Question 1

If U.S.consumers become more optimistic about their future income and wealth, the consumption function will shift upward.

Accepted Answer

A) True 
 B)False

Question 2

In which of the following years was a tax cut ineffective in stimulating aggregate demand?

Accepted Answer

A)  1964 
B)  1975 
C)  1981 
D)  1999 
A)  1964 
B)  1975 
C)  1981 
D)  1999

Question 3

U.S.imports are most likely to increase when

Accepted Answer

A)  U.S.GDP decreases. 
B)  U.S.unemployment rates fall. 
C)  U.S.prices fall. 
D)  foreign prices rise. 
A)  U.S.GDP decreases. 
B)  U.S.unemployment rates fall. 
C)  U.S.prices fall. 
D)  foreign prices rise.

Question 4

Explain why it makes a difference if consumers consider a tax cut temporary rather than permanent.What does this explanation tell us about the importance of government credibility? Put this in the context of the 2008 and 2009 tax cuts favored by President Bush and President Obama.

Accepted Answer

Consumers tend to base their spending de

Question 5

An economic boom in one country usually causes a recession in other countries.

Accepted Answer

A) True 
 B)False

Question 6

In the national income accounts, new investment goods are considered

Accepted Answer

A)  intermediate goods, and therefore, not counted. 
B)  final goods. 
C)  subtractions from final output. 
D)  depreciated goods 
A)  intermediate goods, and therefore, not counted. 
B)  final goods. 
C)  subtractions from final output. 
D)  depreciated goods

Question 7

The main reason that the 1975, 2008, and 2009 tax cuts did not have a large effect on GDP is that they were

Accepted Answer

A)  temporary surcharges rather than permanent surcharges. 
B)  permanent surcharges rather than temporary surcharges. 
C)  temporary tax cuts rather than a permanent tax cuts. 
D)  permanent tax cuts rather than a temporary tax cuts. 
A)  temporary surcharges rather than permanent surcharges. 
B)  permanent surcharges rather than temporary surcharges. 
C)  temporary tax cuts rather than a permanent tax cuts. 
D)  permanent tax cuts rather than a temporary tax cuts.

Question 8

The national income accounts include a value for the amount of capital stock "used up" during the production of current output.This dollar amount is called

Accepted Answer

A)  appreciation. 
B)  dollarization. 
C)  amortization. 
D)  depreciation. 
A)  appreciation. 
B)  dollarization. 
C)  amortization. 
D)  depreciation.

Question 9

If DI falls by $100 billion, and C falls by $90 billion, the slope of the consumption is

Accepted Answer

A)  -0.45. 
B)  0.45. 
C)  -0.90. 
D)  0.90. 
E)  0.50. 
A)  -0.45. 
B)  0.45. 
C)  -0.90. 
D)  0.90. 
E)  0.50.

Question 10

What is disposable income? How is it calculated?

Accepted Answer

Disposable income (DI) is the sum of the

Question 11

The purchase of a new house is included in government spending.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is an example of wealth?

Accepted Answer

A)  a yearly salary of $40,000 
B)  a mutual fund balance of $1,000 
C)  rental payments of $3,000 per month 
D)  stock dividends of $500 per quarter 
A)  a yearly salary of $40,000 
B)  a mutual fund balance of $1,000 
C)  rental payments of $3,000 per month 
D)  stock dividends of $500 per quarter

Question 13

One of the effects of a change in disposable income could not be a(n)

Accepted Answer

A)  movement up along the consumption function. 
B)  movement down along the consumption function. 
C)  change in the amount of consumption expenditures. 
D)  upward shift of the consumption function. 
A)  movement up along the consumption function. 
B)  movement down along the consumption function. 
C)  change in the amount of consumption expenditures. 
D)  upward shift of the consumption function.

Question 14

Adding depreciation to net national product yields

Accepted Answer

A)  disposable income (DI). 
B)  personal income (PI). 
C)  net national product (NNP). 
D)  gross domestic product (GDP). 
A)  disposable income (DI). 
B)  personal income (PI). 
C)  net national product (NNP). 
D)  gross domestic product (GDP).

Question 15

Price level changes have their greatest effect on consumers'

Accepted Answer

A)  income. 
B)  wealth. 
C)  debt. 
D)  expectations. 
A)  income. 
B)  wealth. 
C)  debt. 
D)  expectations.

Question 16

Disposable income is obtained by

Accepted Answer

A)  subtracting personal income taxes from personal income. 
B)  subtracting personal income taxes from national income. 
C)  adding transfer payments to national income. 
D)  adding transfer payments to personal income. 
A)  subtracting personal income taxes from personal income. 
B)  subtracting personal income taxes from national income. 
C)  adding transfer payments to national income. 
D)  adding transfer payments to personal income.

Question 17

The government component (G) of total output includes goods and services purchased by

Accepted Answer

A)  the federal government plus transfer payments. 
B)  all government institutions plus transfer payments. 
C)  all government institutions. 
D)  all government institutions plus tax revenues. 
A)  the federal government plus transfer payments. 
B)  all government institutions plus transfer payments. 
C)  all government institutions. 
D)  all government institutions plus tax revenues.

Question 18

Figure 8-1
  
-Given the scatter diagram in Figure 8-1, how much will consumption decrease if the price level rises by 5 percent?

Accepted Answer

A)  $50 billion 
B)  $100 billion 
C)  $200 billion 
D)  cannot be determined 
A)  $50 billion 
B)  $100 billion 
C)  $200 billion 
D)  cannot be determined

Question 19

Government spending is a leakage out of the circular flow of income and spending.

Accepted Answer

A) True 
 B)False

Question 20

Why is investment spending a highly volatile component?

Accepted Answer

Several factors influence how much busin

Exam 25: Aggregate Demand and the Powerful Consumer

If U.S.consumers become more optimistic about their future income and wealth, the consumption function will shift upward.

In which of the following years was a tax cut ineffective in stimulating aggregate demand?

U.S.imports are most likely to increase when

Explain why it makes a difference if consumers consider a tax cut temporary rather than permanent.What does this explanation tell us about the importance of government credibility? Put this in the context of the 2008 and 2009 tax cuts favored by President Bush and President Obama.

An economic boom in one country usually causes a recession in other countries.

In the national income accounts, new investment goods are considered

The main reason that the 1975, 2008, and 2009 tax cuts did not have a large effect on GDP is that they were

The national income accounts include a value for the amount of capital stock "used up" during the production of current output.This dollar amount is called

If DI falls by $100 billion, and C falls by $90 billion, the slope of the consumption is

What is disposable income? How is it calculated?

The purchase of a new house is included in government spending.

Which of the following is an example of wealth?

One of the effects of a change in disposable income could not be a(n)

Adding depreciation to net national product yields

Price level changes have their greatest effect on consumers'

Disposable income is obtained by

The government component (G) of total output includes goods and services purchased by

Figure 8-1 -Given the scatter diagram in Figure 8-1, how much will consumption decrease if the price level rises by 5 percent?

Government spending is a leakage out of the circular flow of income and spending.

Why is investment spending a highly volatile component?

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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