Question 1

-Consider the above figure. At income level Yd = $30, the APC is equal to

Accepted Answer

A) 1.25. 
B) 1.67. 
C) 1.05. 
D) 0.05. 
A) 1.25. 
B) 1.67. 
C) 1.05. 
D) 0.05.

Question 2

-In the above figure, a change in autonomous consumption to 100 would cause the consumption function to

Accepted Answer

A) become steeper. 
B) become flatter. 
C) shift down. 
D) shift up. 
A) become steeper. 
B) become flatter. 
C) shift down. 
D) shift up.

Question 3

If the average propensity to consume is 0.8, then the average propensity to save is

Accepted Answer

A) 0. 
B) 0.2. 
C) 0.8. 
D) 1. 
A) 0. 
B) 0.2. 
C) 0.8. 
D) 1.

Question 4

-Refer to the above figure. Saving occurs at

Accepted Answer

A) only at point A. 
B) to the left of point B. 
C) only at point B. 
D) to the right of point B. 
A) only at point A. 
B) to the left of point B. 
C) only at point B. 
D) to the right of point B.

Question 5

The investment schedule is downward sloping and the saving schedule is upward sloping with respect to the interest rate. Suppose the equilibrium real investment per year at the market rate of interest is $1 trillion. How is this represented when real national income per year is on the horizontal axis?
 How is this incorporated into the consumption-function graph?

Accepted Answer

Investment spending is a function of the

Question 6

Investment is

Accepted Answer

A) the purchasing of stocks and mutual funds. 
B) goods bought by households. 
C) spending by businesses on things which can be used to produce goods and services in the future. 
D) the production of goods for immediate satisfaction. 
A) the purchasing of stocks and mutual funds. 
B) goods bought by households. 
C) spending by businesses on things which can be used to produce goods and services in the future. 
D) the production of goods for immediate satisfaction.

Question 7

If the average propensity to consume is initially 0.8, the marginal propensity to consume is 0.75, and real disposable income increases by $1000, the new value of saving is

Accepted Answer

A) $200. 
B) $250. 
C) $800. 
D) $750. 
A) $200. 
B) $250. 
C) $800. 
D) $750.

Question 8

Which of the following statements is TRUE?

Accepted Answer

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

Question 9

If the marginal propensity to save (MPS)increases, the multiplier

Accepted Answer

A) decreases. 
B) increases. 
C) stays the same. 
D) can either increase or decrease, depending on what happens to the marginal propensity to consume (MP
C) . 
A) decreases. 
B) increases. 
C) stays the same. 
D) can either increase or decrease, depending on what happens to the marginal propensity to consume (MP
C) .

Question 10

When an individual spends more than her/his disposable income, this person is

Accepted Answer

A) saving. 
B) investing. 
C) dissaving. 
D) unemployed. 
A) saving. 
B) investing. 
C) dissaving. 
D) unemployed.

Question 11

Note: Amounts in billions.
-Refer to the above table. The equilibrium real GDP is

Accepted Answer

A) $12 billion. 
B) $13 billion. 
C) $14 billion. 
D) $15 billion. 
A) $12 billion. 
B) $13 billion. 
C) $14 billion. 
D) $15 billion.

Question 12

Saving is an example of

Accepted Answer

A) a flow concept. 
B) a stock concept. 
C) a depreciation concept. 
D) an investment concept. 
A) a flow concept. 
B) a stock concept. 
C) a depreciation concept. 
D) an investment concept.

Question 13

The average propensity to consume is

Accepted Answer

A) real consumption expenditures divided by real disposable income. 
B) real disposable income divided by real consumption expenditures. 
C) real consumption expenditures divided by real saving. 
D) real saving divided by real consumption expenditures. 
A) real consumption expenditures divided by real disposable income. 
B) real disposable income divided by real consumption expenditures. 
C) real consumption expenditures divided by real saving. 
D) real saving divided by real consumption expenditures.

Question 14

-In the above table, the level of autonomous consumption is

Accepted Answer

A) $0. 
B) $1,000. 
C) $5,000. 
D) $9,000. 
A) $0. 
B) $1,000. 
C) $5,000. 
D) $9,000.

Question 15

According to Keynesian theory, the most important determinant of saving and consumption is

Accepted Answer

A) the level of real disposable income. 
B) the stock of liquid assets. 
C) the stock of durable goods in the consumer's possession. 
D) the level of consumer indebtedness. 
A) the level of real disposable income. 
B) the stock of liquid assets. 
C) the stock of durable goods in the consumer's possession. 
D) the level of consumer indebtedness.

Question 16

According to the Keynesian model, an increase in autonomous investment leads to

Accepted Answer

A) a more than proportional decrease in real Gross Domestic Product (GDP). 
B) a less than proportional decrease in real Gross Domestic Product (GDP). 
C) a proportional increase in real Gross Domestic Product (GDP). 
D) a reduction in taxes, autonomous government spending, and a fall in real Gross Domestic Product (GDP). 
A) a more than proportional decrease in real Gross Domestic Product (GDP). 
B) a less than proportional decrease in real Gross Domestic Product (GDP). 
C) a proportional increase in real Gross Domestic Product (GDP). 
D) a reduction in taxes, autonomous government spending, and a fall in real Gross Domestic Product (GDP).

