Question 1

Which of the following is NOT a flow variable?

Accepted Answer

A) consumption 
B) investment 
C) savings 
D) saving 
A) consumption 
B) investment 
C) savings 
D) saving

Question 2

What determines investment in the Keynesian framework?
 How is investment related to real Gross Domestic Product (GDP)?

Accepted Answer

Investment is determined by business peo

Question 3

All of the following are flow variables EXCEPT

Accepted Answer

A) consumption. 
B) saving. 
C) investment. 
D) capital goods. 
A) consumption. 
B) saving. 
C) investment. 
D) capital goods.

Question 4

Aging baby-boomers, predisposed to hearing loss because of years of listening to loud music, are now approaching the age range in which hearing loss starts to become apparent. What effect does this have on investment spending within the hearing aid industry?

Accepted Answer

A) There will no longer be an opportunity cost associated with investment spending. 
B) There will be no change in real investment spending, because hearing aid manufacturers will look only at the interest rate in determining whether to expand production. 
C) The investment function relating planned real investment spending to the interest rate can be expected to shift rightward. 
D) The investment function relating planned real investment spending to the interest rate can be expected to shift leftward. 
A) There will no longer be an opportunity cost associated with investment spending. 
B) There will be no change in real investment spending, because hearing aid manufacturers will look only at the interest rate in determining whether to expand production. 
C) The investment function relating planned real investment spending to the interest rate can be expected to shift rightward. 
D) The investment function relating planned real investment spending to the interest rate can be expected to shift leftward.

Question 5

If the aggregate supply curve is upward sloping, then an increase in autonomous consumption leads to a(n)

Accepted Answer

A) increase in aggregate demand and a rise in the price level. 
B) decrease in aggregate demand and a rise in the price level. 
C) decrease in aggregate demand and a fall in the price level. 
D) no change in aggregate demand and no change in the price level. 
A) increase in aggregate demand and a rise in the price level. 
B) decrease in aggregate demand and a rise in the price level. 
C) decrease in aggregate demand and a fall in the price level. 
D) no change in aggregate demand and no change in the price level.

Question 6

Spending on new goods and services out of a household's current income is

Accepted Answer

A) consumption. 
B) the capital consumption allowance. 
C) savings. 
D) investment. 
A) consumption. 
B) the capital consumption allowance. 
C) savings. 
D) investment.

Question 7

The difference between "saving" and "savings" is that

Accepted Answer

A) saving is done by households and savings by businesses. 
B) saving is undertaken as a precaution against unemployment and savings are undertaken to increase investment spending. 
C) savings are the result of past and current saving. 
D) saving is placed in financial institutions such as banks, while savings are kept at home by people. 
A) saving is done by households and savings by businesses. 
B) saving is undertaken as a precaution against unemployment and savings are undertaken to increase investment spending. 
C) savings are the result of past and current saving. 
D) saving is placed in financial institutions such as banks, while savings are kept at home by people.

Question 8

When a family's income is low and it is spending more on consumption than it is receiving in income

Accepted Answer

A) the APC must be increasing. 
B) the APC must be equal to the ratio of planned consumption expenditure to total saving. 
C) the MPC must be zero. 
D) some segment of the consumption function curve lies above the 45-degree line, indicating dissaving. 
A) the APC must be increasing. 
B) the APC must be equal to the ratio of planned consumption expenditure to total saving. 
C) the MPC must be zero. 
D) some segment of the consumption function curve lies above the 45-degree line, indicating dissaving.

Question 9

Suppose that when disposable income increases by $2,000, consumption spending increases by $1,500. Given this information, we know that the marginal propensity to consume (MPC)is

Accepted Answer

A) .25. 
B) .75. 
C) $1,000/$750 = 1.33. 
D) 1/.25 = 4. 
A) .25. 
B) .75. 
C) $1,000/$750 = 1.33. 
D) 1/.25 = 4.

