Question 1

If households consume less at each level of disposable income, they are

Accepted Answer

A)  saving more. 
B)  saving less. 
C)  spending more. 
D)  working less. 
A)  saving more. 
B)  saving less. 
C)  spending more. 
D)  working less.

Question 2

The numerical value of the multiplier will be smaller the

Accepted Answer

A)  larger the average propensity to consume. 
B)  larger the slope of the saving schedule. 
C)  larger the slope of the consumption schedule. 
D)  smaller the slope of the saving schedule. 
A)  larger the average propensity to consume. 
B)  larger the slope of the saving schedule. 
C)  larger the slope of the consumption schedule. 
D)  smaller the slope of the saving schedule.

Question 3

Suppose a family's consumption exceeds its disposable income. This means that its

Accepted Answer

A)  MPC is greater than 1. 
B)  MPS is negative. 
C)  APC is greater than 1. 
D)  APS is positive. 
A)  MPC is greater than 1. 
B)  MPS is negative. 
C)  APC is greater than 1. 
D)  APS is positive.

Question 4

Refer to the given diagram. The marginal propensity to consume is equal to

Accepted Answer

A)  AE/0E. 
B)  CF/CD. 
C)  CB/AB. 
D)  CD/CF. 
A)  AE/0E. 
B)  CF/CD. 
C)  CB/AB. 
D)  CD/CF.

Question 5

The size of the MPC is assumed to be

Accepted Answer

A)  less than zero. 
B)  greater than one. 
C)  greater than zero but less than one. 
D)  two or more. 
A)  less than zero. 
B)  greater than one. 
C)  greater than zero but less than one. 
D)  two or more.

Question 6

$$\begin{array} { | c | c | } 
\hline \text { Disposable Income } & \text { Consumption } \
\hline \$ 300 & \$ 310 \
\hline 350 & 340 \
\hline 400 & 370 \
\hline 450 & 400 \
\hline 500 & 430 \
\hline
\end{array}$$ The table shows a consumption schedule. At the $300 level of disposable income,

Accepted Answer

A)  the marginal propensity to save is 0.80. 
B)  the average propensity to consume is 0.60. 
C)  the average propensity to save is 0.30. 
D)  there is a dissaving of $10. 
A)  the marginal propensity to save is 0.80. 
B)  the average propensity to consume is 0.60. 
C)  the average propensity to save is 0.30. 
D)  there is a dissaving of $10.

Question 7

Which of the following is correct?

Accepted Answer

A)  APC + APS = 1. 
B)  APC + MPS = 1. 
C)  APS + MPC = 1. 
D)  APS + MPS = 1. 
A)  APC + APS = 1. 
B)  APC + MPS = 1. 
C)  APS + MPC = 1. 
D)  APS + MPS = 1.

Question 8

Refer to the given saving schedule. As income falls from level 3 to level 2, the amount of

Accepted Answer

A)  dissaving decreases. 
B)  dissaving increases. 
C)  saving decreases. 
D)  saving increases. 
A)  dissaving decreases. 
B)  dissaving increases. 
C)  saving decreases. 
D)  saving increases.

Question 9

$$\begin{array} { | c | c | } 
\hline \text { Disposable Income } & \text { Consumption } \
\hline \$ 200 & \$ 205 \
\hline 225 & 225 \
\hline 250 & 245 \
\hline 275 & 265 \
\hline 300 & 285 \
\hline
\end{array}$$ Refer to the given data. If disposable income was $325, we would expect consumption to be

Accepted Answer

A)  $315. 
B)  $305. 
C)  $20. 
D)  $290. 
A)  $315. 
B)  $305. 
C)  $20. 
D)  $290.

Question 10

Assume a machine that has a useful life of only one year costs $2,000. Assume, also, that net of such operating costs as power, taxes, and so forth, the additional revenue from the output of this machine is
Expected to be $2,300. If the ﬁrm ﬁnds it can borrow funds at an interest rate of 10 percent, the ﬁrm
Should

Accepted Answer

A)  not purchase the machine, because the expected rate of return exceeds the interest rate. 
B)  not purchase the machine, because the interest rate exceeds the expected rate of return. 
C)  purchase the machine because the expected rate of return exceeds the interest rate. 
D)  purchase the machine because the interest rate exceeds the expected rate of return. 
A)  not purchase the machine, because the expected rate of return exceeds the interest rate. 
B)  not purchase the machine, because the interest rate exceeds the expected rate of return. 
C)  purchase the machine because the expected rate of return exceeds the interest rate. 
D)  purchase the machine because the interest rate exceeds the expected rate of return.

