Question 1

If disposable income = $200 billion and the APS = 0.9, then

Accepted Answer

A) saving = $90 billion. 
B) saving = $45 billion. 
C) saving = $180 billion. 
D) saving cannot be determined. 
A) saving = $90 billion. 
B) saving = $45 billion. 
C) saving = $180 billion. 
D) saving cannot be determined.

Question 2

Which of the following is NOT a simplifying assumption in the simple Keynesian model?

Accepted Answer

A) Net investment and gross investment are equal. 
B) All profits are distributed to the business owners. 
C) Real disposable income equals government purchases of goods and services. 
D) There is no foreign trade. 
A) Net investment and gross investment are equal. 
B) All profits are distributed to the business owners. 
C) Real disposable income equals government purchases of goods and services. 
D) There is no foreign trade.

Question 3

The investment function tells us, at any given interest rate

Accepted Answer

A) how many funds people will invest in the stock market. 
B) how many funds people will earn on their stock market investments. 
C) how profitable it will be for firms to expand. 
D) how much businesses will spend on adding to the capital stock. 
A) how many funds people will invest in the stock market. 
B) how many funds people will earn on their stock market investments. 
C) how profitable it will be for firms to expand. 
D) how much businesses will spend on adding to the capital stock.

Question 4

Suppose autonomous consumption is $1 trillion, investment spending is $1.5 trillion, and the marginal propensity to consume is 0.75. Show the graph for the C + I curve. What is the equilibrium level of real GDP?
 Explain its meaning.

Accepted Answer

In the below figure, the C curve has a v

Question 5

If the MPC equals 0.75, then

Accepted Answer

A) for every $100 increase in consumption, real Gross Domestic Product (GDP)increases by $75. 
B) consumption is always more than real Gross Domestic Product (GDP). 
C) for every $100 increase in real Gross Domestic Product (GDP), saving increases by $75. 
D) for every $100 increase in real Gross Domestic Product (GDP), saving increases by $25. 
A) for every $100 increase in consumption, real Gross Domestic Product (GDP)increases by $75. 
B) consumption is always more than real Gross Domestic Product (GDP). 
C) for every $100 increase in real Gross Domestic Product (GDP), saving increases by $75. 
D) for every $100 increase in real Gross Domestic Product (GDP), saving increases by $25.

Question 6

An increase in autonomous consumption means that

Accepted Answer

A) the consumption function shifts down. 
B) the consumption function shifts up. 
C) the consumption function becomes steeper. 
D) the consumption function becomes less steep. 
A) the consumption function shifts down. 
B) the consumption function shifts up. 
C) the consumption function becomes steeper. 
D) the consumption function becomes less steep.

Question 7

Which of the following statements is TRUE?

Accepted Answer

A) consumption + saving = disposable income 
B) consumption + saving = personal income 
C) consumption - investment = disposable income 
D) consumption - saving = personal income 
A) consumption + saving = disposable income 
B) consumption + saving = personal income 
C) consumption - investment = disposable income 
D) consumption - saving = personal income

Question 8

The average price of a share of stock on the New York Stock Exchange falls by 30 percent. Other things being equal, we would expect

Accepted Answer

A) an increase in the marginal propensity to consume. 
B) a decrease in the marginal propensity to consume. 
C) a shift up of the consumption function. 
D) a shift down of the consumption function. 
A) an increase in the marginal propensity to consume. 
B) a decrease in the marginal propensity to consume. 
C) a shift up of the consumption function. 
D) a shift down of the consumption function.

Question 9

Autonomous consumption

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.

Question 10

According to Keynes, planned consumption

Accepted Answer

A) decreases as disposable income increases. 
B) is unstable and fluctuates widely with changes in disposable income. 
C) is positively related to real disposable income. 
D) is indirectly related to the interest rate. 
A) decreases as disposable income increases. 
B) is unstable and fluctuates widely with changes in disposable income. 
C) is positively related to real disposable income. 
D) is indirectly related to the interest rate.

Question 11

Autonomous consumption

Accepted Answer

A) is measured by the slope of the consumption function. 
B) is the reciprocal of consumption. 
C) is equal to the minimum savings. 
D) is measured by the intercept of the consumption function and the Y-axis. 
A) is measured by the slope of the consumption function. 
B) is the reciprocal of consumption. 
C) is equal to the minimum savings. 
D) is measured by the intercept of the consumption function and the Y-axis.

Question 12

The consumption function shows how much

Accepted Answer

A) households plan to consume per year at each level of real disposable income. 
B) households plan to consume per year at each possible interest rate. 
C) real disposable income people will earn at each income tax bracket. 
D) households plan to consume per year at each level of savings. 
A) households plan to consume per year at each level of real disposable income. 
B) households plan to consume per year at each possible interest rate. 
C) real disposable income people will earn at each income tax bracket. 
D) households plan to consume per year at each level of savings.

