Question 1

Assume that government spending increases by $1 billion and national income increases by $10 billion. What is the government multiplier?

Accepted Answer

A)  0.10 
B)  1.0 
C)  10 
D)  100 
A)  0.10 
B)  1.0 
C)  10 
D)  100 C

Question 2

The most important factor determining division of the product between wages and profits is

Accepted Answer

A)  the level of technology. 
B)  the amount of labor required to produce the product. 
C)  the bargaining power between employees and employers. 
D)  federal minimum wages. 
A)  the level of technology. 
B)  the amount of labor required to produce the product. 
C)  the bargaining power between employees and employers. 
D)  federal minimum wages. C

Question 3

In an economic expansion, the average ratio of consumption to income (APC)

Accepted Answer

A)  increases 
B)  decreases. 
C)  stays the same. 
D)  could either increase or decrease. 
A)  increases 
B)  decreases. 
C)  stays the same. 
D)  could either increase or decrease. B

Question 4

Assume that Sam's marginal propensity to consumer is 90%. How much will his consumption increase this year when he receives his raise of $1000?

Accepted Answer

A)  $90 
B)  $900 
C)  $1000 
D)  $100 
A)  $90 
B)  $900 
C)  $1000 
D)  $100

Question 5

What two things does the decision to invest require?

Accepted Answer

A)  Funds necessary to make the investment; the ability to claim depreciation for new plant and equipment. 
B)  Funds necessary to make the investment; the motivation to make the investment. 
C)  Funds necessary to make the investment; a low interest rate to obtain these funds. 
D)  Low capital gains tax; low interest rate. 
A)  Funds necessary to make the investment; the ability to claim depreciation for new plant and equipment. 
B)  Funds necessary to make the investment; the motivation to make the investment. 
C)  Funds necessary to make the investment; a low interest rate to obtain these funds. 
D)  Low capital gains tax; low interest rate.

Question 6

Assume that the marginal propensity to consume in the United States is currently 95%. If the government increases spending by $1 billion, how much will national income increase?

Accepted Answer

A)  $95 million. 
B)  $95 billion. 
C)  $5 billion. 
D)  $20 billion 
A)  $95 million. 
B)  $95 billion. 
C)  $5 billion. 
D)  $20 billion

Question 7

The multiplier effect

Accepted Answer

A)  measures how much a price increase for one good will affect the exchange rate. 
B)  measures how much a price increase for one good will affect the overall rate of inflation. 
C)  measures how much a new injection of spending will affect overall GDP. 
D)  measures how much a new injection of spending will affect the overall rate of inflation. 
A)  measures how much a price increase for one good will affect the exchange rate. 
B)  measures how much a price increase for one good will affect the overall rate of inflation. 
C)  measures how much a new injection of spending will affect overall GDP. 
D)  measures how much a new injection of spending will affect the overall rate of inflation.

Question 8

What is the government multiplier?

Accepted Answer

A)  It measures how much total national income is increased by an increase in government spending. 
B)  It measures how much government spending is increased each year. 
C)  It measures how much government collects in tax revenues each year. 
D)  It measures how much government budgets are affected by the rate of inflation. 
A)  It measures how much total national income is increased by an increase in government spending. 
B)  It measures how much government spending is increased each year. 
C)  It measures how much government collects in tax revenues each year. 
D)  It measures how much government budgets are affected by the rate of inflation.

Question 9

Which of the following would provide funds for investment for Acme Corporation?

Accepted Answer

A)  Sam receives 1000 shares of stock in Acme Corporation from his Aunt Lulu. 
B)  Acme Corporation issues 100,000 shares of new stock on July 1, 2008. Sam buys 1000 shares. 
C)  Donald Bigg, a major investor, buys 10,000 shares of stock from Leona Small, another investor, who uses the funds to buy a retirement condo in Florida. 
D)  Acme Corporation declares a dividend of $1.25 per share. 
A)  Sam receives 1000 shares of stock in Acme Corporation from his Aunt Lulu. 
B)  Acme Corporation issues 100,000 shares of new stock on July 1, 2008. Sam buys 1000 shares. 
C)  Donald Bigg, a major investor, buys 10,000 shares of stock from Leona Small, another investor, who uses the funds to buy a retirement condo in Florida. 
D)  Acme Corporation declares a dividend of $1.25 per share.

Question 10

What are the three sources of funds available to corporations for investment?

