Question 1

The relationship between the real interest rate and investment is shown by the

Accepted Answer

A)  investment demand schedule. 
B)  consumption of ﬁxed capital schedule. 
C)  saving schedule. 
D)  aggregate supply curve. 
A)  investment demand schedule. 
B)  consumption of ﬁxed capital schedule. 
C)  saving schedule. 
D)  aggregate supply curve.

Question 2

Which of the following will not tend to shift the consumption schedule upward?

Accepted Answer

A)  a currently small stock of durable goods in the possession of consumers 
B)  the expectation of a future decline in the consumer price index 
C)  a currently low level of household debt 
D)  the expectation of future shortages of essential consumer goods 
A)  a currently small stock of durable goods in the possession of consumers 
B)  the expectation of a future decline in the consumer price index 
C)  a currently low level of household debt 
D)  the expectation of future shortages of essential consumer goods

Question 3

The consumption schedule is drawn on the assumption that as income increases, consumption will

Accepted Answer

A)  be unaffected. 
B)  increase absolutely but remain constant as a percentage of income. 
C)  increase absolutely but decline as a percentage of income. 
D)  increase both absolutely and as a percentage of income. 
A)  be unaffected. 
B)  increase absolutely but remain constant as a percentage of income. 
C)  increase absolutely but decline as a percentage of income. 
D)  increase both absolutely and as a percentage of income.

Question 4

The greater the MPC, the greater the multiplier.

Accepted Answer

A) True 
 B)False

Question 5

The slope of the consumption schedule is measured by the MPC.

Accepted Answer

A) True 
 B)False

Question 6

Refer to the diagram. Which of the following would increase investment while leaving an existing investment demand curve, say
$I D _ { 2 }$ , in place?

Accepted Answer

A)  a lower interest rate 
B)  a higher interest rate 
C)  lower expected returns on investment 
D)  higher expected returns on investment 
A)  a lower interest rate 
B)  a higher interest rate 
C)  lower expected returns on investment 
D)  higher expected returns on investment

Question 7

The saving schedule is drawn on the assumption that as income increases,

Accepted Answer

A)  saving will decline absolutely and as a percentage of income. 
B)  saving will increase absolutely but remain constant as a percentage of income. 
C)  saving will increase absolutely but decline as a percentage of income. 
D)  saving will increase absolutely and as a percentage of income. 
A)  saving will decline absolutely and as a percentage of income. 
B)  saving will increase absolutely but remain constant as a percentage of income. 
C)  saving will increase absolutely but decline as a percentage of income. 
D)  saving will increase absolutely and as a percentage of income.

Question 8

The real interest rate is

Accepted Answer

A)  the percentage increase in money that the lender receives on a loan. 
B)  the percentage increase in purchasing power that the lender receives on a loan. 
C)  also called the after-tax interest rate. 
D)  usually higher than the nominal interest rate. 
A)  the percentage increase in money that the lender receives on a loan. 
B)  the percentage increase in purchasing power that the lender receives on a loan. 
C)  also called the after-tax interest rate. 
D)  usually higher than the nominal interest rate.

Question 9

If a $500 billion increase in investment spending increases income by $500 billion in the ﬁrst round of the multiplier process and by $450 in the second round, income will eventually increase by

Accepted Answer

A)  $2,500 billion. 
B)  $3,000 billion. 
C)  $4,000 billion. 
D)  $5,000 billion. 
A)  $2,500 billion. 
B)  $3,000 billion. 
C)  $4,000 billion. 
D)  $5,000 billion.

Question 10

Refer to the diagram. Consumption equals disposable income when

Accepted Answer

A)  disposable income is B. 
B)  disposable income is D. 
C)  CD equals A. 
D)  B equals CD. 
A)  disposable income is B. 
B)  disposable income is D. 
C)  CD equals A. 
D)  B equals CD.

