Question 1

An increase in the marginal propensity to consume (MPC) will, other things constant, _____

Accepted Answer

A)  increase the value of the multiplier. 
B)  decrease the value of the multiplier. 
C)  increase the marginal propensity to save. 
D)  shift the aggregate expenditure curve downward. 
E)  cause a downward movement along the aggregate expenditure curve. 
A)  increase the value of the multiplier. 
B)  decrease the value of the multiplier. 
C)  increase the marginal propensity to save. 
D)  shift the aggregate expenditure curve downward. 
E)  cause a downward movement along the aggregate expenditure curve.

Question 2

The fraction of a change in disposable income that is consumed is called _____

Accepted Answer

A)  autonomous consumption. 
B)  induced consumption. 
C)  the multiplier. 
D)  the marginal propensity to consume. 
E)  the marginal propensity to save. 
A)  autonomous consumption. 
B)  induced consumption. 
C)  the multiplier. 
D)  the marginal propensity to consume. 
E)  the marginal propensity to save.

Question 3

Linda earns an income of $3,000 per month. She saves 10 percent and spends the remainder on food, lodging, and other expenses. So far, she has managed to save $20,000. What is her disposable income per month?

Accepted Answer

A)  $20,000 
B)  $3,000 
C)  $2,700 
D)  $3,150 
E)  $450 
A)  $20,000 
B)  $3,000 
C)  $2,700 
D)  $3,150 
E)  $450

Question 4

If the marginal propensity to consume (MPC) is 1, the simple multiplier is _____

Accepted Answer

A)  0. 
B)  1. 
C)  10. 
D)  100. 
E)  infinity. 
A)  0. 
B)  1. 
C)  10. 
D)  100. 
E)  infinity.

Question 5

A decrease in net wealth will _____

Accepted Answer

A)  increase consumption and increase saving. 
B)  increase saving and decrease consumption. 
C)  decrease consumption and decrease saving. 
D)  increase consumption and decrease saving. 
E)  have no effect on consumption. 
A)  increase consumption and increase saving. 
B)  increase saving and decrease consumption. 
C)  decrease consumption and decrease saving. 
D)  increase consumption and decrease saving. 
E)  have no effect on consumption.

Question 6

Consumption reflects _____

Accepted Answer

A)  investment spending. 
B)  government expenditures. 
C)  income. 
D)  sales. 
E)  net exports. 
A)  investment spending. 
B)  government expenditures. 
C)  income. 
D)  sales. 
E)  net exports.

Question 7

Which relationship is shown on the income-expenditure model?

Accepted Answer

A)  real GDP and aggregate expenditures 
B)  real GDP and consumption 
C)  real GDP and income 
D)  nominal GDP and income 
E)  investment and income 
A)  real GDP and aggregate expenditures 
B)  real GDP and consumption 
C)  real GDP and income 
D)  nominal GDP and income 
E)  investment and income

Question 8

Purchases of existing commodities, such as gold and precious gems, are considered investment spending by economists.

Accepted Answer

A) True 
 B)False

Question 9

If the marginal propensity to consume (MPC) equals 0.9, the multiplier is _____

Accepted Answer

A)  1. 
B)  2. 
C)  5. 
D)  10. 
E)  12. 
A)  1. 
B)  2. 
C)  5. 
D)  10. 
E)  12.

Question 10

What changes in the income-expenditure model if spending exceeds GDP?

Accepted Answer

A)  consumption 
B)  prices 
C)  expenditures 
D)  inventories 
E)  income 
A)  consumption 
B)  prices 
C)  expenditures 
D)  inventories 
E)  income

Question 11

Which of the following is true of government purchases?

Accepted Answer

A)  They are positively related to current income. 
B)  They are negatively related to current income. 
C)  They include transfer payments. 
D)  They are decided by public officials. 
E)  They depend on the market rate of interest. 
A)  They are positively related to current income. 
B)  They are negatively related to current income. 
C)  They include transfer payments. 
D)  They are decided by public officials. 
E)  They depend on the market rate of interest.

