Question 1

The immediate determinants of investment spending are the

Accepted Answer

A)  expected rate of return on capital goods and the real interest rate. 
B)  level of saving and the real interest rate. 
C)  marginal propensity to consume and the real interest rate. 
D)  interest rate and the expected price level. 
A)  expected rate of return on capital goods and the real interest rate. 
B)  level of saving and the real interest rate. 
C)  marginal propensity to consume and the real interest rate. 
D)  interest rate and the expected price level.

Question 2

The saving schedule shows the relationship of saving of households to the level of

Accepted Answer

A)  consumption. 
B)  investment. 
C)  disposable income. 
D)  the average propensity to save. 
A)  consumption. 
B)  investment. 
C)  disposable income. 
D)  the average propensity to save.

Question 3

Which one of the following will cause a movement up along an economy's saving schedule?

Accepted Answer

A)  an increase in household borrowing 
B)  an increase in disposable income 
C)  an increase in stock prices 
D)  an increase in interest rates 
A)  an increase in household borrowing 
B)  an increase in disposable income 
C)  an increase in stock prices 
D)  an increase in interest rates

Question 4

The 45-degree line on a graph relating consumption and income shows

Accepted Answer

A)  all the points where the MPC is constant. 
B)  all the points at which saving and income are equal. 
C)  all the points at which consumption and income are equal. 
D)  the amounts households will plan to save at each possible level of income. 
A)  all the points where the MPC is constant. 
B)  all the points at which saving and income are equal. 
C)  all the points at which consumption and income are equal. 
D)  the amounts households will plan to save at each possible level of income.

Question 5

If the MPC is constant at various levels of income, then the APC must also be constant at all of those
income levels.

Accepted Answer

A) True 
 B)False

Question 6

Investment is highly stable; it increases over time at a very steady rate.

Accepted Answer

A) True 
 B)False

Question 7

Assume the MPC is 2/3. If investment spending increases by $2 billion, the level of GDP will increase by

Accepted Answer

A)  $3 billion. 
B)  $2/3 billion. 
C)  $6 billion. 
D)  $2 billion. 
A)  $3 billion. 
B)  $2/3 billion. 
C)  $6 billion. 
D)  $2 billion.

Question 8

In a private closed economy, national income is $4.5 trillion and saving equals $6.4 billion. Based on these data, the marginal propensity to consume

Accepted Answer

A)  decreases as income increases. 
B)  is greater than the marginal propensity to save. 
C)  is less than the average propensity to consume. 
D)  cannot be calculated from the data given. 
A)  decreases as income increases. 
B)  is greater than the marginal propensity to save. 
C)  is less than the average propensity to consume. 
D)  cannot be calculated from the data given.

Question 9

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

Accepted Answer

A)  $100. 
B)  $20. 
C)  $80. 
D)  $200. 
A)  $100. 
B)  $20. 
C)  $80. 
D)  $200.

Question 10

The average propensity to consume is deﬁned as income divided by consumption.

Accepted Answer

A) True 
 B)False

Question 11

Investment spending in the United States tends to be unstable because

Accepted Answer

A)  proﬁts are highly variable. 
B)  the price level ﬂuctuates rapidly. 
C)  investment spending is affected by interest rates. 
D)  capital wears out quickly and must be replaced often. 
A)  proﬁts are highly variable. 
B)  the price level ﬂuctuates rapidly. 
C)  investment spending is affected by interest rates. 
D)  capital wears out quickly and must be replaced often.

Question 12

A rightward shift of the investment demand curve might be caused by

Accepted Answer

A)  an increase in the price level. 
B)  a decline in the real interest rate. 
C)  businesses planning to increase their stock of inventories. 
D)  an increase in business taxes. 
A)  an increase in the price level. 
B)  a decline in the real interest rate. 
C)  businesses planning to increase their stock of inventories. 
D)  an increase in business taxes.

Question 13

In an economy, for every $1,600 decrease in income, spending falls by $1,200. It can be concluded that the

Accepted Answer

A)  slope of the saving schedule is 1.33. 
B)  slope of the saving schedule is 0.75. 
C)  marginal propensity to consume is 1.33. 
D)  marginal propensity to save is 0.25. 
A)  slope of the saving schedule is 1.33. 
B)  slope of the saving schedule is 0.75. 
C)  marginal propensity to consume is 1.33. 
D)  marginal propensity to save is 0.25.

Question 14

Refer to the given consumption schedules. DI signiﬁes disposable income and C represents consumption expenditures. All ﬁgures are in billions of dollars. A $2 billion increase in consumption at
Each level of DI could be caused by

Accepted Answer

A)  a decrease in consumer wealth. 
B)  new expectations of higher future income. 
C)  an increase in taxation. 
D)  an increase in saving. 
A)  a decrease in consumer wealth. 
B)  new expectations of higher future income. 
C)  an increase in taxation. 
D)  an increase in saving.

