Question 1

The numerical value of the MPC is typically

Accepted Answer

A) less than 1. 
B) equal to 1. 
C) greater than 1. 
D) unpredictable. 
A) less than 1. 
B) equal to 1. 
C) greater than 1. 
D) unpredictable.

Question 2

A movement upward along the consumption function can be caused only by a(n)

Accepted Answer

A) increase in disposable income. 
B) decrease in disposable income. 
C) decrease in the price level. 
D) increase in the price level. 
A) increase in disposable income. 
B) decrease in disposable income. 
C) decrease in the price level. 
D) increase in the price level.

Question 3

The relationship between consumption and disposable income is such that as

Accepted Answer

A) consumption rises, disposable income falls. 
B) disposable income rises, consumption rises. 
C) disposable income rises, consumption falls. 
D) disposable income rises, saving falls. 
A) consumption rises, disposable income falls. 
B) disposable income rises, consumption rises. 
C) disposable income rises, consumption falls. 
D) disposable income rises, saving falls.

Question 4

To get a complete measure of the total spending on U.S.-produced final goods and services, one must adjust aggregate demand by

Accepted Answer

A) adding imports and subtracting exports. 
B) adding imports that are purchased by U.S.consumers. 
C) adding exports and subtracting imports. 
D) subtracting exports sold to foreigners. 
A) adding imports and subtracting exports. 
B) adding imports that are purchased by U.S.consumers. 
C) adding exports and subtracting imports. 
D) subtracting exports sold to foreigners.

Question 5

Aggregate demand is the sum of total domestic spending by the private sector.

Accepted Answer

A) True 
 B)False

Question 6

The most volatile component of aggregate demand is:

Accepted Answer

A) ​consumer spending 
B) ​government purchases 
C) ​net exports 
D) ​investment spending 
A) ​consumer spending 
B) ​government purchases 
C) ​net exports 
D) ​investment spending

Question 7

For each of the following, how would they be included in the national income accounts?
a.The University of California buys a new computer.b.Charles buys a new MP₃ player.c.Marian buys a new mountain cabin.d.Vikki buys an old mansion with hopes of restoring it.e.Farmer Brown buys a used combine harvester.

Accepted Answer

a.Government purchases.Purchased by a st

Question 8

A decrease in the price level will most likely have what effect on the consumption function?

Accepted Answer

A) It will shift upward. 
B) It will shift downward. 
C) It will cause movement downward along the function. 
D) It will cause movement upward along the function. 
A) It will shift upward. 
B) It will shift downward. 
C) It will cause movement downward along the function. 
D) It will cause movement upward along the function.

Question 9

Changes in the value of stocks may play a big role in the consumption decisions of individuals.How would changes in the stock market affect the consumption function?

Accepted Answer

Corporate stocks are an increasingly pop

Question 10

Aggregate demand is defined as the total spending

Accepted Answer

A) of all consumers, business firms, government agencies, and foreigners on final goods and services produced in the United States. 
B) by all consumers, business firms, government agencies, and foreigners in the United States. 
C) consumers, businesses, government agencies, and foreigners wish to make in one year. 
D) of consumers, businesses, and government agencies on final output. 
A) of all consumers, business firms, government agencies, and foreigners on final goods and services produced in the United States. 
B) by all consumers, business firms, government agencies, and foreigners in the United States. 
C) consumers, businesses, government agencies, and foreigners wish to make in one year. 
D) of consumers, businesses, and government agencies on final output.

Question 11

A $500 government bond is a money-fixed asset.

Accepted Answer

A) True 
 B)False

Question 12

The largest income component in the national income accounts is

Accepted Answer

A) wages. 
B) rents. 
C) corporate profits. 
D) interest. 
A) wages. 
B) rents. 
C) corporate profits. 
D) interest.

Question 13

The federal government's principal tool in altering consumer spending is changing

Accepted Answer

A) corporate income taxes. 
B) federal sales taxes. 
C) unemployment insurance benefits. 
D) personal income tax rates. 
A) corporate income taxes. 
B) federal sales taxes. 
C) unemployment insurance benefits. 
D) personal income tax rates.

Question 14

The marginal propensity to consume (MPC) is calculated by which formula?

Accepted Answer

A) MPC = change in DI divided by change in C 
B) MPC = change in GDP divided by change in DI 
C) MPC = change in C divided by change in DI 
D) MPC = change in C divided by change in GDP 
A) MPC = change in DI divided by change in C 
B) MPC = change in GDP divided by change in DI 
C) MPC = change in C divided by change in DI 
D) MPC = change in C divided by change in GDP

Question 15

Aggregate demand is the sum of

Accepted Answer

A) C + I + G + (X − IM). 
B) C + I + X. 
C) C + I + X − IM. 
D) C + I + G. 
A) C + I + G + (X − IM). 
B) C + I + X. 
C) C + I + X − IM. 
D) C + I + G.

Question 16

A once-and-for-all jump in the price level would initially cause a(n)

Accepted Answer

A) upward shift in the consumption function. 
B) upward movement along the consumption function. 
C) downward shift in the consumption function. 
D) downward movement along the consumption function. 
A) upward shift in the consumption function. 
B) upward movement along the consumption function. 
C) downward shift in the consumption function. 
D) downward movement along the consumption function.

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

National income is the sum of

Accepted Answer

A) wages and profits. 
B) wages, interest, profits, and rent. 
C) interest and rent. 
D) wages, transfer payments, and tax revenues. 
A) wages and profits. 
B) wages, interest, profits, and rent. 
C) interest and rent. 
D) wages, transfer payments, and tax revenues.

Question 19

The tax cuts of 2008 and 2009 reduced the disposable income of U.S.consumers.

Accepted Answer

A) True 
 B)False

Question 20

Most people base their current consumption spending at least partially on

Accepted Answer

A) short-run debt. 
B) long-run debt. 
C) long-run real interest rates. 
D) long-run income. 
A) short-run debt. 
B) long-run debt. 
C) long-run real interest rates. 
D) long-run income.

Exam 25: Aggregate Demand and the Powerful Consumer

The numerical value of the MPC is typically

A movement upward along the consumption function can be caused only by a(n)

The relationship between consumption and disposable income is such that as

To get a complete measure of the total spending on U.S.-produced final goods and services, one must adjust aggregate demand by

Aggregate demand is the sum of total domestic spending by the private sector.

The most volatile component of aggregate demand is:

A decrease in the price level will most likely have what effect on the consumption function?

Changes in the value of stocks may play a big role in the consumption decisions of individuals.How would changes in the stock market affect the consumption function?

Aggregate demand is defined as the total spending

A $500 government bond is a money-fixed asset.

The largest income component in the national income accounts is

The federal government's principal tool in altering consumer spending is changing

The marginal propensity to consume (MPC) is calculated by which formula?

Aggregate demand is the sum of

A once-and-for-all jump in the price level would initially cause a(n)

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

National income is the sum of

The tax cuts of 2008 and 2009 reduced the disposable income of U.S.consumers.

Most people base their current consumption spending at least partially on

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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