Question 1

The MPC can be deﬁned as the

Accepted Answer

A)  change in consumption divided by the change in income. 
B)  change in income divided by the change in consumption. 
C)  ratio of income to saving. 
D)  ratio of saving to consumption. 
A)  change in consumption divided by the change in income. 
B)  change in income divided by the change in consumption. 
C)  ratio of income to saving. 
D)  ratio of saving to consumption.

Question 2

(Advanced analysis) Assume the following consumption schedule: C = 20 + 0.9Y, where C is consumption and Y is disposable income. At an $800 level of disposable income, the level of saving is

Accepted Answer

A)  $180. 
B)  $740. 
C)  $60. 
D)  $18. 
A)  $180. 
B)  $740. 
C)  $60. 
D)  $18.

Question 3

The multiplier is

Accepted Answer

A)  1/MPC. 
B)  1/(1 + MP
C) . 
C)  1/MPS. 
D)  1/(1 − MPS). 
A)  1/MPC. 
B)  1/(1 + MP
C) . 
C)  1/MPS. 
D)  1/(1 − MPS).

Question 4

$$\begin{array} { | c | c | } 
\hline \text { Disposable Income } & \text { Consumption } \
\hline \$ 200 & \$ 205 \
\hline 225 & 225 \
\hline 250 & 245 \
\hline 275 & 265 \
\hline 300 & 285 \
\hline
\end{array}$$ Refer to the given data. The marginal propensity to consume is

Accepted Answer

A)  0.25. 
B)  0.75. 
C)  0.20. 
D)  0.80. 
A)  0.25. 
B)  0.75. 
C)  0.20. 
D)  0.80.

Question 5

If the real interest rate in the economy is i and the expected rate of return on additional investment is r, then, other things equal,

Accepted Answer

A)  more investment will be forthcoming when i exceeds r. 
B)  less investment will be forthcoming when r rises. 
C)  r will fall as more investment is undertaken. 
D)  r will exceed i at all possible levels of investment. 
A)  more investment will be forthcoming when i exceeds r. 
B)  less investment will be forthcoming when r rises. 
C)  r will fall as more investment is undertaken. 
D)  r will exceed i at all possible levels of investment.

Question 6

The multiplier can be calculated as

Accepted Answer

A)  1/(MPS + MP
C) . 
B)  MPC/MPS. 
C)  1/(1 − MP
C) . 
D)  1 − MPC = MPS. 
A)  1/(MPS + MP
C) . 
B)  MPC/MPS. 
C)  1/(1 − MP
C) . 
D)  1 − MPC = MPS.

Question 7

$$\begin{array} { | c | c | } 
\hline \text { Disposable Income } & \text { Saving } \
\hline \$ 0 & - \$ 10 \
\hline 50 & 0 \
\hline 100 & 10 \
\hline 150 & 20 \
\hline 200 & 30 \
\hline
\end{array}$$ Refer to the given data for a hypothetical economy. If plotted on a graph, the slope of the saving schedule would be

Accepted Answer

A)  0.80. 
B)  0.10. 
C)  0.20. 
D)  0.15. 
A)  0.80. 
B)  0.10. 
C)  0.20. 
D)  0.15.

Question 8

At the point where the consumption schedule intersects the 45-degree line,

Accepted Answer

A)  the MPC is 1.00. 
B)  the APC is 1.00. 
C)  saving is equal to consumption. 
D)  the economy is in equilibrium. 
A)  the MPC is 1.00. 
B)  the APC is 1.00. 
C)  saving is equal to consumption. 
D)  the economy is in equilibrium.

Question 9

The practical signiﬁcance of the multiplier is that it

Accepted Answer

A)  equates the real interest rate and the expected rate of return on investment. 
B)  magniﬁes initial changes in spending into larger changes in GDP. 
C)  keeps inﬂation within tolerable limits. 
D)  helps to stabilize the economy. 
A)  equates the real interest rate and the expected rate of return on investment. 
B)  magniﬁes initial changes in spending into larger changes in GDP. 
C)  keeps inﬂation within tolerable limits. 
D)  helps to stabilize the economy.

