Question 1

Refer to the consumption schedule shown in the graph. Disposable income equals consumption at point

Accepted Answer

A)  A. 
B)  C. 
C)  D. 
D)  G. 
A)  A. 
B)  C. 
C)  D. 
D)  G.

Question 2

Suppose an economy's consumption schedule shifts from C1 to C2, as shown in the diagram. We can say that its

Accepted Answer

A)  MPC has increased, but its APC at each income level is unchanged. 
B)  APC at each income level is increased, but its MPC is unchanged. 
C)  MPC and APC at each income level have both increased. 
D)  MPC and APC at each income level have both decreased. 
A)  MPC has increased, but its APC at each income level is unchanged. 
B)  APC at each income level is increased, but its MPC is unchanged. 
C)  MPC and APC at each income level have both increased. 
D)  MPC and APC at each income level have both decreased.

Question 3

If a $200 billion increase in investment spending creates $200 billion of new income in the ﬁrst round of the multiplier process and $160 billion in the second round, the multiplier in the economy is

Accepted Answer

A)  4. 
B)  5. 
C)  3.33. 
D)  2.5. 
A)  4. 
B)  5. 
C)  3.33. 
D)  2.5.

Question 4

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

Accepted Answer

A)  $4. 
B)  $16. 
C)  $20. 
D)  $24. 
A)  $4. 
B)  $16. 
C)  $20. 
D)  $24.

Question 5

$$\begin{array} { | c | c | } 
\hline \text { Disposable Income } & \text { Consumption } \
\hline \$ 200 & \$ 205 \
\hline 225 & 225 \
\hline 250 & 245 \
\hline 275 & 265 \
\hline 300 & 285 \
\hline
\end{array}$$ Refer to the given data. At the $200 level of disposable income,

Accepted Answer

A)  the marginal propensity to save is 2½ percent. 
B)  dissaving is $5. 
C)  the average propensity to save is 0.20. 
D)  the average propensity to consume is 0.80. 
A)  the marginal propensity to save is 2½ percent. 
B)  dissaving is $5. 
C)  the average propensity to save is 0.20. 
D)  the average propensity to consume is 0.80.

Question 6

The saving schedule shown in the diagram would shift downward if, all else equal,

Accepted Answer

A)  the average propensity to save increased at each income level. 
B)  the marginal propensity to save rose at each income level. 
C)  consumer wealth rose rapidly because of a signiﬁcant increase in stock market prices. 
D)  the real interest rate rose. 
A)  the average propensity to save increased at each income level. 
B)  the marginal propensity to save rose at each income level. 
C)  consumer wealth rose rapidly because of a signiﬁcant increase in stock market prices. 
D)  the real interest rate rose.

Question 7

1 + MPS = MPC.

Accepted Answer

A) True 
 B)False

Question 8

Refer to the diagram. The break-even level of income is

Accepted Answer

A)  zero. 
B)  $150. 
C)  $60. 
D)  $120. 
A)  zero. 
B)  $150. 
C)  $60. 
D)  $120.

Question 9

Which of the following is correct?

Accepted Answer

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

Question 10

The multiplier effect indicates that

Accepted Answer

A)  a decline in the interest rate will cause a proportionately larger increase in investment. 
B)  a change in spending will change aggregate income by a larger amount. 
C)  a change in spending will increase aggregate income by the same amount. 
D)  an increase in total income will generate a larger change in aggregate expenditures. 
A)  a decline in the interest rate will cause a proportionately larger increase in investment. 
B)  a change in spending will change aggregate income by a larger amount. 
C)  a change in spending will increase aggregate income by the same amount. 
D)  an increase in total income will generate a larger change in aggregate expenditures.

Question 11

Which of the following relations is not correct?

Accepted Answer

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

Question 12

Refer to the given saving schedule. Dissaving occurs when disposable income is

Accepted Answer

A)  equal to level 2. 
B)  less than level 2. 
C)  greater than level 2. 
D)  equal to level 3. 
A)  equal to level 2. 
B)  less than level 2. 
C)  greater than level 2. 
D)  equal to level 3.

Question 13

One can determine the amount of any level of total income that is consumed by

Accepted Answer

A)  multiplying total income by the slope of the consumption schedule. 
B)  multiplying total income by the APC. 
C)  subtracting the MPS from total income. 
D)  multiplying total income by the MPC. 
A)  multiplying total income by the slope of the consumption schedule. 
B)  multiplying total income by the APC. 
C)  subtracting the MPS from total income. 
D)  multiplying total income by the MPC.

Question 14

If the nominal interest rate is 18 percent and the real interest rate is 6 percent, the inﬂation rate is

Accepted Answer

A)  18 percent. 
B)  24 percent. 
C)  12 percent. 
D)  6 percent. 
A)  18 percent. 
B)  24 percent. 
C)  12 percent. 
D)  6 percent.

Question 15

Assume there are no prospective investment projects (I) that will yield an expected rate of return (r) of 25 percent or more, but there are $5 billion of investment opportunities with an expected rate of
Return between 20 and 25 percent, an additional $5 billion between 15 and 20 percent, and so on. If
The real interest rate is 15 percent in this economy, the aggregate amount of investment will be

Accepted Answer

A)  $25 billion. 
B)  $20 billion. 
C)  $15 billion. 
D)  $10 billion. 
A)  $25 billion. 
B)  $20 billion. 
C)  $15 billion. 
D)  $10 billion.

Question 16

If the MPC is 0.6, the multiplier will be

Accepted Answer

A)  4.0. 
B)  6.0. 
C)  2.5. 
D)  1.67. 
A)  4.0. 
B)  6.0. 
C)  2.5. 
D)  1.67.