Question 12

A decrease in net wealth will _____

Accepted Answer

A)  shift the consumption function downward. 
B)  make the consumption function steeper. 
C)  cause an upward movement along the consumption function. 
D)  cause a downward movement along the consumption function. 
E)  make the consumption function flatter. 
A)  shift the consumption function downward. 
B)  make the consumption function steeper. 
C)  cause an upward movement along the consumption function. 
D)  cause a downward movement along the consumption function. 
E)  make the consumption function flatter.

Question 13

The amount of U.S. exports to the rest of the world is primarily determined by _____

Accepted Answer

A)  the real disposable income in the United States. 
B)  the real disposable income in other nations. 
C)  the real interest rate in other nations. 
D)  the real interest rate in the United States. 
E)  the government budget deficits in other nations. 
A)  the real disposable income in the United States. 
B)  the real disposable income in other nations. 
C)  the real interest rate in other nations. 
D)  the real interest rate in the United States. 
E)  the government budget deficits in other nations.

Question 14

A technological change that positively affects business expectations will _____

Accepted Answer

A)  cause a rightward shift of the investment demand curve. 
B)  cause a leftward shift of the investment demand curve. 
C)  cause an upward movement along the investment demand curve. 
D)  cause a downward movement along the investment demand curve. 
E)  make the investment demand curve slope upward. 
A)  cause a rightward shift of the investment demand curve. 
B)  cause a leftward shift of the investment demand curve. 
C)  cause an upward movement along the investment demand curve. 
D)  cause a downward movement along the investment demand curve. 
E)  make the investment demand curve slope upward.

Question 15

A decrease in the market interest rate will _____

Accepted Answer

A)  increase investment for individual firms, so total investment in the economy increases. 
B)  increase investment for individual firms, so total investment in the economy decreases. 
C)  decrease investment for individual firms, so total investment in the economy increases. 
D)  decrease investment for individual firms, so total investment in the economy is decreases. 
E)  not change investment for individual firms, so total investment in the economy is unchanged. 
A)  increase investment for individual firms, so total investment in the economy increases. 
B)  increase investment for individual firms, so total investment in the economy decreases. 
C)  decrease investment for individual firms, so total investment in the economy increases. 
D)  decrease investment for individual firms, so total investment in the economy is decreases. 
E)  not change investment for individual firms, so total investment in the economy is unchanged.

Question 16

How does an expected change in car prices affect consumption?

Accepted Answer

A)  Higher car prices in the future prompts some to buy a new car now. 
B)  Higher car prices in the future prompts some to buy a new car in the future. 
C)  Lower car prices in the future prompts some to buy a new car now. 
D)  Lower car prices in the future prompts some to sell their car in the future. 
E)  Changes in car prices do not affect consumption. 
A)  Higher car prices in the future prompts some to buy a new car now. 
B)  Higher car prices in the future prompts some to buy a new car in the future. 
C)  Lower car prices in the future prompts some to buy a new car now. 
D)  Lower car prices in the future prompts some to sell their car in the future. 
E)  Changes in car prices do not affect consumption.

Question 17

Which of the following is true of disposable income?

Accepted Answer

A)  It excludes transfer payments. 
B)  It is the portion of income that is used solely for consumption. 
C)  It is the part of total earned income that is paid to the government in the form of taxes. 
D)  It is the difference between income and saving. 
E)  It equals consumption expenditures plus saving. 
A)  It excludes transfer payments. 
B)  It is the portion of income that is used solely for consumption. 
C)  It is the part of total earned income that is paid to the government in the form of taxes. 
D)  It is the difference between income and saving. 
E)  It equals consumption expenditures plus saving.

Question 18

The slope of the consumption function shows how _____

Accepted Answer

A)  consumption changes over time. 
B)  consumption changes as household size changes. 
C)  consumption changes as the price level changes. 
D)  income changes as the level of consumption changes. 
E)  consumption changes as the level of income changes. 
A)  consumption changes over time. 
B)  consumption changes as household size changes. 
C)  consumption changes as the price level changes. 
D)  income changes as the level of consumption changes. 
E)  consumption changes as the level of income changes.