Question 10

Suppose that the marginal propensity to save (MPS)equals 0.8. The value of the multiplier would be

Accepted Answer

A) 0.8. 
B) 1.25. 
C) 0.2. 
D) 5.0. 
A) 0.8. 
B) 1.25. 
C) 0.2. 
D) 5.0.

Question 11

In the simple Keynesian model, why does actual investment spending have to equal saving in the absence of the government and foreign sectors?
 Is this true only for the equilibrium?
 Explain.

Accepted Answer

Real Gross Domestic Product (GDP)equals

Question 12

Which one of the following statements is TRUE?

Accepted Answer

A) The investment function is positively sloped to reflect the fact that higher interest rates cause more people to invest their funds. 
B) The investment function is positively sloped to reflect the fact that lower interest rates cause more firms to expand their operations. 
C) Along a given investment function, higher interest rates result in more investment projects being undertaken. 
D) Along a given investment function, higher interest rates result in fewer investment projects being undertaken. 
A) The investment function is positively sloped to reflect the fact that higher interest rates cause more people to invest their funds. 
B) The investment function is positively sloped to reflect the fact that lower interest rates cause more firms to expand their operations. 
C) Along a given investment function, higher interest rates result in more investment projects being undertaken. 
D) Along a given investment function, higher interest rates result in fewer investment projects being undertaken.

Question 13

If the multiplier is 4, the marginal propensity to consume (MPC)must be

Accepted Answer

A) 0.25. 
B) 0.5. 
C) 0.75. 
D) 1. 
A) 0.25. 
B) 0.5. 
C) 0.75. 
D) 1.

Question 14

Where the consumption function intersects the 45-degree line

Accepted Answer

A) savings will be negative. 
B) consumption will equal only autonomous consumption. 
C) the average propensity to consume is 0.5. 
D) saving will be zero. 
A) savings will be negative. 
B) consumption will equal only autonomous consumption. 
C) the average propensity to consume is 0.5. 
D) saving will be zero.

Question 15

-According to the above figure, at an income level of Y₁,

Accepted Answer

A) the economy saves an amount equal to BD. 
B) the marginal propensity to save is falling. 
C) the average propensity to save is greater than one. 
D) the economy dissaves an amount equal to BD. 
A) the economy saves an amount equal to BD. 
B) the marginal propensity to save is falling. 
C) the average propensity to save is greater than one. 
D) the economy dissaves an amount equal to BD.

Question 16

The equation is the

Accepted Answer

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

Question 17

Note: Amounts in billions.
-Refer to the above table. When real GDP equals $16 billion

Accepted Answer

A) government expenditures will increase. 
B) the economy is in equilibrium. 
C) unplanned inventories will increase. 
D) unplanned inventories will decrease. 
A) government expenditures will increase. 
B) the economy is in equilibrium. 
C) unplanned inventories will increase. 
D) unplanned inventories will decrease.

Question 18

Which of the following is a TRUE statement relative to retained earnings and investment?

Accepted Answer

A) Lower interest rates stimulate borrowing for investment, but have no effect on the use of retained earnings for investment spending. 
B) Lower interest rates stimulate borrowing for investment, but discourage the use of retained earnings for investment. 
C) Lower interest rates reduce the opportunity cost of retained earnings, stimulating the use of these funds in investment. 
D) Lower interest rates have no effect on investment spending at all because investment spending is autonomous. 
A) Lower interest rates stimulate borrowing for investment, but have no effect on the use of retained earnings for investment spending. 
B) Lower interest rates stimulate borrowing for investment, but discourage the use of retained earnings for investment. 
C) Lower interest rates reduce the opportunity cost of retained earnings, stimulating the use of these funds in investment. 
D) Lower interest rates have no effect on investment spending at all because investment spending is autonomous.

Question 19

Suppose the marginal propensity to consume is 0.75. What does this mean?
 What do we know about the marginal propensity to save?
 What do we know about the average propensity to consume?

