Question 1

The relationship between households' planned consumption expenditures and households' level of disposable real income is called

Accepted Answer

A) the consumption function. 
B) the savings function. 
C) the investment function. 
D) the household aggregate demand function. 
A) the consumption function. 
B) the savings function. 
C) the investment function. 
D) the household aggregate demand function.

Question 2

The planned investment function will shift downward if

Accepted Answer

A) real disposable income increases. 
B) the interest rate falls. 
C) business expectations become more pessimistic. 
D) the existing stock of capital decreases. 
A) real disposable income increases. 
B) the interest rate falls. 
C) business expectations become more pessimistic. 
D) the existing stock of capital decreases.

Question 3

If we observe that interest rates rise but real investment spending still increases, what must have happened to the function relating investment to the interest rate?

Accepted Answer

A) It shifted to the right. 
B) It shifted to the left. 
C) There was a movement up the function relating investment to the interest rate. 
D) There was a movement down the function relating investment to the interest rate. 
A) It shifted to the right. 
B) It shifted to the left. 
C) There was a movement up the function relating investment to the interest rate. 
D) There was a movement down the function relating investment to the interest rate.

Question 4

Supposed actual investment is greater than planned investment at the current level of output in 2010. Given this information, we know that

Accepted Answer

A) GDP will tend to increase over time. 
B) firms' stock of inventories must have increased unexpectedly in 2010. 
C) saving must be less than planned investment. 
D) saving must be equal to planned investment. 
A) GDP will tend to increase over time. 
B) firms' stock of inventories must have increased unexpectedly in 2010. 
C) saving must be less than planned investment. 
D) saving must be equal to planned investment.

Question 5

Suppose the economy is initially at equilibrium, in which total planned real expenditures equals real GDP. Which of the following will occur if there is an increase in autonomous investment?

Accepted Answer

A) Inventories will increase immediately and production of goods and services will decrease until real GDP catches up with total planned real expenditures. 
B) Inventories will decrease immediately and production of goods and services will increase until real GDP catches up with total planned real expenditures. 
C) Both inventories and production of goods and services will increase. 
D) Inventories will not change and production of goods and services will not change either. 
A) Inventories will increase immediately and production of goods and services will decrease until real GDP catches up with total planned real expenditures. 
B) Inventories will decrease immediately and production of goods and services will increase until real GDP catches up with total planned real expenditures. 
C) Both inventories and production of goods and services will increase. 
D) Inventories will not change and production of goods and services will not change either.

Question 6

If the marginal propensity to consume (MPC)decreases, then

Accepted Answer

A) the marginal propensity to save (MPS)decreases. 
B) the multiplier decreases. 
C) the multiplier increases. 
D) MPC + MPS is less than 1. 
A) the marginal propensity to save (MPS)decreases. 
B) the multiplier decreases. 
C) the multiplier increases. 
D) MPC + MPS is less than 1.

Question 7

Another way of stating that investment is independent of real disposable income is to say that it is

Accepted Answer

A) inversely related. 
B) directly related. 
C) complementary. 
D) autonomous. 
A) inversely related. 
B) directly related. 
C) complementary. 
D) autonomous.

Question 8

Which of the following statements is FALSE?

Accepted Answer

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

Question 9

Which one of the following would shift your consumption function in an upward direction?

Accepted Answer

A) an increase in your wealth 
B) a decrease in your wealth 
C) an increase in your real disposable income 
D) a decrease in your real disposable income 
A) an increase in your wealth 
B) a decrease in your wealth 
C) an increase in your real disposable income 
D) a decrease in your real disposable income

Question 10

-Use the above table. The MPS is

Accepted Answer

A) 0.91. 
B) 0.80. 
C) 0.20. 
D) 0.09. 
A) 0.91. 
B) 0.80. 
C) 0.20. 
D) 0.09.

Question 11

A higher level of real Gross Domestic Product (GDP)will result if

Accepted Answer

A) total planned real expenditures exceed real Gross Domestic Product (GDP). 
B) aggregate supply exceeds aggregate demand. 
C) aggregate demand exceeds aggregate supply. 
D) leakage exceeds injections. 
A) total planned real expenditures exceed real Gross Domestic Product (GDP). 
B) aggregate supply exceeds aggregate demand. 
C) aggregate demand exceeds aggregate supply. 
D) leakage exceeds injections.

Question 12

The slope of the saving function is the

Accepted Answer

A) MPC. 
B) APC. 
C) MPS. 
D) APS. 
A) MPC. 
B) APC. 
C) MPS. 
D) APS.

Question 13

Spending by businesses on things such as machines and buildings which can be used to produce goods and services in the future is

Accepted Answer

A) investment. 
B) consumption. 
C) consumption goods. 
D) savings. 
A) investment. 
B) consumption. 
C) consumption goods. 
D) savings.

