Question 1

When do firms buy capital goods?

Accepted Answer

A)  when firms have sufficient funds and can afford the capital goods 
B)  when firms have to borrow funds to buy the capital goods 
C)  when firms expect the investment to yield a higher return than other possible uses of their funds 
D)  when firms grow more optimistic about current profit prospects 
E)  when the capital good has a long productive life 
A)  when firms have sufficient funds and can afford the capital goods 
B)  when firms have to borrow funds to buy the capital goods 
C)  when firms expect the investment to yield a higher return than other possible uses of their funds 
D)  when firms grow more optimistic about current profit prospects 
E)  when the capital good has a long productive life

Question 2

An increase in real disposable income will _____

Accepted Answer

A)  increase the value of net imports of a country. 
B)  decrease the value of net exports of a country. 
C)  increase government purchases. 
D)  decrease government purchases. 
E)  increase net taxes. 
A)  increase the value of net imports of a country. 
B)  decrease the value of net exports of a country. 
C)  increase government purchases. 
D)  decrease government purchases. 
E)  increase net taxes.

Question 3

A decrease in the price level in an economy is likely to cause a(n) _____

Accepted Answer

A)  decrease in the real value of dollar-denominated assets. 
B)  downward shift of the aggregate expenditure line. 
C)  decrease in the equilibrium level of output demanded. 
D)  increase in consumption spending. 
E)  leftward shift of the aggregate demand curve. 
A)  decrease in the real value of dollar-denominated assets. 
B)  downward shift of the aggregate expenditure line. 
C)  decrease in the equilibrium level of output demanded. 
D)  increase in consumption spending. 
E)  leftward shift of the aggregate demand curve.

Question 4

Government outlays equal _____

Accepted Answer

A)  the difference between government expenditures and government revenues. 
B)  the sum of government expenditures and government revenues. 
C)  the sum of government purchases and transfer payments. 
D)  the difference between government purchases and transfer payments. 
E)  the ratio of government purchases to transfer payments. 
A)  the difference between government expenditures and government revenues. 
B)  the sum of government expenditures and government revenues. 
C)  the sum of government purchases and transfer payments. 
D)  the difference between government purchases and transfer payments. 
E)  the ratio of government purchases to transfer payments.

Question 5

Movement along the aggregate demand curve may be caused by a change in autonomous investment spending.

Accepted Answer

A) True 
 B)False

Question 6

_____ is the reward savers earn for deferring consumption.

Accepted Answer

A)  A dividend 
B)  A wage 
C)  Rent 
D)  Profit 
E)  Interest 
A)  A dividend 
B)  A wage 
C)  Rent 
D)  Profit 
E)  Interest

Question 7

Linda earned an income of $3,000 per month which has now increased to $3,500 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 after the increase?

Accepted Answer

A)  $20,000 
B)  $3,500 
C)  $2,700 
D)  $3,150 
E)  $450 
A)  $20,000 
B)  $3,500 
C)  $2,700 
D)  $3,150 
E)  $450

Question 8

The smaller the marginal propensity to save, other things constant, _____

Accepted Answer

A)  the smaller the marginal propensity to consume. 
B)  the larger the marginal propensity to consume. 
C)  the smaller the multiplier. 
D)  the flatter the consumption function. 
E)  the steeper the saving function. 
A)  the smaller the marginal propensity to consume. 
B)  the larger the marginal propensity to consume. 
C)  the smaller the multiplier. 
D)  the flatter the consumption function. 
E)  the steeper the saving function.

Question 9

Linda earned an income of $3,000 per month, which has now increased to $3,500 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 are her savings per month before the increase income and after the increase in income?

Accepted Answer

A)  $500; $450 
B)  $300; $350 
C)  $450; $500 
D)  $350; $300 
E)  $500; $350 
A)  $500; $450 
B)  $300; $350 
C)  $450; $500 
D)  $350; $300 
E)  $500; $350

Question 10

Exports minus imports equals net exports.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following best describes the simple spending multiplier?

