Question 1

If the marginal propensity to consume is 0.75 and investment spending increases by $200 billion,by how much will equilibrium output increase?

Accepted Answer

A)  $350 billion 
B)  $150 billion 
C)  $200 billion 
D)  $266.7 billion 
E)  $800 billion 
A)  $350 billion 
B)  $150 billion 
C)  $200 billion 
D)  $266.7 billion 
E)  $800 billion

Question 2

Suppose the MPC is 0.9.If autonomous consumption spending increases by $20 billion,equilibrium output will

Accepted Answer

A)  increase by $22.2 billion 
B)  increase by $200 billion 
C)  not change because the MPC only changes consumption when income changes 
D)  not change because the expenditures multiplier only applies to changes in investment spending and government purchases 
E)  increase by $18 billion. 
A)  increase by $22.2 billion 
B)  increase by $200 billion 
C)  not change because the MPC only changes consumption when income changes 
D)  not change because the expenditures multiplier only applies to changes in investment spending and government purchases 
E)  increase by $18 billion.

Question 3

Disposable income is best defined as

Accepted Answer

A)  income adjusted for inflation 
B)  nominal income 
C)  the income remaining after bills have been paid 
D)  income after taxes have been paid and transfers received 
E)  income paid in dollars that are worthless 
A)  income adjusted for inflation 
B)  nominal income 
C)  the income remaining after bills have been paid 
D)  income after taxes have been paid and transfers received 
E)  income paid in dollars that are worthless

Question 4

Which of the following statements is most accurate?

Accepted Answer

A)  Most of the variation in consumption spending can be explained by changes in the interest rate. 
B)  Most of the variation in consumption spending can be explained by changes in disposable income. 
C)  Most of the variation in consumption spending can be explained by changes in wealth. 
D)  Most of the variation in consumption spending can be explained by changes in debt. 
E)  There is no single factor that explains much of the variation in consumption spending. 
A)  Most of the variation in consumption spending can be explained by changes in the interest rate. 
B)  Most of the variation in consumption spending can be explained by changes in disposable income. 
C)  Most of the variation in consumption spending can be explained by changes in wealth. 
D)  Most of the variation in consumption spending can be explained by changes in debt. 
E)  There is no single factor that explains much of the variation in consumption spending.

Question 5

In calculating total spending,after adding together Consumption,Investment,and Government Purchases,we must

Accepted Answer

A)  add imports and subtract exports 
B)  add exports and subtract imports 
C)  compute net consumption and net investment by subtracting products produced abroad 
D)  compute net consumption and net investment by adding products produced abroad 
E)  compute net consumption and net investment by add products consumed abroad 
A)  add imports and subtract exports 
B)  add exports and subtract imports 
C)  compute net consumption and net investment by subtracting products produced abroad 
D)  compute net consumption and net investment by adding products produced abroad 
E)  compute net consumption and net investment by add products consumed abroad

Question 6

The marginal propensity to consume (MPC)is

Accepted Answer

A)  the change in consumption divided by the change in disposable income 
B)  total consumption divided by total disposable income 
C)  the change in disposable income divided by the change in consumption 
D)  total disposable income divided by total consumption 
E)  the change in disposable income minus the change in consumption 
A)  the change in consumption divided by the change in disposable income 
B)  total consumption divided by total disposable income 
C)  the change in disposable income divided by the change in consumption 
D)  total disposable income divided by total consumption 
E)  the change in disposable income minus the change in consumption

Question 7

When real consumption expenditure is plotted against real disposable income the resulting relationship is

Accepted Answer

A)  very weak. 
B)  positive and very curvi-linear. 
C)  positive and very close to linear. 
D)  negative and very close to linear. 
E)  virtually flat. 
A)  very weak. 
B)  positive and very curvi-linear. 
C)  positive and very close to linear. 
D)  negative and very close to linear. 
E)  virtually flat.

Question 8

For any value of the MPC (marginal propensity to consume),the formula for the expenditure multiplier is

Accepted Answer

A)  1/(1 - MP
C)  
B)  1/MPC 
C)  1/(MPC - 1) 
D)  (1 + MP
C) /MPC 
E)  1/(1 + MP
C)  
A)  1/(1 - MP
C)  
B)  1/MPC 
C)  1/(MPC - 1) 
D)  (1 + MP
C) /MPC 
E)  1/(1 + MP
C)

Question 9

Which of the following would cause the consumption function to shift downward?

Accepted Answer

A)  A decrease in taxes 
B)  A decrease in interest rates 
C)  Consumers become more pessimistic about the future 
D)  Consumers become more optimistic about the future 
E)  None of the above 
A)  A decrease in taxes 
B)  A decrease in interest rates 
C)  Consumers become more pessimistic about the future 
D)  Consumers become more optimistic about the future 
E)  None of the above

Question 10

-Refer to Figure 11-8.If YFE represents the full-employment level of output,what can we say about the state of the economy at Y₁?