Question 19

If the marginal propensity to save (MPS) is 0.25, the simple multiplier is _____

Accepted Answer

A)  25. 
B)  75. 
C)  5. 
D)  ¾. 
E)  4. 
A)  25. 
B)  75. 
C)  5. 
D)  ¾. 
E)  4.

Question 20

The fraction of a change in income that is spent on consumption is known as _____

Accepted Answer

A)  disposable income. 
B)  the consumption function. 
C)  the marginal propensity to consume. 
D)  the marginal propensity to save. 
E)  net wealth. 
A)  disposable income. 
B)  the consumption function. 
C)  the marginal propensity to consume. 
D)  the marginal propensity to save. 
E)  net wealth.

An increase in the marginal propensity to consume (MPC) will, other things constant, _____

The fraction of a change in disposable income that is consumed is called _____

Linda earns an income of $3,000 per month. She saves 10 percent and spends the remainder on food, lodging, and other expenses. So far, she has managed to save $20,000. What is her disposable income per month?

If the marginal propensity to consume (MPC) is 1, the simple multiplier is _____

A decrease in net wealth will _____

Consumption reflects _____

Which relationship is shown on the income-expenditure model?

Purchases of existing commodities, such as gold and precious gems, are considered investment spending by economists.

If the marginal propensity to consume (MPC) equals 0.9, the multiplier is _____

What changes in the income-expenditure model if spending exceeds GDP?

Which of the following is true of government purchases?

A decrease in net wealth will _____

The amount of U.S. exports to the rest of the world is primarily determined by _____

A technological change that positively affects business expectations will _____

A decrease in the market interest rate will _____

How does an expected change in car prices affect consumption?

Which of the following is true of disposable income?

The slope of the consumption function shows how _____

If the marginal propensity to save (MPS) is 0.25, the simple multiplier is _____

The fraction of a change in income that is spent on consumption is known as _____

The Art and Science of Economic Analysis.

Economic Tools and Economic Systems.

Economic Decision Makers.

Demand, Supply, and Markets.

Introduction to Macroeconomics.

Tracking the U. S. Economy.

Unemployment and Inflation.

Productivity and Growth.

Aggregate Supply.

Fiscal Policy.

Federal Budgets and Public Policy.

Money and the Financial System.

Banking and the Money Supply.

Monetary Theory and Policy.

Macro Policy Debate: Active or Passive?

International Trade.

International Finance.

Economic Development.

Filters

Exam 9: Aggregate Demand.

An increase in the marginal propensity to consume (MPC) will, other things constant, _____

The fraction of a change in disposable income that is consumed is called _____

Linda earns an income of $3,000 per month. She saves 10 percent and spends the remainder on food, lodging, and other expenses. So far, she has managed to save $20,000. What is her disposable income per month?

If the marginal propensity to consume (MPC) is 1, the simple multiplier is _____

A decrease in net wealth will _____

Consumption reflects _____

Which relationship is shown on the income-expenditure model?

Purchases of existing commodities, such as gold and precious gems, are considered investment spending by economists.

If the marginal propensity to consume (MPC) equals 0.9, the multiplier is _____

What changes in the income-expenditure model if spending exceeds GDP?

Which of the following is true of government purchases?

A decrease in net wealth will _____

The amount of U.S. exports to the rest of the world is primarily determined by _____

A technological change that positively affects business expectations will _____

A decrease in the market interest rate will _____

How does an expected change in car prices affect consumption?

Which of the following is true of disposable income?

The slope of the consumption function shows how _____

If the marginal propensity to save (MPS) is 0.25, the simple multiplier is _____

The fraction of a change in income that is spent on consumption is known as _____

The Art and Science of Economic Analysis.

Economic Tools and Economic Systems.

Economic Decision Makers.

Demand, Supply, and Markets.

Introduction to Macroeconomics.

Tracking the U. S. Economy.

Unemployment and Inflation.

Productivity and Growth.

Aggregate Supply.

Fiscal Policy.

Federal Budgets and Public Policy.

Money and the Financial System.

Banking and the Money Supply.

Monetary Theory and Policy.

Macro Policy Debate: Active or Passive?

International Trade.

International Finance.

Economic Development.

Filters