Question 1

To predict the effects of a tax cut on consumption spending, economists must have some estimate of the

Accepted Answer

A) income effect. 
B) substitution effect. 
C) relative price effect. 
D) marginal propensity to consume. 
A) income effect. 
B) substitution effect. 
C) relative price effect. 
D) marginal propensity to consume.

Question 2

A decrease in disposable income will

Accepted Answer

A) lead to an upward movement along the consumption function. 
B) lead to a downward movement along the consumption function. 
C) shift the consumption function upward. 
D) shift the consumption function downward. 
A) lead to an upward movement along the consumption function. 
B) lead to a downward movement along the consumption function. 
C) shift the consumption function upward. 
D) shift the consumption function downward.

Question 3

The national income accounts include a value for the amount of capital stock "used up" during the production of current output.This dollar amount is called

Accepted Answer

A) appreciation. 
B) dollarization. 
C) amortization. 
D) depreciation. 
A) appreciation. 
B) dollarization. 
C) amortization. 
D) depreciation.

Question 4

We should expect the consumption function to shift downward if

Accepted Answer

A) real interest rates rise. 
B) price levels fall. 
C) consumers become more optimistic about future incomes. 
D) consumers become more pessimistic about future incomes. 
A) real interest rates rise. 
B) price levels fall. 
C) consumers become more optimistic about future incomes. 
D) consumers become more pessimistic about future incomes.

Question 5

In calculating the nation's total output, net exports

Accepted Answer

A) represent exports of goods and services minus imports of goods and services. 
B) have been a negative number in the last several years. 
C) would include purchases of U.S.-made automobiles by foreigners minus purchase of foreign-made automobiles by U.S.residents. 
D) All of the above are correct. 
A) represent exports of goods and services minus imports of goods and services. 
B) have been a negative number in the last several years. 
C) would include purchases of U.S.-made automobiles by foreigners minus purchase of foreign-made automobiles by U.S.residents. 
D) All of the above are correct.

Question 6

The one category of goods that are not sold but are, nevertheless, included in GDP is

Accepted Answer

A) inventories. 
B) imports. 
C) consumer services. 
D) exports. 
A) inventories. 
B) imports. 
C) consumer services. 
D) exports.

Question 7

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

Accepted Answer

A) 900. 
B) 950. 
C) 955. 
D) 960. 
A) 900. 
B) 950. 
C) 955. 
D) 960.

Question 8

Why is it true that domestic product and national income must be equal?

Accepted Answer

A) The IRS national accounting system assures that taxes equal total income. 
B) The total amount of spending must equal total national sales. 
C) The value of final product must equal the sum of resource income that produced it. 
D) The total amount of income earned is eventually spent. 
A) The IRS national accounting system assures that taxes equal total income. 
B) The total amount of spending must equal total national sales. 
C) The value of final product must equal the sum of resource income that produced it. 
D) The total amount of income earned is eventually spent.

Question 9

U.S.imports are most likely to increase when

Accepted Answer

A) U.S.GDP decreases. 
B) U.S.unemployment rates fall. 
C) U.S.prices fall. 
D) foreign prices rise. 
A) U.S.GDP decreases. 
B) U.S.unemployment rates fall. 
C) U.S.prices fall. 
D) foreign prices rise.

Question 10

Which of the following is the best example of an intermediate good?

Accepted Answer

A) a tire purchased by an auto company 
B) a new house purchased by a newly married couple 
C) grain sold to foreign farmers 
D) All of the above are intermediate goods. 
A) a tire purchased by an auto company 
B) a new house purchased by a newly married couple 
C) grain sold to foreign farmers 
D) All of the above are intermediate goods.

Question 11

Saving is a leakage in the sense that

Accepted Answer

A) saving is lost to the economy and ultimately leads to stagnation. 
B) the financial system often makes negative profits. 
C) it often accompanies a trade deficit. 
D) consumers spend less than their total income. 
A) saving is lost to the economy and ultimately leads to stagnation. 
B) the financial system often makes negative profits. 
C) it often accompanies a trade deficit. 
D) consumers spend less than their total income.