Question 11

When the consumption schedule is plotted on a graph,

Accepted Answer

A)  consumption is on the horizontal axis and saving is on the vertical axis. 
B)  consumption is on the vertical axis and saving is on the horizontal axis. 
C)  consumption is on the horizontal axis and disposable income is on the vertical axis. 
D)  consumption is on the vertical axis and disposable income is on the horizontal axis. 
A)  consumption is on the horizontal axis and saving is on the vertical axis. 
B)  consumption is on the vertical axis and saving is on the horizontal axis. 
C)  consumption is on the horizontal axis and disposable income is on the vertical axis. 
D)  consumption is on the vertical axis and disposable income is on the horizontal axis.

Question 12

Refer to the diagram. The marginal propensity to consume is

Accepted Answer

A)  0.4. 
B)  0.6. 
C)  0.5. 
D)  0.8. 
A)  0.4. 
B)  0.6. 
C)  0.5. 
D)  0.8.

Question 13

A decline in disposable income

Accepted Answer

A)  increases consumption by moving upward along a speciﬁc consumption schedule. 
B)  decreases consumption because it shifts the consumption schedule downward. 
C)  decreases consumption by moving downward along a speciﬁc consumption schedule. 
D)  increases consumption because it shifts the consumption schedule upward. 
A)  increases consumption by moving upward along a speciﬁc consumption schedule. 
B)  decreases consumption because it shifts the consumption schedule downward. 
C)  decreases consumption by moving downward along a speciﬁc consumption schedule. 
D)  increases consumption because it shifts the consumption schedule upward.

Question 14

$\begin{array}{|l|c|c|c|}
\hline & \text { Change in income } & \begin{array}{c}
\text { Change in } \
\text { Consumption }
\end{array} & \text { Change in Saving } \
\hline \text { Assumed Increase in Investment } & \$ 20 & \$ & \$ 4.00 \
\hline \text { Second Round } & \$ & \$ 12.80 & \$ \
\hline \text { All Other Rounds } & \$ & \$ 51.20 & \$ \
\hline \text { Totals } & \$ & \$ & \$ 20.00 \
\hline
\end{array}$ Refer to the given table, which illustrates the multiplier process. The marginal propensity to consume is

Accepted Answer

A)  0.5. 
B)  0.75. 
C)  0.8. 
D)  0.9. 
A)  0.5. 
B)  0.75. 
C)  0.8. 
D)  0.9.

Question 15

$$\begin{array} { | l | c | c | c | } 
\hline & \text { Change in Income } & \begin{array} { c } 
\text { Change in } \
\text { Consumption }
\end{array} & \text { Change in Saving } \
\hline \text { Assumed Increase in Investment } & \$ 20 & \$ & \$ 4.00 \
\hline \text { Second Round } & \$ & \$ 12.80 & \$ \
\hline \text { All Other Rounds } & \$ & \$ 51.20 & \$ \
\hline \text { Totals } & \$ & \$ & \$ 20.00 \
\hline
\end{array}$$ Refer to the given table, which illustrates the multiplier process. The multiplier in this economy is

Accepted Answer

A)  2. 
B)  4. 
C)  5. 
D)  10. 
A)  2. 
B)  4. 
C)  5. 
D)  10.

Question 16

Refer to the given diagram. The economy is dissaving

Accepted Answer

A)  in the amount CD. 
B)  at all income levels greater than E. 
C)  at income level H. 
D)  at income level E. 
A)  in the amount CD. 
B)  at all income levels greater than E. 
C)  at income level H. 
D)  at income level E.

Question 17

Refer to the given consumption schedules. DI signiﬁes disposable income and C represents consumption expenditures. All ﬁgures are in billions of dollars. At an income level of $400 billion, the
Average propensity to save in economy (2) is

Accepted Answer

A)  0.9125. 
B)  0.0725. 
C)  0.0875. 
D)  0.9305. 
A)  0.9125. 
B)  0.0725. 
C)  0.0875. 
D)  0.9305.

Question 18

A speciﬁc investment will be undertaken if the expected rate of return, r, exceeds the interest rate, i.

Accepted Answer

A) True 
 B)False

Question 19

The actual multiplier effect in the U.S. economy is less than the multiplier effect in the text examples because

Accepted Answer

A)  the real-world MPS is larger than the MPS in the examples. 
B)  in addition to saving, households use some of any increase in income to buy imported goods and to pay additional taxes. 
C)  the gap between the nominal interest rate and the real interest rate widens as the economy expands or contracts. 
D)  the MPC in the United States is greater than 1. 
A)  the real-world MPS is larger than the MPS in the examples. 
B)  in addition to saving, households use some of any increase in income to buy imported goods and to pay additional taxes. 
C)  the gap between the nominal interest rate and the real interest rate widens as the economy expands or contracts. 
D)  the MPC in the United States is greater than 1.

