Question 1

The multiplier equals

Accepted Answer

A) consumption/real disposable income. 
B) change in consumption/change in real disposable income. 
C) 1/MPC. 
D) 1/(1 - MP
C) . 
A) consumption/real disposable income. 
B) change in consumption/change in real disposable income. 
C) 1/MPC. 
D) 1/(1 - MP
C) .

Question 2

When graphing the consumption function, what purpose is served by the 45-degree line?

Accepted Answer

A) It identifies all the points at which saving and consumption spending are equal. 
B) It identifies all the points at which real disposable income and planned real consumption spending are equal. 
C) It identifies all the points at which real planned investment expenditure and real autonomous consumption spending are equal. 
D) It identifies all the points where real dissaving and saving are equal. 
A) It identifies all the points at which saving and consumption spending are equal. 
B) It identifies all the points at which real disposable income and planned real consumption spending are equal. 
C) It identifies all the points at which real planned investment expenditure and real autonomous consumption spending are equal. 
D) It identifies all the points where real dissaving and saving are equal.

Question 3

Which of the following correctly defines the average propensity to consume (APC)?

Accepted Answer

A) change in planned consumption divided by change in real disposable income 
B) planned consumption divided by real disposable income 
C) real disposable income divided by planned consumption 
D) change in real disposable income divided by change in planned consumption 
A) change in planned consumption divided by change in real disposable income 
B) planned consumption divided by real disposable income 
C) real disposable income divided by planned consumption 
D) change in real disposable income divided by change in planned consumption

Question 4

A lower price level causes the C + I + G + X curve to shift as a result of a change in all the following EXCEPT

Accepted Answer

A) an increase in real wealth. 
B) a decrease in interest rates. 
C) an increase in aggregate supply. 
D) an increase in foreign spending on domestic goods. 
A) an increase in real wealth. 
B) a decrease in interest rates. 
C) an increase in aggregate supply. 
D) an increase in foreign spending on domestic goods.

Question 5

Consumption goods

Accepted Answer

A) include goods such as DVDs that firms hold in inventory. 
B) are only the goods bought by households for immediate satisfaction. 
C) include spending on machines and buildings so that goods can be produced in the future. 
D) are goods that are used to make other goods. 
A) include goods such as DVDs that firms hold in inventory. 
B) are only the goods bought by households for immediate satisfaction. 
C) include spending on machines and buildings so that goods can be produced in the future. 
D) are goods that are used to make other goods.

Question 6

If the average propensity to consume is 1.0, the marginal propensity to consume is 0.8, and real disposable income increases by $100, the additional saving is

Accepted Answer

A) $0. 
B) $20. 
C) $80. 
D) $100. 
A) $0. 
B) $20. 
C) $80. 
D) $100.

Question 7

According to the permanent income hypothesis, a temporary increase in income that does not affect average lifetime income would

Accepted Answer

A) cause a large increase in consumption. 
B) cause no change in consumption. 
C) cause an increase in consumption and saving by the same amount. 
D) cause a decrease in consumption and saving by the same amount. 
A) cause a large increase in consumption. 
B) cause no change in consumption. 
C) cause an increase in consumption and saving by the same amount. 
D) cause a decrease in consumption and saving by the same amount.

Question 8

-Refer to the above figure. At real GDP of $1 trillion, actual investment equals

Accepted Answer

A) planned investment of $1 trillion. 
B) planned saving of $1 trillion. 
C) actual saving of 0. 
D) unanticipated inventory adjustments of $1 trillion. 
A) planned investment of $1 trillion. 
B) planned saving of $1 trillion. 
C) actual saving of 0. 
D) unanticipated inventory adjustments of $1 trillion.

Question 9

The life-cycle theory of consumption predicts that when a person anticipates a higher income in the future, then that person will

Accepted Answer

A) consume more and save less in the current period. 
B) consume less and save more in the current period. 
C) consume less and save less in the current period. 
D) not change the amount of consumption or saving in the current period. 
A) consume more and save less in the current period. 
B) consume less and save more in the current period. 
C) consume less and save less in the current period. 
D) not change the amount of consumption or saving in the current period.

Question 10

Suppose that when disposable income increases by $1,000, consumption spending increases by $750. 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 11

The multiplier helps explain

Accepted Answer

A) why a rise in government expenditures causes real Gross Domestic Product (GDP)to rise by more than the amount of the increase in government spending. 
B) why an increase in disposable income causes real Gross Domestic Product (GDP)to rise by less than the amount of the increase in disposable income. 
C) why a decrease in taxes causes real Gross Domestic Product (GDP)to fall by more than the amount of the decrease in taxes. 
D) why a fall in investment cause real Gross Domestic Product (GDP)to rise by more than the amount of the decrease in investment. 
A) why a rise in government expenditures causes real Gross Domestic Product (GDP)to rise by more than the amount of the increase in government spending. 
B) why an increase in disposable income causes real Gross Domestic Product (GDP)to rise by less than the amount of the increase in disposable income. 
C) why a decrease in taxes causes real Gross Domestic Product (GDP)to fall by more than the amount of the decrease in taxes. 
D) why a fall in investment cause real Gross Domestic Product (GDP)to rise by more than the amount of the decrease in investment.

Question 12

The marginal propensity to consume (MPC)

Accepted Answer

A) shows how much real disposable income changes when consumption falls. 
B) is greater than 1 only if the marginal propensity to save is greater than 1. 
C) shows how much of an extra dollar of real disposable income is spent. 
D) shows the percentage of real disposable income consumed at each level of income. 
A) shows how much real disposable income changes when consumption falls. 
B) is greater than 1 only if the marginal propensity to save is greater than 1. 
C) shows how much of an extra dollar of real disposable income is spent. 
D) shows the percentage of real disposable income consumed at each level of income.

