Question 1

The nation of Omega has an MPC of 0.70 and a multiplier of 2.22. Therefore, Omega's MPM is

Accepted Answer

A) 0.9 
B) 0.7 
C) 0.5 
D) 0.15 
E) This question cannot be answered without knowing the MPS 
A) 0.9 
B) 0.7 
C) 0.5 
D) 0.15 
E) This question cannot be answered without knowing the MPS D

Question 2

In the consumption function: C = a + b(Y - NT), the term b represents the

Accepted Answer

A) intercept of the consumption function 
B) level of taxation 
C) level of net taxation 
D) level of income 
E) marginal propensity to consume 
A) intercept of the consumption function 
B) level of taxation 
C) level of net taxation 
D) level of income 
E) marginal propensity to consume E

Question 3

If C = a + bY, which of the following is true?

Accepted Answer

A) If a increases, autonomous saving will increase. 
B) If a increases, the multiplier will increase. 
C) If a increases, the multiplier will decrease. 
D) If b increases, the multiplier will increase. 
E) If b increases, the multiplier will decrease. 
A) If a increases, autonomous saving will increase. 
B) If a increases, the multiplier will increase. 
C) If a increases, the multiplier will decrease. 
D) If b increases, the multiplier will increase. 
E) If b increases, the multiplier will decrease. D

Question 4

If the net export function is 500 - 0.15Y, then an increase in income of $1,000 will decrease net exports by $150.

Accepted Answer

A) True 
 B)False

Question 5

If C = $3,000 + 0.9Y, which of the following will not be true?

Accepted Answer

A) If income is less than $30,000, saving must be negative. 
B) If income is $30,000, then consumers are not saving. 
C) If income equals $40,000, saving must be $0. 
D) The marginal propensity to consume is 0.9. 
E) Autonomous consumption is $3,000. 
A) If income is less than $30,000, saving must be negative. 
B) If income is $30,000, then consumers are not saving. 
C) If income equals $40,000, saving must be $0. 
D) The marginal propensity to consume is 0.9. 
E) Autonomous consumption is $3,000.

Question 6

If Y = C + I + G + (X - M) (where C = $100, I = $50, G = $50, and X - M = -$10) the equilibrium level of Y equals

Accepted Answer

A) $150 
B) $180 
C) $190 
D) $200 
E) $210 
A) $150 
B) $180 
C) $190 
D) $200 
E) $210

Question 7

If Y = C + I + G + (X - M) and Y = $190, C = $100, I = $50 and G = $50 then, in equilibrium, X - M must equal

Accepted Answer

A) -$20 
B) -$10 
C) $10 
D) $20 
E) $50 
A) -$20 
B) -$10 
C) $10 
D) $20 
E) $50

Question 8

Consumption that is independent of the level of income is called autonomous consumption.

Accepted Answer

A) True 
 B)False

Question 9

Equilibrium output equals autonomous spending multiplied by the spending multiplier.

Accepted Answer

A) True 
 B)False

Question 10

If the marginal propensity to import increases, the spending multiplier increases.

Accepted Answer

A) True 
 B)False

Question 11

Equilibrium output can be found by solving for the value of Y in the expression a + b(Y - NT) + I + G + X - M(Y - NT).

Accepted Answer

A) True 
 B)False

Question 12

Increases in consumption that result from increases in investment are called induced consumption.

Accepted Answer

A) True 
 B)False

Question 13

If the net export function is 500 - 0.15Y, then exports are represented by -0.15Y.

Accepted Answer

A) True 
 B)False

Question 14

If C = $3,000 + 0.9Y and income is $20,000,

Accepted Answer

A) consumption is $20,000 
B) consumption is $18,000 
C) saving is $0 
D) saving is -$1,000 
E) income will increase to $200,000 
A) consumption is $20,000 
B) consumption is $18,000 
C) saving is $0 
D) saving is -$1,000 
E) income will increase to $200,000

Question 15

If C = 10 + 0.8Y, a $100 increase in Y would increase consumption by

Accepted Answer

A) $10 
B) $20 
C) $50 
D) $80 
E) $100 
A) $10 
B) $20 
C) $50 
D) $80 
E) $100

Question 16

The nation of Omega has an MPC of 0.70 and an MPM of 0.15. Therefore, Omega's spending multiplier is

Accepted Answer

A) 1.18 
B) 2.22 
C) 3.33 
D) 1.43 
E) This question cannot be answered without knowing the MPS 
A) 1.18 
B) 2.22 
C) 3.33 
D) 1.43 
E) This question cannot be answered without knowing the MPS

Question 17

Investment is the only autonomous spending component in aggregate expenditure.

Accepted Answer

A) True 
 B)False

Exam 25: The Algebra of Income and Expenditure

The nation of Omega has an MPC of 0.70 and a multiplier of 2.22. Therefore, Omega's MPM is

In the consumption function: C = a + b(Y - NT), the term b represents the

If C = a + bY, which of the following is true?

If the net export function is 500 - 0.15Y, then an increase in income of $1,000 will decrease net exports by $150.

If C = $3,000 + 0.9Y, which of the following will not be true?

If Y = C + I + G + (X - M) (where C = $100, I = $50, G = $50, and X - M = -$10) the equilibrium level of Y equals

If Y = C + I + G + (X - M) and Y = $190, C = $100, I = $50 and G = $50 then, in equilibrium, X - M must equal

Consumption that is independent of the level of income is called autonomous consumption.

Equilibrium output equals autonomous spending multiplied by the spending multiplier.

If the marginal propensity to import increases, the spending multiplier increases.

Equilibrium output can be found by solving for the value of Y in the expression a + b(Y - NT) + I + G + X - M(Y - NT).

Increases in consumption that result from increases in investment are called induced consumption.

If the net export function is 500 - 0.15Y, then exports are represented by -0.15Y.

If C = $3,000 + 0.9Y and income is $20,000,

If C = 10 + 0.8Y, a $100 increase in Y would increase consumption by

The nation of Omega has an MPC of 0.70 and an MPM of 0.15. Therefore, Omega's spending multiplier is

Investment is the only autonomous spending component in aggregate expenditure.

The Art and Science of Economic Analysis

Economic Tools and Economics Systems

Economic Decision Makers

Demand Supply and Markets

Introduction to Macroeconomics

Tracking the Us Economy

Unemployment and Inflation

Productivity and Growth

Aggregate Expenditure

Aggregate Expenditure and Aggregate Demand

Aggregate Supply

Fiscal Policy

Federal Budgets and Public Policy

Money and the Financial System

Banking and the Money Supply

Monetary Theory and Policy

Macro Policy Debate: Active or Passive

The Algebra of Demand-Side Equilibrium

International Trade

International Finance

Economic Development

National Income Accounts

Understanding Graphs

Variable Net Exports

Variable Net Exports Revisited

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