Question 1

Governments can affect the level of aggregate demand in a direct way by changing

Accepted Answer

A)  government spending. 
B)  exports. 
C)  taxes. 
D)  transfer payments. 
A)  government spending. 
B)  exports. 
C)  taxes. 
D)  transfer payments.

Question 2

Price level changes have their greatest effect on consumers'

Accepted Answer

A)  income. 
B)  wealth. 
C)  debt. 
D)  expectations. 
A)  income. 
B)  wealth. 
C)  debt. 
D)  expectations.

Question 3

Figure 8-1
  
-Given the scatter diagram in Figure 8-1,how much will consumption decrease if the price level rises by 5 percent?

Accepted Answer

A)  $50 billion 
B)  $100 billion 
C)  $200 billion 
D)  cannot be determined 
A)  $50 billion 
B)  $100 billion 
C)  $200 billion 
D)  cannot be determined

Question 4

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 5

Which of the following would be added to U.S.national income?

Accepted Answer

A)  an American consumer buying French wine 
B)  an American business selling aircraft to British Airways 
C)  a Swedish firm selling mobile phones to Americans 
D)  a French firm buying a Swedish cellular phone 
A)  an American consumer buying French wine 
B)  an American business selling aircraft to British Airways 
C)  a Swedish firm selling mobile phones to Americans 
D)  a French firm buying a Swedish cellular phone

Question 6

A decrease in disposable income will

Accepted Answer

A)  lead to an upward movement along the consumption function. 
B)  lead to a downward movement along the consumption function. 
C)  shift the consumption function upward. 
D)  shift the consumption function downward. 
A)  lead to an upward movement along the consumption function. 
B)  lead to a downward movement along the consumption function. 
C)  shift the consumption function upward. 
D)  shift the consumption function downward.

Question 7

If personal taxes are cut temporarily,the resulting

Accepted Answer

A)  increase in personal saving would be larger than if they were cut permanently. 
B)  decrease in personal saving would be larger than if they were cut permanently. 
C)  decrease in personal saving would be smaller than if they were cut permanently. 
D)  increase in personal saving would be smaller than if they were cut permanently. 
A)  increase in personal saving would be larger than if they were cut permanently. 
B)  decrease in personal saving would be larger than if they were cut permanently. 
C)  decrease in personal saving would be smaller than if they were cut permanently. 
D)  increase in personal saving would be smaller than if they were cut permanently.

Question 8

If an economist wants to make a prediction about the effects of a change in disposable income on the change in consumption spending based on historical data,she must assume that

Accepted Answer

A)  the future will closely resemble the past. 
B)  consumption and disposable income will be negatively related. 
C)  the consumption function will have a downward slope. 
D)  as disposable income increases, consumer spending will remain constant. 
A)  the future will closely resemble the past. 
B)  consumption and disposable income will be negatively related. 
C)  the consumption function will have a downward slope. 
D)  as disposable income increases, consumer spending will remain constant.

Question 9

If real interest rates decrease,we generally expect

Accepted Answer

A)  saving to increase. 
B)  saving to decrease. 
C)  consumption spending to decrease. 
D)  no significant change in saving. 
A)  saving to increase. 
B)  saving to decrease. 
C)  consumption spending to decrease. 
D)  no significant change in saving.

Question 10

When saving leaks out of the circular flow of income and spending,

Accepted Answer

A)  total income necessarily falls. 
B)  it leaks out of the financial system. 
C)  it flows to borrowers. 
D)  it increases the size of the spending flow. 
A)  total income necessarily falls. 
B)  it leaks out of the financial system. 
C)  it flows to borrowers. 
D)  it increases the size of the spending flow.

Question 11

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 12

The term "depreciation" in the national income accounts refers to

Accepted Answer

A)  the adjustment of GDP for inflation. 
B)  plant and equipment "used up" in producing current output. 
C)  citizenship differences among income recipients. 
D)  government transfer payments minus tax revenues. 
A)  the adjustment of GDP for inflation. 
B)  plant and equipment "used up" in producing current output. 
C)  citizenship differences among income recipients. 
D)  government transfer payments minus tax revenues.

Question 13

Figure 8-2
  
-In Figure 8-2,which of the following moves can be explained by a decrease in the price level?

Accepted Answer

A)  A to B 
B)  A to C 
C)  A to D 
D)  A to E 
A)  A to B 
B)  A to C 
C)  A to D 
D)  A to E

Question 14

Historical data representing consumption and disposable income reveals that

Accepted Answer

A)  during the 1930s, U.S. saving was at a high level. 
B)  U.S. citizens increased saving during World War II. 
C)  there is no systematic relationship between the two. 
D)  consumption rises faster than disposable income during recessions. 
A)  during the 1930s, U.S. saving was at a high level. 
B)  U.S. citizens increased saving during World War II. 
C)  there is no systematic relationship between the two. 
D)  consumption rises faster than disposable income during recessions.