Accepted Answer

A)  Retained profits, borrowing from financial institutions, individual investors. 
B)  Dividends, retained profits, individual investors. 
C)  Borrowing from financial institutions, borrowing from the government, borrowing from other firms. 
D)  Borrowing from consumers, borrowing from financial institutions, borrowing from the government. 
A)  Retained profits, borrowing from financial institutions, individual investors. 
B)  Dividends, retained profits, individual investors. 
C)  Borrowing from financial institutions, borrowing from the government, borrowing from other firms. 
D)  Borrowing from consumers, borrowing from financial institutions, borrowing from the government.

Question 11

Over the business cycle, investment spending tracks closely with

Accepted Answer

A)  consumption 
B)  profit 
C)  corporate debt 
D)  unemployment 
A)  consumption 
B)  profit 
C)  corporate debt 
D)  unemployment

Question 12

Assume that the marginal propensity to consume in the United States is currently 99%. What is the marginal propensity to save?

Accepted Answer

A)  10% 
B)  1% 
C)  9% 
D)  .01% 
A)  10% 
B)  1% 
C)  9% 
D)  .01%

Question 13

What are "retained earnings?"

Accepted Answer

A)  The amount of a paycheck that a worker gets to keep. 
B)  The amount of personal income that is saved. 
C)  The amount of profits paid to shareholders in the form of dividends. 
D)  The amount of profits not distributed to shareholders. 
A)  The amount of a paycheck that a worker gets to keep. 
B)  The amount of personal income that is saved. 
C)  The amount of profits paid to shareholders in the form of dividends. 
D)  The amount of profits not distributed to shareholders.

Assume that government spending increases by $1 billion and national income increases by $10 billion. What is the government multiplier?

The most important factor determining division of the product between wages and profits is

In an economic expansion, the average ratio of consumption to income (APC)

Assume that Sam's marginal propensity to consumer is 90%. How much will his consumption increase this year when he receives his raise of $1000?

What two things does the decision to invest require?

Assume that the marginal propensity to consume in the United States is currently 95%. If the government increases spending by $1 billion, how much will national income increase?

The multiplier effect

What is the government multiplier?

Which of the following would provide funds for investment for Acme Corporation?

What are the three sources of funds available to corporations for investment?

Over the business cycle, investment spending tracks closely with

Assume that the marginal propensity to consume in the United States is currently 99%. What is the marginal propensity to save?

What are "retained earnings?"

What Is Macroeconomics and the Evolution of Capitalism

The Classical View of the Macro-Economy

The Keynesian Revolution

National Income Accounting

Classical and Keynesian Graphical Analysis

Introduction to Economic Growth

Introduction to Business Cycles

Consumer Spending, and Credit and Interest

Housing Bubble, Financial Crisis, and Government Spending, Taxes, and Deficits

The Trade Gap

Business Cycles

Globalization and the Spread of Instability

Inflation

Monetary Policy, Financial Regulation, and Debates Over Monetary Policy

Fiscal Policy: How to Stimulate the Economy

Fiscal Policy: Austerians and Deficit Hawks V Stimulus

A Road to Full Employment

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Exam 8: Investment and Profit, and the Multiplier

Assume that government spending increases by $1 billion and national income increases by $10 billion. What is the government multiplier?

The most important factor determining division of the product between wages and profits is

In an economic expansion, the average ratio of consumption to income (APC)

Assume that Sam's marginal propensity to consumer is 90%. How much will his consumption increase this year when he receives his raise of $1000?

What two things does the decision to invest require?

Assume that the marginal propensity to consume in the United States is currently 95%. If the government increases spending by $1 billion, how much will national income increase?

The multiplier effect

What is the government multiplier?

Which of the following would provide funds for investment for Acme Corporation?

What are the three sources of funds available to corporations for investment?

Over the business cycle, investment spending tracks closely with

Assume that the marginal propensity to consume in the United States is currently 99%. What is the marginal propensity to save?

What are "retained earnings?"

What Is Macroeconomics and the Evolution of Capitalism

The Classical View of the Macro-Economy

The Keynesian Revolution

National Income Accounting

Classical and Keynesian Graphical Analysis

Introduction to Economic Growth

Introduction to Business Cycles

Consumer Spending, and Credit and Interest

Housing Bubble, Financial Crisis, and Government Spending, Taxes, and Deficits

The Trade Gap

Business Cycles

Globalization and the Spread of Instability

Inflation

Monetary Policy, Financial Regulation, and Debates Over Monetary Policy

Fiscal Policy: How to Stimulate the Economy

Fiscal Policy: Austerians and Deficit Hawks V Stimulus

A Road to Full Employment

Filters