Question 1

The aggregate expenditure line is drawn on a graph that measures _____

Accepted Answer

A)  real GDP on the horizontal axis and aggregate expenditure on the vertical axis. 
B)  aggregate expenditure on the horizontal axis and real GDP on the vertical axis. 
C)  consumption on the horizontal axis and aggregate expenditure on the vertical axis. 
D)  aggregate expenditure on the horizontal axis and consumption on the vertical axis. 
E)  investment on the horizontal axis and aggregate expenditure on the vertical axis. 
A)  real GDP on the horizontal axis and aggregate expenditure on the vertical axis. 
B)  aggregate expenditure on the horizontal axis and real GDP on the vertical axis. 
C)  consumption on the horizontal axis and aggregate expenditure on the vertical axis. 
D)  aggregate expenditure on the horizontal axis and consumption on the vertical axis. 
E)  investment on the horizontal axis and aggregate expenditure on the vertical axis.

Question 2

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 consumption per month before and after the increase in income?

Accepted Answer

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

Question 3

The marginal propensity to consume (MPC) is _____

Accepted Answer

A)  the relationship between a change in consumption and a change in income. 
B)  the relationship between a change in consumption and a change in saving. 
C)  the relationship between changes in consumption and changes in net wealth. 
D)  the ratio of income to consumption at any given level of income. 
E)  the ratio of total consumption to total saving. 
A)  the relationship between a change in consumption and a change in income. 
B)  the relationship between a change in consumption and a change in saving. 
C)  the relationship between changes in consumption and changes in net wealth. 
D)  the ratio of income to consumption at any given level of income. 
E)  the ratio of total consumption to total saving.

Question 4

If a household's income falls from $20,000 to $17,000 and its consumption spending falls from $18,000 to $15,000, then its _____

Accepted Answer

A)  marginal propensity to consume is −0.67. 
B)  marginal propensity to consume is 0.88. 
C)  marginal propensity to consume is 0.20. 
D)  marginal propensity to save is 0. 
E)  marginal propensity to save is 0.12. 
A)  marginal propensity to consume is −0.67. 
B)  marginal propensity to consume is 0.88. 
C)  marginal propensity to consume is 0.20. 
D)  marginal propensity to save is 0. 
E)  marginal propensity to save is 0.12.

Question 5

Which of the following will not shift the consumption function?

Accepted Answer

A)  a change in household wealth 
B)  a change in the price level 
C)  a change in household disposable income 
D)  a change in the level of unemployment 
E)  a change in the rate of interest 
A)  a change in household wealth 
B)  a change in the price level 
C)  a change in household disposable income 
D)  a change in the level of unemployment 
E)  a change in the rate of interest

Question 6

Assuming that there is no capital depreciation and no business saving, what is the relationship between spending and income in an economy?

Accepted Answer

A)  Spending is greater than income. 
B)  Spending is less than income. 
C)  Spending is equal to income. 
D)  Spending is equal to income plus investment. 
E)  Spending is unrelated to income. 
A)  Spending is greater than income. 
B)  Spending is less than income. 
C)  Spending is equal to income. 
D)  Spending is equal to income plus investment. 
E)  Spending is unrelated to income.

Question 7

An increase 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 8

An economy's investment demand curve shows the inverse relationship between the quantity of investment demanded and the market interest rate, other things held constant.

Accepted Answer

A) True 
 B)False

Question 9

As disposable income decreases, saving decreases.

Accepted Answer

A) True 
 B)False

Question 10

Table 9.2
  
-Refer to Table 9.2, which shows the values of different components of aggregate expenditure of an economy. The equilibrium level of gross domestic product (GDP) is _____

Accepted Answer

A)  $5.0 trillion. 
B)  $5.5 trillion. 
C)  $6.0 trillion. 
D)  $6.5 trillion. 
E)  $7.0 trillion. 
A)  $5.0 trillion. 
B)  $5.5 trillion. 
C)  $6.0 trillion. 
D)  $6.5 trillion. 
E)  $7.0 trillion.

