Question 1

The relationship between consumer spending and disposable income is called the

Accepted Answer

A) conjunction function. 
B) consumption function. 
C) aggregate demand function. 
D) marginal spending function. 
A) conjunction function. 
B) consumption function. 
C) aggregate demand function. 
D) marginal spending function.

Question 2

A change in the value of consumer's stock market holdings will cause a shift in the consumption function.

Accepted Answer

A) True 
 B)False

Question 3

Capital goods are counted the same as consumer goods in the national product accounts.

Accepted Answer

A) True 
 B)False

Question 4

GDP can be calculated by the value-added approach, which

Accepted Answer

A) is useful in avoiding double counting. 
B) includes only the value-added portion from the sale of goods and services. 
C) includes the revenue a firm receives from selling a product minus the amount paid for goods purchased from other firms. 
D) All of the above correct. 
A) is useful in avoiding double counting. 
B) includes only the value-added portion from the sale of goods and services. 
C) includes the revenue a firm receives from selling a product minus the amount paid for goods purchased from other firms. 
D) All of the above correct.

Question 5

The net export component of aggregate demand is defined as U.S.

Accepted Answer

A) imports minus U.S.exports. 
B) imports plus U.S.exports. 
C) exports minus U.S.imports. 
D) exports minus taxes and customs duties. 
A) imports minus U.S.exports. 
B) imports plus U.S.exports. 
C) exports minus U.S.imports. 
D) exports minus taxes and customs duties.

Question 6

Figure 8-1
  
-Given the scatter diagram in Figure 8-1, how much will consumption decrease if the price level rises by 5 percent?

Accepted Answer

A) $50 billion 
B) $100 billion 
C) $200 billion 
D) cannot be determined 
A) $50 billion 
B) $100 billion 
C) $200 billion 
D) cannot be determined

Question 7

If DI falls by $100 billion, and C falls by $90 billion, the slope of the consumption is

Accepted Answer

A) −0.45. 
B) 0.45. 
C) −0.90. 
D) 0.90. 
E) 0.50. 
A) −0.45. 
B) 0.45. 
C) −0.90. 
D) 0.90. 
E) 0.50.

Question 8

In the circular flow model, which of the following is an injection?

Accepted Answer

A) investment spending 
B) government taxes 
C) total exports 
D) imports 
A) investment spending 
B) government taxes 
C) total exports 
D) imports

Question 9

Taxes add to and transfers subtract from the flow of income and spending.

Accepted Answer

A) True 
 B)False

Question 10

Changes in the price level affect household wealth more than household income.

Accepted Answer

A) True 
 B)False

Question 11

When computing gross domestic product, government services are valued at the

Accepted Answer

A) price consumers pay for them. 
B) value of the resources used to produce them. 
C) value of comparable outputs from the private sector. 
D) value of taxes collected from consumers. 
A) price consumers pay for them. 
B) value of the resources used to produce them. 
C) value of comparable outputs from the private sector. 
D) value of taxes collected from consumers.

Question 12

If consumers receive an increase in income of $1,000, their spending will increase by a smaller amount.

Accepted Answer

A) True 
 B)False

Question 13

If Kobe, an NBA star athlete, earns $10 million per year but has no money in the bank, he has a

Accepted Answer

A) high income and high wealth. 
B) low income and high wealth. 
C) high income and low wealth. 
D) low income and low wealth. 
A) high income and high wealth. 
B) low income and high wealth. 
C) high income and low wealth. 
D) low income and low wealth.

Question 14

Which of the following is not a factor that influences investment spending?

Accepted Answer

A) transfer payment policy 
B) business confidence 
C) business expectations 
D) technical change 
A) transfer payment policy 
B) business confidence 
C) business expectations 
D) technical change

Question 15

A major employer in a small town announces upcoming major layoffs of employees.What should we expect to happen to the consumption functions of the affected employees?

Accepted Answer

A) the consumption functions will shift upward. 
B) most employees will move upward along their consumption functions 
C) the consumption functions will shift downward 
D) most employees will move downward along their consumption functions 
A) the consumption functions will shift upward. 
B) most employees will move upward along their consumption functions 
C) the consumption functions will shift downward 
D) most employees will move downward along their consumption functions

Question 16

The U.S.experience with tax cuts and tax increases since 1975 suggests that

Accepted Answer

A) tax cuts always stimulate consumption spending. 
B) tax changes have a stable and predictable effect on consumption spending. 
C) temporary tax changes are less effective than permanent changes. 
D) tax changes have no effect on consumption spending. 
A) tax cuts always stimulate consumption spending. 
B) tax changes have a stable and predictable effect on consumption spending. 
C) temporary tax changes are less effective than permanent changes. 
D) tax changes have no effect on consumption spending.

Question 17

-According to the data in Table 8-1, the value of NNP is

Accepted Answer

A) 900. 
B) 805. 
C) 750. 
D) 705. 
A) 900. 
B) 805. 
C) 750. 
D) 705.

Question 18

The value of both exports and imports are added to the value of national product.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is an example of wealth?

Accepted Answer

A) a yearly salary of $40,000 
B) a mutual fund balance of $1,000 
C) rental payments of $3,000 per month 
D) stock dividends of $500 per quarter 
A) a yearly salary of $40,000 
B) a mutual fund balance of $1,000 
C) rental payments of $3,000 per month 
D) stock dividends of $500 per quarter

Question 20

The system of measurement for expressing macroeconomic data is called

Accepted Answer

A) national income accounting. 
B) balance of payment accounting. 
C) generally accepted accounting principles. 
D) double entry bookkeeping. 
A) national income accounting. 
B) balance of payment accounting. 
C) generally accepted accounting principles. 
D) double entry bookkeeping.

Exam 25: Aggregate Demand and the Powerful Consumer

The relationship between consumer spending and disposable income is called the

A change in the value of consumer's stock market holdings will cause a shift in the consumption function.

Capital goods are counted the same as consumer goods in the national product accounts.

GDP can be calculated by the value-added approach, which

The net export component of aggregate demand is defined as U.S.

Figure 8-1 -Given the scatter diagram in Figure 8-1, how much will consumption decrease if the price level rises by 5 percent?

If DI falls by $100 billion, and C falls by $90 billion, the slope of the consumption is

In the circular flow model, which of the following is an injection?

Taxes add to and transfers subtract from the flow of income and spending.

Changes in the price level affect household wealth more than household income.

When computing gross domestic product, government services are valued at the

If consumers receive an increase in income of $1,000, their spending will increase by a smaller amount.

If Kobe, an NBA star athlete, earns $10 million per year but has no money in the bank, he has a

Which of the following is not a factor that influences investment spending?

A major employer in a small town announces upcoming major layoffs of employees.What should we expect to happen to the consumption functions of the affected employees?

The U.S.experience with tax cuts and tax increases since 1975 suggests that

-According to the data in Table 8-1, the value of NNP is

The value of both exports and imports are added to the value of national product.

Which of the following is an example of wealth?

The system of measurement for expressing macroeconomic data is called

What Is Economics

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: an Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: the Importance of Marginal Analysis

Securities: Business Finance and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets: the Price System

The Shortcomings of Free Markets

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

Is Useconomic Leadership Threatened

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Demand-Side Equilibrium: Unemployment or Inflation

Bringing in the Supply Side: Unemployment and Inflation

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

He Financial Crisis and the Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off Between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder

Exchange Rates and the Macroeconomy

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