Accepted Answer

A marginal propensity to consume of 0.75

Question 20

Marginal propensity to consume

Accepted Answer

A) is the same as the break-even point. 
B) gives the amount a person changes planned consumption for a change in real disposable income. 
C) is the amount of consumption that is independent of the level of disposable income. 
D) is the proportion of total disposable income that is consumed. 
A) is the same as the break-even point. 
B) gives the amount a person changes planned consumption for a change in real disposable income. 
C) is the amount of consumption that is independent of the level of disposable income. 
D) is the proportion of total disposable income that is consumed.

Which of the following is NOT a flow variable?

What determines investment in the Keynesian framework? How is investment related to real Gross Domestic Product (GDP)?

All of the following are flow variables EXCEPT

Aging baby-boomers, predisposed to hearing loss because of years of listening to loud music, are now approaching the age range in which hearing loss starts to become apparent. What effect does this have on investment spending within the hearing aid industry?

If the aggregate supply curve is upward sloping, then an increase in autonomous consumption leads to a(n)

Spending on new goods and services out of a household's current income is

The difference between "saving" and "savings" is that

When a family's income is low and it is spending more on consumption than it is receiving in income

Suppose that when disposable income increases by $2,000, consumption spending increases by $1,500. Given this information, we know that the marginal propensity to consume (MPC)is

Suppose that the marginal propensity to save (MPS)equals 0.8. The value of the multiplier would be

In the simple Keynesian model, why does actual investment spending have to equal saving in the absence of the government and foreign sectors? Is this true only for the equilibrium? Explain.

Which one of the following statements is TRUE?

If the multiplier is 4, the marginal propensity to consume (MPC)must be

Where the consumption function intersects the 45-degree line

-According to the above figure, at an income level of Y₁,

The equation is the

Note: Amounts in billions. -Refer to the above table. When real GDP equals $16 billion

Which of the following is a TRUE statement relative to retained earnings and investment?

Suppose the marginal propensity to consume is 0.75. What does this mean? What do we know about the marginal propensity to save? What do we know about the average propensity to consume?

Marginal propensity to consume

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Fiscal Policy

Deficit Spending and the Public Debt

Money Banking and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

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Exam 11: Consumption, Real GDP, and the Multiplier

Which of the following is NOT a flow variable?

What determines investment in the Keynesian framework? How is investment related to real Gross Domestic Product (GDP)?

All of the following are flow variables EXCEPT

Aging baby-boomers, predisposed to hearing loss because of years of listening to loud music, are now approaching the age range in which hearing loss starts to become apparent. What effect does this have on investment spending within the hearing aid industry?

If the aggregate supply curve is upward sloping, then an increase in autonomous consumption leads to a(n)

Spending on new goods and services out of a household's current income is

The difference between "saving" and "savings" is that

When a family's income is low and it is spending more on consumption than it is receiving in income

Suppose that when disposable income increases by $2,000, consumption spending increases by $1,500. Given this information, we know that the marginal propensity to consume (MPC)is

Suppose that the marginal propensity to save (MPS)equals 0.8. The value of the multiplier would be

In the simple Keynesian model, why does actual investment spending have to equal saving in the absence of the government and foreign sectors? Is this true only for the equilibrium? Explain.

Which one of the following statements is TRUE?

If the multiplier is 4, the marginal propensity to consume (MPC)must be

Where the consumption function intersects the 45-degree line

-According to the above figure, at an income level of Y₁,

The equation is the

Note: Amounts in billions. -Refer to the above table. When real GDP equals $16 billion

Which of the following is a TRUE statement relative to retained earnings and investment?

Suppose the marginal propensity to consume is 0.75. What does this mean? What do we know about the marginal propensity to save? What do we know about the average propensity to consume?

Marginal propensity to consume

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Fiscal Policy

Deficit Spending and the Public Debt

Money Banking and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters