Question 1

Historically, consumption spending in the United States has

Accepted Answer

A) increased as a percentage of income 
B) remained approximately constant as a percentage of income 
C) decreased as a percentage of income 
D) remained constant over time 
E) increased more than income 
A) increased as a percentage of income 
B) remained approximately constant as a percentage of income 
C) decreased as a percentage of income 
D) remained constant over time 
E) increased more than income B

Question 2

An increase in the interest rate, other things constant, decreases the amount of investment spending.

Accepted Answer

A) True 
 B)False  True

Question 3

The marginal propensity to save is the fraction of a change in income that is saved.

Accepted Answer

A) True 
 B)False  True

Question 4

If income increases by $100 and saving increases by $25, the slope of the saving function equals

Accepted Answer

A) 1/4 
B) 1/5 
C) 1/2 
D) 3/4 
E) 3/5 
A) 1/4 
B) 1/5 
C) 1/2 
D) 3/4 
E) 3/5

Question 5

If a household's income rises from $20,000 to $22,000 and its consumption spending rises from $19,000 to $20,500, then its

Accepted Answer

A) marginal propensity to save is 0.70 
B) marginal propensity to save is 0.02 
C) marginal propensity to consume is 0.93 
D) marginal propensity to consume is 0.95 
E) marginal propensity to consume is 0.75 
A) marginal propensity to save is 0.70 
B) marginal propensity to save is 0.02 
C) marginal propensity to consume is 0.93 
D) marginal propensity to consume is 0.95 
E) marginal propensity to consume is 0.75

Question 6

Which of the following would shift the consumption function upward?

Accepted Answer

A) a decrease in disposable income 
B) an increase in disposable income 
C) an increase in the interest rate 
D) expectations of lower future prices 
E) an increase in net wealth 
A) a decrease in disposable income 
B) an increase in disposable income 
C) an increase in the interest rate 
D) expectations of lower future prices 
E) an increase in net wealth

Question 7

The economy's investment demand curve shows the inverse relationship between the quantity of investment demanded and the market interest rate, other things held constant.

Accepted Answer

A) True 
 B)False

Question 8

The marginal propensity to consume

Accepted Answer

A) is the proportion of disposable income consumed 
B) is the reciprocal of the ratio of disposable income to saving 
C) is the change in consumption relative to a change in disposable income 
D) minus the marginal propensity to save must equal 1 
E) is greater than 1 at all levels of income 
A) is the proportion of disposable income consumed 
B) is the reciprocal of the ratio of disposable income to saving 
C) is the change in consumption relative to a change in disposable income 
D) minus the marginal propensity to save must equal 1 
E) is greater than 1 at all levels of income

Question 9

Net exports are

Accepted Answer

A) the value of goods produced in the domestic economy but sold in other countries 
B) the value of goods produced in other countries but purchased domestically 
C) the largest component of aggregate expenditure 
D) the value of imports minus the value of exports 
E) the value of exports minus the value of imports 
A) the value of goods produced in the domestic economy but sold in other countries 
B) the value of goods produced in other countries but purchased domestically 
C) the largest component of aggregate expenditure 
D) the value of imports minus the value of exports 
E) the value of exports minus the value of imports

Question 10

Dennis spends $400 on a snowblower, expecting to earn $80 per year for each of the next five years clearing out his neighbors' driveways. The rate of return he expects on this investment is

Accepted Answer

A) 500 percent per year 
B) 100 percent per year 
C) 80 percent per year 
D) 25 percent per year 
E) 20 percent per year 
A) 500 percent per year 
B) 100 percent per year 
C) 80 percent per year 
D) 25 percent per year 
E) 20 percent per year

Question 11

If business managers become more optimistic about future sales and profits, then there will be

Accepted Answer

A) a rightward movement along the autonomous investment function 
B) a leftward movement along the autonomous investment function 
C) an upward shift of the autonomous investment function 
D) a downward shift of the autonomous investment function 
E) no movement along or shift of the autonomous investment function 
A) a rightward movement along the autonomous investment function 
B) a leftward movement along the autonomous investment function 
C) an upward shift of the autonomous investment function 
D) a downward shift of the autonomous investment function 
E) no movement along or shift of the autonomous investment function

Question 12

New investment will be undertaken up to the point where the expected rate of return equals

Accepted Answer

A) zero 
B) 10 percent 
C) 5 percent 
D) the market interest rate 
E) the inflation rate 
A) zero 
B) 10 percent 
C) 5 percent 
D) the market interest rate 
E) the inflation rate

Question 13

Which of the following would be most likely to cause a rightward shift of the investment demand curve?

