Question 1

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 2

From the perspective of the classical model,many economists would say that the most important automatic stabilizer is

Accepted Answer

A)  taxes 
B)  imports 
C)  interest rates 
D)  transfer payments 
E)  passage of time 
A)  taxes 
B)  imports 
C)  interest rates 
D)  transfer payments 
E)  passage of time

Question 3

If net taxes are included in the model,the equation that shows consumption at each level of income is: C = a + b(Y - T)or C = a + bY - bT.

Accepted Answer

A) True 
 B)False

Question 4

A movement along the consumption-function line would most likely be caused by a(n)

Accepted Answer

A)  increase in net taxes 
B)  decrease in net taxes 
C)  increase in income 
D)  decrease in productivity 
E)  change in autonomous consumption 
A)  increase in net taxes 
B)  decrease in net taxes 
C)  increase in income 
D)  decrease in productivity 
E)  change in autonomous consumption

Question 5

If net taxes were lowered from $5,000 to $1,000,the marginal propensity to consume is 0.75,and autonomous consumption spending is $10,000,by how much would consumption increase?

Accepted Answer

A)  $3,000 
B)  $1,250 
C)  $7,500 
D)  $3,750 
E)  $750 
A)  $3,000 
B)  $1,250 
C)  $7,500 
D)  $3,750 
E)  $750

Question 6

If real consumption spending increases by $400 billion each time real disposable income rises by $1,000 billion,the marginal propensity to consume is

Accepted Answer

A)  40 
B)  4 
C)  0.4 
D)  0.04 
E)  0.004 
A)  40 
B)  4 
C)  0.4 
D)  0.04 
E)  0.004

Question 7

Use the table below to determine the marginal propensity to consume (MPC).

Accepted Answer

A)  0.7 
B)  0.8 
C)  0.9 
D)  1.0 
E)  1.8. 
A)  0.7 
B)  0.8 
C)  0.9 
D)  1.0 
E)  1.8.

Question 8

Which of the following is not an automatic stabilizer?

Accepted Answer

A)  Forward-looking behavior 
B)  Interest rates 
C)  Imports 
D)  Transfer payments 
E)  Consumption spending. 
A)  Forward-looking behavior 
B)  Interest rates 
C)  Imports 
D)  Transfer payments 
E)  Consumption spending.

Question 9

The equilibrium level of GDP can be determined by finding the output level at which the unplanned change in inventories is

Accepted Answer

A)  greater than aggregate expenditures 
B)  less than aggregate expenditures 
C)  zero 
D)  equal to government expenditures 
E)  equal to consumer spending 
A)  greater than aggregate expenditures 
B)  less than aggregate expenditures 
C)  zero 
D)  equal to government expenditures 
E)  equal to consumer spending

Question 10

In the short run,

Accepted Answer

A)  spending depends on income and income depends on spending 
B)  spending depends on income,but income does not depend on spending 
C)  income depends on spending,but spending does not depend on income 
D)  spending and income are independent of one another 
E)  spending is the only determinant of how much income an economy will produce 
A)  spending depends on income and income depends on spending 
B)  spending depends on income,but income does not depend on spending 
C)  income depends on spending,but spending does not depend on income 
D)  spending and income are independent of one another 
E)  spending is the only determinant of how much income an economy will produce

Question 11

In the short run,

Accepted Answer

A)  the labor market is always in equilibrium 
B)  actual output can deviate from potential output 
C)  crowding out is always complete 
D)  total output is independent of spending 
E)  spending is independent of total income 
A)  the labor market is always in equilibrium 
B)  actual output can deviate from potential output 
C)  crowding out is always complete 
D)  total output is independent of spending 
E)  spending is independent of total income

Question 12

-Refer to Figure 11-7.If the economy is currently producing at point X,what does the short-run macro model predict will happen?

Accepted Answer

A)  Nothing will happen;the economy is in equilibrium. 
B)  Prices will rise and firms will increase production. 
C)  Prices will fall and firms will increase production. 
D)  Inventories will shrink and firms will increase production. 
E)  Inventories will accumulate and firms will cut production. 
A)  Nothing will happen;the economy is in equilibrium. 
B)  Prices will rise and firms will increase production. 
C)  Prices will fall and firms will increase production. 
D)  Inventories will shrink and firms will increase production. 
E)  Inventories will accumulate and firms will cut production.

Question 13

What are the marginal propensity to consume and level of autonomous consumption spending for a consumption function of the following form: C = 1,200 + 0.5DI?

Accepted Answer

A)  The marginal propensity to consume is 0.5;autonomous consumption spending is $0.50. 
B)  The marginal propensity to consume is 0.5;autonomous consumption spending is $1,200. 
C)  The marginal propensity to consume is 1,200;autonomous consumption spending is $0.50. 
D)  The marginal propensity to consume is 1,200;autonomous consumption spending is $600. 
E)  There is insufficient information to answer this. 
A)  The marginal propensity to consume is 0.5;autonomous consumption spending is $0.50. 
B)  The marginal propensity to consume is 0.5;autonomous consumption spending is $1,200. 
C)  The marginal propensity to consume is 1,200;autonomous consumption spending is $0.50. 
D)  The marginal propensity to consume is 1,200;autonomous consumption spending is $600. 
E)  There is insufficient information to answer this.

Question 14

If net taxes decrease by $500 billion,both household disposable income and consumption spending will increase by $500 billion.