Question 11

Aggregate expenditure means total or combined spending.

Accepted Answer

A) True 
 B)False

Question 12

If households save $30 billion more at each level of income and the marginal propensity to consume (MPC) is 0.9, the aggregate expenditure line will _____

Accepted Answer

A)  intersect the 45-degree line at a real GDP of $30 billion. 
B)  shift upward by $30 billion. 
C)  shift downward by $30 billion. 
D)  shift upward by $300 billion because of the multiplier effect. 
E)  shift downward by $300 billion because of the multiplier effect. 
A)  intersect the 45-degree line at a real GDP of $30 billion. 
B)  shift upward by $30 billion. 
C)  shift downward by $30 billion. 
D)  shift upward by $300 billion because of the multiplier effect. 
E)  shift downward by $300 billion because of the multiplier effect.

Question 13

A firm's level of investment depends on the market interest rate _____

Accepted Answer

A)  only when the firm has to borrow funds to invest in new equipment. 
B)  only when the firm has to borrow funds to buy stocks and bonds. 
C)  only when the firm already has sufficient funds and could lend them. 
D)  because the interest rate represents the opportunity cost of investing in capital. 
E)  because investments are always made with borrowed funds. 
A)  only when the firm has to borrow funds to invest in new equipment. 
B)  only when the firm has to borrow funds to buy stocks and bonds. 
C)  only when the firm already has sufficient funds and could lend them. 
D)  because the interest rate represents the opportunity cost of investing in capital. 
E)  because investments are always made with borrowed funds.

Question 14

What happens to the fraction of disposable income saved in an economy as the economy changes?

Accepted Answer

A)  The fraction of disposable income saved increases as the economy grows. 
B)  The fraction of disposable income saved increases as the economy shrinks. 
C)  The fraction of disposable income saved decreases as the economy grows. 
D)  The fraction of disposable income saved decreases as the economy shrinks. 
E)  The fraction of disposable income saved is unchanged as the economy grows. 
A)  The fraction of disposable income saved increases as the economy grows. 
B)  The fraction of disposable income saved increases as the economy shrinks. 
C)  The fraction of disposable income saved decreases as the economy grows. 
D)  The fraction of disposable income saved decreases as the economy shrinks. 
E)  The fraction of disposable income saved is unchanged as the economy grows.

Question 15

Which of the following is correct if real GDP is $20.5 trillion and spending is $20 trillion?

Accepted Answer

A)  Spending is greater than output by $0.5 trillion. 
B)  Spending is less than output by $0.5 trillion. 
C)  Spending is greater than output by $20.5 trillion. 
D)  Spending is less than output by $20.5 trillion. 
E)  Spending is equal to output. 
A)  Spending is greater than output by $0.5 trillion. 
B)  Spending is less than output by $0.5 trillion. 
C)  Spending is greater than output by $20.5 trillion. 
D)  Spending is less than output by $20.5 trillion. 
E)  Spending is equal to output.

Question 16

The most important determinant of a household's consumption spending is _____

Accepted Answer

A)  its disposable income. 
B)  the in-kind transfers received by the household. 
C)  the level of education of the members of the household. 
D)  the interest rate. 
E)  the ratio of wage to non-wage income of the household. 
A)  its disposable income. 
B)  the in-kind transfers received by the household. 
C)  the level of education of the members of the household. 
D)  the interest rate. 
E)  the ratio of wage to non-wage income of the household.

Question 17

An increase in planned investment will shift the _____

Accepted Answer

A)  aggregate demand curve rightward. 
B)  aggregate demand curve leftward. 
C)  aggregate supply curve rightward. 
D)  aggregate supply curve leftward. 
E)  consumption function upward. 
A)  aggregate demand curve rightward. 
B)  aggregate demand curve leftward. 
C)  aggregate supply curve rightward. 
D)  aggregate supply curve leftward. 
E)  consumption function upward.

