Question 1

A reduction in personal consumption expenditures induced by a fall in disposable income

Accepted Answer

A)  will shift the consumption function downward. 
B)  will shift the saving function downward. 
C)  will produce an increase in intended investment. 
D)  will be offset by an increase in the amount saved. 
E)  represents a movement along a given consumption function. 
A)  will shift the consumption function downward. 
B)  will shift the saving function downward. 
C)  will produce an increase in intended investment. 
D)  will be offset by an increase in the amount saved. 
E)  represents a movement along a given consumption function.

Question 2

The following question are based on the following diagram:
  
-The marginal propensity to consume is

Accepted Answer

A)  1. 
B)  19/21. 
C)  5/7. 
D)  2/3. 
E)  impossible to tell from the graph. 
A)  1. 
B)  19/21. 
C)  5/7. 
D)  2/3. 
E)  impossible to tell from the graph.

Question 3

In the Keynesian model,supply adjusts passively to demand in the short run because

Accepted Answer

A)  of Say's law. 
B)  the equilibrium level of output automatically adjusts to the full-employment level. 
C)  actual saving equals actual investment at all times. 
D)  both consumption and investment respond to changes in interest rates when the aggregate supply curve is vertical. 
E)  high levels of unemployment keep wages and prices stable. 
A)  of Say's law. 
B)  the equilibrium level of output automatically adjusts to the full-employment level. 
C)  actual saving equals actual investment at all times. 
D)  both consumption and investment respond to changes in interest rates when the aggregate supply curve is vertical. 
E)  high levels of unemployment keep wages and prices stable.

Question 4

The following question are based on the following information for a society:
  
-If disposable income is $1,800 billion,the average propensity to consume is

Accepted Answer

A)  0.8. 
B)  0.84. 
C)  0.92. 
D)  1.00. 
E)  1.08. 
A)  0.8. 
B)  0.84. 
C)  0.92. 
D)  1.00. 
E)  1.08.

Question 5

An upward shift in the consumption function

Accepted Answer

A)  results if people decide they want to save more. 
B)  has the same kind of multiplier effect as an increase in investment. 
C)  occurs if people's incomes rise. 
D)  raises the average propensity to save. 
E)  raises the marginal propensity to consume. 
A)  results if people decide they want to save more. 
B)  has the same kind of multiplier effect as an increase in investment. 
C)  occurs if people's incomes rise. 
D)  raises the average propensity to save. 
E)  raises the marginal propensity to consume.

Question 6

If disposable income rises by $100 billion and personal consumption expenditure rises by $60 billion,what is the average propensity to consume?

Accepted Answer

A)  0.60 
B)  0.40 
C)  -0.40 
D)  -1.00 
E)  impossible to calculate from these figures 
A)  0.60 
B)  0.40 
C)  -0.40 
D)  -1.00 
E)  impossible to calculate from these figures

Question 7

An MPC of zero means the value of the multiplier is

Accepted Answer

A)  0. 
B)  1. 
C)  2. 
D)  2.5. 
E)  3. 
A)  0. 
B)  1. 
C)  2. 
D)  2.5. 
E)  3.

Question 8

The value of the multiplier is

Accepted Answer

A)  negative at low income levels. 
B)  the reciprocal of the marginal propensity to consume. 
C)  increased as autonomous investment spending declines. 
D)  never less than 1. 
E)  difficult to calculate unless you know the change in equilibrium GDP. 
A)  negative at low income levels. 
B)  the reciprocal of the marginal propensity to consume. 
C)  increased as autonomous investment spending declines. 
D)  never less than 1. 
E)  difficult to calculate unless you know the change in equilibrium GDP.

Question 9

If disposable income is held constant,aggregate consumption expenditure will increase in all but which of the following cases?

Accepted Answer

A)  The public's wealth holdings increase. 
B)  The rate of interest increases. 
C)  The public anticipates price increases in the future. 
D)  The public currently has an abnormally low stock of durable goods. 
E)  The population increases. 
A)  The public's wealth holdings increase. 
B)  The rate of interest increases. 
C)  The public anticipates price increases in the future. 
D)  The public currently has an abnormally low stock of durable goods. 
E)  The population increases.

Question 10

If disposable income rises by $100 billion and personal consumption expenditure rises by $60 billion,what is the marginal propensity to consume?

Accepted Answer

A)  0.60 
B)  0.40 
C)  1.60 
D)  1.66 
E)  2.50 
A)  0.60 
B)  0.40 
C)  1.60 
D)  1.66 
E)  2.50

Question 11

The following question are based on the following information:
  
-If actual GDP equals $1,980 billion

Accepted Answer

A)  intended saving equals intended investment. 
B)  the economy is operating below its equilibrium level. 
C)  business inventories will increase by $60 billion. 
D)  producers will plan to increase production further still. 
E)  the C + I line lies above the 45-degree line. 
A)  intended saving equals intended investment. 
B)  the economy is operating below its equilibrium level. 
C)  business inventories will increase by $60 billion. 
D)  producers will plan to increase production further still. 
E)  the C + I line lies above the 45-degree line.

Question 12

The sensitivity of GDP to changes in intended investment increases as the

Accepted Answer

A)  marginal propensity to save declines. 
B)  multiplier declines. 
C)  slope of the consumption function declines. 
D)  change in equilibrium declines. 
E)  spending chain declines. 
A)  marginal propensity to save declines. 
B)  multiplier declines. 
C)  slope of the consumption function declines. 
D)  change in equilibrium declines. 
E)  spending chain declines.