Accepted Answer

A) an increase in income 
B) a decline in the market interest rate 
C) an improvement in business expectations 
D) an increase in the market rate of interest 
E) a decrease in income 
A) an increase in income 
B) a decline in the market interest rate 
C) an improvement in business expectations 
D) an increase in the market rate of interest 
E) a decrease in income

Question 14

If a household's income falls from $26,000 to $24,000 and its saving falls from $1,000 to $500, then its

Accepted Answer

A) marginal propensity to consume is 0.98 
B) marginal propensity to consume is 1.33 
C) marginal propensity to consume is 0.75 
D) marginal propensity to save is 0.02 
E) marginal propensity to save is 0.4 
A) marginal propensity to consume is 0.98 
B) marginal propensity to consume is 1.33 
C) marginal propensity to consume is 0.75 
D) marginal propensity to save is 0.02 
E) marginal propensity to save is 0.4

Question 15

If a household's income falls from $26,000 to $24,000 and its consumption spending falls from $25,000 to $23,500, then its

Accepted Answer

A) marginal propensity to consume is 0.98 
B) marginal propensity to consume is 1.33 
C) marginal propensity to consume is 0.94 
D) marginal propensity to save is 0.02 
E) marginal propensity to save is 0.25 
A) marginal propensity to consume is 0.98 
B) marginal propensity to consume is 1.33 
C) marginal propensity to consume is 0.94 
D) marginal propensity to save is 0.02 
E) marginal propensity to save is 0.25

Question 16

Which of the following would not shift the consumption function upwards?

Accepted Answer

A) an increase in wealth 
B) an increase in disposable income 
C) a decrease in the price level 
D) a decline in the interest rate 
E) a more optimistic outlook about the future 
A) an increase in wealth 
B) an increase in disposable income 
C) a decrease in the price level 
D) a decline in the interest rate 
E) a more optimistic outlook about the future

Question 17

The marginal propensity to consume measures the change in consumption divided by the change in income.

Accepted Answer

A) True 
 B)False

Question 18

If a new pizza oven costs $50,000 and is expected to generate $10,000 in revenue next year, its expected rate of return is 20 percent.

Accepted Answer

A) True 
 B)False

Question 19

A household that expects a decrease in disposable income in the future will

Accepted Answer

A) increase its current consumption spending 
B) decrease its current consumption spending 
C) maintain its current consumption spending 
D) increase its current consumption spending, then increase spending when income falls 
E) decrease its current consumption spending, then increase spending when income falls 
A) increase its current consumption spending 
B) decrease its current consumption spending 
C) maintain its current consumption spending 
D) increase its current consumption spending, then increase spending when income falls 
E) decrease its current consumption spending, then increase spending when income falls

Question 20

Which of the following would not increase the Gallego family's real net wealth?

Accepted Answer

A) an increase in the value of their home 
B) an increase in the value of Mrs. Gallego's pension fund 
C) an increase in the amount that the Gallegos have saved in the bank 
D) a rise in the price level 
E) a decrease in the size of the mortgage payments on the Gallego's home 
A) an increase in the value of their home 
B) an increase in the value of Mrs. Gallego's pension fund 
C) an increase in the amount that the Gallegos have saved in the bank 
D) a rise in the price level 
E) a decrease in the size of the mortgage payments on the Gallego's home

Exam 9: Aggregate Expenditure

Historically, consumption spending in the United States has

An increase in the interest rate, other things constant, decreases the amount of investment spending.

The marginal propensity to save is the fraction of a change in income that is saved.

If income increases by $100 and saving increases by $25, the slope of the saving function equals

If a household's income rises from $20,000 to $22,000 and its consumption spending rises from $19,000 to $20,500, then its

Which of the following would shift the consumption function upward?

The economy's investment demand curve shows the inverse relationship between the quantity of investment demanded and the market interest rate, other things held constant.

The marginal propensity to consume

Net exports are

Dennis spends $400 on a snowblower, expecting to earn $80 per year for each of the next five years clearing out his neighbors' driveways. The rate of return he expects on this investment is

If business managers become more optimistic about future sales and profits, then there will be

New investment will be undertaken up to the point where the expected rate of return equals

Which of the following would be most likely to cause a rightward shift of the investment demand curve?

If a household's income falls from $26,000 to $24,000 and its saving falls from $1,000 to $500, then its

If a household's income falls from $26,000 to $24,000 and its consumption spending falls from $25,000 to $23,500, then its

Which of the following would not shift the consumption function upwards?

The marginal propensity to consume measures the change in consumption divided by the change in income.

If a new pizza oven costs $50,000 and is expected to generate $10,000 in revenue next year, its expected rate of return is 20 percent.

A household that expects a decrease in disposable income in the future will

Which of the following would not increase the Gallego family's real net wealth?

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 and Aggregate Demand

Aggregate Supply

Fiscal Policy

Federal Budgets and Public Policy

Money and the Financial System

Banking and the Money Supply

The Algebra of Income and Expenditure

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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