Question 18

Exhibit 9.1
  
-Refer to Exhibit 9.1, which shows the income-expenditure model. At point C, _____

Accepted Answer

A)  consumption expenditure exceeds disposable income. 
B)  producers experience an unexpected loss of inventory. 
C)  aggregate expenditure is exactly equal to real GDP. 
D)  real GDP exceeds aggregate expenditure. 
E)  producers experience an unexpected accumulation of inventory. 
A)  consumption expenditure exceeds disposable income. 
B)  producers experience an unexpected loss of inventory. 
C)  aggregate expenditure is exactly equal to real GDP. 
D)  real GDP exceeds aggregate expenditure. 
E)  producers experience an unexpected accumulation of inventory.

Question 19

The relationship showing spending at each level of real gross domestic product or real income is known as the _____

Accepted Answer

A)  aggregate expenditure line. 
B)  real GDP line. 
C)  income level. 
D)  spending level. 
E)  price level. 
A)  aggregate expenditure line. 
B)  real GDP line. 
C)  income level. 
D)  spending level. 
E)  price level.

Question 20

The slope of the consumption function is equal to the marginal propensity to save (MPS).

Accepted Answer

A) True 
 B)False

The aggregate expenditure line is drawn on a graph that measures _____

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 consumption per month before and after the increase in income?

The marginal propensity to consume (MPC) is _____

If a household's income falls from $20,000 to $17,000 and its consumption spending falls from $18,000 to $15,000, then its _____

Which of the following will not shift the consumption function?

Assuming that there is no capital depreciation and no business saving, what is the relationship between spending and income in an economy?

An increase in net wealth will _____

An economy's investment demand curve shows the inverse relationship between the quantity of investment demanded and the market interest rate, other things held constant.

As disposable income decreases, saving decreases.

Table 9.2 -Refer to Table 9.2, which shows the values of different components of aggregate expenditure of an economy. The equilibrium level of gross domestic product (GDP) is _____

Aggregate expenditure means total or combined spending.

If households save $30 billion more at each level of income and the marginal propensity to consume (MPC) is 0.9, the aggregate expenditure line will _____

A firm's level of investment depends on the market interest rate _____

What happens to the fraction of disposable income saved in an economy as the economy changes?

Which of the following is correct if real GDP is $20.5 trillion and spending is $20 trillion?

The most important determinant of a household's consumption spending is _____

An increase in planned investment will shift the _____

Exhibit 9.1 -Refer to Exhibit 9.1, which shows the income-expenditure model. At point C, _____

The relationship showing spending at each level of real gross domestic product or real income is known as the _____

The slope of the consumption function is equal to the marginal propensity to save (MPS).

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.

The aggregate expenditure line is drawn on a graph that measures _____

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 consumption per month before and after the increase in income?

The marginal propensity to consume (MPC) is _____

If a household's income falls from $20,000 to $17,000 and its consumption spending falls from $18,000 to $15,000, then its _____

Which of the following will not shift the consumption function?

Assuming that there is no capital depreciation and no business saving, what is the relationship between spending and income in an economy?

An increase in net wealth will _____

An economy's investment demand curve shows the inverse relationship between the quantity of investment demanded and the market interest rate, other things held constant.

As disposable income decreases, saving decreases.

Table 9.2 -Refer to Table 9.2, which shows the values of different components of aggregate expenditure of an economy. The equilibrium level of gross domestic product (GDP) is _____

Aggregate expenditure means total or combined spending.

If households save $30 billion more at each level of income and the marginal propensity to consume (MPC) is 0.9, the aggregate expenditure line will _____

A firm's level of investment depends on the market interest rate _____

What happens to the fraction of disposable income saved in an economy as the economy changes?

Which of the following is correct if real GDP is $20.5 trillion and spending is $20 trillion?

The most important determinant of a household's consumption spending is _____

An increase in planned investment will shift the _____

Exhibit 9.1 -Refer to Exhibit 9.1, which shows the income-expenditure model. At point C, _____

The relationship showing spending at each level of real gross domestic product or real income is known as the _____

The slope of the consumption function is equal to the marginal propensity to save (MPS).

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