Question 1

The book that is the basis for modern macroeconomic theory is

Accepted Answer

A)  The Wealth of Nations. 
B)  Principles of Political Economy. 
C)  The General History of Money and Banking. 
D)  The General Theory of Employment, Interest, and Money. 
A)  The Wealth of Nations. 
B)  Principles of Political Economy. 
C)  The General History of Money and Banking. 
D)  The General Theory of Employment, Interest, and Money.

Question 2

The net export component of aggregate demand is defined as U.S.

Accepted Answer

A)  imports minus U.S. exports. 
B)  imports plus U.S. exports. 
C)  exports minus U.S. imports. 
D)  exports minus taxes and customs duties. 
A)  imports minus U.S. exports. 
B)  imports plus U.S. exports. 
C)  exports minus U.S. imports. 
D)  exports minus taxes and customs duties.

Question 3

To predict the effects of a tax cut on consumption spending, economists must have some estimate of the

Accepted Answer

A)  income effect. 
B)  substitution effect. 
C)  relative price effect. 
D)  marginal propensity to consume. 
A)  income effect. 
B)  substitution effect. 
C)  relative price effect. 
D)  marginal propensity to consume.

Question 4

If the Japanese economy is currently suffering from a recession, we should expect U.S. exports to Japan to

Accepted Answer

A)  decrease. 
B)  increase. 
C)  remain the same. 
D)  increase only if the Japanese Yen depreciates. 
A)  decrease. 
B)  increase. 
C)  remain the same. 
D)  increase only if the Japanese Yen depreciates.

Question 5

Changes in the value of stocks may play a big role in the consumption decisions of individuals. How would changes in the stock market affect the consumption function?

Accepted Answer

Corporate stocks are an increasingly pop

Question 6

Consumers increased consumption by a relatively small amount in 2008 and 2009 because they believed the tax cuts were temporary.

Accepted Answer

A) True 
 B)False

Question 7

Taxes are not considered a leakage because they become transfers in the circular flow of income and spending model.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following will most likely have the greatest effect on an individual's consumption function?

Accepted Answer

A)  Winning a small amount in the lottery 
B)  A one-time tuition grant 
C)  A week of high overtime pay 
D)  An inheritance paying a modest annual dividend 
A)  Winning a small amount in the lottery 
B)  A one-time tuition grant 
C)  A week of high overtime pay 
D)  An inheritance paying a modest annual dividend

Question 9

The relationship between consumption and disposable income is such that as

Accepted Answer

A)  consumption rises, disposable income falls. 
B)  disposable income rises, consumption rises. 
C)  disposable income rises, consumption falls. 
D)  disposable income rises, saving falls. 
A)  consumption rises, disposable income falls. 
B)  disposable income rises, consumption rises. 
C)  disposable income rises, consumption falls. 
D)  disposable income rises, saving falls.

Question 10

The numerical value of the MPC is typically

Accepted Answer

A)  less than 1. 
B)  equal to 1. 
C)  greater than 1. 
D)  unpredictable. 
A)  less than 1. 
B)  equal to 1. 
C)  greater than 1. 
D)  unpredictable.

Question 11

Assume that consumption in the United States is $9,000 billion in 2009. If the MPC is 0.8 and disposable income increases by $1,000 billion in 2010, then the level of consumption in 2010 will be

Accepted Answer

A)  $10,000 billion. 
B)  $9,800 billion. 
C)  $9,000 billion. 
D)  $7,200 billion. 
A)  $10,000 billion. 
B)  $9,800 billion. 
C)  $9,000 billion. 
D)  $7,200 billion.

Question 12

The sum of wages and salaries, interest, rent, and profits equals

Accepted Answer

A)  net national product. 
B)  national interest. 
C)  gross national product. 
D)  national income. 
A)  net national product. 
B)  national interest. 
C)  gross national product. 
D)  national income.

Question 13

The largest component of aggregate demand is

Accepted Answer

A)  investment spending. 
B)  consumer spending. 
C)  government spending. 
D)  total imports. 
A)  investment spending. 
B)  consumer spending. 
C)  government spending. 
D)  total imports.

Question 14

On a graph with consumption on the vertical axis and disposable income on the horizontal axis, the slope of the line is

Accepted Answer

A)  greater than 1. 
B)  equal to 1. 
C)  less than 1. 
D)  undefined. 
A)  greater than 1. 
B)  equal to 1. 
C)  less than 1. 
D)  undefined.

Question 15

The most volatile part of wealth is

Accepted Answer

A)  transfer payments. 
B)  Bonds. 
C)  the stockmarket. 
D)  savings accounts. 
A)  transfer payments. 
B)  Bonds. 
C)  the stockmarket. 
D)  savings accounts.

Question 16

Which of the following is the injection into the circular flow model?

Accepted Answer

A)  Money deposited in a savings account 
B)  Income earned through exports 
C)  Goods imported from abroad 
D)  Taxes paid by the individuals 
A)  Money deposited in a savings account 
B)  Income earned through exports 
C)  Goods imported from abroad 
D)  Taxes paid by the individuals

Question 17

Define investment? 
The meaning of investment is different for economists. Explain.

Accepted Answer

Investment is an asset or item that is p

Question 18

What is the marginal propensity to consume (MPC) and why is it important in predicting consumer behavior?

Accepted Answer

The marginal propensity to consume is th

Question 19

Government spending is a leakage out of the circular flow of income and spending.

Accepted Answer

A) True 
 B)False

Question 20

The slope of the scatter diagram representing the relationship between consumption and disposable income in the United States is approximately

Accepted Answer

A)  1.10. 
B)  0.30. 
C)  0.50. 
D)  0.90. 
A)  1.10. 
B)  0.30. 
C)  0.50. 
D)  0.90.

Exam 24: Aggregate Demand and the Powerful Consumer

The book that is the basis for modern macroeconomic theory is

The net export component of aggregate demand is defined as U.S.

To predict the effects of a tax cut on consumption spending, economists must have some estimate of the

If the Japanese economy is currently suffering from a recession, we should expect U.S. exports to Japan to

Changes in the value of stocks may play a big role in the consumption decisions of individuals. How would changes in the stock market affect the consumption function?

Consumers increased consumption by a relatively small amount in 2008 and 2009 because they believed the tax cuts were temporary.

Taxes are not considered a leakage because they become transfers in the circular flow of income and spending model.

Which of the following will most likely have the greatest effect on an individual's consumption function?

The relationship between consumption and disposable income is such that as

The numerical value of the MPC is typically

Assume that consumption in the United States is $9,000 billion in 2009. If the MPC is 0.8 and disposable income increases by $1,000 billion in 2010, then the level of consumption in 2010 will be

The sum of wages and salaries, interest, rent, and profits equals

The largest component of aggregate demand is

On a graph with consumption on the vertical axis and disposable income on the horizontal axis, the slope of the line is

The most volatile part of wealth is

Which of the following is the injection into the circular flow model?

Define investment? The meaning of investment is different for economists. Explain.

What is the marginal propensity to consume (MPC) and why is it important in predicting consumer behavior?

Government spending is a leakage out of the circular flow of income and spending.

The slope of the scatter diagram representing the relationship between consumption and disposable income in the United States is approximately

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

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