Question 1

National income minus personal taxes net of transfer payments equals disposable income.

Accepted Answer

A) True 
 B)False

Question 2

Discuss the major determinants of net exports.

Accepted Answer

National incomes: Although both exports

Question 3

Tax reductions should also reduce the amount of consumer expenditures.

Accepted Answer

A) True 
 B)False

Question 4

When saving leaks out of the circular flow of income and spending,

Accepted Answer

A) total income necessarily falls. 
B) it leaks out of the financial system. 
C) it flows to borrowers. 
D) it increases the size of the spending flow. 
A) total income necessarily falls. 
B) it leaks out of the financial system. 
C) it flows to borrowers. 
D) it increases the size of the spending flow.

Question 5

Suppose the federal government wants to encourage businesses to increase investment spending.Which policy may be the most effective?

Accepted Answer

A) an increase in corporate income taxes 
B) an increase in real interest rates 
C) an increase in warnings of a coming recession 
D) an increase in tax deductions for investment spending 
A) an increase in corporate income taxes 
B) an increase in real interest rates 
C) an increase in warnings of a coming recession 
D) an increase in tax deductions for investment spending

Question 6

Bank accounts and bonds are examples of money-fixed assets.

Accepted Answer

A) True 
 B)False

Question 7

Consumers most likely decide on their current consumption spending by looking at their short-run income prospects.

Accepted Answer

A) True 
 B)False

Question 8

The sum of all factor payments in the economy yields

Accepted Answer

A) gross domestic product. 
B) national income. 
C) disposable income. 
D) net domestic product. 
A) gross domestic product. 
B) national income. 
C) disposable income. 
D) net domestic product.

Question 9

The difference between disposable income and consumption spending is

Accepted Answer

A) transfer payments. 
B) personal taxes. 
C) net exports. 
D) personal investment. 
E) personal saving. 
A) transfer payments. 
B) personal taxes. 
C) net exports. 
D) personal investment. 
E) personal saving.

Question 10

If real interest rates decrease, we generally expect

Accepted Answer

A) saving to increase. 
B) saving to decrease. 
C) consumption spending to decrease. 
D) no significant change in saving. 
A) saving to increase. 
B) saving to decrease. 
C) consumption spending to decrease. 
D) no significant change in saving.

Question 11

If households decrease the amount of bank account withdrawals, the consumption function may shift upward.

Accepted Answer

A) True 
 B)False

Question 12

The largest component of aggregate demand is

Accepted Answer

A) investment spending. 
B) consumer spending. 
C) government spending. 
D) total imports. 
A) investment spending. 
B) consumer spending. 
C) government spending. 
D) total imports.

Question 13

Residential construction (new houses and apartments) are included in which component of GDP?

Accepted Answer

A) government purchases 
B) retail spending 
C) investment spending 
D) net exports 
A) government purchases 
B) retail spending 
C) investment spending 
D) net exports

Question 14

The purchase of stocks and bonds is included in which component of GDP?

Accepted Answer

A) saving 
B) investment 
C) consumer spending 
D) They are not included in GDP. 
A) saving 
B) investment 
C) consumer spending 
D) They are not included in GDP.

Question 15

For each $1 of a tax cut, economists expect consumption to

Accepted Answer

A) decrease by $1. 
B) decrease by less than $1. 
C) increase by less than $1. 
D) increase by $1. 
A) decrease by $1. 
B) decrease by less than $1. 
C) increase by less than $1. 
D) increase by $1.

Question 16

To economists, investment means buying stocks and bonds.

Accepted Answer

A) True 
 B)False

Question 17

Figure 8-2
  
-In Figure 8-2, which of the following moves can be explained by a decrease in the price level?

Accepted Answer

A) A to B 
B) A to C 
C) A to D 
D) A to E 
A) A to B 
B) A to C 
C) A to D 
D) A to E

Question 18

Lower real interest rates

Accepted Answer

A) tend to shift the consumption function upward. 
B) have no significant effect on consumption. 
C) tend to shift the consumption function downward. 
D) tend to move the consumer upward along the consumption function. 
A) tend to shift the consumption function upward. 
B) have no significant effect on consumption. 
C) tend to shift the consumption function downward. 
D) tend to move the consumer upward along the consumption function.

Question 19

Historical data representing consumption and disposable income reveals that

Accepted Answer

A) during the 1930s, U.S.saving was at a high level. 
B) U.S.citizens increased saving during World War II. 
C) there is no systematic relationship between the two. 
D) consumption rises faster than disposable income during recessions. 
A) during the 1930s, U.S.saving was at a high level. 
B) U.S.citizens increased saving during World War II. 
C) there is no systematic relationship between the two. 
D) consumption rises faster than disposable income during recessions.

Question 20

Figure 8-1
  
-Based on the scatter diagram in Figure 8-1, if real disposable income is $800 billion, the consumption spending would be approximately

Accepted Answer

A) $800 billion. 
B) $650 billion. 
C) $540 billion. 
D) $420 billion. 
A) $800 billion. 
B) $650 billion. 
C) $540 billion. 
D) $420 billion.

Exam 25: Aggregate Demand and the Powerful Consumer

National income minus personal taxes net of transfer payments equals disposable income.

Discuss the major determinants of net exports.

Tax reductions should also reduce the amount of consumer expenditures.

When saving leaks out of the circular flow of income and spending,

Suppose the federal government wants to encourage businesses to increase investment spending.Which policy may be the most effective?

Bank accounts and bonds are examples of money-fixed assets.

Consumers most likely decide on their current consumption spending by looking at their short-run income prospects.

The sum of all factor payments in the economy yields

The difference between disposable income and consumption spending is

If real interest rates decrease, we generally expect

If households decrease the amount of bank account withdrawals, the consumption function may shift upward.

The largest component of aggregate demand is

Residential construction (new houses and apartments) are included in which component of GDP?

The purchase of stocks and bonds is included in which component of GDP?

For each $1 of a tax cut, economists expect consumption to

To economists, investment means buying stocks and bonds.

Figure 8-2 -In Figure 8-2, which of the following moves can be explained by a decrease in the price level?

Lower real interest rates

Historical data representing consumption and disposable income reveals that

Figure 8-1 -Based on the scatter diagram in Figure 8-1, if real disposable income is $800 billion, the consumption spending would be approximately

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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