Question 10

$$\begin{array} { | c | c | } 
\hline \text { Disposable Income } & \text { Consumption } \
\hline \$ 300 & \$ 310 \
\hline 350 & 340 \
\hline 400 & 370 \
\hline 450 & 400 \
\hline 500 & 430 \
\hline
\end{array}$$ The table shows a consumption schedule. If disposable income is $550, we would expect consumption to be

Accepted Answer

A)  $430. 
B)  $450. 
C)  $460. 
D)  $470. 
A)  $430. 
B)  $450. 
C)  $460. 
D)  $470.

Question 11

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 $40 billion, the
Average propensity to consume

Accepted Answer

A)  is highest in economy (1). 
B)  is highest in economy (2). 
C)  is highest in economy (3). 
D)  cannot be determined from the data given. 
A)  is highest in economy (1). 
B)  is highest in economy (2). 
C)  is highest in economy (3). 
D)  cannot be determined from the data given.

Question 12

Refer to the given diagram. At income level F, the volume of saving is

Accepted Answer

A)  BD. 
B)  AB. 
C)  CF − BF. 
D)  CD. 
A)  BD. 
B)  AB. 
C)  CF − BF. 
D)  CD.

Question 13

Refer to the given ﬁgure. If the relevant saving schedule were constructed,

Accepted Answer

A)  saving would be minus $20 billion at the zero level of income. 
B)  aggregate saving would be $60 at the $60 billion level of income. 
C)  its slope would be 1/2. 
D)  it would slope downward and to the right. 
A)  saving would be minus $20 billion at the zero level of income. 
B)  aggregate saving would be $60 at the $60 billion level of income. 
C)  its slope would be 1/2. 
D)  it would slope downward and to the right.

Question 14

As disposable income increases, consumption

Accepted Answer

A)  and saving both increase. 
B)  and saving both decrease. 
C)  decreases and saving increases. 
D)  increases and saving decreases. 
A)  and saving both increase. 
B)  and saving both decrease. 
C)  decreases and saving increases. 
D)  increases and saving decreases.

Question 15

Which of the following statements about consuming in excess of one's disposable income is not true?

Accepted Answer

A)  It is possible, and it's called dissaving. 
B)  In this case, the values of both saving and the APS are negative. 
C)  (APC + APS) will be less than 1 in this situation. 
D)  The value of APC will be greater than 1 in this case. 
A)  It is possible, and it's called dissaving. 
B)  In this case, the values of both saving and the APS are negative. 
C)  (APC + APS) will be less than 1 in this situation. 
D)  The value of APC will be greater than 1 in this case.

Question 16

$$\begin{array} { | c | r | } 
\hline \text { Disposable Income } & \text { Saving } \
\hline \$ 0 & - \$ 10 \
\hline 50 & 0 \
\hline 100 & 10 \
\hline 150 & 20 \
\hline 200 & 30 \
\hline
\end{array}$$ Refer to the given data for a hypothetical economy. The marginal propensity to consume is

Accepted Answer

A)  0.80. 
B)  0.75. 
C)  0.20. 
D)  0.25. 
A)  0.80. 
B)  0.75. 
C)  0.20. 
D)  0.25.

Question 17

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

Accepted Answer

A)  0.5. 
B)  0.25. 
C)  0.2. 
D)  0.1. 
A)  0.5. 
B)  0.25. 
C)  0.2. 
D)  0.1.

Question 18

The fraction, or percentage, of total income which is consumed is called the

Accepted Answer

A)  break-even income. 
B)  consumption schedule. 
C)  marginal propensity to consume. 
D)  average propensity to consume. 
A)  break-even income. 
B)  consumption schedule. 
C)  marginal propensity to consume. 
D)  average propensity to consume.