Question 13

If total intended spending precisely equals GDP

Accepted Answer

A)  inflation soars. 
B)  consumer spending begins to decline. 
C)  expected rates of return exceed interest rates. 
D)  unemployment rises. 
E)  GDP tends to remain unchanged. 
A)  inflation soars. 
B)  consumer spending begins to decline. 
C)  expected rates of return exceed interest rates. 
D)  unemployment rises. 
E)  GDP tends to remain unchanged.

Question 14

If a family's disposable income is $100,000 and the amount it saves is $35,000,its

Accepted Answer

A)  average propensity to consume is 0.65. 
B)  marginal propensity to save is 0.53. 
C)  marginal propensity to consume is 0.65. 
D)  marginal plus average propensities to consume equal 1. 
E)  average propensity to consume is 1.53. 
A)  average propensity to consume is 0.65. 
B)  marginal propensity to save is 0.53. 
C)  marginal propensity to consume is 0.65. 
D)  marginal plus average propensities to consume equal 1. 
E)  average propensity to consume is 1.53.

Question 15

The slope of the saving function equals the

Accepted Answer

A)  marginal propensity to save. 
B)  average propensity to save. 
C)  marginal efficiency of saving. 
D)  expected rate of return. 
E)  rate of interest. 
A)  marginal propensity to save. 
B)  average propensity to save. 
C)  marginal efficiency of saving. 
D)  expected rate of return. 
E)  rate of interest.

Question 16

When GDP is at its equilibrium value

Accepted Answer

A)  firms' inventories will neither increase nor decrease unexpectedly. 
B)  employment and GDP are identical. 
C)  the multiplier is zero. 
D)  intended investment equals the 45-degree line. 
E)  consumption equals disposable income. 
A)  firms' inventories will neither increase nor decrease unexpectedly. 
B)  employment and GDP are identical. 
C)  the multiplier is zero. 
D)  intended investment equals the 45-degree line. 
E)  consumption equals disposable income.

Question 17

The determinants of investment are

Accepted Answer

A)  the marginal propensity to invest and the savings rate. 
B)  the level of gross domestic product and the marginal propensity to spend. 
C)  the profit rate and the equilibrium rate. 
D)  business expectations and the Dow Jones Industrial Average. 
E)  the interest rate and the expected rate of return from capital. 
A)  the marginal propensity to invest and the savings rate. 
B)  the level of gross domestic product and the marginal propensity to spend. 
C)  the profit rate and the equilibrium rate. 
D)  business expectations and the Dow Jones Industrial Average. 
E)  the interest rate and the expected rate of return from capital.

Question 18

Investment in a project will take place if the

Accepted Answer

A)  marginal propensity to save exceeds the marginal propensity to consume. 
B)  expected rate of return exceeds the interest rate. 
C)  interest rate exceeds the marginal propensity to save. 
D)  net investment in the economy exceeds gross investment. 
E)  multiplier exceeds the expected rate of return. 
A)  marginal propensity to save exceeds the marginal propensity to consume. 
B)  expected rate of return exceeds the interest rate. 
C)  interest rate exceeds the marginal propensity to save. 
D)  net investment in the economy exceeds gross investment. 
E)  multiplier exceeds the expected rate of return.

Question 19

The following question are based on the following diagram:
  
-Given the consumption and investment spending shown on the graph,the equilibrium GDP is ________ billion.

Accepted Answer

A)  $1,500 
B)  $1,700 
C)  $1,800 
D)  $1,900 
E)  $2,100 
A)  $1,500 
B)  $1,700 
C)  $1,800 
D)  $1,900 
E)  $2,100

Question 20

The saving function assumes that personal saving depends primarily on

Accepted Answer

A)  interest rates. 
B)  the amount of investment. 
C)  the difference between the average and marginal propensities to consume. 
D)  disposable income. 
E)  the unemployment rate. 
A)  interest rates. 
B)  the amount of investment. 
C)  the difference between the average and marginal propensities to consume. 
D)  disposable income. 
E)  the unemployment rate.

Exam 17: The Determination of National Output and the Keynesian Multiplier

A reduction in personal consumption expenditures induced by a fall in disposable income

The following question are based on the following diagram: -The marginal propensity to consume is

In the Keynesian model,supply adjusts passively to demand in the short run because

The following question are based on the following information for a society: -If disposable income is $1,800 billion,the average propensity to consume is

An upward shift in the consumption function

If disposable income rises by $100 billion and personal consumption expenditure rises by $60 billion,what is the average propensity to consume?

An MPC of zero means the value of the multiplier is

The value of the multiplier is

If disposable income is held constant,aggregate consumption expenditure will increase in all but which of the following cases?

If disposable income rises by $100 billion and personal consumption expenditure rises by $60 billion,what is the marginal propensity to consume?

The following question are based on the following information: -If actual GDP equals $1,980 billion

The sensitivity of GDP to changes in intended investment increases as the

If total intended spending precisely equals GDP

If a family's disposable income is $100,000 and the amount it saves is $35,000,its

The slope of the saving function equals the

When GDP is at its equilibrium value

The determinants of investment are

Investment in a project will take place if the

The following question are based on the following diagram: -Given the consumption and investment spending shown on the graph,the equilibrium GDP is ________ billion.

The saving function assumes that personal saving depends primarily on

What is Economics

Markets and Prices

The Business Firm: Organization,motivation,and Optimal Input Decisions

Getting Behind the Demand and Supply Curves

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