Question 14

-Refer to the above figure. The marginal propensity to consume and the marginal propensity to save

Accepted Answer

A) are 0.90 and 0.10, respectively. 
B) are 0.83 and 0.17, respectively. 
C) are 0.75 and 0.25, respectively. 
D) depend on the level of income. 
A) are 0.90 and 0.10, respectively. 
B) are 0.83 and 0.17, respectively. 
C) are 0.75 and 0.25, respectively. 
D) depend on the level of income.

Question 15

If the multiplier is 10 and income increases by $1000, then saving will increase by

Accepted Answer

A) $90. 
B) $900. 
C) $100. 
D) $1000. 
A) $90. 
B) $900. 
C) $100. 
D) $1000.

Question 16

Autonomous consumption is the level of consumption that is

Accepted Answer

A) consistent with the average standard of living. 
B) observed at the poverty line. 
C) independent of real income. 
D) available to someone earning the minimum wage. 
A) consistent with the average standard of living. 
B) observed at the poverty line. 
C) independent of real income. 
D) available to someone earning the minimum wage.

Question 17

Suppose the marginal propensity to consume (MPC)equals 0.80, an increase in autonomous investment of $100 will lead to an increase in real Gross Domestic Product (GDP)by

Accepted Answer

A) $100. 
B) $400. 
C) $500. 
D) $800. 
A) $100. 
B) $400. 
C) $500. 
D) $800.

Question 18

Which formula is correct?

Accepted Answer

A) S = Yd - C 
B) Yd + S = C 
C) Yd × S = C 
D) Yd + C = S 
A) S = Yd - C 
B) Yd + S = C 
C) Yd × S = C 
D) Yd + C = S

Question 19

A rise in the price level causes

Accepted Answer

A) an increase in aggregate demand. 
B) a decrease in aggregate demand. 
C) a reduction in total planned real expenditures. 
D) an increase in total planned real expenditures. 
A) an increase in aggregate demand. 
B) a decrease in aggregate demand. 
C) a reduction in total planned real expenditures. 
D) an increase in total planned real expenditures.

Question 20

-In the above figure, the marginal propensity to consume (MPC)equals

Accepted Answer

A) 0.8. 
B) 0.9. 
C) 0.75. 
D) 0.85. 
A) 0.8. 
B) 0.9. 
C) 0.75. 
D) 0.85.

The relationship between households' planned consumption expenditures and households' level of disposable real income is called

The planned investment function will shift downward if

If we observe that interest rates rise but real investment spending still increases, what must have happened to the function relating investment to the interest rate?

Supposed actual investment is greater than planned investment at the current level of output in 2010. Given this information, we know that

Suppose the economy is initially at equilibrium, in which total planned real expenditures equals real GDP. Which of the following will occur if there is an increase in autonomous investment?

If the marginal propensity to consume (MPC)decreases, then

Another way of stating that investment is independent of real disposable income is to say that it is

Which of the following statements is FALSE?

Which one of the following would shift your consumption function in an upward direction?

-Use the above table. The MPS is

A higher level of real Gross Domestic Product (GDP)will result if

The slope of the saving function is the

Spending by businesses on things such as machines and buildings which can be used to produce goods and services in the future is

-Refer to the above figure. The marginal propensity to consume and the marginal propensity to save

If the multiplier is 10 and income increases by $1000, then saving will increase by

Autonomous consumption is the level of consumption that is

Suppose the marginal propensity to consume (MPC)equals 0.80, an increase in autonomous investment of $100 will lead to an increase in real Gross Domestic Product (GDP)by

Which formula is correct?

A rise in the price level causes

-In the above figure, the marginal propensity to consume (MPC)equals

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 relationship between households' planned consumption expenditures and households' level of disposable real income is called

The planned investment function will shift downward if

If we observe that interest rates rise but real investment spending still increases, what must have happened to the function relating investment to the interest rate?

Supposed actual investment is greater than planned investment at the current level of output in 2010. Given this information, we know that

Suppose the economy is initially at equilibrium, in which total planned real expenditures equals real GDP. Which of the following will occur if there is an increase in autonomous investment?

If the marginal propensity to consume (MPC)decreases, then

Another way of stating that investment is independent of real disposable income is to say that it is

Which of the following statements is FALSE?

Which one of the following would shift your consumption function in an upward direction?

-Use the above table. The MPS is

A higher level of real Gross Domestic Product (GDP)will result if

The slope of the saving function is the

Spending by businesses on things such as machines and buildings which can be used to produce goods and services in the future is

-Refer to the above figure. The marginal propensity to consume and the marginal propensity to save

If the multiplier is 10 and income increases by $1000, then saving will increase by

Autonomous consumption is the level of consumption that is

Suppose the marginal propensity to consume (MPC)equals 0.80, an increase in autonomous investment of $100 will lead to an increase in real Gross Domestic Product (GDP)by

Which formula is correct?

A rise in the price level causes

-In the above figure, the marginal propensity to consume (MPC)equals

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