Question 1

If disposable income decreased,which of the following changes in the consumption-function line would occur?

Accepted Answer

A)  A rightward movement along the line 
B)  A leftward movement along the line 
C)  The entire line would shift upward 
D)  The entire line would shift downward 
E)  The entire line would shift downward and there would be a rightward movement along the new line 
A)  A rightward movement along the line 
B)  A leftward movement along the line 
C)  The entire line would shift upward 
D)  The entire line would shift downward 
E)  The entire line would shift downward and there would be a rightward movement along the new line

Question 2

Which of the following would lead to an upward shift of the consumption-income line?

Accepted Answer

A)  A decrease in income 
B)  A decrease in population 
C)  An increase in income 
D)  An increase in wealth 
E)  An increase in the interest rate 
A)  A decrease in income 
B)  A decrease in population 
C)  An increase in income 
D)  An increase in wealth 
E)  An increase in the interest rate

Question 3

If Americans became more pessimistic about the economy,what would happen to the consumption-income line?

Accepted Answer

A)  A rightward movement along the line 
B)  A leftward movement along the line 
C)  The entire line would shift upward 
D)  The entire line would shift downward 
E)  The entire line would shift downward and there would be a rightward movement along the new line 
A)  A rightward movement along the line 
B)  A leftward movement along the line 
C)  The entire line would shift upward 
D)  The entire line would shift downward 
E)  The entire line would shift downward and there would be a rightward movement along the new line

Question 4

If the marginal propensity to consume is 0.6,what is the long-run expenditure multiplier?

Accepted Answer

A)  0.0 
B)  2.0 
C)  2.5 
D)  10.0 
E)  1.0 
A)  0.0 
B)  2.0 
C)  2.5 
D)  10.0 
E)  1.0

Question 5

Which of the following would be most likely to increase consumption spending?

Accepted Answer

A)  A higher interest rate 
B)  A drop in stock prices 
C)  A reduction in consumer credit card debt 
D)  The expectation of lower future prices 
E)  An increase in the income tax rate. 
A)  A higher interest rate 
B)  A drop in stock prices 
C)  A reduction in consumer credit card debt 
D)  The expectation of lower future prices 
E)  An increase in the income tax rate.

Question 6

-The graph shown in Figure 11-4 shows

Accepted Answer

A)  equilibrium in the short-run macro model 
B)  when inventories will accumulate and when they will shrink 
C)  how an increase in GDP will increase government tax revenues 
D)  how an increase in aggregate expenditure will increase GDP 
E)  every point at which aggregate expenditure equals GDP 
A)  equilibrium in the short-run macro model 
B)  when inventories will accumulate and when they will shrink 
C)  how an increase in GDP will increase government tax revenues 
D)  how an increase in aggregate expenditure will increase GDP 
E)  every point at which aggregate expenditure equals GDP

Question 7

The impact of saving on the economy is

Accepted Answer

A)  always beneficial 
B)  always harmful 
C)  beneficial in the short run,but not in the long run 
D)  beneficial in the long run,but not necessarily in the short run 
E)  neutral in both the short run and the long run 
A)  always beneficial 
B)  always harmful 
C)  beneficial in the short run,but not in the long run 
D)  beneficial in the long run,but not necessarily in the short run 
E)  neutral in both the short run and the long run

Question 8

If the marginal propensity to consume is 0.5 and disposable income decreases by $10,000,by how much will consumption spending decrease?

Accepted Answer

A)  $10,000 
B)  $500 
C)  $50 
D)  $5,000 
E)  $9,524 
A)  $10,000 
B)  $500 
C)  $50 
D)  $5,000 
E)  $9,524

Question 9

Which of the following is considered to be the major cause of the recession of 2001?

Accepted Answer

A)  A decrease in defense spending 
B)  A spike in oil prices and the collapse of the housing bubble 
C)  A decline in oil prices and the collapse of the housing bubble 
D)  Federal Reserve policy 
E)  None of the above. 
A)  A decrease in defense spending 
B)  A spike in oil prices and the collapse of the housing bubble 
C)  A decline in oil prices and the collapse of the housing bubble 
D)  Federal Reserve policy 
E)  None of the above.

Question 10

-Refer to Figure 11-9.If YFE represents the full employment level of output,the situation depicted at Y₁ in the graph is

Accepted Answer

A)  impossible to achieve because employment would exceed full employment 
B)  one in which we would expect businesses to cut production 
C)  one in which we would expect businesses to increase production 
D)  identified as an expansion 
E)  identified as a recession 
A)  impossible to achieve because employment would exceed full employment 
B)  one in which we would expect businesses to cut production 
C)  one in which we would expect businesses to increase production 
D)  identified as an expansion 
E)  identified as a recession

Question 11

Net exports are

Accepted Answer

A)  total exports minus total imports 
B)  what foreigners earn in the United States minus what US citizens earn abroad 
C)  always positive because the United States has always had a positive trade balance. 
D)  total imports minus total exports 
E)  total exports minus depreciation 
A)  total exports minus total imports 
B)  what foreigners earn in the United States minus what US citizens earn abroad 
C)  always positive because the United States has always had a positive trade balance. 
D)  total imports minus total exports 
E)  total exports minus depreciation

Question 12

If the marginal propensity to consume is 0.5,what is the value of the expenditure multiplier?