Accepted Answer

A)  It shows the magnified change in planned aggregate spending that arises from a change in output. 
B)  It shows the magnified change in equilibrium output demanded that arises from a change in income. 
C)  It shows the magnified change in planned aggregate spending that arises from a change in equilibrium output. 
D)  It shows the magnified change in equilibrium output demanded that arises from a given initial change in planned aggregate spending. 
E)  It shows the change in planned aggregate spending that arises from a change in real output. 
A)  It shows the magnified change in planned aggregate spending that arises from a change in output. 
B)  It shows the magnified change in equilibrium output demanded that arises from a change in income. 
C)  It shows the magnified change in planned aggregate spending that arises from a change in equilibrium output. 
D)  It shows the magnified change in equilibrium output demanded that arises from a given initial change in planned aggregate spending. 
E)  It shows the change in planned aggregate spending that arises from a change in real output.

Question 12

If the marginal propensity to consume (MPC) is 7/8, the simple spending multiplier is _____

Accepted Answer

A)  1/8. 
B)  1/4. 
C)  4/5. 
D)  7/8. 
E)  8. 
A)  1/8. 
B)  1/4. 
C)  4/5. 
D)  7/8. 
E)  8.

Question 13

Table 9.2
  
-Refer to Table 9.2, which shows the values of different components of aggregate expenditure of an economy. The marginal propensity to save (MPS) equals _____

Accepted Answer

A)  0.80 or 4/5. 
B)  0.60 or 3/5. 
C)  0.40 or 2/5. 
D)  0.10 or 1/10. 
E)  0.20 or 1/5. 
A)  0.80 or 4/5. 
B)  0.60 or 3/5. 
C)  0.40 or 2/5. 
D)  0.10 or 1/10. 
E)  0.20 or 1/5.

Question 14

If the marginal propensity to consume (MPC) is 0.8, the simple spending multiplier is ____

Accepted Answer

A)  1/0.8. 
B)  1/0.4. 
C)  1/0.2. 
D)  1/8. 
E)  8. 
A)  1/0.8. 
B)  1/0.4. 
C)  1/0.2. 
D)  1/8. 
E)  8.

Question 15

If the marginal propensity to consume (MPC) is 4/5, the value of the simple multiplier is _____

Accepted Answer

A)  4. 
B)  1/5. 
C)  4/5. 
D)  5/4. 
E)  5. 
A)  4. 
B)  1/5. 
C)  4/5. 
D)  5/4. 
E)  5.

Question 16

Which of the following will shift the investment demand curve rightward?

Accepted Answer

A)  higher interest rates 
B)  gloomy sales expectations 
C)  a cut in corporate taxes that raises after-tax profits 
D)  a decrease in the marginal propensity to consume 
E)  an increase in aggregate income 
A)  higher interest rates 
B)  gloomy sales expectations 
C)  a cut in corporate taxes that raises after-tax profits 
D)  a decrease in the marginal propensity to consume 
E)  an increase in aggregate income

Question 17

Table 9.3
 $$\begin{array}{l}
\text { ‡ Table } 9.3\
\begin{array} { c c c } 
\begin{array} { c } 
\text { Real } \
\text { GDP } ( \$ )
\end{array} & \text { Consumption } ( \$ ) & \begin{array} { c } 
\text { Planned } \
\text { Investment } ( \$ )
\end{array} \
\hline 0 & 140 & 100 \
100 & 220 & 100 \
200 & 300 & 100 \
300 & 380 & 100 \
400 & 460 & 100 \
500 & 540 & 100 \
600 & 620 & 100 \
700 & 700 & 100 \
800 & 780 & 100 \
900 & 860 & 100 \
1,000 & 940 & 100 \
1,100 & 1,020 & 100 \
1,200 & 1,100 & 100 \
1,300 & 1,180 & 100
\end{array}
\end{array}$$
-Refer to Table 9.3, which shows the real gross domestic product (GDP), consumption, and planned investment in an economy. The marginal propensity to consume (MPC) in the economy is _____

Accepted Answer

A)  0. 
B)  0.2. 
C)  0.8. 
D)  0.9. 
E)  80. 
A)  0. 
B)  0.2. 
C)  0.8. 
D)  0.9. 
E)  80.

