Question 1

The U.S. experience with tax cuts and tax increases since 1975 suggests that

Accepted Answer

A)  tax cuts always stimulate consumption spending. 
B)  tax changes have a stable and predictable effect on consumption spending. 
C)  temporary tax changes are less effective than permanent changes. 
D)  tax changes have no effect on consumption spending. 
A)  tax cuts always stimulate consumption spending. 
B)  tax changes have a stable and predictable effect on consumption spending. 
C)  temporary tax changes are less effective than permanent changes. 
D)  tax changes have no effect on consumption spending.

Question 2

Government purchases are included in national product.

Accepted Answer

A) True 
 B)False

Question 3

Anna enters the workforce after being unemployed for a year. How would this be shown on her consumption function?

Accepted Answer

A)  Movement down the consumption function 
B)  Shift upward of the function 
C)  Shift downward of the function 
D)  Movement up along the consumption function 
A)  Movement down the consumption function 
B)  Shift upward of the function 
C)  Shift downward of the function 
D)  Movement up along the consumption function

Question 4

The consumption function shows an indirect relationship between consumer spending and disposable income.

Accepted Answer

A) True 
 B)False

Question 5

If DI falls by $100 billion, and C falls by $90 billion, the slope of the consumption is

Accepted Answer

A)  −0.45. 
B)  0.45. 
C)  −0.90. 
D)  0.90. 
E)  0.50. 
A)  −0.45. 
B)  0.45. 
C)  −0.90. 
D)  0.90. 
E)  0.50.

Question 6

The most volatile component of aggregate demand is

Accepted Answer

A)  consumption spending. 
B)  government spending. 
C)  investment spending. 
D)  net exports. 
A)  consumption spending. 
B)  government spending. 
C)  investment spending. 
D)  net exports.

Question 7

Which of the following factors would cause your consumption function to shift upward?

Accepted Answer

A)  A decrease in the value of fixed-money assets 
B)  An increase in the value of your fixed-money assets 
C)  A decrease to your disposable income 
D)  An increase in the average price of goods and services 
A)  A decrease in the value of fixed-money assets 
B)  An increase in the value of your fixed-money assets 
C)  A decrease to your disposable income 
D)  An increase in the average price of goods and services

Question 8

Disposable income is obtained by

Accepted Answer

A)  subtracting personal income taxes from personal income. 
B)  subtracting personal income taxes from national income. 
C)  adding transfer payments to national income. 
D)  adding transfer payments to personal income. 
A)  subtracting personal income taxes from personal income. 
B)  subtracting personal income taxes from national income. 
C)  adding transfer payments to national income. 
D)  adding transfer payments to personal income.

Question 9

Discuss the major determinants of net exports.

Accepted Answer

National incomes: Although both exports

Question 10

The majority of payments made by the federal government are for

Accepted Answer

A)  transfer payments. 
B)  administrative expenses. 
C)  foreign aid. 
D)  defense purchases. 
A)  transfer payments. 
B)  administrative expenses. 
C)  foreign aid. 
D)  defense purchases.

Question 11

Table 8-1   According to the data in Table 8-1, the value of NNP is

Accepted Answer

A)  900 
B)  805 
C)  750 
D)  705 
A)  900 
B)  805 
C)  750 
D)  705

Question 12

The difference between Gross National Product and Net National Product is the

Accepted Answer

A)  rate of inflation. 
B)  statistical discrepancy encountered in calculating GDP. 
C)  difference between real versus nominal GDP. 
D)  depreciation of the economy's capital stock. 
A)  rate of inflation. 
B)  statistical discrepancy encountered in calculating GDP. 
C)  difference between real versus nominal GDP. 
D)  depreciation of the economy's capital stock.

Question 13

A once-and-for-all jump in the price level would initially cause a(n)

Accepted Answer

A)  upward shift in the consumption function. 
B)  upward movement along the consumption function. 
C)  downward shift in the consumption function. 
D)  downward movement along the consumption function. 
A)  upward shift in the consumption function. 
B)  upward movement along the consumption function. 
C)  downward shift in the consumption function. 
D)  downward movement along the consumption function.

Question 14

The value of both exports and imports are added to the value of national product.

Accepted Answer

A) True 
 B)False

Question 15

The circular flow diagram is best described as a(n)

Accepted Answer

A)  abstraction of little value in macroeconomics. 
B)  exact representation of the cause and effect relationship between spending and employment. 
C)  model that clarifies the relationship between spending and income. 
D)  model to explain the relationship between the federal deficit and tax revenues. 
A)  abstraction of little value in macroeconomics. 
B)  exact representation of the cause and effect relationship between spending and employment. 
C)  model that clarifies the relationship between spending and income. 
D)  model to explain the relationship between the federal deficit and tax revenues.

Question 16

The national income accounts include a value for the amount of capital stock "used up" during the production of current output. This dollar amount is called

Accepted Answer

A)  appreciation. 
B)  dollarization. 
C)  amortization. 
D)  depreciation. 
A)  appreciation. 
B)  dollarization. 
C)  amortization. 
D)  depreciation.

Question 17

Money-fixed assets include government bonds, corporate bonds, and certificates of deposit.

Accepted Answer

A) True 
 B)False

Question 18

Aggregate demand is a ____ rather than a ____.

Accepted Answer

A)  fixed number; concept 
B)  schedule; fixed number 
C)  set number; concept 
D)  government aggregate; private aggregate 
A)  fixed number; concept 
B)  schedule; fixed number 
C)  set number; concept 
D)  government aggregate; private aggregate

Question 19

Most statistical studies on the relationship between real interest rates and saving conclude that higher real interest rates

Accepted Answer

A)  increase saving. 
B)  tend to decrease saving. 
C)  tend to decrease both consumption and saving. 
D)  have no effect on saving. 
A)  increase saving. 
B)  tend to decrease saving. 
C)  tend to decrease both consumption and saving. 
D)  have no effect on saving.

Question 20

The equation representing the final demand approach to calculating GDP is

Accepted Answer

A)  Y = C + I + X + IM. 
B)  Y = C + I + G. 
C)  Y = G + I + X − IM. 
D)  Y = C+ I + G + (X − IM). 
A)  Y = C + I + X + IM. 
B)  Y = C + I + G. 
C)  Y = G + I + X − IM. 
D)  Y = C+ I + G + (X − IM).

Exam 24: Aggregate Demand and the Powerful Consumer

The U.S. experience with tax cuts and tax increases since 1975 suggests that

Government purchases are included in national product.

Anna enters the workforce after being unemployed for a year. How would this be shown on her consumption function?

The consumption function shows an indirect relationship between consumer spending and disposable income.

If DI falls by $100 billion, and C falls by $90 billion, the slope of the consumption is

The most volatile component of aggregate demand is

Which of the following factors would cause your consumption function to shift upward?

Disposable income is obtained by

Discuss the major determinants of net exports.

The majority of payments made by the federal government are for

Table 8-1 According to the data in Table 8-1, the value of NNP is

The difference between Gross National Product and Net National Product is the

A once-and-for-all jump in the price level would initially cause a(n)

The value of both exports and imports are added to the value of national product.

The circular flow diagram is best described as a(n)

The national income accounts include a value for the amount of capital stock "used up" during the production of current output. This dollar amount is called

Money-fixed assets include government bonds, corporate bonds, and certificates of deposit.

Aggregate demand is a ____ rather than a ____.

Most statistical studies on the relationship between real interest rates and saving conclude that higher real interest rates

The equation representing the final demand approach to calculating GDP is

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

Aggregate demand is a rather than a .