Accepted Answer

A)  1.0 
B)  1.5 
C)  2.0 
D)  0.5 
E)  10.0 
A)  1.0 
B)  1.5 
C)  2.0 
D)  0.5 
E)  10.0

Question 13

Government purchases

Accepted Answer

A)  are only weakly related to aggregate income 
B)  include spending on goods and services plus transfer payments 
C)  are inversely related to aggregate income 
D)  are inversely related to the price level 
E)  are inversely related to the interest rate 
A)  are only weakly related to aggregate income 
B)  include spending on goods and services plus transfer payments 
C)  are inversely related to aggregate income 
D)  are inversely related to the price level 
E)  are inversely related to the interest rate

Question 14

The most important factor that influences total spending is

Accepted Answer

A)  the interest rate 
B)  real wealth 
C)  expectations regarding future income 
D)  the income tax rate 
E)  real disposable income 
A)  the interest rate 
B)  real wealth 
C)  expectations regarding future income 
D)  the income tax rate 
E)  real disposable income

Question 15

A spending shock is a change in spending that ultimately affects the entire economy.

Accepted Answer

A) True 
 B)False

Question 16

Use the following to determine the marginal propensity to consume (MPC).

Accepted Answer

A)  0.85 
B)  1.33 
C)  0.92 
D)  0.75 
E)  0.80 
A)  0.85 
B)  1.33 
C)  0.92 
D)  0.75 
E)  0.80

Question 17

Suppose the economy is in equilibrium when business firms decide to increase investment spending by $100 billion.According to the short-run macro model,what would be the effect on equilibrium real GDP?

Accepted Answer

A)  There would be no effect;the increased investment spending would be offset by decreased spending in other sectors. 
B)  It would increase by $100 billion. 
C)  It would increase by more than $100 billion. 
D)  It would increase,but by less than $100 billion. 
E)  It would decline by $100 billion. 
A)  There would be no effect;the increased investment spending would be offset by decreased spending in other sectors. 
B)  It would increase by $100 billion. 
C)  It would increase by more than $100 billion. 
D)  It would increase,but by less than $100 billion. 
E)  It would decline by $100 billion.

Question 18

A change in autonomous consumption causes a movement along the aggregate expenditure line,while a change in consumption that depends on income causes a shift of the aggregate expenditure line.

Accepted Answer

A) True 
 B)False

Question 19

All of the following would shift the consumption-income line except

Accepted Answer

A)  an increase in taxes that causes the marginal propensity to consume to change 
B)  an increase in taxes that changes autonomous spending 
C)  a change in expectations of future income 
D)  a change in wealth 
E)  none of the above 
A)  an increase in taxes that causes the marginal propensity to consume to change 
B)  an increase in taxes that changes autonomous spending 
C)  a change in expectations of future income 
D)  a change in wealth 
E)  none of the above

Question 20

The marginal propensity to consume is always

Accepted Answer

A)  a negative number 
B)  larger than 1.0 
C)  larger than 10 
D)  greater than zero and less than 0.5 
E)  greater than zero and less than 1.0 
A)  a negative number 
B)  larger than 1.0 
C)  larger than 10 
D)  greater than zero and less than 0.5 
E)  greater than zero and less than 1.0

If disposable income decreased,which of the following changes in the consumption-function line would occur?

Which of the following would lead to an upward shift of the consumption-income line?

If Americans became more pessimistic about the economy,what would happen to the consumption-income line?

If the marginal propensity to consume is 0.6,what is the long-run expenditure multiplier?

Which of the following would be most likely to increase consumption spending?

-The graph shown in Figure 11-4 shows

The impact of saving on the economy is

If the marginal propensity to consume is 0.5 and disposable income decreases by $10,000,by how much will consumption spending decrease?

Which of the following is considered to be the major cause of the recession of 2001?

-Refer to Figure 11-9.If YFE represents the full employment level of output,the situation depicted at Y₁ in the graph is

Net exports are

If the marginal propensity to consume is 0.5,what is the value of the expenditure multiplier?

Government purchases

The most important factor that influences total spending is

A spending shock is a change in spending that ultimately affects the entire economy.

Use the following to determine the marginal propensity to consume (MPC).

Suppose the economy is in equilibrium when business firms decide to increase investment spending by $100 billion.According to the short-run macro model,what would be the effect on equilibrium real GDP?

A change in autonomous consumption causes a movement along the aggregate expenditure line,while a change in consumption that depends on income causes a shift of the aggregate expenditure line.

All of the following would shift the consumption-income line except

The marginal propensity to consume is always

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

Exam 11: The Short-run Macro Model

If disposable income decreased,which of the following changes in the consumption-function line would occur?

Which of the following would lead to an upward shift of the consumption-income line?

If Americans became more pessimistic about the economy,what would happen to the consumption-income line?

If the marginal propensity to consume is 0.6,what is the long-run expenditure multiplier?

Which of the following would be most likely to increase consumption spending?

-The graph shown in Figure 11-4 shows

The impact of saving on the economy is

If the marginal propensity to consume is 0.5 and disposable income decreases by $10,000,by how much will consumption spending decrease?

Which of the following is considered to be the major cause of the recession of 2001?

-Refer to Figure 11-9.If YFE represents the full employment level of output,the situation depicted at Y₁ in the graph is

Net exports are

If the marginal propensity to consume is 0.5,what is the value of the expenditure multiplier?

Government purchases

The most important factor that influences total spending is

A spending shock is a change in spending that ultimately affects the entire economy.

Use the following to determine the marginal propensity to consume (MPC).

Suppose the economy is in equilibrium when business firms decide to increase investment spending by $100 billion.According to the short-run macro model,what would be the effect on equilibrium real GDP?

A change in autonomous consumption causes a movement along the aggregate expenditure line,while a change in consumption that depends on income causes a shift of the aggregate expenditure line.

All of the following would shift the consumption-income line except

The marginal propensity to consume is always

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