Question 1

If real disposable income is $300 billion and real consumer expenditures are $250 billion, it can be assumed that

Accepted Answer

A)  the government is spending the difference. 
B)  the difference is being invested. 
C)  households are saving the difference. 
D)  transfer payments make up the difference. 
A)  the government is spending the difference. 
B)  the difference is being invested. 
C)  households are saving the difference. 
D)  transfer payments make up the difference.

Question 2

Bank accounts and bonds are examples of money-fixed assets.

Accepted Answer

A) True 
 B)False

Question 3

Suppose the stock market rises, causing a rapid increase in consumers' wealth.This would lead to

Accepted Answer

A)  a downward movement along the consumption function. 
B)  a downward shift of the consumption function. 
C)  an upward movement along the consumption function. 
D)  an upward shift of the consumption function. 
A)  a downward movement along the consumption function. 
B)  a downward shift of the consumption function. 
C)  an upward movement along the consumption function. 
D)  an upward shift of the consumption function.

Question 4

A major employer in a small town announces upcoming major layoffs of employees.What should we expect to happen to the consumption functions of the affected employees?

Accepted Answer

A)  the consumption functions will shift upward. 
B)  most employees will move upward along their consumption functions 
C)  the consumption functions will shift downward 
D)  most employees will move downward along their consumption functions 
A)  the consumption functions will shift upward. 
B)  most employees will move upward along their consumption functions 
C)  the consumption functions will shift downward 
D)  most employees will move downward along their consumption functions

Question 5

The accounting identity for the economy's factor payments can be written as ____.

Accepted Answer

A)  GDP = wages + interest + rents + profits 
B)  GDP = consumption + investment + government + intermediate goods + net exports 
C)  GDP = wages + interest + rents + net exports 
D)  GDP = wages + interest + rents + saving + investment 
A)  GDP = wages + interest + rents + profits 
B)  GDP = consumption + investment + government + intermediate goods + net exports 
C)  GDP = wages + interest + rents + net exports 
D)  GDP = wages + interest + rents + saving + investment

Question 6

National income can be calculated by subtracting

Accepted Answer

A)  depreciation from GDP. 
B)  indirect business taxes from GDP. 
C)  depreciation and indirect business taxes from GDP. 
D)  transfer payments and taxes from GDP. 
A)  depreciation from GDP. 
B)  indirect business taxes from GDP. 
C)  depreciation and indirect business taxes from GDP. 
D)  transfer payments and taxes from GDP.

Question 7

National income is the sum of

Accepted Answer

A)  wages and profits. 
B)  wages, interest, profits, and rent. 
C)  interest and rent. 
D)  wages, transfer payments, and tax revenues. 
A)  wages and profits. 
B)  wages, interest, profits, and rent. 
C)  interest and rent. 
D)  wages, transfer payments, and tax revenues.

Question 8

In economic analysis, which of the following is considered an injection?

Accepted Answer

A)  saving 
B)  taxes 
C)  imports 
D)  exports 
A)  saving 
B)  taxes 
C)  imports 
D)  exports

Question 9

Which of the following would be added to U.S.national income?

Accepted Answer

A)  an American consumer buying French wine 
B)  an American business selling aircraft to British Airways 
C)  a Swedish firm selling mobile phones to Americans 
D)  a French firm buying a Swedish cellular phone 
A)  an American consumer buying French wine 
B)  an American business selling aircraft to British Airways 
C)  a Swedish firm selling mobile phones to Americans 
D)  a French firm buying a Swedish cellular phone

Question 10

Tax reductions should also reduce the amount of consumer expenditures.

Accepted Answer

A) True 
 B)False

Question 11

After years of hard work in the field of macroeconomics, you win the Nobel Prize in economics (currently about $1.5 million).What is the most likely effect of this prize on your consumption function?

