Question 1

Which of the following would shift the saving schedule upward?

Accepted Answer

A) a decrease in wealth 
B) a decrease in real interest rates 
C) consumer expectations of rising prices of products 
D) increased optimism about future incomes 
A) a decrease in wealth 
B) a decrease in real interest rates 
C) consumer expectations of rising prices of products 
D) increased optimism about future incomes

Question 2

The investment demand curve suggests that

Accepted Answer

A) changes in the real interest rate will not affect the amount invested. 
B) there is an inverse relationship between the real rate of interest and the level of investment spending. 
C) an increase in business taxes will tend to stimulate investment spending. 
D) there is a direct relationship between the real rate of interest and the level of investment spending. 
A) changes in the real interest rate will not affect the amount invested. 
B) there is an inverse relationship between the real rate of interest and the level of investment spending. 
C) an increase in business taxes will tend to stimulate investment spending. 
D) there is a direct relationship between the real rate of interest and the level of investment spending.

Question 3

The saving schedule is such that as aggregate income increases by a certain amount, saving

Accepted Answer

A) increases by the same amount as the increase in income. 
B) does not change. 
C) increases, but by a smaller amount. 
D) increases by an even larger amount. 
A) increases by the same amount as the increase in income. 
B) does not change. 
C) increases, but by a smaller amount. 
D) increases by an even larger amount.

Question 4

The 45-degree line on a graph relating consumption and income shows

Accepted Answer

A) all the points where the MPC is constant. 
B) all the points at which saving and income are equal. 
C) all the points at which consumption and income are equal. 
D) the amounts households will plan to save at each possible level of income. 
A) all the points where the MPC is constant. 
B) all the points at which saving and income are equal. 
C) all the points at which consumption and income are equal. 
D) the amounts households will plan to save at each possible level of income.

Question 5

The multiplier can be calculated as

Accepted Answer

A) 1/(MPS + MP
C) . 
B) MPC/MPS. 
C) 1/(1 − MP
C) . 
D) 1 − MPC = MPS. 
A) 1/(MPS + MP
C) . 
B) MPC/MPS. 
C) 1/(1 − MP
C) . 
D) 1 − MPC = MPS.

Question 6

If disposable income is $900 billion when the average propensity to consume is 0.9, it can be concluded that

Accepted Answer

A) the marginal propensity to consume is also 0.9. 
B) the marginal propensity to save is 0.1. 
C) consumption is $900 billion. 
D) saving is $90 billion. 
A) the marginal propensity to consume is also 0.9. 
B) the marginal propensity to save is 0.1. 
C) consumption is $900 billion. 
D) saving is $90 billion.

Question 7

In the late 1990s, the U.S.stock market boomed, causing U.S.consumption to rise.Economists refer to this outcome as the

Accepted Answer

A) Keynes effect. 
B) interest-rate effect. 
C) wealth effect. 
D) multiplier effect. 
A) Keynes effect. 
B) interest-rate effect. 
C) wealth effect. 
D) multiplier effect.

Question 8

The investment demand curve will shift to the left as the result of

Accepted Answer

A) business pessimism about future economic conditions. 
B) limited available productive capacity. 
C) an increase in the interest rate. 
D) a decrease in business taxes. 
A) business pessimism about future economic conditions. 
B) limited available productive capacity. 
C) an increase in the interest rate. 
D) a decrease in business taxes.

Question 9

If disposable income increases from $912 to $927 billion and MPC = 0.6, then consumption will increase by

Accepted Answer

A) $6 billion. 
B) $9 billion. 
C) $54 billion. 
D) $56 billion. 
A) $6 billion. 
B) $9 billion. 
C) $54 billion. 
D) $56 billion.

Question 10

Assume a machine that has a useful life of only one year costs $2,000.Assume, also, that net of such operating costs as power, taxes, and so forth, the additional revenue from the output of this machine is expected to be $2,300.If the firm finds it can borrow funds at an interest rate of 10 percent, the firm should

Accepted Answer

A) not purchase the machine, because the expected rate of return exceeds the interest rate. 
B) not purchase the machine, because the interest rate exceeds the expected rate of return. 
C) purchase the machine because the expected rate of return exceeds the interest rate. 
D) purchase the machine because the interest rate exceeds the expected rate of return. 
A) not purchase the machine, because the expected rate of return exceeds the interest rate. 
B) not purchase the machine, because the interest rate exceeds the expected rate of return. 
C) purchase the machine because the expected rate of return exceeds the interest rate. 
D) purchase the machine because the interest rate exceeds the expected rate of return.

