Question 1

The slope of the consumption function is equal to the marginal propensity to save.

Accepted Answer

A) True 
 B)False

Question 2

The sum of all factor payments in the economy yields

Accepted Answer

A)  gross domestic product. 
B)  national income. 
C)  disposable income. 
D)  net domestic product. 
A)  gross domestic product. 
B)  national income. 
C)  disposable income. 
D)  net domestic product.

Question 3

A decrease in disposable income causes a shift in the consumption function.

Accepted Answer

A) True 
 B)False

Question 4

The relationship between consumption and disposable income is very unreliable and unpredictable.

Accepted Answer

A) True 
 B)False

Question 5

In 1963, government economists assumed that the MPC for the United States was approximately 0.90.If taxes were cut by $9 billion, then consumer expenditures would initially be expected to

Accepted Answer

A)  decrease by $9.0 billion. 
B)  increase by $9.0 billion. 
C)  decrease by $8.1 billion. 
D)  increase by $8.1 billion. 
A)  decrease by $9.0 billion. 
B)  increase by $9.0 billion. 
C)  decrease by $8.1 billion. 
D)  increase by $8.1 billion.

Question 6

"Men are disposed, as a rule, and on the average, to increase their consumption as their income increases, but not by as much as the increase in their incomes." Which of the following is consistent with this statement by J.M.Keynes?

Accepted Answer

A)  The slope of the consumption function is positive and less than one. 
B)  The slope of the consumption function is greater than that of the 45-degree line. 
C)  The slope of the consumption function is negative. 
D)  The slope of the consumption function is equal to one. 
A)  The slope of the consumption function is positive and less than one. 
B)  The slope of the consumption function is greater than that of the 45-degree line. 
C)  The slope of the consumption function is negative. 
D)  The slope of the consumption function is equal to one.

Question 7

The relationship between consumption and disposable income is such that as

Accepted Answer

A)  consumption rises, disposable income falls. 
B)  disposable income rises, consumption rises. 
C)  disposable income rises, consumption falls. 
D)  disposable income rises, saving falls. 
A)  consumption rises, disposable income falls. 
B)  disposable income rises, consumption rises. 
C)  disposable income rises, consumption falls. 
D)  disposable income rises, saving falls.

Question 8

Because of recent corporate downsizing, Chuck loses his job.The most likely effect on his consumption function is a(n)

Accepted Answer

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

Question 9

Figure 8-2
  
-In Figure 8-2, which of the following moves can be explained by a decrease in disposable income?

Accepted Answer

A)  E to B 
B)  A to C 
C)  A to D 
D)  B to E 
A)  E to B 
B)  A to C 
C)  A to D 
D)  B to E

Question 10

Changes in the price level affect household wealth more than household income.

Accepted Answer

A) True 
 B)False

Question 11

When aggregate demand decreases rapidly, the economy is likely to experience

Accepted Answer

A)  inflation. 
B)  an economic boom. 
C)  economic growth. 
D)  recession. 
A)  inflation. 
B)  an economic boom. 
C)  economic growth. 
D)  recession.

Question 12

The relationship between consumer spending and disposable income is called the

Accepted Answer

A)  conjunction function. 
B)  consumption function. 
C)  aggregate demand function. 
D)  marginal spending function. 
A)  conjunction function. 
B)  consumption function. 
C)  aggregate demand function. 
D)  marginal spending function.

Question 13

Explain why national income and domestic product must be equal.

Accepted Answer

When a firm produces goods and sells the

Question 14

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

Exam 25: Aggregate Demand and the Powerful Consumer

The slope of the consumption function is equal to the marginal propensity to save.

The sum of all factor payments in the economy yields

A decrease in disposable income causes a shift in the consumption function.

The relationship between consumption and disposable income is very unreliable and unpredictable.

In 1963, government economists assumed that the MPC for the United States was approximately 0.90.If taxes were cut by $9 billion, then consumer expenditures would initially be expected to

"Men are disposed, as a rule, and on the average, to increase their consumption as their income increases, but not by as much as the increase in their incomes." Which of the following is consistent with this statement by J.M.Keynes?

The relationship between consumption and disposable income is such that as

Because of recent corporate downsizing, Chuck loses his job.The most likely effect on his consumption function is a(n)

Figure 8-2 -In Figure 8-2, which of the following moves can be explained by a decrease in disposable income?

Changes in the price level affect household wealth more than household income.

When aggregate demand decreases rapidly, the economy is likely to experience

The relationship between consumer spending and disposable income is called the

Explain why national income and domestic product must be equal.

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

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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