Question 15

Economists expect the relationship between consumption and disposable income to be

Accepted Answer

A)  unpredictable. 
B)  transitory. 
C)  fixed. 
D)  inverse 
E)  stable. 
A)  unpredictable. 
B)  transitory. 
C)  fixed. 
D)  inverse 
E)  stable.

Question 16

Suppose the federal government wants to encourage businesses to increase investment spending.Which policy may be the most effective?

Accepted Answer

A)  an increase in corporate income taxes 
B)  an increase in real interest rates 
C)  an increase in warnings of a coming recession 
D)  an increase in tax deductions for investment spending 
A)  an increase in corporate income taxes 
B)  an increase in real interest rates 
C)  an increase in warnings of a coming recession 
D)  an increase in tax deductions for investment spending

Question 17

Which of the following will most likely cause movement along the consumption function?

Accepted Answer

A)  a change in disposable income 
B)  a change in interest rates 
C)  a change in tastes 
D)  a change in consumers' expectations 
A)  a change in disposable income 
B)  a change in interest rates 
C)  a change in tastes 
D)  a change in consumers' expectations

Question 18

The system of measurement for expressing macroeconomic data is called

Accepted Answer

A)  national income accounting. 
B)  balance of payment accounting. 
C)  generally accepted accounting principles. 
D)  double entry bookkeeping. 
A)  national income accounting. 
B)  balance of payment accounting. 
C)  generally accepted accounting principles. 
D)  double entry bookkeeping.

Question 19

A decrease in the price level will most likely have what effect on the consumption function?

Accepted Answer

A)  It will shift upward. 
B)  It will shift downward. 
C)  It will cause movement downward along the function. 
D)  It will cause movement upward along the function. 
A)  It will shift upward. 
B)  It will shift downward. 
C)  It will cause movement downward along the function. 
D)  It will cause movement upward along the function.

Question 20

Which factors will cause the consumption function to shift? Which factors do not cause the function to shift?

Accepted Answer

The principal factors that will cause th

Governments can affect the level of aggregate demand in a direct way by changing

Price level changes have their greatest effect on consumers'

Figure 8-1 -Given the scatter diagram in Figure 8-1,how much will consumption decrease if the price level rises by 5 percent?

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

Which of the following would be added to U.S.national income?

A decrease in disposable income will

If personal taxes are cut temporarily,the resulting

If an economist wants to make a prediction about the effects of a change in disposable income on the change in consumption spending based on historical data,she must assume that

If real interest rates decrease,we generally expect

When saving leaks out of the circular flow of income and spending,

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

The term "depreciation" in the national income accounts refers to

Figure 8-2 -In Figure 8-2,which of the following moves can be explained by a decrease in the price level?

Historical data representing consumption and disposable income reveals that

Economists expect the relationship between consumption and disposable income to be

Suppose the federal government wants to encourage businesses to increase investment spending.Which policy may be the most effective?

Which of the following will most likely cause movement along the consumption function?

The system of measurement for expressing macroeconomic data is called

A decrease in the price level will most likely have what effect on the consumption function?

Which factors will cause the consumption function to shift? Which factors do not cause the function to shift?

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

Filters

Exam 8: Aggregate Demand and the Powerful Consumer

Governments can affect the level of aggregate demand in a direct way by changing

Price level changes have their greatest effect on consumers'

Figure 8-1 -Given the scatter diagram in Figure 8-1,how much will consumption decrease if the price level rises by 5 percent?

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

Which of the following would be added to U.S.national income?

A decrease in disposable income will

If personal taxes are cut temporarily,the resulting

If an economist wants to make a prediction about the effects of a change in disposable income on the change in consumption spending based on historical data,she must assume that

If real interest rates decrease,we generally expect

When saving leaks out of the circular flow of income and spending,

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

The term "depreciation" in the national income accounts refers to

Figure 8-2 -In Figure 8-2,which of the following moves can be explained by a decrease in the price level?

Historical data representing consumption and disposable income reveals that

Economists expect the relationship between consumption and disposable income to be

Suppose the federal government wants to encourage businesses to increase investment spending.Which policy may be the most effective?

Which of the following will most likely cause movement along the consumption function?

The system of measurement for expressing macroeconomic data is called

A decrease in the price level will most likely have what effect on the consumption function?

Which factors will cause the consumption function to shift? Which factors do not cause the function to shift?

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

Filters