Question 20

The given ﬁgure suggests that

Accepted Answer

A)  consumption would be $60 billion even if income were zero. 
B)  saving is zero at the $120 billion income level. 
C)  as income increases, consumption decreases as a percentage of income. 
D)  as income increases, consumption decreases absolutely. 
A)  consumption would be $60 billion even if income were zero. 
B)  saving is zero at the $120 billion income level. 
C)  as income increases, consumption decreases as a percentage of income. 
D)  as income increases, consumption decreases absolutely.

If households consume less at each level of disposable income, they are

The numerical value of the multiplier will be smaller the

Suppose a family's consumption exceeds its disposable income. This means that its

Refer to the given diagram. The marginal propensity to consume is equal to

The size of the MPC is assumed to be

Disposable Income Consumption \ 300 \ 310 350 340 400 370 450 400 500 430 The table shows a consumption schedule. At the $300 level of disposable income,

Which of the following is correct?

Refer to the given saving schedule. As income falls from level 3 to level 2, the amount of

Disposable Income Consumption \ 200 \ 205 225 225 250 245 275 265 300 285 Refer to the given data. If disposable income was $325, we would expect consumption to be

When the consumption schedule is plotted on a graph,

Refer to the diagram. The marginal propensity to consume is

A decline in disposable income

Change in income Change in Consumption Change in Saving Assumed Increase in Investment \ 20 \ \ 4.00 Second Round \ \ 12.80 \ All Other Rounds \ \ 51.20 \ Totals \ \ \ 20.00 Refer to the given table, which illustrates the multiplier process. The marginal propensity to consume is

Change in Income Change in Consumption Change in Saving Assumed Increase in Investment \ 20 \ \ 4.00 Second Round \ \ 12.80 \ All Other Rounds \ \ 51.20 \ Totals \ \ \ 20.00 Refer to the given table, which illustrates the multiplier process. The multiplier in this economy is

Refer to the given diagram. The economy is dissaving

Refer to the given consumption schedules. DI signiﬁes disposable income and C represents consumption expenditures. All ﬁgures are in billions of dollars. At an income level of $400 billion, the Average propensity to save in economy (2) is

A speciﬁc investment will be undertaken if the expected rate of return, r, exceeds the interest rate, i.

The actual multiplier effect in the U.S. economy is less than the multiplier effect in the text examples because

The given ﬁgure suggests that

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures Caused by Externalities Asymmetric Information

Public Goods, Public Choice, and Government Failure

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, and Debt

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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Exam 10: Basic Macroeconomic Relationships

If households consume less at each level of disposable income, they are

The numerical value of the multiplier will be smaller the

Suppose a family's consumption exceeds its disposable income. This means that its

Refer to the given diagram. The marginal propensity to consume is equal to

The size of the MPC is assumed to be

Disposable Income Consumption \ 300 \ 310 350 340 400 370 450 400 500 430 The table shows a consumption schedule. At the $300 level of disposable income,

Which of the following is correct?

Refer to the given saving schedule. As income falls from level 3 to level 2, the amount of

Disposable Income Consumption \ 200 \ 205 225 225 250 245 275 265 300 285 Refer to the given data. If disposable income was $325, we would expect consumption to be

When the consumption schedule is plotted on a graph,

Refer to the diagram. The marginal propensity to consume is

A decline in disposable income

Change in income Change in Consumption Change in Saving Assumed Increase in Investment \ 20 \ \ 4.00 Second Round \ \ 12.80 \ All Other Rounds \ \ 51.20 \ Totals \ \ \ 20.00 Refer to the given table, which illustrates the multiplier process. The marginal propensity to consume is

Change in Income Change in Consumption Change in Saving Assumed Increase in Investment \ 20 \ \ 4.00 Second Round \ \ 12.80 \ All Other Rounds \ \ 51.20 \ Totals \ \ \ 20.00 Refer to the given table, which illustrates the multiplier process. The multiplier in this economy is

Refer to the given diagram. The economy is dissaving

Refer to the given consumption schedules. DI signiﬁes disposable income and C represents consumption expenditures. All ﬁgures are in billions of dollars. At an income level of $400 billion, the Average propensity to save in economy (2) is

A speciﬁc investment will be undertaken if the expected rate of return, r, exceeds the interest rate, i.

The actual multiplier effect in the U.S. economy is less than the multiplier effect in the text examples because

The given ﬁgure suggests that

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures Caused by Externalities Asymmetric Information

Public Goods, Public Choice, and Government Failure

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, and Debt

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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