Question 13

Which of the following will NOT lead to a shift in the investment function?

Accepted Answer

A) A firm downgrades its future profitability. 
B) A new discovery leads to a technological advancement. 
C) The government just lowered business taxes. 
D) The cost of borrowing has just decreased. 
A) A firm downgrades its future profitability. 
B) A new discovery leads to a technological advancement. 
C) The government just lowered business taxes. 
D) The cost of borrowing has just decreased.

Question 14

-In the above table, the average propensity to save when disposable income is $5,000 is

Accepted Answer

A) 0.2. 
B) 0.1. 
C) 0.0. 
D) -0.1. 
A) 0.2. 
B) 0.1. 
C) 0.0. 
D) -0.1.

Question 15

Note: Amounts in $ trillions
-Refer to the above table. Which variables in the table are NOT autonomous?

Accepted Answer

A) taxes, government spending, and saving 
B) planned investment, net exports, and government spending 
C) planned consumption and planned saving 
D) planned saving only 
A) taxes, government spending, and saving 
B) planned investment, net exports, and government spending 
C) planned consumption and planned saving 
D) planned saving only

Question 16

The consumption function relates

Accepted Answer

A) a household's consumption to its wealth. 
B) planned household consumption to real disposable income. 
C) planned household consumption and real interest rates. 
D) real disposable incomes earned by households with the level of consumption credit desired in the economy. 
A) a household's consumption to its wealth. 
B) planned household consumption to real disposable income. 
C) planned household consumption and real interest rates. 
D) real disposable incomes earned by households with the level of consumption credit desired in the economy.

Question 17

-In the above table, the average propensity to consume when income is $10,000 is

Accepted Answer

A) 0.8. 
B) 0.2. 
C) 0.0. 
D) 0.9. 
A) 0.8. 
B) 0.2. 
C) 0.0. 
D) 0.9.

Question 18

The non-income determinants of consumption include all of the following EXCEPT

Accepted Answer

A) stock of assets owned by household. 
B) innovation. 
C) the interest rate. 
D) real wealth. 
A) stock of assets owned by household. 
B) innovation. 
C) the interest rate. 
D) real wealth.

Question 19

When real planned saving is greater than real planned investment spending

Accepted Answer

A) the interest rate will increase. 
B) the interest rate will decrease. 
C) real GDP will increase. 
D) real GDP will decrease. 
A) the interest rate will increase. 
B) the interest rate will decrease. 
C) real GDP will increase. 
D) real GDP will decrease.

Question 20

In equilibrium, real GDP is equal to

Accepted Answer

A) C + I + G - X. 
B) C + I + X - G. 
C) C + I + G + X. 
D) C + I + G + X + S. 
A) C + I + G - X. 
B) C + I + X - G. 
C) C + I + G + X. 
D) C + I + G + X + S.

The multiplier equals

When graphing the consumption function, what purpose is served by the 45-degree line?

Which of the following correctly defines the average propensity to consume (APC)?

A lower price level causes the C + I + G + X curve to shift as a result of a change in all the following EXCEPT

Consumption goods

If the average propensity to consume is 1.0, the marginal propensity to consume is 0.8, and real disposable income increases by $100, the additional saving is

According to the permanent income hypothesis, a temporary increase in income that does not affect average lifetime income would

-Refer to the above figure. At real GDP of $1 trillion, actual investment equals

The life-cycle theory of consumption predicts that when a person anticipates a higher income in the future, then that person will

Suppose that when disposable income increases by $1,000, consumption spending increases by $750. Given this information, we know that the marginal propensity to consume (MPC)is

The multiplier helps explain

The marginal propensity to consume (MPC)

Which of the following will NOT lead to a shift in the investment function?

-In the above table, the average propensity to save when disposable income is $5,000 is

Note: Amounts in $ trillions -Refer to the above table. Which variables in the table are NOT autonomous?

The consumption function relates

-In the above table, the average propensity to consume when income is $10,000 is

The non-income determinants of consumption include all of the following EXCEPT

When real planned saving is greater than real planned investment spending

In equilibrium, real GDP is equal to

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

The multiplier equals

When graphing the consumption function, what purpose is served by the 45-degree line?

Which of the following correctly defines the average propensity to consume (APC)?

A lower price level causes the C + I + G + X curve to shift as a result of a change in all the following EXCEPT

Consumption goods

If the average propensity to consume is 1.0, the marginal propensity to consume is 0.8, and real disposable income increases by $100, the additional saving is

According to the permanent income hypothesis, a temporary increase in income that does not affect average lifetime income would

-Refer to the above figure. At real GDP of $1 trillion, actual investment equals

The life-cycle theory of consumption predicts that when a person anticipates a higher income in the future, then that person will

Suppose that when disposable income increases by $1,000, consumption spending increases by $750. Given this information, we know that the marginal propensity to consume (MPC)is

The multiplier helps explain

The marginal propensity to consume (MPC)

Which of the following will NOT lead to a shift in the investment function?

-In the above table, the average propensity to save when disposable income is $5,000 is

Note: Amounts in $ trillions -Refer to the above table. Which variables in the table are NOT autonomous?

The consumption function relates

-In the above table, the average propensity to consume when income is $10,000 is

The non-income determinants of consumption include all of the following EXCEPT

When real planned saving is greater than real planned investment spending

In equilibrium, real GDP is equal to

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