Question 1

The largest income component in the national income accounts is

Accepted Answer

A)  wages. 
B)  rents. 
C)  corporate profits. 
D)  interest. 
A)  wages. 
B)  rents. 
C)  corporate profits. 
D)  interest.

Question 2

Adding depreciation to net national product yields

Accepted Answer

A)  disposable income (DI). 
B)  personal income (PI). 
C)  net national product (NNP). 
D)  gross domestic product (GDP). 
A)  disposable income (DI). 
B)  personal income (PI). 
C)  net national product (NNP). 
D)  gross domestic product (GDP).

Question 3

If income in Austria decreases by 30 million euros and consumption decreases by 24 euros, then the MPC equals

Accepted Answer

A)  0.90. 
B)  0.80. 
C)  0.60. 
D)  −0.60. 
A)  0.90. 
B)  0.80. 
C)  0.60. 
D)  −0.60.

Question 4

Goods produced that go into inventories are

Accepted Answer

A)  not counted in GDP. 
B)  only counted in GDP when they are ultimately sold. 
C)  counted in GDP even though they are not sold. 
D)  counted if they completely depreciate within the calendar year. 
A)  not counted in GDP. 
B)  only counted in GDP when they are ultimately sold. 
C)  counted in GDP even though they are not sold. 
D)  counted if they completely depreciate within the calendar year.

Question 5

According to economists, how does an increase in the inflation rate affect the consumption function?

Accepted Answer

A)  It shifts the function upward. 
B)  It shifts the function downward. 
C)  It causes movement upward along the function. 
D)  It causes movement downward along the function. 
E)  It has no predictable effect on the function. 
A)  It shifts the function upward. 
B)  It shifts the function downward. 
C)  It causes movement upward along the function. 
D)  It causes movement downward along the function. 
E)  It has no predictable effect on the function.

Question 6

Aggregate demand is the sum of total domestic spending by the private sector.

Accepted Answer

A) True 
 B)False

Question 7

Why does an increase in the price level tend to cause the consumption function to shift downward?

Accepted Answer

A)  An increase in the price level decreases disposable income. 
B)  An increase in the price level increases the demand for fixed money assets. 
C)  An increase in the price level decreases the value of fixed money assets. 
D)  An increase in the price level decreases saving and increases debt. 
A)  An increase in the price level decreases disposable income. 
B)  An increase in the price level increases the demand for fixed money assets. 
C)  An increase in the price level decreases the value of fixed money assets. 
D)  An increase in the price level decreases saving and increases debt.

Question 8

Which of the following methods is not used to calculate GDP?

Accepted Answer

A)  The sum of all the final goods and services produced by a country's resources 
B)  The sum of all factor payments plus depreciation and indirect business taxes 
C)  The sum of all values added at each stage of production 
D)  The sum of all spending on final goods and services 
A)  The sum of all the final goods and services produced by a country's resources 
B)  The sum of all factor payments plus depreciation and indirect business taxes 
C)  The sum of all values added at each stage of production 
D)  The sum of all spending on final goods and services

Question 9

Explain why it makes a difference if consumers consider a tax cut temporary rather than permanent. What does this explanation tell us about the importance of government credibility? Put this in the context of the 2008 and 2009 tax cuts favored by President Bush and President Obama.

Accepted Answer

Consumers tend to base their spending de

Question 10

A movement upward along the consumption function can be caused only by a(n)

Accepted Answer

A)  increase in disposable income. 
B)  decrease in disposable income. 
C)  decrease in the price level. 
D)  increase in the price level. 
A)  increase in disposable income. 
B)  decrease in disposable income. 
C)  decrease in the price level. 
D)  increase in the price level.

Question 11

Government-produced goods are added to GDP at

Accepted Answer

A)  their market value. 
B)  the value they have to their users. 
C)  the value of the inputs used to produce them. 
D)  the value Congress places on them. 
A)  their market value. 
B)  the value they have to their users. 
C)  the value of the inputs used to produce them. 
D)  the value Congress places on them.

Question 12

The system of measurement for expressing macroeconomic data is called

Accepted Answer

A)  national income accounting. 
B)  balance of payment accounting. 
C)  generally accepted accounting principles. 
D)  double entry bookkeeping. 
A)  national income accounting. 
B)  balance of payment accounting. 
C)  generally accepted accounting principles. 
D)  double entry bookkeeping.

Question 13

If real interest rates decrease, we generally expect

Accepted Answer

A)  saving to increase. 
B)  saving to decrease. 
C)  consumption spending to decrease. 
D)  no significant change in saving. 
A)  saving to increase. 
B)  saving to decrease. 
C)  consumption spending to decrease. 
D)  no significant change in saving.

