Question 1

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 2

Which of the following transactions is included in GDP?

Accepted Answer

A)  You buy a used car for $10,000. 
B)  An unemployed worker receives a check for $450 as unemployment benefits. 
C)  You buy a one-acre lot in Florida where you plan to build a beach house. 
D)  Toyota builds 1,000 Accords in Kentucky at a cost of $25,000 each but is unable to sell them and, therefore, they are added to inventory. 
A)  You buy a used car for $10,000. 
B)  An unemployed worker receives a check for $450 as unemployment benefits. 
C)  You buy a one-acre lot in Florida where you plan to build a beach house. 
D)  Toyota builds 1,000 Accords in Kentucky at a cost of $25,000 each but is unable to sell them and, therefore, they are added to inventory.

Question 3

Government spending is an injection in the sense that it

Accepted Answer

A)  increases the amount of total spending. 
B)  increases the size of the federal deficit. 
C)  decreases the amount of household saving. 
D)  decreases the amount of taxes paid. 
A)  increases the amount of total spending. 
B)  increases the size of the federal deficit. 
C)  decreases the amount of household saving. 
D)  decreases the amount of taxes paid.

Question 4

Discuss the major determinants of net exports.

Accepted Answer

National incomes: Although both exports

Question 5

Residential construction (new houses and apartments) are included in which component of GDP?

Accepted Answer

A)  government purchases 
B)  retail spending 
C)  investment spending 
D)  net exports 
A)  government purchases 
B)  retail spending 
C)  investment spending 
D)  net exports

Question 6

Most statistical studies on the relationship between real interest rates and saving conclude that higher real interest rates

Accepted Answer

A)  increase saving. 
B)  tend to decrease saving. 
C)  tend to decrease both consumption and saving. 
D)  have no effect on saving. 
A)  increase saving. 
B)  tend to decrease saving. 
C)  tend to decrease both consumption and saving. 
D)  have no effect on saving.

Question 7

Scatter diagrams are a useful way to depict the relationship between two variables.

Accepted Answer

A) True 
 B)False

Question 8

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 9

Changes in the value of stocks may play a big role in the consumption decisions of individuals.How would changes in the stock market affect the consumption function?

Accepted Answer

Corporate stocks are an increasingly pop

Question 10

The federal government's principal tool in altering consumer spending is changing

Accepted Answer

A)  corporate income taxes. 
B)  federal sales taxes. 
C)  unemployment insurance benefits. 
D)  personal income tax rates. 
A)  corporate income taxes. 
B)  federal sales taxes. 
C)  unemployment insurance benefits. 
D)  personal income tax rates.

Question 11

U.S.imports rise when income in the United States increases.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following will most likely cause movement along the consumption function?

Accepted Answer

A)  a change in disposable income 
B)  a change in interest rates 
C)  a change in tastes 
D)  a change in consumers' expectations 
A)  a change in disposable income 
B)  a change in interest rates 
C)  a change in tastes 
D)  a change in consumers' expectations

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

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 15

The difference between Gross National Product and Net National Product is the

Accepted Answer

A)  rate of inflation. 
B)  statistical discrepancy encountered in calculating GDP. 
C)  difference between real versus nominal GDP. 
D)  depreciation of the economy's capital stock. 
A)  rate of inflation. 
B)  statistical discrepancy encountered in calculating GDP. 
C)  difference between real versus nominal GDP. 
D)  depreciation of the economy's capital stock.

Question 16

Historical data representing consumption and disposable income reveals that

Accepted Answer

A)  during the 1930s, U.S.saving was at a high level. 
B)  U.S.citizens increased saving during World War II. 
C)  there is no systematic relationship between the two. 
D)  consumption rises faster than disposable income during recessions. 
A)  during the 1930s, U.S.saving was at a high level. 
B)  U.S.citizens increased saving during World War II. 
C)  there is no systematic relationship between the two. 
D)  consumption rises faster than disposable income during recessions.

Question 17

If a U.S.citizen buys a car produced in Germany, this transaction will add to

Accepted Answer

A)  U.S.aggregate demand. 
B)  U.S.aggregate supply. 
C)  German aggregate demand. 
D)  German imports. 
A)  U.S.aggregate demand. 
B)  U.S.aggregate supply. 
C)  German aggregate demand. 
D)  German imports.

Question 18

Which factors will cause the consumption function to shift? Which factors do not cause the function to shift?

Accepted Answer

The principal factors that will cause th

Question 19

The largest income component in the national income accounts is

Accepted Answer

A)  wages. 
B)  rents. 
C)  corporate profits. 
D)  interest. 
A)  wages. 
B)  rents. 
C)  corporate profits. 
D)  interest.

Question 20

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.

Exam 25: Aggregate Demand and the Powerful Consumer

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

Which of the following transactions is included in GDP?

Government spending is an injection in the sense that it

Discuss the major determinants of net exports.

Residential construction (new houses and apartments) are included in which component of GDP?

Most statistical studies on the relationship between real interest rates and saving conclude that higher real interest rates

Scatter diagrams are a useful way to depict the relationship between two variables.

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

Changes in the value of stocks may play a big role in the consumption decisions of individuals.How would changes in the stock market affect the consumption function?

The federal government's principal tool in altering consumer spending is changing

U.S.imports rise when income in the United States increases.

Which of the following will most likely cause movement along the consumption function?

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

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

The difference between Gross National Product and Net National Product is the

Historical data representing consumption and disposable income reveals that

If a U.S.citizen buys a car produced in Germany, this transaction will add to

Which factors will cause the consumption function to shift? Which factors do not cause the function to shift?

The largest income component in the national income accounts is

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

What Is Economics?

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: An Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: The Importance of Marginal Analysis

Securities: Business Finance, and the Economy: The Tail that Wags the Dog?

The Firm and the Industry under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets I: The Price System

The Shortcomings of Free Markets

The Market's Prime Achievement: Innovation and Growth

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: The Human Inputs

Poverty, Inequality, and Discrimination

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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