Question 1

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.

Question 2

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 3

Money-fixed assets include government bonds, corporate bonds, and certificates of deposit.

Accepted Answer

A) True 
 B)False

Question 4

Consumption functions would shift downward if

Accepted Answer

A) disposable incomes fall. 
B) disposable incomes rise. 
C) price levels fall. 
D) price levels rise. 
A) disposable incomes fall. 
B) disposable incomes rise. 
C) price levels fall. 
D) price levels rise.

Question 5

Figure 8-2
​  
-In Figure 8-2, which of the following moves can be explained by a decrease in the price level?

Accepted Answer

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

Question 6

Which of the following observations concerning GDP calculations is true?

Accepted Answer

A) Goods and services produced by governments are valued at market price. 
B) Inventories are treated as if they are yet to be sold. 
C) Goods produced but not sold during the year are counted in that year's GDP. 
D) Goods that firms add to their inventories do not count in the GDP. 
A) Goods and services produced by governments are valued at market price. 
B) Inventories are treated as if they are yet to be sold. 
C) Goods produced but not sold during the year are counted in that year's GDP. 
D) Goods that firms add to their inventories do not count in the GDP.

Question 7

Figure 8-2
​  
-In Figure 8-2, which of the following moves can be explained by a tax cut?

Accepted Answer

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

Question 8

Which of the following is not part of the investment component of GDP?

Accepted Answer

A) Residential construction 
B) Plant, equipment, and software 
C) Net imports 
D) Business structures 
A) Residential construction 
B) Plant, equipment, and software 
C) Net imports 
D) Business structures

Question 9

When saving leaks out of the circular flow of income and spending,

Accepted Answer

A) total income necessarily falls. 
B) it leaks out of the financial system. 
C) it flows to borrowers. 
D) it increases the size of the spending flow. 
A) total income necessarily falls. 
B) it leaks out of the financial system. 
C) it flows to borrowers. 
D) it increases the size of the spending flow.

Question 10

Aggregate demand is the total demand for

Accepted Answer

A) all intermediate and final goods. 
B) all monetary investments. 
C) real and financial investments. 
D) all final goods and services. 
A) all intermediate and final goods. 
B) all monetary investments. 
C) real and financial investments. 
D) all final goods and services.

Question 11

Historical data depicted on a scatter diagram show that consumer spending and disposable income

Accepted Answer

A) converge as income grows. 
B) generally move together. 
C) diverge as income grows. 
D) show no clear relationship. 
A) converge as income grows. 
B) generally move together. 
C) diverge as income grows. 
D) show no clear relationship.

Question 12

Lower real interest rates

Accepted Answer

A) tend to shift the consumption function upward. 
B) have no significant effect on consumption. 
C) tend to shift the consumption function downward. 
D) tend to move the consumer upward along the consumption function. 
A) tend to shift the consumption function upward. 
B) have no significant effect on consumption. 
C) tend to shift the consumption function downward. 
D) tend to move the consumer upward along the consumption function.

Question 13

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 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

Question 15

If the MPC is 0.80, then a change in disposable income of $60 billion will lead to an initial change in consumption of

Accepted Answer

A) $30 billion. 
B) $42 billion. 
C) $48 billion. 
D) $60 billion. 
E) $70 billion. 
A) $30 billion. 
B) $42 billion. 
C) $48 billion. 
D) $60 billion. 
E) $70 billion.

Question 16

The majority of payments made by the federal government are for

Accepted Answer

A) transfer payments. 
B) administrative expenses. 
C) foreign aid. 
D) defense purchases. 
A) transfer payments. 
B) administrative expenses. 
C) foreign aid. 
D) defense purchases.

Question 17

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 18

If consumers' expectations about future income are very optimistic, then we should expect

Accepted Answer

A) the consumption function to shift downward. 
B) consumers to move up along the consumption function. 
C) the consumption function to shift upward. 
D) consumers to move down along the consumption function. 
A) the consumption function to shift downward. 
B) consumers to move up along the consumption function. 
C) the consumption function to shift upward. 
D) consumers to move down along the consumption function.

Question 19

Among the following, which would not be considered part of the investment component of GDP?

Accepted Answer

A) Manufacturers' equipment 
B) Buying corporate stock 
C) New houses 
D) Business structures 
A) Manufacturers' equipment 
B) Buying corporate stock 
C) New houses 
D) Business structures

Question 20

Which of the following methods is not used to calculate GDP?

Accepted Answer

A) The sum of all the final goods and services produced by a country's resources 
B) The sum of all factor payments plus depreciation and indirect business taxes 
C) The sum of all values added at each stage of production 
D) The sum of all spending on final goods and services 
A) The sum of all the final goods and services produced by a country's resources 
B) The sum of all factor payments plus depreciation and indirect business taxes 
C) The sum of all values added at each stage of production 
D) The sum of all spending on final goods and services

Exam 24: Aggregate Demand and the Powerful Consumer

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

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

Money-fixed assets include government bonds, corporate bonds, and certificates of deposit.

Consumption functions would shift downward if

Figure 8-2 ​ -In Figure 8-2, which of the following moves can be explained by a decrease in the price level?

Which of the following observations concerning GDP calculations is true?

Figure 8-2 ​ -In Figure 8-2, which of the following moves can be explained by a tax cut?

Which of the following is not part of the investment component of GDP?

When saving leaks out of the circular flow of income and spending,

Aggregate demand is the total demand for

Historical data depicted on a scatter diagram show that consumer spending and disposable income

Lower real interest rates

The most volatile component of aggregate demand is

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

If the MPC is 0.80, then a change in disposable income of $60 billion will lead to an initial change in consumption of

The majority of payments made by the federal government are for

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

If consumers' expectations about future income are very optimistic, then we should expect

Among the following, which would not be considered part of the investment component of GDP?

Which of the following methods is not used to calculate GDP?

What Is Economics

The Economony: 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

The Financial Markets and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

The Case for Free Markets: the Price System

Monopoly

Between Competition and Monopoly

Limiting Market Power: Antitrust and Regulation

The Shortcomings of Free Markets

The Economics of 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

Contemporary Issues in the Useconomy

Filters

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

Figure 8-2 -In Figure 8-2, which of the following moves can be explained by a tax cut?