Question 11

The size of the multiplier is equal to the

Accepted Answer

A) slope of the consumption schedule. 
B) reciprocal of the slope of the consumption schedule. 
C) slope of the saving schedule. 
D) reciprocal of the slope of the saving schedule. 
A) slope of the consumption schedule. 
B) reciprocal of the slope of the consumption schedule. 
C) slope of the saving schedule. 
D) reciprocal of the slope of the saving schedule.

Question 12

If the MPC is 0.70 and investment increases by $3 billion, the equilibrium GDP will

Accepted Answer

A) increase by $10 billion. 
B) increase by $2.10 billion. 
C) decrease by $4.29 billion. 
D) increase by $4.29 billion. 
A) increase by $10 billion. 
B) increase by $2.10 billion. 
C) decrease by $4.29 billion. 
D) increase by $4.29 billion.

Question 13

A decline in the real interest rate will

Accepted Answer

A) increase the amount of investment spending. 
B) shift the investment schedule downward. 
C) shift the investment demand curve to the right. 
D) shift the investment demand curve to the left. 
A) increase the amount of investment spending. 
B) shift the investment schedule downward. 
C) shift the investment demand curve to the right. 
D) shift the investment demand curve to the left.

Question 14

If the real rate of interest increases, then the level of investment in the economy will also increase.

Accepted Answer

A) True 
 B)False

Question 15

If the slope of the consumption schedule is 0.75, then the slope of the saving schedule

Accepted Answer

A) is 0.25. 
B) is 0.75. 
C) is 1.25. 
D) cannot be determined from the data. 
A) is 0.25. 
B) is 0.75. 
C) is 1.25. 
D) cannot be determined from the data.

Question 16

The multiplier measures the change in real GDP that results from a given change in the price level.

Accepted Answer

A) True 
 B)False

Question 17

If the MPS is only half as large as the MPC, the multiplier is

Accepted Answer

A) 2. 
B) 3. 
C) 4. 
D) 5. 
A) 2. 
B) 3. 
C) 4. 
D) 5.

Question 18

The multiplier is useful in determining the

Accepted Answer

A) full-employment unemployment rate. 
B) level of business inventories. 
C) change in the rate of inflation from a change in the interest rate. 
D) change in GDP resulting from a change in spending. 
A) full-employment unemployment rate. 
B) level of business inventories. 
C) change in the rate of inflation from a change in the interest rate. 
D) change in GDP resulting from a change in spending.

Question 19

The APC is calculated as

Accepted Answer

A) change in consumption/change in income. 
B) consumption/income. 
C) change in income/change in consumption. 
D) income/consumption. 
A) change in consumption/change in income. 
B) consumption/income. 
C) change in income/change in consumption. 
D) income/consumption.

Question 20

As disposable income decreases, the

Accepted Answer

A) average propensity to consume increases. 
B) average propensity to consume decreases. 
C) level of consumption increases. 
D) level of saving increases. 
A) average propensity to consume increases. 
B) average propensity to consume decreases. 
C) level of consumption increases. 
D) level of saving increases.

Exam 30: Basic Macroeconomic Relationships

Which of the following would shift the saving schedule upward?

The investment demand curve suggests that

The saving schedule is such that as aggregate income increases by a certain amount, saving

The 45-degree line on a graph relating consumption and income shows

The multiplier can be calculated as

If disposable income is $900 billion when the average propensity to consume is 0.9, it can be concluded that

In the late 1990s, the U.S.stock market boomed, causing U.S.consumption to rise.Economists refer to this outcome as the

The investment demand curve will shift to the left as the result of

If disposable income increases from $912 to $927 billion and MPC = 0.6, then consumption will increase by

The size of the multiplier is equal to the

If the MPC is 0.70 and investment increases by $3 billion, the equilibrium GDP will

A decline in the real interest rate will

If the real rate of interest increases, then the level of investment in the economy will also increase.

If the slope of the consumption schedule is 0.75, then the slope of the saving schedule

The multiplier measures the change in real GDP that results from a given change in the price level.

If the MPS is only half as large as the MPC, the multiplier is

The multiplier is useful in determining the

The APC is calculated as

As disposable income decreases, the

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

Elasticity

Utility Maximization

Behavioral Economics

Businesses and the Costs of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Technology, Rd, and Efficiency

The Demand for Resources

Wage Determination

Rent, Interest, and Profit

Natural Resource and Energy Economics

Public Finance: Expenditures and Taxes

Antitrust Policy and Regulation

Agriculture: Economics and Policy

Income Inequality, Poverty, and Discrimination

Health Care

Immigration

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, and Debt

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

Filters