Question 19

$$\begin{array} { | l | c | c | c | } 
\hline & \text { Change in Income } & \begin{array} { c } 
\text { Change in } \
\text { Consumption }
\end{array} & \text { Change in Saving } \
\hline \text { Assumed Increase in Investment } & \$ 20 & \$ & \$ 4.00 \
\hline \text { Second Round } & \$ & \$ 12.80 & \$ \
\hline \text { All Other Rounds } & \$ & \$ 51.20 & \$ \
\hline \text { Totals } & \$ & \$ & \$ 20.00 \
\hline
\end{array}$$ Refer to the given table, which illustrates the multiplier process. The total change in consumption resulting from the initial change in investment will be

Accepted Answer

A)  $100. 
B)  $96. 
C)  $180. 
D)  $80. 
A)  $100. 
B)  $96. 
C)  $180. 
D)  $80.

Question 20

Given the expected rate of return on all possible investment opportunities in the economy,

Accepted Answer

A)  an increase in the real rate of interest will reduce the level of investment. 
B)  a decrease in the real rate of interest will reduce the level of investment. 
C)  a change in the real interest rate will have no impact on the level of investment. 
D)  an increase in the real interest rate will increase the level of investment. 
A)  an increase in the real rate of interest will reduce the level of investment. 
B)  a decrease in the real rate of interest will reduce the level of investment. 
C)  a change in the real interest rate will have no impact on the level of investment. 
D)  an increase in the real interest rate will increase the level of investment.

The MPC can be deﬁned as the

(Advanced analysis) Assume the following consumption schedule: C = 20 + 0.9Y, where C is consumption and Y is disposable income. At an $800 level of disposable income, the level of saving is

The multiplier is

Disposable Income Consumption \ 200 \ 205 225 225 250 245 275 265 300 285 Refer to the given data. The marginal propensity to consume is

If the real interest rate in the economy is i and the expected rate of return on additional investment is r, then, other things equal,

The multiplier can be calculated as

Disposable Income Saving \ 0 -\ 10 50 0 100 10 150 20 200 30 Refer to the given data for a hypothetical economy. If plotted on a graph, the slope of the saving schedule would be

At the point where the consumption schedule intersects the 45-degree line,

The practical signiﬁcance of the multiplier is that it

Disposable Income Consumption \ 300 \ 310 350 340 400 370 450 400 500 430 The table shows a consumption schedule. If disposable income is $550, we would expect consumption to be

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 $40 billion, the Average propensity to consume

Refer to the given diagram. At income level F, the volume of saving is

Refer to the given ﬁgure. If the relevant saving schedule were constructed,

As disposable income increases, consumption

Which of the following statements about consuming in excess of one's disposable income is not true?

Disposable Income Saving \ 0 -\ 10 50 0 100 10 150 20 200 30 Refer to the given data for a hypothetical economy. 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 marginal propensity to save is

The fraction, or percentage, of total income which is consumed is called the

Given the expected rate of return on all possible investment opportunities in the economy,

The Market System and the Circular Flow

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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

The MPC can be deﬁned as the

(Advanced analysis) Assume the following consumption schedule: C = 20 + 0.9Y, where C is consumption and Y is disposable income. At an $800 level of disposable income, the level of saving is

The multiplier is

Disposable Income Consumption \ 200 \ 205 225 225 250 245 275 265 300 285 Refer to the given data. The marginal propensity to consume is

If the real interest rate in the economy is i and the expected rate of return on additional investment is r, then, other things equal,

The multiplier can be calculated as

Disposable Income Saving \ 0 -\ 10 50 0 100 10 150 20 200 30 Refer to the given data for a hypothetical economy. If plotted on a graph, the slope of the saving schedule would be

At the point where the consumption schedule intersects the 45-degree line,

The practical signiﬁcance of the multiplier is that it

Disposable Income Consumption \ 300 \ 310 350 340 400 370 450 400 500 430 The table shows a consumption schedule. If disposable income is $550, we would expect consumption to be

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 $40 billion, the Average propensity to consume

Refer to the given diagram. At income level F, the volume of saving is

Refer to the given ﬁgure. If the relevant saving schedule were constructed,

As disposable income increases, consumption

Which of the following statements about consuming in excess of one's disposable income is not true?

Disposable Income Saving \ 0 -\ 10 50 0 100 10 150 20 200 30 Refer to the given data for a hypothetical economy. 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 marginal propensity to save is

The fraction, or percentage, of total income which is consumed is called the

Given the expected rate of return on all possible investment opportunities in the economy,

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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