Accepted Answer

A)  It is in equilibrium,but below full employment. 
B)  It is in equilibrium,and therefore at full employment. 
C)  It is in equilibrium,but above full employment. 
D)  It is not in equilibrium,and output will increase. 
E)  It is not in equilibrium,and output will fall. 
A)  It is in equilibrium,but below full employment. 
B)  It is in equilibrium,and therefore at full employment. 
C)  It is in equilibrium,but above full employment. 
D)  It is not in equilibrium,and output will increase. 
E)  It is not in equilibrium,and output will fall.

Question 11

In the short-run macro model,if aggregate expenditure is less than GDP,output will

Accepted Answer

A)  decline as firms cut production to stop the buildup of inventories 
B)  decline as firms increase their prices to stop the buildup of inventories 
C)  increase as firms increase production to try to stop depletion of inventories 
D)  increase as firms cut their prices to try to stop depletion of inventories 
E)  remain unchanged indefinitely unless government takes action 
A)  decline as firms cut production to stop the buildup of inventories 
B)  decline as firms increase their prices to stop the buildup of inventories 
C)  increase as firms increase production to try to stop depletion of inventories 
D)  increase as firms cut their prices to try to stop depletion of inventories 
E)  remain unchanged indefinitely unless government takes action

Question 12

If the marginal propensity to consume is 0.75 and investment spending decreases by $20 billion,what will be the overall effect on GDP?

Accepted Answer

A)  GDP will decrease by $20 billion 
B)  GDP will increase by $15 billion 
C)  GDP will decrease by $80 billion 
D)  GDP will decrease by $30 billion 
E)  GDP will decrease by $26.7 billion 
A)  GDP will decrease by $20 billion 
B)  GDP will increase by $15 billion 
C)  GDP will decrease by $80 billion 
D)  GDP will decrease by $30 billion 
E)  GDP will decrease by $26.7 billion

Question 13

If the marginal propensity to consume is 0.5,the income tax rate is 10%,and income rises by $20,000,by how much will consumption spending increase?

Accepted Answer

A)  $15,000 
B)  $10,000 
C)  $5,000 
D)  $9,000 
E)  $1,000 
A)  $15,000 
B)  $10,000 
C)  $5,000 
D)  $9,000 
E)  $1,000

Question 14

If aggregate expenditure at a particular level of income is less than output,

Accepted Answer

A)  output will increase 
B)  output will decrease 
C)  output will remain the same 
D)  output will rise slightly and then level off 
E)  we cannot determine what will happen to output 
A)  output will increase 
B)  output will decrease 
C)  output will remain the same 
D)  output will rise slightly and then level off 
E)  we cannot determine what will happen to output

Question 15

Everything else being equal,a higher interest rate

Accepted Answer

A)  increases consumption spending as people face increasing debt 
B)  reduces consumption spending as people have a greater incentive to save 
C)  does not change consumption spending because consumption is only affected by income 
D)  does not change total consumption spending,but does change who does the spending 
E)  reduces both consumption spending and saving as people face increased debt. 
A)  increases consumption spending as people face increasing debt 
B)  reduces consumption spending as people have a greater incentive to save 
C)  does not change consumption spending because consumption is only affected by income 
D)  does not change total consumption spending,but does change who does the spending 
E)  reduces both consumption spending and saving as people face increased debt.

Question 16

If the marginal propensity to consume is 0.6 and investment spending declines by $50 billion,by how much will equilibrium output change?

Accepted Answer

A)  -$125 billion 
B)  -$83.3 billion 
C)  -$50 billion 
D)  $83.3 billion 
E)  $125 billion 
A)  -$125 billion 
B)  -$83.3 billion 
C)  -$50 billion 
D)  $83.3 billion 
E)  $125 billion

Question 17

Which of the following is the definition of wealth?

Accepted Answer

A)  Real disposable income 
B)  The total value of assets 
C)  Real income 
D)  The value of liabilities minus the value of assets 
E)  The value of assets minus the value of outstanding liabilities. 
A)  Real disposable income 
B)  The total value of assets 
C)  Real income 
D)  The value of liabilities minus the value of assets 
E)  The value of assets minus the value of outstanding liabilities.

Question 18

Which of the following is not true of an economic expansion?

Accepted Answer

A)  The economy is overheated. 
B)  There is too much spending. 
C)  Production exceeds equilibrium output. 
D)  The aggregate expenditure line is too low to create an intersection at full-employment output. 
E)  Unemployment will be unusually low. 
A)  The economy is overheated. 
B)  There is too much spending. 
C)  Production exceeds equilibrium output. 
D)  The aggregate expenditure line is too low to create an intersection at full-employment output. 
E)  Unemployment will be unusually low.

Question 19

In the short-run macro model,what type of unemployment is caused by insufficient spending?