Accepted Answer

A) True 
 B)False

Question 15

-Refer to Figure 11-1.The graph shows

Accepted Answer

A)  a negative and relatively stable relationship between real consumption and real disposable income 
B)  a negative,but unstable,relationship between real consumption and real disposable income 
C)  a positive,but unstable,relationship between real consumption and real disposable income 
D)  a positive and relatively stable relationship between real consumption and real disposable income 
E)  no discernible relationship between real consumption and real disposable income 
A)  a negative and relatively stable relationship between real consumption and real disposable income 
B)  a negative,but unstable,relationship between real consumption and real disposable income 
C)  a positive,but unstable,relationship between real consumption and real disposable income 
D)  a positive and relatively stable relationship between real consumption and real disposable income 
E)  no discernible relationship between real consumption and real disposable income

Question 16

Use the table below to find the marginal propensity to consume.

Accepted Answer

A)  0.50 
B)  0.60 
C)  0.65 
D)  0.75 
E)  0.80 
A)  0.50 
B)  0.60 
C)  0.65 
D)  0.75 
E)  0.80

Question 17

Which of the following is the definition of autonomous consumption spending?

Accepted Answer

A)  The effect of a change in wealth on consumption spending 
B)  The part of consumption spending that is independent of disposable income 
C)  The impact of disposable income on consumption spending 
D)  The part of consumption spending that is independent of wealth 
E)  The horizontal intercept of the consumption function. 
A)  The effect of a change in wealth on consumption spending 
B)  The part of consumption spending that is independent of disposable income 
C)  The impact of disposable income on consumption spending 
D)  The part of consumption spending that is independent of wealth 
E)  The horizontal intercept of the consumption function.

Question 18

Another expression for disposable income would be

Accepted Answer

A)  income left over after subtracting deductions such as 401Ks and health insurance 
B)  income left over after subtracting taxes 
C)  income left over after subtracting fixed payments like rent or car payments 
D)  income left over after subtracting all required spending items such as food,utilities,etc. 
E)  income left over after subtracting transfer payments. 
A)  income left over after subtracting deductions such as 401Ks and health insurance 
B)  income left over after subtracting taxes 
C)  income left over after subtracting fixed payments like rent or car payments 
D)  income left over after subtracting all required spending items such as food,utilities,etc. 
E)  income left over after subtracting transfer payments.

Question 19

The value of the expenditure multiplier in the long run is

Accepted Answer

A)  1 
B)  0 
C)  -1 
D)  equal to the MPC 
E)  equal to the 1/MPC 
A)  1 
B)  0 
C)  -1 
D)  equal to the MPC 
E)  equal to the 1/MPC

Question 20

In the short-run macro model,cyclical unemployment

Accepted Answer

A)  will be eliminated once the equilibrium output level is reached 
B)  is caused by an economic expansion 
C)  occurs when the economy is overheated 
D)  is caused by too much spending 
E)  results from insufficient spending 
A)  will be eliminated once the equilibrium output level is reached 
B)  is caused by an economic expansion 
C)  occurs when the economy is overheated 
D)  is caused by too much spending 
E)  results from insufficient spending

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

From the perspective of the classical model,many economists would say that the most important automatic stabilizer is

If net taxes are included in the model,the equation that shows consumption at each level of income is: C = a + b(Y - T)or C = a + bY - bT.

A movement along the consumption-function line would most likely be caused by a(n)

If net taxes were lowered from $5,000 to $1,000,the marginal propensity to consume is 0.75,and autonomous consumption spending is $10,000,by how much would consumption increase?

If real consumption spending increases by $400 billion each time real disposable income rises by $1,000 billion,the marginal propensity to consume is

Use the table below to determine the marginal propensity to consume (MPC).

Which of the following is not an automatic stabilizer?

The equilibrium level of GDP can be determined by finding the output level at which the unplanned change in inventories is

In the short run,

In the short run,

-Refer to Figure 11-7.If the economy is currently producing at point X,what does the short-run macro model predict will happen?

What are the marginal propensity to consume and level of autonomous consumption spending for a consumption function of the following form: C = 1,200 + 0.5DI?

If net taxes decrease by $500 billion,both household disposable income and consumption spending will increase by $500 billion.

-Refer to Figure 11-1.The graph shows

Use the table below to find the marginal propensity to consume.

Which of the following is the definition of autonomous consumption spending?

Another expression for disposable income would be

The value of the expenditure multiplier in the long run is

In the short-run macro model,cyclical unemployment

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

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

From the perspective of the classical model,many economists would say that the most important automatic stabilizer is

If net taxes are included in the model,the equation that shows consumption at each level of income is: C = a + b(Y - T)or C = a + bY - bT.

A movement along the consumption-function line would most likely be caused by a(n)

If net taxes were lowered from $5,000 to $1,000,the marginal propensity to consume is 0.75,and autonomous consumption spending is $10,000,by how much would consumption increase?

If real consumption spending increases by $400 billion each time real disposable income rises by $1,000 billion,the marginal propensity to consume is

Use the table below to determine the marginal propensity to consume (MPC).

Which of the following is not an automatic stabilizer?

The equilibrium level of GDP can be determined by finding the output level at which the unplanned change in inventories is

In the short run,

In the short run,

-Refer to Figure 11-7.If the economy is currently producing at point X,what does the short-run macro model predict will happen?

What are the marginal propensity to consume and level of autonomous consumption spending for a consumption function of the following form: C = 1,200 + 0.5DI?

If net taxes decrease by $500 billion,both household disposable income and consumption spending will increase by $500 billion.

-Refer to Figure 11-1.The graph shows

Use the table below to find the marginal propensity to consume.

Which of the following is the definition of autonomous consumption spending?

Another expression for disposable income would be

The value of the expenditure multiplier in the long run is

In the short-run macro model,cyclical unemployment

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