the change in income.

Investment levels depend mainly on:

The 45-degree line represents the set of points where aggregate expenditures is equal to disposable income.

When the foreign sector, government spending, and taxes are added to the simple Keynesian model, at equilibrium, all injections must equal all withdrawals, as stated by the equation I + G + X = S + T + M.

Activities that remove spending from the economy are called:

In Keynesian macroeconomic equilibrium, pressures on the economy to move to a different income exist.

If income rises from $10,000 to $20,000 and savings increases from $9,000 to $16,000, then the marginal propensity to save is:

When the economy is in equilibrium in the simple Keynesian model:

If the stock market collapses, consumption will:

If aggregate expenditures equals $7,600 and aggregate income equals $8,000, businesses will produce:

Income rises when desired investment is:

Personal consumption expenditures:

The factors that would shift the savings and consumption schedule include all of the following EXCEPT:

The paradox of thrift suggests that when households intend to save more, they will _____ consumption, which will ultimately lead to _____ actual aggregate saving.

Changes in spending modify income by an amount equal to the change in spending.

In the Keynesian aggregate expenditure model, which variable is assumed to be fixed?

Which of the following would NOT shift the investment demand schedule?

The marginal propensity to consumer plus the marginal propensity to save:

Which two countries currently have the highest savings rates?

Exploring Economics

Production, Economic Growth, and Trade

Supply and Demand

Markets and Government

Introduction to Macroeconomics

Measuring Inflation and Unemployment

Economic Growth

Aggregate Demand and Supply

Fiscal Policy and Debt

Saving, Investment, and the Financial System

Money Creation and the Federal Reserve

Monetary Policy

Macroeconomic Policy: Challenges in a Global Economy

International Trade

Open Economy Macroeconomics

Filters

The paradox of thrift suggests that when households intend to save more, they will _ consumption, which will ultimately lead to _ actual aggregate saving.