Question 12

The main reason that the 1975, 2008, and 2009 tax cuts did not have a large effect on GDP is that they were

Accepted Answer

A) temporary surcharges rather than permanent surcharges. 
B) permanent surcharges rather than temporary surcharges. 
C) temporary tax cuts rather than a permanent tax cuts. 
D) permanent tax cuts rather than a temporary tax cuts. 
A) temporary surcharges rather than permanent surcharges. 
B) permanent surcharges rather than temporary surcharges. 
C) temporary tax cuts rather than a permanent tax cuts. 
D) permanent tax cuts rather than a temporary tax cuts.

Question 13

Figure 8-2
  
-In Figure 8-2, which of the following moves can be explained by a decrease in the prices of stock on the NASDAQ?

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 14

If you fit a line through a scatter diagram of points that represent coordinates of consumer spending and disposable income, the slope of this line will equal the

Accepted Answer

A) propensity to consume 
B) variable propensity to consume. 
C) marginal propensity to consume. 
D) average propensity to consume. 
A) propensity to consume 
B) variable propensity to consume. 
C) marginal propensity to consume. 
D) average propensity to consume.

Question 15

The term "depreciation" in the national income accounts refers to

Accepted Answer

A) the adjustment of GDP for inflation. 
B) plant and equipment "used up" in producing current output. 
C) citizenship differences among income recipients. 
D) government transfer payments minus tax revenues. 
A) the adjustment of GDP for inflation. 
B) plant and equipment "used up" in producing current output. 
C) citizenship differences among income recipients. 
D) government transfer payments minus tax revenues.

Question 16

In economic analysis, which of the following is considered an injection?

Accepted Answer

A) saving 
B) taxes 
C) imports 
D) exports 
A) saving 
B) taxes 
C) imports 
D) exports

Question 17

Explain why national income and domestic product must be equal.

Accepted Answer

When a firm produces goods and sells the

Question 18

Do economists know the value of the MPC for most economies?

Accepted Answer

A) Yes, with a high level of precision. 
B) Yes, with a certainty level of four decimal places. 
C) No, it is impossible to determine a national MPC. 
D) Yes, but with some level of uncertainty. 
A) Yes, with a high level of precision. 
B) Yes, with a certainty level of four decimal places. 
C) No, it is impossible to determine a national MPC. 
D) Yes, but with some level of uncertainty.

Question 19

In the national income accounts, new investment goods are considered

Accepted Answer

A) intermediate goods, and therefore, not counted. 
B) final goods. 
C) subtractions from final output. 
D) depreciated goods 
A) intermediate goods, and therefore, not counted. 
B) final goods. 
C) subtractions from final output. 
D) depreciated goods

Question 20

One of the effects of a change in disposable income could not be a(n)

Accepted Answer

A) movement up along the consumption function. 
B) movement down along the consumption function. 
C) change in the amount of consumption expenditures. 
D) upward shift of the consumption function. 
A) movement up along the consumption function. 
B) movement down along the consumption function. 
C) change in the amount of consumption expenditures. 
D) upward shift of the consumption function.

Exam 25: Aggregate Demand and the Powerful Consumer

To predict the effects of a tax cut on consumption spending, economists must have some estimate of the

A decrease in disposable income will

The national income accounts include a value for the amount of capital stock "used up" during the production of current output.This dollar amount is called

We should expect the consumption function to shift downward if

In calculating the nation's total output, net exports

The one category of goods that are not sold but are, nevertheless, included in GDP is

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

Why is it true that domestic product and national income must be equal?

U.S.imports are most likely to increase when

Which of the following is the best example of an intermediate good?

Saving is a leakage in the sense that

The main reason that the 1975, 2008, and 2009 tax cuts did not have a large effect on GDP is that they were

Figure 8-2 -In Figure 8-2, which of the following moves can be explained by a decrease in the prices of stock on the NASDAQ?

If you fit a line through a scatter diagram of points that represent coordinates of consumer spending and disposable income, the slope of this line will equal the

The term "depreciation" in the national income accounts refers to

In economic analysis, which of the following is considered an injection?

Explain why national income and domestic product must be equal.

Do economists know the value of the MPC for most economies?

In the national income accounts, new investment goods are considered

One of the effects of a change in disposable income could not be a(n)

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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