Question 18

Net wealth is _____

Accepted Answer

A)  the value of a household's assets plus liabilities. 
B)  the value of household's assets minus liabilities. 
C)  a household's income minus consumption. 
D)  a household's income minus savings. 
E)  a household's income plus consumption 
A)  the value of a household's assets plus liabilities. 
B)  the value of household's assets minus liabilities. 
C)  a household's income minus consumption. 
D)  a household's income minus savings. 
E)  a household's income plus consumption

Question 19

An increase in autonomous investment in an economy will _____

Accepted Answer

A)  shift the aggregate expenditure line upward. 
B)  shift the aggregate expenditure line downward. 
C)  result in an upward movement along the aggregate expenditure line. 
D)  result in a downward movement along the aggregate expenditure line. 
E)  increase aggregate expenditures only at high levels of income. 
A)  shift the aggregate expenditure line upward. 
B)  shift the aggregate expenditure line downward. 
C)  result in an upward movement along the aggregate expenditure line. 
D)  result in a downward movement along the aggregate expenditure line. 
E)  increase aggregate expenditures only at high levels of income.

Question 20

Suppose an increase in disposable income from $3 trillion to $3.2 trillion increases consumption from $2.5 trillion to $2.6 trillion. The marginal propensity to consume (MPC) is _____

Accepted Answer

A)  0.1. 
B)  0.2. 
C)  0.5. 
D)  0.8. 
E)  0.9. 
A)  0.1. 
B)  0.2. 
C)  0.5. 
D)  0.8. 
E)  0.9.

When do firms buy capital goods?

An increase in real disposable income will _____

A decrease in the price level in an economy is likely to cause a(n) _____

Government outlays equal _____

Movement along the aggregate demand curve may be caused by a change in autonomous investment spending.

_____ is the reward savers earn for deferring consumption.

Linda earned an income of $3,000 per month which has now increased to $3,500 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 after the increase?

The smaller the marginal propensity to save, other things constant, _____

Exports minus imports equals net exports.

Which of the following best describes the simple spending multiplier?

If the marginal propensity to consume (MPC) is 7/8, the simple spending multiplier is _____

Table 9.2 -Refer to Table 9.2, which shows the values of different components of aggregate expenditure of an economy. The marginal propensity to save (MPS) equals _____

If the marginal propensity to consume (MPC) is 0.8, the simple spending multiplier is ____

If the marginal propensity to consume (MPC) is 4/5, the value of the simple multiplier is _____

Which of the following will shift the investment demand curve rightward?

Net wealth is _____

An increase in autonomous investment in an economy will _____

Suppose an increase in disposable income from $3 trillion to $3.2 trillion increases consumption from $2.5 trillion to $2.6 trillion. The marginal propensity to consume (MPC) is _____

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.

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Exam 9: Aggregate Demand.

When do firms buy capital goods?

An increase in real disposable income will _____

A decrease in the price level in an economy is likely to cause a(n) _____

Government outlays equal _____

Movement along the aggregate demand curve may be caused by a change in autonomous investment spending.

_____ is the reward savers earn for deferring consumption.

Linda earned an income of $3,000 per month which has now increased to $3,500 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 after the increase?

The smaller the marginal propensity to save, other things constant, _____

Exports minus imports equals net exports.

Which of the following best describes the simple spending multiplier?

If the marginal propensity to consume (MPC) is 7/8, the simple spending multiplier is _____

Table 9.2 -Refer to Table 9.2, which shows the values of different components of aggregate expenditure of an economy. The marginal propensity to save (MPS) equals _____

If the marginal propensity to consume (MPC) is 0.8, the simple spending multiplier is ____

If the marginal propensity to consume (MPC) is 4/5, the value of the simple multiplier is _____

Which of the following will shift the investment demand curve rightward?

Net wealth is _____

An increase in autonomous investment in an economy will _____

Suppose an increase in disposable income from $3 trillion to $3.2 trillion increases consumption from $2.5 trillion to $2.6 trillion. The marginal propensity to consume (MPC) is _____

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