Question 14

The sum of all factor payments in the economy yields

Accepted Answer

A)  gross domestic product. 
B)  national income. 
C)  disposable income. 
D)  net domestic product. 
A)  gross domestic product. 
B)  national income. 
C)  disposable income. 
D)  net domestic product.

Question 15

For each $1 of a tax cut, economists expect consumption to

Accepted Answer

A)  decrease by $1. 
B)  decrease by less than $1. 
C)  increase by less than $1. 
D)  increase by $1. 
A)  decrease by $1. 
B)  decrease by less than $1. 
C)  increase by less than $1. 
D)  increase by $1.

Question 16

The relationship between consumer spending and disposable income is called the

Accepted Answer

A)  conjunction function. 
B)  consumption function. 
C)  aggregate demand function. 
D)  marginal spending function. 
A)  conjunction function. 
B)  consumption function. 
C)  aggregate demand function. 
D)  marginal spending function.

Question 17

What is disposable income? How is it calculated?

Accepted Answer

Disposable income (DI) is the sum of the

Question 18

The value-added approach of measuring GDP does not do the following.

Accepted Answer

A)  It includes the revenue a firm receives from selling a product minus the amount paid for goods purchased from other firms. 
B)  It includes only the value-added portion from the sale of goods and services. 
C)  It includes only the second-to-the-last value of the intermediate good used. 
D)  It avoids double counting. 
A)  It includes the revenue a firm receives from selling a product minus the amount paid for goods purchased from other firms. 
B)  It includes only the value-added portion from the sale of goods and services. 
C)  It includes only the second-to-the-last value of the intermediate good used. 
D)  It avoids double counting.

Question 19

Financial investments, such as mutual fund purchases, are included in the national income component.

Accepted Answer

A) True 
 B)False

The largest income component in the national income accounts is

Adding depreciation to net national product yields

If income in Austria decreases by 30 million euros and consumption decreases by 24 euros, then the MPC equals

Goods produced that go into inventories are

According to economists, how does an increase in the inflation rate affect the consumption function?

Aggregate demand is the sum of total domestic spending by the private sector.

Why does an increase in the price level tend to cause the consumption function to shift downward?

Which of the following methods is not used to calculate GDP?

Explain why it makes a difference if consumers consider a tax cut temporary rather than permanent. What does this explanation tell us about the importance of government credibility? Put this in the context of the 2008 and 2009 tax cuts favored by President Bush and President Obama.

A movement upward along the consumption function can be caused only by a(n)

Government-produced goods are added to GDP at

The system of measurement for expressing macroeconomic data is called

If real interest rates decrease, we generally expect

The sum of all factor payments in the economy yields

For each $1 of a tax cut, economists expect consumption to

The relationship between consumer spending and disposable income is called the

What is disposable income? How is it calculated?

The value-added approach of measuring GDP does not do the following.

Financial investments, such as mutual fund purchases, are included in the national income component.

What Is Economics

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: an Initial Look

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Demand-Side Equilibrium: Unemployment or Inflation

Bringing in the Supply Side: Unemployment and Inflation

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off Between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder

Exchange Rates and the Macroeconomy

Contemporary Issues in the Us Economy

Filters

Exam 24: Aggregate Demand and the Powerful Consumer

The largest income component in the national income accounts is

Adding depreciation to net national product yields

If income in Austria decreases by 30 million euros and consumption decreases by 24 euros, then the MPC equals

Goods produced that go into inventories are

According to economists, how does an increase in the inflation rate affect the consumption function?

Aggregate demand is the sum of total domestic spending by the private sector.

Why does an increase in the price level tend to cause the consumption function to shift downward?

Which of the following methods is not used to calculate GDP?

Explain why it makes a difference if consumers consider a tax cut temporary rather than permanent. What does this explanation tell us about the importance of government credibility? Put this in the context of the 2008 and 2009 tax cuts favored by President Bush and President Obama.

A movement upward along the consumption function can be caused only by a(n)

Government-produced goods are added to GDP at

The system of measurement for expressing macroeconomic data is called

If real interest rates decrease, we generally expect

The sum of all factor payments in the economy yields

For each $1 of a tax cut, economists expect consumption to

The relationship between consumer spending and disposable income is called the

What is disposable income? How is it calculated?

The value-added approach of measuring GDP does not do the following.

Financial investments, such as mutual fund purchases, are included in the national income component.

What Is Economics

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: an Initial Look

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Demand-Side Equilibrium: Unemployment or Inflation

Bringing in the Supply Side: Unemployment and Inflation

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off Between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder

Exchange Rates and the Macroeconomy

Contemporary Issues in the Us Economy

Filters