Accepted Answer

A)  Cyclical 
B)  Structural 
C)  Frictional 
D)  Seasonal 
E)  All types of unemployment are caused by insufficient spending 
A)  Cyclical 
B)  Structural 
C)  Frictional 
D)  Seasonal 
E)  All types of unemployment are caused by insufficient spending

Question 20

The difference between the number of workers employed if the economy was operating at full employment and the number of workers currently employed given aggregate expenditures is known as

Accepted Answer

A)  cyclical unemployment 
B)  frictional unemployment 
C)  structural unemployment 
D)  unemployment is not possible in the short run macro model 
E)  urban unemployment 
A)  cyclical unemployment 
B)  frictional unemployment 
C)  structural unemployment 
D)  unemployment is not possible in the short run macro model 
E)  urban unemployment

If the marginal propensity to consume is 0.75 and investment spending increases by $200 billion,by how much will equilibrium output increase?

Suppose the MPC is 0.9.If autonomous consumption spending increases by $20 billion,equilibrium output will

Disposable income is best defined as

Which of the following statements is most accurate?

In calculating total spending,after adding together Consumption,Investment,and Government Purchases,we must

The marginal propensity to consume (MPC)is

When real consumption expenditure is plotted against real disposable income the resulting relationship is

For any value of the MPC (marginal propensity to consume),the formula for the expenditure multiplier is

Which of the following would cause the consumption function to shift downward?

-Refer to Figure 11-8.If YFE represents the full-employment level of output,what can we say about the state of the economy at Y₁?

In the short-run macro model,if aggregate expenditure is less than GDP,output will

If the marginal propensity to consume is 0.75 and investment spending decreases by $20 billion,what will be the overall effect on GDP?

If the marginal propensity to consume is 0.5,the income tax rate is 10%,and income rises by $20,000,by how much will consumption spending increase?

If aggregate expenditure at a particular level of income is less than output,

Everything else being equal,a higher interest rate

If the marginal propensity to consume is 0.6 and investment spending declines by $50 billion,by how much will equilibrium output change?

Which of the following is the definition of wealth?

Which of the following is not true of an economic expansion?

In the short-run macro model,what type of unemployment is caused by insufficient spending?

The difference between the number of workers employed if the economy was operating at full employment and the number of workers currently employed given aggregate expenditures is known as

What is Economics?

Scarcity, Choice, and Economic Systems

Supply and Demand

Working With Supply and Demand

What Macroeconomics Tries to Explain

Production, Income, and Employment

The Price Level and Inflation

The Classical Long run Model

Economic Growth and Rising Living Standards

Economic Fluctuations

Fiscal Policy

Money, Banks, and the Federal Reserve

The Money Market and Monetary Policy

Aggregate Demand and Aggregate Supply

Inflation and Monetary Policy

Exchange Rates and Macroeconomic Policy

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Exam 11: The Short-run Macro Model

If the marginal propensity to consume is 0.75 and investment spending increases by $200 billion,by how much will equilibrium output increase?

Suppose the MPC is 0.9.If autonomous consumption spending increases by $20 billion,equilibrium output will

Disposable income is best defined as

Which of the following statements is most accurate?

In calculating total spending,after adding together Consumption,Investment,and Government Purchases,we must

The marginal propensity to consume (MPC)is

When real consumption expenditure is plotted against real disposable income the resulting relationship is

For any value of the MPC (marginal propensity to consume),the formula for the expenditure multiplier is

Which of the following would cause the consumption function to shift downward?

-Refer to Figure 11-8.If YFE represents the full-employment level of output,what can we say about the state of the economy at Y₁?

In the short-run macro model,if aggregate expenditure is less than GDP,output will

If the marginal propensity to consume is 0.75 and investment spending decreases by $20 billion,what will be the overall effect on GDP?

If the marginal propensity to consume is 0.5,the income tax rate is 10%,and income rises by $20,000,by how much will consumption spending increase?

If aggregate expenditure at a particular level of income is less than output,

Everything else being equal,a higher interest rate

If the marginal propensity to consume is 0.6 and investment spending declines by $50 billion,by how much will equilibrium output change?

Which of the following is the definition of wealth?

Which of the following is not true of an economic expansion?

In the short-run macro model,what type of unemployment is caused by insufficient spending?

The difference between the number of workers employed if the economy was operating at full employment and the number of workers currently employed given aggregate expenditures is known as

What is Economics?

Scarcity, Choice, and Economic Systems

Supply and Demand

Working With Supply and Demand

What Macroeconomics Tries to Explain

Production, Income, and Employment

The Price Level and Inflation

The Classical Long run Model

Economic Growth and Rising Living Standards

Economic Fluctuations

Fiscal Policy

Money, Banks, and the Federal Reserve

The Money Market and Monetary Policy

Aggregate Demand and Aggregate Supply

Inflation and Monetary Policy

Exchange Rates and Macroeconomic Policy

Filters