Question 11

When the marginal propensity to consume is less than 1, the

Accepted Answer

A)  average propensity to consume is greater than 1. 
B)  average propensity to save is greater than 1. 
C)  marginal propensity to save is negative. 
D)  marginal propensity to save is positive. 
A)  average propensity to consume is greater than 1. 
B)  average propensity to save is greater than 1. 
C)  marginal propensity to save is negative. 
D)  marginal propensity to save is positive.

Question 12

Refer to the consumption schedule shown in the graph. At income level 3, the amount of consumption is represented by the line segment

Accepted Answer

A)  FG. 
B)  FH. 
C)  FD. 
D)  GH. 
A)  FG. 
B)  FH. 
C)  FD. 
D)  GH.

Question 13

Refer to the consumption schedule shown in the graph. The break-even level of income would be at income level

Accepted Answer

A)  0. 
B)  1. 
C)  2. 
D)  3. 
A)  0. 
B)  1. 
C)  2. 
D)  3.

Question 14

An upward shift of the saving schedule suggests

Accepted Answer

A)  nothing with respect to changes in the APC and APS; only that the MPS has changed. 
B)  that the APC and APS have both decreased at each GDP level. 
C)  that the APC and APS have both increased at each GDP level. 
D)  that the APC has decreased and the APS has increased at each GDP level. 
A)  nothing with respect to changes in the APC and APS; only that the MPS has changed. 
B)  that the APC and APS have both decreased at each GDP level. 
C)  that the APC and APS have both increased at each GDP level. 
D)  that the APC has decreased and the APS has increased at each GDP level.

Question 15

The APC can be deﬁned as the fraction of a

Accepted Answer

A)  change in income that is not spent. 
B)  change in income that is spent. 
C)  speciﬁc level of total income that is not consumed. 
D)  speciﬁc level of total income that is consumed. 
A)  change in income that is not spent. 
B)  change in income that is spent. 
C)  speciﬁc level of total income that is not consumed. 
D)  speciﬁc level of total income that is consumed.

Question 16

The ﬁgure shows the saving schedules for economies 1, 2, 3, and 4. Which economy has the highest marginal propensity to consume?

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  4 
A)  1 
B)  2 
C)  3 
D)  4

Question 17

Refer to the given saving schedule. The break-even income would be level

Accepted Answer

A)  0. 
B)  1. 
C)  2. 
D)  3. 
A)  0. 
B)  1. 
C)  2. 
D)  3.

Question 18

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.
The investment demand curve for this economy is shown in which table?

Accepted Answer

A)  $$\begin{array} { | c | r | } 
\hline r & l \
\hline 25 \% & \$ 10 \
\hline 20 & 15 \
\hline 15 & 20 \
\hline 10 & 25 \
\hline 5 & 30 \
\hline 0 & 35 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | c | r | } 
\hline r & l\
\hline 25 \% & \$ 0 \
\hline 20 & 5 \
\hline 15 & 10 \
\hline 10 & 15 \
\hline 5 & 20 \
\hline 0 & 25 \
\hline
\end{array}$$ 
C)  $\begin{array} { | c | c | } 
\hline r & l \
\hline 20 \% & \$ 10 \
\hline 15 & 20 \
\hline 10 & 30 \
\hline 5 & 40 \
\hline 0 & 50 \
\hline
\end{array}$ 
D)  $$\begin{array} { | c | c | } 
\hline r & l \
\hline 25 \% & \$ 5 \
\hline 20 & 10 \
\hline 15 & 15 \
\hline 10 & 20 \
\hline 5 & 25 \
\hline 0 & 30 \
\hline
\end{array}$$ 
A)  $$\begin{array} { | c | r | } 
\hline r & l \
\hline 25 \% & \$ 10 \
\hline 20 & 15 \
\hline 15 & 20 \
\hline 10 & 25 \
\hline 5 & 30 \
\hline 0 & 35 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | c | r | } 
\hline r & l\
\hline 25 \% & \$ 0 \
\hline 20 & 5 \
\hline 15 & 10 \
\hline 10 & 15 \
\hline 5 & 20 \
\hline 0 & 25 \
\hline
\end{array}$$ 
C)  $\begin{array} { | c | c | } 
\hline r & l \
\hline 20 \% & \$ 10 \
\hline 15 & 20 \
\hline 10 & 30 \
\hline 5 & 40 \
\hline 0 & 50 \
\hline
\end{array}$ 
D)  $$\begin{array} { | c | c | } 
\hline r & l \
\hline 25 \% & \$ 5 \
\hline 20 & 10 \
\hline 15 & 15 \
\hline 10 & 20 \
\hline 5 & 25 \
\hline 0 & 30 \
\hline
\end{array}$$