Question 17

If the marginal propensity to save (MPS)is 0.5 and net exports falls by $100 million, then

Accepted Answer

A) real Gross Domestic Product (GDP)will increase by $100 million. 
B) real Gross Domestic Product (GDP)will fall by $200 million. 
C) real Gross Domestic Product (GDP)will not change. 
D) the effect on real Gross Domestic Product (GDP)cannot be determined from the given information. 
A) real Gross Domestic Product (GDP)will increase by $100 million. 
B) real Gross Domestic Product (GDP)will fall by $200 million. 
C) real Gross Domestic Product (GDP)will not change. 
D) the effect on real Gross Domestic Product (GDP)cannot be determined from the given information.

Question 18

Suppose real disposable income increases by $1,000. Given this information, we know that

Accepted Answer

A)  consumption will generally increase by exactly $1,000. 
B)  consumption will generally increase by less than $1,000. 
C)  consumption will generally increase by more than $1,000. 
D)  saving will generally increase by exactly $1,000. 
A)  consumption will generally increase by exactly $1,000. 
B)  consumption will generally increase by less than $1,000. 
C)  consumption will generally increase by more than $1,000. 
D)  saving will generally increase by exactly $1,000.

Question 19

-Consider the above figure. Autonomous consumption, in this scenario, is equal to

Accepted Answer

A) $30. 
B) $40. 
C) $60. 
D) $80. 
A) $30. 
B) $40. 
C) $60. 
D) $80.

Question 20

An increase in the price level causes

Accepted Answer

A) reduced investment spending, because interest rates increase, but an increase in net exports as U.S. residents buy fewer imports. The change in investment is usually greater than the change in net exports. 
B) a reduction in net exports as higher priced U.S. goods induce foreigners to buy fewer American products, and an increase in investment spending as the higher prices make businesses more profitable. 
C) reduced investment spending, because interest rates increase and a decrease in net exports as the higher prices induce foreigners to buy fewer U.S. goods. 
D) increased government spending, which crowds out investment spending, so that the net effect on aggregate demand is nil. 
A) reduced investment spending, because interest rates increase, but an increase in net exports as U.S. residents buy fewer imports. The change in investment is usually greater than the change in net exports. 
B) a reduction in net exports as higher priced U.S. goods induce foreigners to buy fewer American products, and an increase in investment spending as the higher prices make businesses more profitable. 
C) reduced investment spending, because interest rates increase and a decrease in net exports as the higher prices induce foreigners to buy fewer U.S. goods. 
D) increased government spending, which crowds out investment spending, so that the net effect on aggregate demand is nil.

-Consider the above figure. At income level Yd = $30, the APC is equal to

-In the above figure, a change in autonomous consumption to 100 would cause the consumption function to

If the average propensity to consume is 0.8, then the average propensity to save is

-Refer to the above figure. Saving occurs at

Investment is

If the average propensity to consume is initially 0.8, the marginal propensity to consume is 0.75, and real disposable income increases by $1000, the new value of saving is

Which of the following statements is TRUE?

If the marginal propensity to save (MPS)increases, the multiplier

When an individual spends more than her/his disposable income, this person is

Note: Amounts in billions. -Refer to the above table. The equilibrium real GDP is

Saving is an example of

The average propensity to consume is

-In the above table, the level of autonomous consumption is

According to Keynesian theory, the most important determinant of saving and consumption is

According to the Keynesian model, an increase in autonomous investment leads to

If the marginal propensity to save (MPS)is 0.5 and net exports falls by $100 million, then

Suppose real disposable income increases by $1,000. Given this information, we know that

-Consider the above figure. Autonomous consumption, in this scenario, is equal to

An increase in the price level causes

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

-Consider the above figure. At income level Yd = $30, the APC is equal to

-In the above figure, a change in autonomous consumption to 100 would cause the consumption function to

If the average propensity to consume is 0.8, then the average propensity to save is

-Refer to the above figure. Saving occurs at

Investment is

If the average propensity to consume is initially 0.8, the marginal propensity to consume is 0.75, and real disposable income increases by $1000, the new value of saving is

Which of the following statements is TRUE?

If the marginal propensity to save (MPS)increases, the multiplier

When an individual spends more than her/his disposable income, this person is

Note: Amounts in billions. -Refer to the above table. The equilibrium real GDP is

Saving is an example of

The average propensity to consume is

-In the above table, the level of autonomous consumption is

According to Keynesian theory, the most important determinant of saving and consumption is

According to the Keynesian model, an increase in autonomous investment leads to

If the marginal propensity to save (MPS)is 0.5 and net exports falls by $100 million, then

Suppose real disposable income increases by $1,000. Given this information, we know that

-Consider the above figure. Autonomous consumption, in this scenario, is equal to

An increase in the price level causes

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