Question 17

$$\begin{array} { | c | c | } 
\hline \text { Disposable Income } & \text { Consumption } \
\hline \$ 0 & \$ 8 \
\hline 80 & 80 \
\hline 160 & 152 \
\hline 240 & 224 \
\hline 320 & 296 \
\hline 400 & 368 \
\hline
\end{array}$$ The disposable income (DI) and consumption (C) schedules are for a private, closed economy. All ?gures are in billions of dollars. If plotted on a graph, the slope of the consumption schedule would be

Accepted Answer

A)  0.6. 
B)  0.7. 
C)  0.8. 
D)  0.9. 
A)  0.6. 
B)  0.7. 
C)  0.8. 
D)  0.9.

Question 18

Refer to the given graph. A movement from a to b along C1 might be caused by a(n)

Accepted Answer

A)  recession. 
B)  wealth effect of an increase in stock market prices. 
C)  increase in income tax rates. 
D)  increase in real GDP. 
A)  recession. 
B)  wealth effect of an increase in stock market prices. 
C)  increase in income tax rates. 
D)  increase in real GDP.

Question 19

$$\begin{array} { | c | c | } 
\hline \text { Disposable Income } \left( Y _ { d } \right) & \text { Consumption (C) } \
\hline \$ 0 & \$ 40 \
\hline 100 & 100 \
\hline 200 & 160 \
\hline 300 & 220 \
\hline 400 & 280 \
\hline
\end{array}$$ (Advanced analysis) Which of the following equations correctly represents the given data?

Accepted Answer

A)  Yd = 40 + 0.6C. 
B)  C = 60 + 0.4Yd. 
C)  C = 40 + 0.6Yd. 
D)  C = 0.6Yd. 
A)  Yd = 40 + 0.6C. 
B)  C = 60 + 0.4Yd. 
C)  C = 40 + 0.6Yd. 
D)  C = 0.6Yd.

Question 20

If disposable income is $900 billion when the average propensity to consume is 0.9, it can be concluded that

Accepted Answer

A)  the marginal propensity to consume is also 0.9. 
B)  the marginal propensity to save is 0.1. 
C)  consumption is $900 billion. 
D)  saving is $90 billion. 
A)  the marginal propensity to consume is also 0.9. 
B)  the marginal propensity to save is 0.1. 
C)  consumption is $900 billion. 
D)  saving is $90 billion.

Refer to the consumption schedule shown in the graph. Disposable income equals consumption at point

Suppose an economy's consumption schedule shifts from C1 to C2, as shown in the diagram. We can say that its

If a $200 billion increase in investment spending creates $200 billion of new income in the ﬁrst round of the multiplier process and $160 billion in the second round, the multiplier in the economy 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 change in income in round two will be

Disposable Income Consumption \ 200 \ 205 225 225 250 245 275 265 300 285 Refer to the given data. At the $200 level of disposable income,

The saving schedule shown in the diagram would shift downward if, all else equal,

1 + MPS = MPC.

Refer to the diagram. The break-even level of income is

Which of the following is correct?

The multiplier effect indicates that

Which of the following relations is not correct?

Refer to the given saving schedule. Dissaving occurs when disposable income is

One can determine the amount of any level of total income that is consumed by

If the nominal interest rate is 18 percent and the real interest rate is 6 percent, the inﬂation rate is

If the MPC is 0.6, the multiplier will be

Disposable Income Consumption \ 0 \ 8 80 80 160 152 240 224 320 296 400 368 The disposable income (DI) and consumption (C) schedules are for a private, closed economy. All ?gures are in billions of dollars. If plotted on a graph, the slope of the consumption schedule would be

Refer to the given graph. A movement from a to b along C1 might be caused by a(n)

Disposable Income Consumption (C) \ 0 \ 40 100 100 200 160 300 220 400 280 (Advanced analysis) Which of the following equations correctly represents the given data?

If disposable income is $900 billion when the average propensity to consume is 0.9, it can be concluded 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

Refer to the consumption schedule shown in the graph. Disposable income equals consumption at point

Suppose an economy's consumption schedule shifts from C1 to C2, as shown in the diagram. We can say that its

If a $200 billion increase in investment spending creates $200 billion of new income in the ﬁrst round of the multiplier process and $160 billion in the second round, the multiplier in the economy 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 change in income in round two will be

Disposable Income Consumption \ 200 \ 205 225 225 250 245 275 265 300 285 Refer to the given data. At the $200 level of disposable income,

The saving schedule shown in the diagram would shift downward if, all else equal,

1 + MPS = MPC.

Refer to the diagram. The break-even level of income is

Which of the following is correct?

The multiplier effect indicates that

Which of the following relations is not correct?

Refer to the given saving schedule. Dissaving occurs when disposable income is

One can determine the amount of any level of total income that is consumed by

If the nominal interest rate is 18 percent and the real interest rate is 6 percent, the inﬂation rate is

If the MPC is 0.6, the multiplier will be

Disposable Income Consumption \ 0 \ 8 80 80 160 152 240 224 320 296 400 368 The disposable income (DI) and consumption (C) schedules are for a private, closed economy. All ?gures are in billions of dollars. If plotted on a graph, the slope of the consumption schedule would be

Refer to the given graph. A movement from a to b along C1 might be caused by a(n)

Disposable Income Consumption (C) \ 0 \ 40 100 100 200 160 300 220 400 280 (Advanced analysis) Which of the following equations correctly represents the given data?

If disposable income is $900 billion when the average propensity to consume is 0.9, it can be concluded 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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