Question 13

One divided by the marginal propensity to save (MPS)is the formula for

Accepted Answer

A) one minus the multiplier. 
B) the inverse of the multiplier. 
C) the multiplier. 
D) autonomous consumption. 
A) one minus the multiplier. 
B) the inverse of the multiplier. 
C) the multiplier. 
D) autonomous consumption.

Question 14

How much people plan to consume at various levels of disposable income is known as

Accepted Answer

A) dissaving. 
B) investment. 
C) the consumption function. 
D) inventory investment. 
A) dissaving. 
B) investment. 
C) the consumption function. 
D) inventory investment.

Question 15

-Refer to the above figure. The equilibrium level of real GDP occurs

Accepted Answer

A) at point A. 
B) to the right of point A. 
C) to the left of point A. 
D) at the undetermined point on the graph depending upon the level of investment. 
A) at point A. 
B) to the right of point A. 
C) to the left of point A. 
D) at the undetermined point on the graph depending upon the level of investment.

Question 16

Which of the following is correct?

Accepted Answer

A) 1 + MPS = MPC 
B) 1 - MPC = MPS 
C) 1 - MPS = MPC + 1 
D) 1 - MPS = MPC - 1 
A) 1 + MPS = MPC 
B) 1 - MPC = MPS 
C) 1 - MPS = MPC + 1 
D) 1 - MPS = MPC - 1

Question 17

An increase in the marginal propensity to save (MPS)

Accepted Answer

A) increases the value of the multiplier. 
B) increases autonomous consumption. 
C) increases the marginal propensity to consume (MP
C) . 
D) none of the above. 
A) increases the value of the multiplier. 
B) increases autonomous consumption. 
C) increases the marginal propensity to consume (MP
C) . 
D) none of the above.

Question 18

Which of the following statements is TRUE?

Accepted Answer

A) APC + APS = 1 
B) APC + APS < 1 
C) APC + MPS = 1 
D) APC + APS + MPC + MPS = 1 
A) APC + APS = 1 
B) APC + APS < 1 
C) APC + MPS = 1 
D) APC + APS + MPC + MPS = 1

Question 19

According to Keynes, an individual's level of saving is primarily determined by

Accepted Answer

A) the interest rate. 
B) the individual's current level of disposable real income. 
C) the individual's assessment of the future direction of the stock market. 
D) real Gross Domestic Product (GDP)for the economy. 
A) the interest rate. 
B) the individual's current level of disposable real income. 
C) the individual's assessment of the future direction of the stock market. 
D) real Gross Domestic Product (GDP)for the economy.

Question 20

Note: Amounts in billions.
-Refer to the above table. When real GDP equals $10 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.

If disposable income = $200 billion and the APS = 0.9, then

Which of the following is NOT a simplifying assumption in the simple Keynesian model?

The investment function tells us, at any given interest rate

Suppose autonomous consumption is $1 trillion, investment spending is $1.5 trillion, and the marginal propensity to consume is 0.75. Show the graph for the C + I curve. What is the equilibrium level of real GDP? Explain its meaning.

If the MPC equals 0.75, then

An increase in autonomous consumption means that

Which of the following statements is TRUE?

The average price of a share of stock on the New York Stock Exchange falls by 30 percent. Other things being equal, we would expect

Autonomous consumption

According to Keynes, planned consumption

Autonomous consumption

The consumption function shows how much

One divided by the marginal propensity to save (MPS)is the formula for

How much people plan to consume at various levels of disposable income is known as

-Refer to the above figure. The equilibrium level of real GDP occurs

Which of the following is correct?

An increase in the marginal propensity to save (MPS)

Which of the following statements is TRUE?

According to Keynes, an individual's level of saving is primarily determined by

Note: Amounts in billions. -Refer to the above table. When real GDP equals $10 billion

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

Exam 11: Consumption, Real GDP, and the Multiplier

If disposable income = $200 billion and the APS = 0.9, then

Which of the following is NOT a simplifying assumption in the simple Keynesian model?

The investment function tells us, at any given interest rate

Suppose autonomous consumption is $1 trillion, investment spending is $1.5 trillion, and the marginal propensity to consume is 0.75. Show the graph for the C + I curve. What is the equilibrium level of real GDP? Explain its meaning.

If the MPC equals 0.75, then

An increase in autonomous consumption means that

Which of the following statements is TRUE?

The average price of a share of stock on the New York Stock Exchange falls by 30 percent. Other things being equal, we would expect

Autonomous consumption

According to Keynes, planned consumption

Autonomous consumption

The consumption function shows how much

One divided by the marginal propensity to save (MPS)is the formula for

How much people plan to consume at various levels of disposable income is known as

-Refer to the above figure. The equilibrium level of real GDP occurs

Which of the following is correct?

An increase in the marginal propensity to save (MPS)

Which of the following statements is TRUE?

According to Keynes, an individual's level of saving is primarily determined by

Note: Amounts in billions. -Refer to the above table. When real GDP equals $10 billion

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