Question 19

Dissaving occurs when

Accepted Answer

A)  income is greater than saving. 
B)  income is less than consumption. 
C)  saving is greater than consumption. 
D)  saving is greater than the interest rate. 
A)  income is greater than saving. 
B)  income is less than consumption. 
C)  saving is greater than consumption. 
D)  saving is greater than the interest rate.

Question 20

If Carol's disposable income increases from $1,200 to $1,700 and her level of saving increases from minus $100 to a plus $100, her marginal propensity to

Accepted Answer

A)  save is three-ﬁfths. 
B)  consume is one-half. 
C)  consume is three-ﬁfths. 
D)  consume is two-ﬁfths. 
A)  save is three-ﬁfths. 
B)  consume is one-half. 
C)  consume is three-ﬁfths. 
D)  consume is two-ﬁfths.

The relationship between the real interest rate and investment is shown by the

Which of the following will not tend to shift the consumption schedule upward?

The consumption schedule is drawn on the assumption that as income increases, consumption will

The greater the MPC, the greater the multiplier.

The slope of the consumption schedule is measured by the MPC.

The saving schedule is drawn on the assumption that as income increases,

The real interest rate is

If a $500 billion increase in investment spending increases income by $500 billion in the ﬁrst round of the multiplier process and by $450 in the second round, income will eventually increase by

Refer to the diagram. Consumption equals disposable income when

When the marginal propensity to consume is less than 1, the

Refer to the consumption schedule shown in the graph. At income level 3, the amount of consumption is represented by the line segment

Refer to the consumption schedule shown in the graph. The break-even level of income would be at income level

An upward shift of the saving schedule suggests

The APC can be deﬁned as the fraction of a

The ﬁgure shows the saving schedules for economies 1, 2, 3, and 4. Which economy has the highest marginal propensity to consume?

Refer to the given saving schedule. The break-even income would be level

Dissaving occurs when

If Carol's disposable income increases from $1,200 to $1,700 and her level of saving increases from minus $100 to a plus $100, her marginal propensity to

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

Filters

Exam 10: Basic Macroeconomic Relationships

The relationship between the real interest rate and investment is shown by the

Which of the following will not tend to shift the consumption schedule upward?

The consumption schedule is drawn on the assumption that as income increases, consumption will

The greater the MPC, the greater the multiplier.

The slope of the consumption schedule is measured by the MPC.

Refer to the diagram. Which of the following would increase investment while leaving an existing investment demand curve, say ID2I D _ { 2 }ID2​ , in place?

The saving schedule is drawn on the assumption that as income increases,

The real interest rate is

If a $500 billion increase in investment spending increases income by $500 billion in the ﬁrst round of the multiplier process and by $450 in the second round, income will eventually increase by

Refer to the diagram. Consumption equals disposable income when

When the marginal propensity to consume is less than 1, the

Refer to the consumption schedule shown in the graph. At income level 3, the amount of consumption is represented by the line segment

Refer to the consumption schedule shown in the graph. The break-even level of income would be at income level

An upward shift of the saving schedule suggests

The APC can be deﬁned as the fraction of a

The ﬁgure shows the saving schedules for economies 1, 2, 3, and 4. Which economy has the highest marginal propensity to consume?

Refer to the given saving schedule. The break-even income would be level

Dissaving occurs when

If Carol's disposable income increases from $1,200 to $1,700 and her level of saving increases from minus $100 to a plus $100, her marginal propensity to

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

Filters