Question 15

The amount of consumption in an economy correlates

Accepted Answer

A)  inversely with the level of disposable income. 
B)  directly with the level of disposable income. 
C)  directly with the level of saving. 
D)  directly with the rate of interest. 
A)  inversely with the level of disposable income. 
B)  directly with the level of disposable income. 
C)  directly with the level of saving. 
D)  directly with the rate of interest.

Question 16

The consumption schedule directly relates

Accepted Answer

A)  consumption to the level of disposable income. 
B)  saving to the level of disposable income. 
C)  disposable income to domestic income. 
D)  consumption to saving. 
A)  consumption to the level of disposable income. 
B)  saving to the level of disposable income. 
C)  disposable income to domestic income. 
D)  consumption to saving.

Question 17

The multiplier applies to

Accepted Answer

A)  investment but not to net exports or government spending. 
B)  investment, net exports, and government spending. 
C)  increases in spending but not to decreases in spending. 
D)  spending by the private sector but not by the public sector. 
A)  investment but not to net exports or government spending. 
B)  investment, net exports, and government spending. 
C)  increases in spending but not to decreases in spending. 
D)  spending by the private sector but not by the public sector.

Question 18

Assume that an increase in a household's disposable income from $40,000 to $48,000 leads to an increase in consumption from $35,000 to $41,000, then the

Accepted Answer

A)  slope of the consumption schedule is 0.75. 
B)  average propensity to consume is 0.75. 
C)  marginal propensity to save is 0.20. 
D)  marginal propensity to consume is 0.6. 
A)  slope of the consumption schedule is 0.75. 
B)  average propensity to consume is 0.75. 
C)  marginal propensity to save is 0.20. 
D)  marginal propensity to consume is 0.6.

Question 19

The fraction, or percentage, of total income that is saved is called the

Accepted Answer

A)  average propensity to save. 
B)  marginal propensity to save. 
C)  disposable income schedule. 
D)  saving schedule. 
A)  average propensity to save. 
B)  marginal propensity to save. 
C)  disposable income schedule. 
D)  saving schedule.

Question 20

Refer to the given diagram. The marginal propensity to save is

Accepted Answer

A)  CD/EF. 
B)  CB/CF. 
C)  CB/AF. 
D)  EF/CB. 
A)  CD/EF. 
B)  CB/CF. 
C)  CB/AF. 
D)  EF/CB.

The immediate determinants of investment spending are the

The saving schedule shows the relationship of saving of households to the level of

Which one of the following will cause a movement up along an economy's saving schedule?

The 45-degree line on a graph relating consumption and income shows

If the MPC is constant at various levels of income, then the APC must also be constant at all of those income levels.

Investment is highly stable; it increases over time at a very steady rate.

Assume the MPC is 2/3. If investment spending increases by $2 billion, the level of GDP will increase by

In a private closed economy, national income is $4.5 trillion and saving equals $6.4 billion. Based on these data, the marginal propensity to consume

The average propensity to consume is deﬁned as income divided by consumption.

Investment spending in the United States tends to be unstable because

A rightward shift of the investment demand curve might be caused by

In an economy, for every $1,600 decrease in income, spending falls by $1,200. It can be concluded that the

Refer to the given consumption schedules. DI signiﬁes disposable income and C represents consumption expenditures. All ﬁgures are in billions of dollars. A $2 billion increase in consumption at Each level of DI could be caused by

The amount of consumption in an economy correlates

The consumption schedule directly relates

The multiplier applies to

Assume that an increase in a household's disposable income from $40,000 to $48,000 leads to an increase in consumption from $35,000 to $41,000, then the

The fraction, or percentage, of total income that is saved is called the

Refer to the given diagram. The marginal propensity to save is

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

The immediate determinants of investment spending are the

The saving schedule shows the relationship of saving of households to the level of

Which one of the following will cause a movement up along an economy's saving schedule?

The 45-degree line on a graph relating consumption and income shows

If the MPC is constant at various levels of income, then the APC must also be constant at all of those income levels.

Investment is highly stable; it increases over time at a very steady rate.

Assume the MPC is 2/3. If investment spending increases by $2 billion, the level of GDP will increase by

In a private closed economy, national income is $4.5 trillion and saving equals $6.4 billion. Based on these data, the marginal propensity to consume

The average propensity to consume is deﬁned as income divided by consumption.

Investment spending in the United States tends to be unstable because

A rightward shift of the investment demand curve might be caused by

In an economy, for every $1,600 decrease in income, spending falls by $1,200. It can be concluded that the

Refer to the given consumption schedules. DI signiﬁes disposable income and C represents consumption expenditures. All ﬁgures are in billions of dollars. A $2 billion increase in consumption at Each level of DI could be caused by

The amount of consumption in an economy correlates

The consumption schedule directly relates

The multiplier applies to

Assume that an increase in a household's disposable income from $40,000 to $48,000 leads to an increase in consumption from $35,000 to $41,000, then the

The fraction, or percentage, of total income that is saved is called the

Refer to the given diagram. The marginal propensity to save is

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