Accepted Answer

A)  It will shift downward temporarily. 
B)  It will shift upward temporarily. 
C)  It will shift downward permanently. 
D)  It will shift upward permanently. 
E)  none of the above 
A)  It will shift downward temporarily. 
B)  It will shift upward temporarily. 
C)  It will shift downward permanently. 
D)  It will shift upward permanently. 
E)  none of the above

Question 12

Consumer spending is an injection in the circular flow of income and spending.

Accepted Answer

A) True 
 B)False

Question 13

If households decrease the amount of bank account withdrawals, the consumption function may shift upward.

Accepted Answer

A) True 
 B)False

Question 14

The system of measurement for expressing macroeconomic data is called

Accepted Answer

A)  national income accounting. 
B)  balance of payment accounting. 
C)  generally accepted accounting principles. 
D)  double entry bookkeeping. 
A)  national income accounting. 
B)  balance of payment accounting. 
C)  generally accepted accounting principles. 
D)  double entry bookkeeping.

Question 15

Most older persons regularly spend more than their current disposable income.How is this possible?

Accepted Answer

A)  They receive government transfer payments. 
B)  They work to supplement their retirement income. 
C)  They borrow and increase their debt levels. 
D)  They withdraw funds from accumulated wealth. 
A)  They receive government transfer payments. 
B)  They work to supplement their retirement income. 
C)  They borrow and increase their debt levels. 
D)  They withdraw funds from accumulated wealth.

Question 16

Saving is a leakage in the sense that

Accepted Answer

A)  saving is lost to the economy and ultimately leads to stagnation. 
B)  the financial system often makes negative profits. 
C)  it often accompanies a trade deficit. 
D)  consumers spend less than their total income. 
A)  saving is lost to the economy and ultimately leads to stagnation. 
B)  the financial system often makes negative profits. 
C)  it often accompanies a trade deficit. 
D)  consumers spend less than their total income.

Question 17

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 18

The difference between national income and disposable income is

Accepted Answer

A)  residential investment. 
B)  federal deficits. 
C)  net exports. 
D)  financial investment. 
E)  the amount of taxes collected. 
A)  residential investment. 
B)  federal deficits. 
C)  net exports. 
D)  financial investment. 
E)  the amount of taxes collected.

Question 19

Economists expect the relationship between consumption and disposable income to be

Accepted Answer

A)  unpredictable. 
B)  transitory. 
C)  fixed. 
D)  inverse 
E)  stable. 
A)  unpredictable. 
B)  transitory. 
C)  fixed. 
D)  inverse 
E)  stable.

Question 20

Most people base their current consumption spending at least partially on

Accepted Answer

A)  short-run debt. 
B)  long-run debt. 
C)  long-run real interest rates. 
D)  long-run income. 
A)  short-run debt. 
B)  long-run debt. 
C)  long-run real interest rates. 
D)  long-run income.

Exam 25: Aggregate Demand and the Powerful Consumer

If real disposable income is $300 billion and real consumer expenditures are $250 billion, it can be assumed that

Bank accounts and bonds are examples of money-fixed assets.

Suppose the stock market rises, causing a rapid increase in consumers' wealth.This would lead to

A major employer in a small town announces upcoming major layoffs of employees.What should we expect to happen to the consumption functions of the affected employees?

The accounting identity for the economy's factor payments can be written as ____.

National income can be calculated by subtracting

National income is the sum of

In economic analysis, which of the following is considered an injection?

Which of the following would be added to U.S.national income?

Tax reductions should also reduce the amount of consumer expenditures.

After years of hard work in the field of macroeconomics, you win the Nobel Prize in economics (currently about $1.5 million).What is the most likely effect of this prize on your consumption function?

Consumer spending is an injection in the circular flow of income and spending.

If households decrease the amount of bank account withdrawals, the consumption function may shift upward.

The system of measurement for expressing macroeconomic data is called

Most older persons regularly spend more than their current disposable income.How is this possible?

Saving is a leakage in the sense that

The most volatile component of aggregate demand is

The difference between national income and disposable income is

Economists expect the relationship between consumption and disposable income to be

Most people base their current consumption spending at least partially on

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

Filters